NEW ISSUE Rating: Moody’s “Aaa” (State of Idaho Guaranty; “Aa2” underlying) See “STATE OF IDAHO GUARANTY” and “MISCELLANEOUS—Bond Ratings” herein.

Subject to compliance by the District with certain covenants, in the opinion of Hawley Troxell Ennis & Hawley LLP, Bond Coun-sel, under present law, interest on the 2012 Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and cor-porations, and (iii) is not taken into account in computing adjusted current earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain corporations. Interest on the 2012 Bonds is not included in Idaho taxable income under present Idaho income tax laws.

$19,540,000

Joint School District No. 421 (McCall–Donnelly) Valley and Adams Counties, State of Idaho

General Obligation Refunding Bonds, Series 2012 (Idaho State Bond Guaranty and Credit Enhancement Programs)

The $19,540,000 General Obligation Refunding Bonds, Series 2012, dated the date of original issuance, are issuable by Joint

School District No. 421 (McCall–Donnelly), Valley and Adams Counties, State of Idaho, as fully–registered bonds and, when ini-tially issued, will be in book–entry only form, registered in the name of Cede & Co., as nominee for The Depository Trust Compa-ny, New York, New York. DTC will act as securities depository for the 2012 Bonds.

Principal of and interest on the 2012 Bonds (interest payable February 1 and August 1 of each year, commencing Febru-

ary 1, 2013) are payable by U.S. Bank National Association, Corporate Trust Services, Salt Lake City, Utah, as Paying Agent, to the registered owners thereof, initially DTC. See “THE 2012 BONDS—Book–Entry System” herein.

The 2012 Bonds are subject to optional redemption prior to maturity. See “THE 2012 BONDS—Redemption Provisions” herein. The 2012 Bonds will be general obligations of the District payable from the proceeds of ad valorem taxes to be levied without

limitation as to rate or amount on all of the taxable property in the District, fully sufficient to pay the 2012 Bonds as to both princi-pal and interest.

Payment of the principal of and interest on the 2012 Bonds when due is further secured by the

State of Idaho

pursuant to the Idaho School Bond Guaranty Program and the Idaho Endowment Fund Investment Board pursuant to the Credit Enhancement Program. See “STATE OF IDAHO GUARANTY” herein.

Dated: Date of Delivery1 Due: August 1, as shown below

Due CUSIP Principal Interest Due CUSIP Principal Interest August 1 919278 Amount Rate Yield August 1 919278 Amount Rate Yield 2013…… CB5 $ 50,000 2.00% 0.45% 2020…… CJ8 $1,790,000 5.00% 1.47% 2014…… CC3 50,000 2.00 0.55 2021…… CK5 1,875,000 5.00 1.70 2015…… CD1 50,000 2.00 0.70 2022…… CL3 1,960,000 5.00 1.89 2016…… CE9 50,000 2.00 0.80 2023…… CM1 2,070,000 5.00 2.03 2017…… CF6 1,605,000 3.00 0.78 2024…… CN9 2,155,000 3.00 2.25 2018…… CG4 1,660,000 3.00 0.95 2025…… CP4 2,225,000 3.00 2.33 2019…… CH2 1,715,000 4.00 1.20 2026…… CQ2 2,285,000 3.00 2.40

The 2012 Bonds were awarded pursuant to competitive bidding received by means of the PARITY® electronic bid submission system on Thursday, November 1, 2012, as set forth in the OFFICIAL NOTICE OF BOND SALE (dated October 23, 2012) to BMO Capital Markets GKST Inc., Chicago, Illinois at a “true interest rate” of 2.04%.

Zions Bank Public Finance, Salt Lake City, Utah, acted as Financial Advisor.

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire OFFICIAL STATEMENT to obtain information essential to the making of an informed investment decision.

This OFFICIAL STATEMENT is dated November 1, 2012, and the information contained herein speaks only as of that date.

1 The anticipated date of delivery is Tuesday, November 20, 2012.

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Table Of Contents

Page Page

INTRODUCTION ............................................................................ 1 Public Sale/Electronic Bid ........................................................ 1 Joint School District No. 421 (McCall–Donnelly), Valley

and Adams Counties, State of Idaho ..................................... 1 The 2012 Bonds ........................................................................ 2 Security ..................................................................................... 2 Authority And Purpose ............................................................. 2 Redemption Provisions ............................................................. 2 Registration, Denominations, Manner Of Payment .................. 2 Tax–Exempt Status Of The 2012 Bonds ................................... 3 Professional Services ................................................................ 3 Conditions Of Delivery, Anticipated Date, Manner, And

Place Of Delivery .................................................................. 4 Information Reporting Agreement ............................................ 4 Basic Documentation ................................................................ 4 Contact Persons ........................................................................ 4 

INFORMATION REPORTING AGREEMENT ............................. 5 STATE OF IDAHO GUARANTY .................................................. 5 

The Guaranty; Pledge of State Sales Tax .................................. 5 The Sales Tax Guaranty Program ............................................. 6 Credit Enhancement Program ................................................... 6 Guaranty Procedures ................................................................. 7 State Treasurer to Monitor District’s Fiscal Solvency .............. 8 Status of the Programs .............................................................. 8 State Of Idaho–Financial And Operating Information .............. 8 

BOND LEVY EQUALIZATION SUPPORT PROGRAM ............. 9 Availability of the Levy Subsidy .............................................. 9 Benefit of Levy Subsidy to the District .................................... 9 

THE 2012 BONDS ........................................................................ 10 General ................................................................................... 10 Plan Of Refunding .................................................................. 10 Sources And Uses Of Funds ................................................... 11 Security And Sources Of Payment ......................................... 11 Redemption Provisions ........................................................... 12 Registration And Transfer ...................................................... 13 Book–Entry System ................................................................ 13 Debt Service On The 2012 Bonds .......................................... 14 

JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY) VALLEY AND ADAMS COUNTIES, STATE OF IDAHO .................................................................... 14 

General ................................................................................... 14 Form Of Government ............................................................. 15 Employee Workforce; Other Post–Employment Benefits;

Pension System ................................................................... 16 Actuarial Valuation and Funding ............................................ 17 Risk Management ................................................................... 18 Investment Of Funds ............................................................... 18 Population ............................................................................... 19 Economic Indicators of the County ........................................ 19 Largest Employers (1) ............................................................ 20 Labor Market Data of the County and Employment by

Industry (1) ......................................................................... 20 Annual New Privately–Owned Residential Building

Permits Within the County .................................................. 21 Rate Of Unemployment—Annual Average ............................ 21 

DEBT STRUCTURE OF JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY) VALLEY AND ADAMS COUNTIES, STATE OF IDAHO ............................... 21 

Outstanding General Obligation Bonded Indebtedness .......... 21 

Other Financial Considerations ............................................... 22 Debt Service Schedule Of Outstanding General Obligation

Bonds By Fiscal Year .......................................................... 23 Overlapping General Obligation Debt .................................... 24 Debt Ratios.............................................................................. 24 General Obligation Legal Debt Limit And Additional Debt

Incurring Capacity ............................................................... 25 No Defaulted Obligations ....................................................... 25 

FINANCIAL INFORMATION REGARDING JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY) VALLEY AND ADAMS COUNTIES, STATE OF IDAHO ..... 25 

Fund Structure; Accounting Basis ........................................... 25 Budgets And Budgetary Accounting ....................................... 25 Undistributed Reserve in School District Budget ................... 25 Financial Summaries ............................................................... 26 

TAXES AND STATE FUNDING ................................................. 31 Overview ................................................................................. 31 Tax Levy And Collection ........................................................ 31 Ad Valorem Tax System ......................................................... 31 Homeowner’s Exemption........................................................ 32 School District Levies ............................................................. 32 Historical Tax Rates ................................................................ 33 Comparative Total School District Tax Rates ......................... 33 Market Value Of Property Of The District ............................. 34 Tax Collection Record Of The District ................................... 35 Some Of The Largest Taxpayers ............................................. 35 

STATE OF IDAHO SCHOOL FINANCE ..................................... 35 General .................................................................................... 35 Appropriations to Public Schools ............................................ 36 Federal Education Maintenance of Effort Requirements ........ 37 Summary Of State And Federal Funds.................................... 38 Reform Legislation ................................................................. 38 2012 Legislative Actions ......................................................... 41 The Initiative Process .............................................................. 41 Historical Initiative Petitions ................................................... 42 Current Initiative Petitions ...................................................... 42 

LEGAL MATTERS ....................................................................... 42 Absence Of Litigation Concerning The 2012 Bonds .............. 42 Tax Exemption ........................................................................ 43 State Of Idaho Income Tax ..................................................... 44 Premium Bonds ....................................................................... 44 Tax Legislative Changes ......................................................... 44 General .................................................................................... 44 

MISCELLANEOUS ....................................................................... 45 Bond Ratings ........................................................................... 45 Escrow Verification ................................................................ 45 Financial Advisor .................................................................... 45 Independent Auditors .............................................................. 45 Accuracy and Completeness of the Official Statement ........... 46 Additional Information ........................................................... 46 

APPENDIX A—BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION FOR FISCAL YEAR 2012 ............................................................... A–1 

APPENDIX B—PROPOSED FORM OF OPINION OF BOND COUNSEL ................................................................... B–1 

APPENDIX C—PROPOSED FORM OF INFORMATION REPORTING AGREEMENT ................................................. C–1 

APPENDIX D—BOOK–ENTRY SYSTEM .............................. D–1 

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This OFFICIAL STATEMENT does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of the principal amount of the 2012 Bonds (as defined herein) by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than those contained herein, and if given or made, such other informational representations must not be relied upon as having been authorized by any of: Joint School District No. 421 (McCall–Donnelly), Valley and Ad-ams Counties, State of Idaho; Zions Bank Public Finance, Salt Lake City, Utah; U.S. Bank National Associa-tion, Corporate Trust Services, Salt Lake City, Utah, as Paying Agent; the successful bidder(s); or any other entity. All other information contained herein has been obtained from the District, The Depository Trust Com-pany, New York, New York, and from other sources which are believed to be reliable. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this OFFICIAL STATEMENT nor the issuance, sale, delivery or exchange of the 2012 Bonds, shall under any circumstance create any implication that there has been no change in the affairs of the District, since the date hereof.

The 2012 Bonds have not been registered under the Securities Act of 1933, as amended, or any state secu-

rities laws in reliance upon exemptions contained in such act and laws. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the accuracy or adequacy of this OFFICIAL STATEMENT. Any representation to the contrary is unlawful.

The yields at which the 2012 Bonds are offered to the public may vary from the initial reoffering yields on

the cover page of this OFFICIAL STATEMENT. In addition, the successful bidder(s) may allow concessions or discounts from the initial offering prices of the 2012 Bonds to dealers and others. In connection with the offer-ing of the 2012 Bonds, the successful bidder(s) may engage in transactions that stabilize, maintain, or other-wise affect the price of the 2012 Bonds. Such transactions may include overallotments in connection with the purchase of 2012 Bonds, the purchase of 2012 Bonds to stabilize their market price and the purchase of 2012 Bonds to cover the successful bidder’s short positions. Such transactions, if commenced, may be discon-tinued at any time.

The CUSIP (the Committee on Uniform Securities Identification Procedures) identification numbers are

provided on the cover page of this OFFICIAL STATEMENT and are being provided solely for the conven-ience of bondholders only, and the District does not make any representation with respect to such numbers or undertake any responsibility for their accuracy. The CUSIP numbers are subject to being changed after the issuance of the 2012 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of the 2012 Bonds.

The information available at the websites referenced in this OFFICIAL STATEMENT has not been re-

viewed for accuracy and completeness. The District assumes no obligation to update any information appear-ing on its website. Such information has not been provided in connection with the offering of the 2012 Bonds and is not a part of this OFFICIAL STATEMENT.

Certain statements contained in this OFFICIAL STATEMENT do not reflect historical facts, but are fore-

casts and “forward–looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as “estimated,” “projected,” “anticipate,” “expect,” “intend,” “plan,” “believe”, and similar expressions are intended to identify forward–looking statements. All projections, assumptions and other for-ward–looking statements are expressly qualified in their entirety by the cautionary statements set forth in this OFFICIAL STATEMENT.

This OFFICIAL STATEMENT has been designed to conform, where applicable, to the guidelines pre-

sented in Disclosure Guidelines for State and Local Government Securities, published by the Government Fi-nance Officers Association in 1991, as revised.

1

OFFICIAL STATEMENT RELATED TO

$19,540,000

Joint School District No. 421 (McCall–Donnelly)

Valley and Adams Counties, State of Idaho

General Obligation Refunding Bonds, Series 2012 (Idaho State Bond Guaranty and Credit Enhancement Programs)

INTRODUCTION This introduction is only a brief description of the 2012 Bonds, as hereinafter defined, the security and

source of payment for the 2012 Bonds and certain information regarding the Joint School District No. 421 (McCall–Donnelly), Valley and Adams Counties, State of Idaho (the “District”). The information contained herein is expressly qualified by reference to the entire OFFICIAL STATEMENT. Investors are urged to make a full review of the entire OFFICIAL STATEMENT.

See the following appendices that are attached hereto and incorporated herein by reference:

“APPENDIX A—BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFOR-MATION FOR FISCAL YEAR 2012;” “APPENDIX B—PROPOSED FORM OF OPINION OF BOND COUNSEL;” “APPENDIX C—PROPOSED FORM OF INFORMATION REPORTING AGREEMENT;” and “APPENDIX D—BOOK–ENTRY SYSTEM.”

When used herein the terms “Fiscal Year[s] 20YY” or “Fiscal Year[s] End[ed][ing] June 30, 20YY” shall

refer to the year ended or ending on June 30 of the year indicated and beginning on July 1 of the preceding calendar year. Capitalized terms used but not otherwise defined herein have the same meaning as given to them in the Resolution, as hereinafter defined.

Public Sale/Electronic Bid

The 2012 Bonds were awarded pursuant to competitive bidding received by means of the PARITY® elec-

tronic bid submission system on Thursday, November 1, 2012 as set forth in the OFFICIAL NOTICE OF BOND SALE (dated October 23, 2012) to BMO Capital Markets GKST Inc., Chicago, Illinois at a “true in-terest rate” of 2.04%.

Joint School District No. 421 (McCall–Donnelly), Valley and Adams Counties, State of Idaho

The District, established in 1950, is located in the west central Idaho mountains in Long Valley. The Dis-

trict covers an area of 2,423 square miles, with over 98% of the District located in Valley County (“the Coun-ty”). The remainder of the District is located in Adams County. According to the U.S. Census, the District’s 2010 population was 7,494. The County had an estimated 9,862 residents according to the 2010 Census and is ranked the 29th most populous county (out of 44 counties). The 2011 estimate by the Bureau of the Census estimates the County’s July 1, 2011 population at 9,638 people. The District’s headquarters are located in McCall, Idaho (the “City”). The City was incorporated in 1911, and had 2,924 residents according to the 2011 estimate by the Bureau of the Census.

2

The 2012 Bonds This OFFICIAL STATEMENT, including the cover page, introduction and appendices, provides infor-

mation in connection with the issuance and sale by the District of its $19,540,000 General Obligation Refund-ing Bonds, Series 2012 (Idaho State Bond Guaranty and Credit Enhancement Programs) (the “2012 Bonds” or “2012 Bond”), initially issued in book–entry form only.

Security

The 2012 Bonds will be general obligations of the District, payable from the proceeds of ad valorem taxes

to be levied, without limitation as to rate or amount, on all of the taxable property in the District, fully suffi-cient to pay the 2012 Bonds as to both principal and interest. See “THE 2012 BONDS—Security And Sources Of Payment” and “TAXES AND STATE FUNDING—Tax Levy And Collection” below.

Payment of the principal of and interest on the 2012 Bonds when due is guaranteed by the State of Idaho

(the “State”) pursuant to the Idaho School Bond Guaranty Program under the provisions of the Idaho School Bond Guaranty Act, Title 33, Chapter 53, Idaho Code (the “Sales Tax Guaranty Program”) and the Credit En-hancement Program supported by the public schools endowment fund, pursuant to Section 57–728, Idaho Code (the “Credit Enhancement Program”). See “STATE OF IDAHO GUARANTY” below.

Authority And Purpose

Authority. The 2012 Bonds are being issued pursuant to (i) the School Bonds Law, Title 33, Chapter 11,

Idaho Code, as amended, the Public Obligations Registration Act, Title 57, Chapter 9, Idaho Code, as amend-ed, the Municipal Bond Law, Title 57, Chapter 2, and the bond refunding provisions of Title 57, Chapter 5, Idaho Code (collectively, the “Act”), (ii) the Resolution of the District adopted on November 1, 2012 (the “Resolution”), which provides for the issuance of the 2012 Bonds, and (iii) other applicable provisions of law.

Purpose. The 2012 Bonds are being issued to refund certain outstanding general obligation bonds previ-

ously issued by the District and the payment of costs associated with the issuance of the 2012 Bonds. See “THE 2012 BONDS—Plan Of Refunding,” and “—Sources And Uses Of Funds” below.

Redemption Provisions

The 2012 Bonds are subject to optional redemption prior to maturity. See “THE 2012 BONDS—

Redemption Provisions” below.

Registration, Denominations, Manner Of Payment The 2012 Bonds are issuable only as fully–registered bonds and, when initially issued, will be registered

in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the 2012 Bonds. Purchases of Bonds will be made in book–entry form only, in the principal amount of $5,000 or any whole multiple thereof, through brokers and dealers who are, or who act through, DTC’s Direct Participants (as defined herein). Beneficial Owners (as defined herein) of the 2012 Bonds will not be entitled to receive physical delivery of bond certificates so long as DTC or a successor securities depository acts as the securities depository with respect to the 2012 Bonds. “Direct Partic-ipants,” “Indirect Participants” and “Beneficial Owners” are defined under “APPENDIX D—BOOK–ENTRY SYSTEM” below.

Principal of and interest on the 2012 Bonds (interest payable February 1 and August 1 of each year, com-

mencing February 1, 2013) are payable by U.S. Bank National Association, Corporate Trust Services, Salt Lake City, Utah (“U.S. Bank”), as paying agent (the “Paying Agent”) for the 2012 Bonds, to the registered owners of the 2012 Bonds. So long as Cede & Co. is the registered owner of the 2012 Bonds, DTC will, in

3

turn, remit such principal and interest to its Direct Participants, for subsequent disbursements to the Beneficial Owners of the 2012 Bonds, as described under “APPENDIX D—BOOK–ENTRY SYSTEM” below.

So long as DTC or its nominee is the registered owner of the 2012 Bonds, neither the District nor the Pay-

ing Agent will have any responsibility or obligation to any Direct or Indirect Participants of DTC, or the per-sons for whom they act as nominees, with respect to the payments to or the providing of notice for the Direct Participants, Indirect Participants or the Beneficial Owners of the 2012 Bonds. Under these same circum-stances, references herein and in the Resolution to the “Bondowners” or “Registered Owners” of the 2012 Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of the 2012 Bonds.

Tax–Exempt Status Of The 2012 Bonds

Subject to compliance by the District with certain covenants, in the opinion of Hawley Troxell Ennis &

Hawley LLP as bond counsel (“Bond Counsel”), under present law, interest on the 2012 Bonds (i) is excluda-ble from gross income of the owners thereof for federal income tax purposes, (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations and (iii) is not taken into account in computing adjusted current earnings, which is used as an adjustment in determining the federal alternative minimum tax for certain corporations. In the opinion of Bond Counsel, under the exist-ing laws of the State of Idaho, as presently enacted and construed, interest on the 2012 Bonds is exempt from taxes imposed by the State of Idaho. See “LEGAL MATTERS—Tax Exemption” herein for a more complete discussion.

Professional Services

In connection with the issuance of the 2012 Bonds, the following have served the District in the capacity

indicated. Bond Counsel Attorney for the District

Hawley Troxell Ennis & Hawley LLP Eberharter–Maki & Tappen PA 877 Main St Ste 1000 818 La Cassia Dr PO Box 1617 Boise ID 83705–2253 Boise ID 83701–1617 208.336.8858 | f 208.336.1560 208.344.6000 | f 208.954.5421 eemaki@emtedlaw.com nmiller@hawleytroxell.com Escrow Agent, Paying Agent and Bond Registrar Escrow Verification Agent

U.S. Bank National Association Grant Thornton LLP Corporate Trust Services Accountants and Management Consultants 170 S Main St Ste 200 500 Pillsbury Center Salt Lake City UT 84101 Minneapolis MN 55402 801.534.6051 | f 801.534.6013 612.332.0001 | f 612.332.8361 brandon.elzinga@usbank.com stephanie.seroogy@gt.com

Financial Advisor

Zions Bank Public Finance Zions Bank Building One S Main St 18th Fl

Salt Lake City UT 84133–1109 801.844.7373 | f 801.844.4484

alan.westenskow@zionsbank.com

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Conditions Of Delivery, Anticipated Date, Manner, And Place Of Delivery The 2012 Bonds are offered, subject to prior sale, when, as and if issued and received by the successful

bidder(s), subject to the approval of legality of the 2012 Bonds by Bond Counsel, and certain other conditions. Certain legal matters will be passed on for the District by Eberharter–Maki & Tappen PA, Boise, Idaho. It is expected that the 2012 Bonds, in book–entry form only, will be available for delivery in Boise, Idaho for de-posit with the Paying Agent, as fast agent of DTC, on or about Tuesday, November 20, 2012.

Information Reporting Agreement

The District will enter into an Information Reporting Agreement (the “Disclosure Undertaking”) for the

benefit of the Owners of the 2012 Bonds. For a detailed discussion of this disclosure undertaking, previous undertakings and timing of submissions see “INFORMATION REPORTING AGREEMENT” below and “APPENDIX C—PROPOSED FORM OF INFORMATION REPORTING AGREEMENT.”

Basic Documentation

This OFFICIAL STATEMENT speaks only as of its date, and the information contained herein is subject

to change. Brief descriptions of the District’s Board of Trustees (the “Board”), the District, the 2012 Bonds, and the Resolution are included in this OFFICIAL STATEMENT. Such descriptions do not purport to be comprehensive or definitive. All references herein to the Resolution are qualified in their entirety by reference to such document, and references herein to the 2012 Bonds are qualified in their entirety by reference to the form thereof included in the Resolution. The “basic documentation” which includes the Resolution, the clos-ing documents and other documentation authorizing the issuance of the 2012 Bonds and establishing the rights and responsibilities of the District and other parties to the transaction may be obtained from the “con-tact persons” as indicated below.

Contact Persons

As of the date of this OFFICIAL STATEMENT, the chief contact persons for the District concerning the

2012 Bonds are:

Glen Szymoniak, Superintendent, gszymoniak@mdsd.org Cheryl Moriarty, Business Manager, cmoriarty@mdsd.org

Joint School District No. 421 (McCall–Donnelly) 120 Idaho Street McCall ID 83638

208.634.2161 | f 208.634.4075 www.mdsd.org

As of the date of this OFFICIAL STATEMENT, the chief contact person for the State concerning the State guaranty for the 2012 Bonds is:

Chris Priest, Investment Manager, chris.priest@sto.idaho.gov

Office of the Idaho State Treasurer 304 N 8th St Rm 208

Boise ID 83720 208.332.2955 | f 208.332.2961

sto.idaho.gov As of the date of this OFFICIAL STATEMENT, additional requests for information may be directed to

Zions Bank Public Finance, Salt Lake City, Utah as financial advisor to the District (the “Financial Advisor”):

5

Alan Westenskow, Vice President, alan.westenskow@zionsbank.com Cara Bertot, Financial Analyst, cara.bertot@zionsbank.com

Zions Bank Public Finance One S Main St 18th Fl

Salt Lake City UT 84133–1109 801.844.7373 | f 801.844.4484

INFORMATION REPORTING AGREEMENT The District will enter into a Disclosure Undertaking for the benefit of the Owners of the 2012 Bonds to

send certain information annually and to provide notice of certain events to the Municipal Securities Rule-making Board (“MSRB”) through its Electronic Municipal Market Access (“EMMA”) pursuant to the re-quirements of paragraph (b)(5) of Rule 15c2–12 (the “Rule”) adopted by the Securities and Exchange Com-mission under the Securities Exchange Act of 1934, as amended. No person, other than the District, has un-dertaken, or is otherwise expected, to provide continuing disclosure with respect to the 2012 Bonds. The in-formation to be provided on an annual basis, the events which will be noticed on an occurrence basis and oth-er terms of the Disclosure Undertaking, including termination, amendment and remedies, are set forth in the proposed form of Disclosure Undertaking in “APPENDIX C—PROPOSED FORM OF INFORMATION REPORTING AGREEMENT.”

The District has complied in all material respects with each and every undertaking previously entered

into by it pursuant to the Rule. Based on prior disclosure undertakings the District submits its annual financial report (“financial re-

port”) (Fiscal Year Ending June 30) and other operating and financial information on or before Decem-ber 27 (180 days from the end of the Fiscal Year). The District will submit the Fiscal Year 2012 financial report and other operating and financial information for the 2012 Bonds on or before December 27, 2012, and annually thereafter on or before each December 27.

A failure by the District to comply with the Disclosure Undertaking will not constitute a default under the

Resolution, and Owners of the 2012 Bonds are limited to the remedies provided in the Disclosure Undertak-ing. A failure by the District to comply with the Disclosure Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the 2012 Bonds in the secondary market. Any such failure may adversely affect the marketability of the 2012 Bonds.

STATE OF IDAHO GUARANTY

The Guaranty; Pledge of State Sales Tax Payment of the principal of and interest on the 2012 Bonds when due is guaranteed by the Sales Tax

Guaranty Program pursuant to the provisions of the Idaho School Bond Guaranty Act, Title 33, Chapter 53, Idaho Code and the Credit Enhancement Program pursuant to Section 57–728, Idaho Code (collectively re-ferred to herein as the “Programs”). The 2009 Legislature adopted Senate Bill 1154 which made several changes to these Programs as described below. The principal change effectuated by Senate Bill 1154 is to cre-ate a “two–tiered” program in which school districts may have outstanding up to $20 million of school bonds guaranteed by both the Sales Tax Guaranty Program and the Credit Enhancement Program and may obtain a guaranty solely by the Sales Tax Guaranty Program for bonds in excess of $20 million. House Bill 682 adopt-ed by the 2010 Legislature made additional technical changes to the Programs.

6

The 2012 Bonds are guaranteed by both Programs. Moody’s Investors Service Inc. (“Moody’s) has as-signed its “Aaa” rating to bonds that are guaranteed by both the Credit Enhancement Program and the Sales Tax Guaranty Program.

The Sales Tax Guaranty Program

Any school district may apply to the Idaho State Treasurer (the “State Treasurer”) for the State’s guaranty

of its eligible bonds. Pursuant to the Sales Tax Guaranty Program, the sales tax of the State is pledged to guarantee full and timely payment of the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on refunding bonds issued on and after March 1, 1999 for voter–approved bonds which were voted on by the electorate prior to March 1, 1999, and voter approved–bonds which were voted on by the electorate on and after March 1, 1999, as such payments shall become due (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any ad-vancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration) (the “Guaranty”). The Guaranty does not extend to the payment of any redemption premi-um. The Guaranty is good for the life of the bond, even if the State Treasurer later determines the District is ineligible for future guaranties. See “State Treasurer to Monitor District’s Fiscal Solvency” below.

In addition, the Sales Tax Guaranty Program provides that the State pledges to and agrees with the hold-

ers of bonds guaranteed under the program that the State will not alter, impair, or limit the rights vested by the program with respect to bonds until the bonds, together with applicable interest, are fully paid and discharged. However, this pledge does not preclude an alteration, impairment, or limitation if adequate provision is made by law for the protection of the holders of the bonds.

The District applied for the Sales Tax Guaranty Program and received a Certificate of Eligibility from the

State Treasurer, issued on October 19, 2012. This Certificate of Eligibility evidences the District’s eligibility for the Sales Tax Guaranty Program for one year from the date of issuance. Once the 2012 Bonds are issued pursuant to the Certificate of Eligibility, the Guaranty is in effect for as long as the 2012 Bonds are outstand-ing.

Credit Enhancement Program

If approved to participate in the Sales Tax Guaranty Program, a school district may also apply to the

Credit Enhancement Program. Pursuant to the Credit Enhancement Program, the endowment fund investment board (the “Endowment Board”) is mandated to purchase notes issued by the State for the purpose of making debt service payments under the Sales Tax Guaranty Program.

Under the Credit Enhancement Program, the following will take effect in the event moneys from the sales

tax are insufficient to pay the District's debt service payment under the Sales Tax Guaranty Program: (i) the Endowment Board may purchase on behalf of the public school endowment fund, or from other funds admin-istered by the Endowment Board, notes of the State issued by the State Treasurer under such terms as are ne-gotiated between the Endowment Board and the State Treasurer; or (ii) upon the request of the State Treasur-er, the Endowment Board will purchase on behalf of the public school endowment fund notes issued by the State Treasurer, the proceeds of which will be sufficient to pay debt service payments as they become due (the “Notes”).

The Notes will bear interest at a rate equal to the annual rate of one-year treasury bills, as published by the

Federal Reserve, plus 400 basis points, plus, for the first six months of the term of the Note, an amount, as determined by the Endowment Board, up to a maximum of 50 basis points, to cover all additional administra-tive and transaction costs related to the purchase of the Notes. The Notes will have a maximum term of one year, and may be renewed at the request of the State Treasurer. The Notes will be repaid from the District’s reimbursement payments pursuant to the Sales Tax Guaranty Program, and the State may make additional

7

payments on the Notes. The Endowment Board may require the State Treasurer to compel the District to mod-ify its fiscal practices and its general operations if the Endowment Board determines that there is a substantial likelihood that the District will not be able to make future payments.

Pursuant to the provisions of the Credit Enhancement Program, the Endowment Board will make availa-

ble $200,000,000 from the public school endowment fund for the purposes of purchasing Notes under this program, and the principal amount of bonds guaranteed by the Credit Enhancement Program may not be greater than $800,000,000. The aggregate principal amount of school district bonds outstanding that may be guaranteed by the Credit Enhancement Program may not exceed $20,000,000 per district. On Octo-ber 22, 2012, the Endowment Board issued to the District its Certificate of Approval of Credit Enhancement, which applies to the 2012 Bonds.

Currently, the District does not have any general obligation bonds outstanding that are guaranteed under

the Programs.

Guaranty Procedures The Programs are for the protection of the bondholders. Ultimate liability for the payment of the

2012 Bonds remains with the District. Accordingly, the Sales Tax Guaranty Program contains provisions, in-cluding interception of state aid to the District, possible action to compel levy of a tax sufficient to reimburse the State for any payments made to bondholders pursuant to its guaranty, and various oversight provisions to assure that the District, and not the State, will ultimately be responsible for debt service on the 2012 Bonds.

Under the Sales Tax Guaranty Program, the Superintendent of the eligible District is required to transfer

moneys sufficient for scheduled debt service payments on the 2012 Bonds to the Paying Agent at least 15 days before any principal or interest payment date for the 2012 Bonds. If the Superintendent is unable to transfer the scheduled debt service payment to the Paying Agent at least 15 days before the payment date, the Superintendent must immediately notify the Paying Agent and the State Treasurer. In addition, if the Paying Agent has not received the scheduled debt service payment at least 15 days prior to the scheduled debt service payment date for the 2012 Bonds, the Paying Agent shall notify the State Treasurer in writing at least 10 days prior to the payment date. The Sales Tax Guaranty Program further provides that if sufficient moneys have not been transferred to the Paying Agent, then the State Treasurer shall, on or before the scheduled payment date, transfer sufficient moneys to the Paying Agent to make the scheduled debt service payment. Payment by the State of a debt service payment on the 2012 Bonds discharges the obligation of the District to the bond-holders for that payment to the extent of the State’s payment, and transfers the District’s obligation for that payment to the State.

If one or more payments are made by the State Treasurer pursuant to the Sales Tax Guaranty Program, the

State Treasurer shall immediately intercept any payments from any sources of operating moneys provided by the State to the District that would otherwise be paid to the District, and apply these intercepted payments to reimburse the State until all obligations of the District to the State arising from these payments are paid in full, including interest and penalties payable pursuant to the Sales Tax Guaranty Program. The State has no obliga-tion to replace any moneys intercepted. The Sales Tax Guaranty Program obligates the District to reimburse all moneys drawn by the State Treasurer on its behalf, pay interest to the State on all moneys paid at not less than the average prime rate for national money center banks plus 1%, and to pay any additional penalties, which may be imposed by the State Treasurer pursuant to the Sales Tax Guaranty Program at a rate of not more than 5% of the amount paid by the State pursuant to its Guaranty, for each instance payment is made. If the State Treasurer determines amounts obtained pursuant to the Sales Tax Guaranty Program will not be suf-ficient to reimburse the State within one year from a payment the State makes, the State Treasurer must pur-sue any legal action against the District necessary to compel it to levy and provide tax revenues sufficient to pay debt service and to meet its repayment obligations to the State.

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The District may use property taxes or other moneys to replace intercepted funds if the moneys are de-rived from taxes originally levied to make the payment but which were not timely received by the District; taxes from a supplemental levy made to make the missed payment or to replace the intercepted moneys; mon-eys transferred from the undistributed reserve, if any, of the District, or any other source of money on hand and legally available. A District may not replace operating funds intercepted by the State with moneys col-lected and held to make payments on the 2012 Bonds if that replacement would divert moneys from the pay-ment of future debt service on the 2012 Bonds and increase the risk that the Guaranty would be called upon an additional time.

Since the inception of the Programs, the State has not been called upon to pay the principal of or inter-

est on any bonds guaranteed under the State Sales Tax Guaranty Program or the Credit Enhancement Program.

State Treasurer to Monitor District’s Fiscal Solvency

The Sales Tax Guaranty Program also charges the State Treasurer with the responsibility to monitor,

evaluate and, at least annually, report his or her findings as to the fiscal solvency of each school district. Pur-suant to the Sales Tax Guaranty Program, the State Treasurer will receive annual statements of the financial condition of the District and a copy of the complete audit of the financial statements of the District, which is prepared pursuant to Section 33–701, Idaho Code. The State Treasurer is also required to report his conclu-sions regarding the fiscal solvency of the District at least annually to the Governor, the Legislature, the En-dowment Fund Investment Board and the State Superintendent of Public Instruction. In addition, the State Treasurer must immediately report any circumstances suggesting that the District will be unable to meet its debt service obligations and immediately recommend a course of remedial action.

Status of the Programs

As of October 1, 2012, the State has guaranteed the following under the Programs: Total

Sales Tax Credit Guaranteed by Guaranty Enhancement both Programs (1)

Number of School Districts ............................ 9 65 74 Number of Bond Issues ................................... 15 100 115 Current principal outstanding guaranteed ....... $239,163,000 $442,184,286 $681,347,286

(1) This total does not include $83,945,000 for 9 pending School Bond Guarantee(s).

Source: Office of the Idaho State Treasurer.

State Of Idaho–Financial And Operating Information The State produces a Comprehensive Annual Financial Report (“CAFR”) in accordance with generally

accepted accounting principles as defined by the Government Accounting Standards Board. The State’s CAFR can be viewed at sco.idaho.gov. Such information contained on the internet shall not be considered to be a part of this OFFICIAL STATEMENT and is not provided in connection with the offering of the 2012 Bonds.

The State’s most recent official statements and information reporting for its general obligation and lease

revenue bond debt are currently on file with EMMA.

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BOND LEVY EQUALIZATION SUPPORT PROGRAM In 2002, the State created a Bond Levy Equalization Support Program (the “Bond Levy Subsidy Pro-

gram”). The Bond Levy Subsidy Program provides for a subsidy payment from the State’s Bond Levy Equal-ization Fund to school districts to offset a portion of the costs of annual bond interest and redemption pay-ments made on bonds approved at elections occurring on or after September 15, 2002 (the “Levy Subsidy”). The District’s General Obligation School Bonds, Series 2006 (the “2006 Bonds”), a portion of which are be-ing refunded by the 2012 Bonds, were authorized at an election in the District on August 2, 2006, thus making the 2006 Bonds eligible for the Bond Levy Subsidy Program. Under the Bond Levy Subsidy Program, refund-ing bonds, such as the 2012 Bonds, are eligible for Levy Subsidy payments.

Availability of the Levy Subsidy

The Levy Subsidy is designed to provide a higher benefit to those school districts with greater economic

disadvantages. To determine the amount of the average payment, the Idaho State Department of Education (the “DOE”) calculates a value index (the “Value Index”) annually for each school district based upon the following three components: (1) the district’s market value per support unit for equalization divided by two; (2) the average annual seasonally adjusted unemployment rate in the county in which a plurality of the school district’s market value for assessment purposes (the “Taxable Assessed Value”) is located, and (3) the per capita income in the county in which a plurality of the school districts Taxable Assessed Value is located. The Levy Subsidy payment to a district is determined by multiplying one, minus the district’s Value Index, times the district’s average annual principal and interest on bonded indebtedness, subject to the provisions that eve-ry school district with a Value Index of less than 1.50 will receive a minimum payment of no less than 10% of its interest payments. School districts with a Value Index of 1.50 or greater receive no Levy Subsidy. The DOE disburses Levy Subsidy payments no later than September 1 of each year for school districts in which voters have approved the issuance of qualifying bonds by no later than January 1 of that calendar year.

To be entitled to a Levy Subsidy payment from the DOE, a district is required to annually report the status

of all qualifying bonds to the DOE by January 1 of each year, including bonds approved by the voters that have not been issued. Information submitted includes the following: (1) the actual or estimated bond interest and redemption payment schedule; (2) any qualifying bond that has been paid in full; and (3) other infor-mation as may be required by the DOE.

In 2012 Legislature appropriated $17,400,000 for Levy Subsidy for Fiscal Year 2013 disbursement,

which was disbursed to qualifying schools on September 1, 2012. The Value Index is recalculated annually. There can be no assurance that the District will qualify to re-

ceive levy equalization payments from the State or that there will be sufficient funds in the Bond Levy Equali-zation Fund of the State to make payments to all eligible districts. Further, there can be no assurance that the Bond Levy Subsidy Program will not be altered, amended or discontinued in the future.

Benefit of Levy Subsidy to the District

Based on information provided by the DOE, the District’s Value Index for Fiscal Year 2012 is approxi-

mately 3.5879. The unemployment rate in the District has remained high since the beginning of the recession in 2008, but the District has a very high ratio of market value per support unit which is the largest of the three factors going into computing the Value Index, and also has per capita income higher than the state average. As a consequence the District continues to have a Value Index significantly above 1.50, and the District does not expect to fall below 1.50 and therefore does not expect to receive Levy Subsidy payments. The Value In-dex for future fiscal years (beginning with fiscal year 2013) will be recalculated annually by the DOE and provided in July, shortly after the beginning of the applicable fiscal year. Based on information provided by the District, the District’s value index for Fiscal Year 2012 is expected to exceed the 1.50 index cap. If the

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District’s Value Index is above 1.50 for any fiscal year during the repayment of the 2012 Bonds, the District will not receive a subsidy payment for that fiscal year.

The District is eligible to receive a subsidy payment beginning September 1, 2013 (the 2014 Fiscal Year)

for the 2012 Bonds if it has a Value Index below 1.50. There can be no assurance that the District will qualify to receive levy equalization payments from the State or that there will be sufficient funds in the Bond Levy Equalization Fund of the State to make payments to all eligible districts. Further, there can be no assurance that the Bond Levy Subsidy Program will not be altered, amended or discontinued in the future.

THE 2012 BONDS

General The 2012 Bonds will be dated the date of their original issuance and delivery1 (the “Dated Date”) and will

mature on August 1 of the years and in the amounts as set forth on the cover page of this OFFICIAL STATEMENT.

The 2012 Bonds will bear interest from their Dated Date at the rates set forth on the cover page of this

OFFICIAL STATEMENT. Interest on the 2012 Bonds is payable semiannually on each February 1 and Au-gust 1, commencing February 1, 2013. Interest on the 2012 Bonds will be computed on the basis of a 360–day year comprised of 12, 30–day months. U.S. Bank is the Bond Registrar and Paying Agent for the 2012 Bonds under the Resolution (in such respective capacities, the initial “Bond Registrar”).

The 2012 Bonds will be issued as fully–registered bonds, initially in book–entry form, in the denomina-

tion of $5,000 or any whole multiple thereof, not exceeding the amount of each maturity.

Plan Of Refunding The District issued the 2006 Bonds on August 2, 2006. The original proceeds of the 2006 Bonds were

used to construct and finance the costs of a new school and additional renovations within the District. Certain proceeds from the 2012 Bonds and the funds contributed by the District from the debt service

fund for the 2006 Bonds will be deposited with U.S. Bank, as Escrow Agent (the “Escrow Agent”), pursuant to an Escrow Agreement to be dated as of November 20, 2012 (the “Escrow Agreement”) to establish an ir-revocable trust escrow account (the “Escrow Account”), consisting of cash and government obligations of the United States of America.

Amounts in the Escrow Account shall be used to pay interest on all of the callable portions of the

2006 Bonds maturing on and after August 1, 2017 (the “2006 Refunded Bonds”) and to redeem the 2006 Refunded Bonds on August 1, 2016, at a redemption price of 100% of the principal amount thereof. The 2006 Refunded Bonds mature on the dates and in the amounts, and bear interest at the rates, as fol-lows:

1 The anticipated date of delivery is Tuesday, November 20, 2012.

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Scheduled Maturity Redemption CUSIP Principal Interest Redemption (August 1) Date 919278 Amount Rate Price

2017 ............................. August 1, 2016 BR1 $ 1,600,000 4.50 % 100% 2018 ............................. August 1, 2016 BS9 1,675,000 4.50 100 2019 ............................. August 1, 2016 BT7 1,750,000 4.50 100 2020 ............................. August 1, 2016 BU4 1,825,000 4.375 100 2021 ............................. August 1, 2016 BV2 1,900,000 4.40 100 2022 ............................. August 1, 2016 BW0 1,975,000 4.50 100 2023 ............................. August 1, 2016 BX8 2,075,000 4.50 100 2024 ............................. August 1, 2016 BY6 2,175,000 4.50 100 2025 ............................. August 1, 2016 BZ3 2,275,000 4.50 100 2026 ............................. August 1, 2016 CA7 2,375,000 4.50 100

Totals ...................................................................... $19,625,000 The cash and investments held in the Escrow Account will bear interest and mature in amounts sufficient

to pay (a) the interest falling due on the 2006 Refunded Bonds through August 1, 2016 and (b) the redemption price of the 2006 Refunded Bonds, as such becomes due and payable on August 1, 2016.

Certain mathematical computations regarding the sufficiency of and the yield on the investments held in

the Escrow Account will be verified by Grant Thornton LLP, Minneapolis, Minnesota. See “MISCELLANE-OUS—Escrow Verification” below.

Sources And Uses Of Funds

The sources and uses of funds in connection with the issuance of the 2012 Bonds are estimated to be as

follows: Sources:

Par amount of Bonds ................................................................................. $19,540,000.00 Original issue premium ............................................................................. 3,085,475.90 Transfer from prior issue Debt Service Fund ............................................ 344,468.39

Total ................................................................................................... $22,969,944.29

Uses:

Deposit to Escrow Account ...................................................................... $22,759,524.90 Underwriter’s discount .............................................................................. 107,189.97 Costs of Issuance (1) ................................................................................. 103,229.42

Total ................................................................................................... $22,969,944.29

(1) Includes legal fees, Financial Advisor fees, rating agency fees, Bond Registrar and Paying Agent fees, Escrow Agent fees, credit enhancement fee, escrow verification agent fees, rounding amounts and other miscellaneous costs of is-suance.

Security And Sources Of Payment The 2012 Bonds will be general obligations of the District, payable from the proceeds of ad valorem taxes

to be levied without limitation as to rate or amount on all of the taxable property in the District, fully suffi-cient to pay the 2012 Bonds as to both principal and interest.

Payment of the principal of and interest on the 2012 Bonds when due is guaranteed by the State of Idaho

pursuant to the Programs. See “STATE OF IDAHO GUARANTY” above.

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See “TAXES AND STATE FUNDING—Ad Valorem Tax System” and “STATE OF IDAHO SCHOOL FINANCE” below.

Redemption Provisions

Optional Redemption. The 2012 Bonds maturing on or after August 1, 2023, are subject to redemption at

the option of the Board on August 1, 2022 (the “First Redemption Date”), and on any date thereafter prior to maturity, in whole or in part, from such maturities or parts thereof as may be selected by the Board, and at random within each maturity if less than the full amount of any maturity is to be redeemed, upon not less than 30 days’ prior written notice, at a redemption price equal to 100% of the principal amount of the 2012 Bonds to be redeemed, plus accrued interest thereon to the redemption date. 2012 Bonds maturing on or prior to the First Redemption Date are not subject to optional redemption.

Selection for Redemption. If less than all 2012 Bonds of any maturity are to be redeemed, the particular

2012 Bonds or portion of 2012 Bonds of such maturity to be redeemed will be selected at random by the Bond Registrar in such manner as the Bond Registrar in its discretion may deem fair and appropriate. The portion of any registered 2012 Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or a whole multiple thereof, and in selecting portions of such 2012 Bonds for redemption, the Bond Registrar will treat each such 2012 Bond as representing that number of 2012 Bonds of $5,000 de-nomination that is obtained by dividing the principal amount of such 2012 Bond by $5,000.

Notice of Redemption. Notice of redemption will be given by the Bond Registrar by registered or certified

mail, not less than 30 nor more than 45 days prior to the redemption date, to the owner, as of the Record Date, as defined under “THE 2012 BONDS—Registration And Transfer” below, of each 2012 Bond that is subject to redemption, at the address of such owner as it appears on the registration books of the Board kept by the Bond Registrar, or at such other address as is furnished to the Bond Registrar in writing by such owner on or prior to the Record Date. Each notice of redemption will state the Record Date, the principal amount, the re-demption date, the place of redemption, the redemption price and, if less than all of the 2012 Bonds are to be redeemed, the distinctive numbers of the 2012 Bonds or portions of 2012 Bonds to be redeemed, and will also state that the interest on the 2012 Bonds in such notice designated for redemption will cease to accrue from and after such redemption date and that on the redemption date there will become due and payable on each of the 2012 Bonds to be redeemed the principal thereof and interest accrued thereon to the redemption date.

Each notice of optional redemption may further state that such redemption will be conditioned upon the

receipt by the Paying Agent, on or prior to the date fixed for redemption, of moneys sufficient to pay the prin-cipal of and premium, if any, and interest on such 2012 Bonds to be redeemed and that if such moneys have not been so received the notice will be of no force or effect and the Board will not be required to redeem such 2012 Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made and the Bond Registrar will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so re-ceived. Any such notice mailed will be conclusively presumed to have been duly given, whether or not the Bondowner receives such notice. Failure to give such notice or any defect therein with respect to any 2012 Bond will not affect the validity of the proceedings for redemption with respect to any other 2012 Bond.

In addition to the foregoing notice, further notice of such redemption will be given by the Bond Registrar

to DTC and certain registered securities depositories and national information services as provided in the Resolution, but no defect in such further notice nor any failure to give all or any portion of such notice will in any manner affect the validity of a call for redemption if notice thereof is given as prescribed above and in the Resolution.

For so long as a book–entry system is in effect with respect to the 2012 Bonds, the Bond Registrar will

mail notices of redemption to DTC or its successor. Any failure of DTC to convey such notice to any Direct Participants or any failure of the Direct Participants or Indirect Participants to convey such notice to any

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Beneficial Owner will not affect the sufficiency of the notice or the validity of the redemption of 2012 Bonds. See “THE 2012 BONDS—Book–Entry System” below.

Registration And Transfer

In the event the book–entry system is discontinued, any 2012 Bond may, in accordance with its terms, be

transferred, upon the registration books kept by the Bond Registrar, by the person in whose name it is regis-tered, in person or by such owner’s duly authorized attorney, upon surrender of such 2012 Bond for cancella-tion, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Bond Registrar. No transfer will be effective until entered on the registration books kept by the Bond Regis-trar. Whenever any 2012 Bond is surrendered for transfer, the Bond Registrar will authenticate and deliver a new fully–registered 2012 Bond or 2012 Bonds of the same series, designation, maturity and interest rate and of authorized denominations duly executed by the Board, for a like aggregate principal amount.

The 2012 Bonds may be exchanged at the office of the Bond Registrar for a like aggregate principal

amount of fully–registered 2012 Bonds of the same series, designation, maturity and interest rate of other au-thorized denominations.

For every such exchange or transfer of the 2012 Bonds, the Bond Registrar must make a charge sufficient

to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or transfer of the 2012 Bonds.

The Bond Registrar will not be required to transfer or exchange any 2012 Bond (a) after the Record Date

with respect to any interest payment date to and including such interest payment date, or (b) after the Record Date with respect to any redemption of such 2012 Bond. The term “Record Date” means (i) with respect to each interest payment date, the day that is 15 days preceding such interest payment date, or if such day is not a business day for the Bond Registrar, the next preceding day that is a business day for the Bond Registrar, and (ii) with respect to any redemption of any 2012 Bond such Record Date as is specified by the Bond Regis-trar in the notice of redemption, provided that such Record Date will be not less than 15 calendar days before the mailing of such notice of redemption.

The Board, the Bond Registrar and the Paying Agent may treat and consider the person in whose name

each 2012 Bond is registered in the registration books kept by the Bond Registrar as the holder and absolute owner thereof for the purpose of receiving payment of, or on account of, the principal or redemption price thereof (on the 2012 Bonds) and interest due thereon and for all other purposes whatsoever.

Book–Entry System

DTC will act as securities depository for the 2012 Bonds. The 2012 Bonds will be issued as fully–

registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully–registered Bond certificate will be is-sued for each maturity of the 2012 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See “APPENDIX D—BOOK–ENTRY SYSTEM” for a more detailed discussion of the book–entry system and DTC.

The District, the Bond Registrar and the Paying Agent may treat DTC (or its nominee) as the sole and ex-

clusive owner of the 2012 Bonds registered in its name for the purpose of payment of the principal of and in-terest on the 2012 Bonds, giving any notice permitted or required to be given to registered owners under the Resolution, registering the transfer of Bonds, obtaining any consent or other action to be taken by registered owners and for all other purposes whatsoever, and shall not be affected by any notice to the contrary. The Dis-trict, the Bond Registrar and the Paying Agent shall not have any responsibility or obligation to any Partici-pant, any person claiming a beneficial ownership interest in the 2012 Bonds under or through DTC or any Participant, or any other person which is not shown on the registration books of the District.

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So long as Cede & Co. is the registered Owner of the 2012 Bonds, as nominee of DTC, references herein and in the Resolution to the Bondowners or registered Owners of the 2012 Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of the 2012 Bonds.

Neither the District, the Bond Registrar nor the Paying Agent will have any responsibility or obligation to

any Participants of DTC, or the persons for whom they act as nominees, with respect to the payments to or the providing of notice to the Participants, or Beneficial Owners of the 2012 Bonds.

In the event the book–entry system is discontinued, interest on the 2012 Bonds will be payable by check

or draft of the Paying Agent, mailed to the registered owners thereof at the addresses shown on the registra-tion books of the District kept for that purpose by the Bond Registrar. The principal of all 2012 Bonds will be payable at the principal office of the Paying Agent.

Debt Service On The 2012 Bonds

The 2012 Bonds Payment Date Principal Interest Period Total Fiscal Total

February 1, 2013 ............... $ 0.00 $ 148,952.08 $ 148,952.08 $ 148,952.08 August 1, 2013 .................. 50,000.00 377,625.00 427,625.00 February 1, 2014 ............... 0.00 377,125.00 377,125.00 804,750.00 August 1, 2014 .................. 50,000.00 377,125.00 427,125.00 February 1, 2015 ............... 0.00 376,625.00 376,625.00 803,750.00 August 1, 2015 .................. 50,000.00 376,625.00 426,625.00 February 1, 2016 ............... 0.00 376,125.00 376,125.00 802,750.00 August 1, 2016 .................. 50,000.00 376,125.00 426,125.00 February 1, 2017 ............... 0.00 375,625.00 375,625.00 801,750.00 August 1, 2017 .................. 1,605,000.00 375,625.00 1,980,625.00 February 1, 2018 ............... 0.00 351,550.00 351,550.00 2,332,175.00 August 1, 2018 .................. 1,660,000.00 351,550.00 2,011,550.00 February 1, 2019 ............... 0.00 326,650.00 326,650.00 2,338,200.00 August 1, 2019 .................. 1,715,000.00 326,650.00 2,041,650.00 February 1, 2020 ............... 0.00 292,350.00 292,350.00 2,334,000.00 August 1, 2020 .................. 1,790,000.00 292,350.00 2,082,350.00 February 1, 2021 ............... 0.00 247,600.00 247,600.00 2,329,950.00 August 1, 2021 .................. 1,875,000.00 247,600.00 2,122,600.00 February 1, 2022 ............... 0.00 200,725.00 200,725.00 2,323,325.00 August 1, 2022 .................. 1,960,000.00 200,725.00 2,160,725.00 February 1, 2023 ............... 0.00 151,725.00 151,725.00 2,312,450.00 August 1, 2023 .................. 2,070,000.00 151,725.00 2,221,725.00 February 1, 2024 ............... 0.00 99,975.00 99,975.00 2,321,700.00 August 1, 2024 .................. 2,155,000.00 99,975.00 2,254,975.00 February 1, 2025 ............... 0.00 67,650.00 67,650.00 2,322,625.00 August 1, 2025 .................. 2,225,000.00 67,650.00 2,292,650.00 February 1, 2026 ............... 0.00 34,275.00 34,275.00 2,326,925.00 August 1, 2026 .................. 2,285,000.00 34,275.00 2,319,275.00 2,319,275.00

Totals ......................... $19,540,000.00 $7,082,577.08 $26,622,577.08

JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY) VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

General

The District, established in 1950, is located in the west central Idaho mountains in Long Valley. The Dis-

trict covers an area of 2,423 square miles, with over 98% of the District located in the County. The remainder

15

of the District is located in Adams County. The County had 9,862 residents according to the 2010 Census Bu-reau and ranked as the 29th most populous county (out of 44 counties). The 2011 estimate by the Bureau of the Census estimates the County’s July 1, 2011 population at 9,638 people. The District’s headquarters are locat-ed in the City. The City, was incorporated in 1911, and had 2,924 residents according to the 2011 estimate by the Bureau of the Census.

The District estimates that about 98% of the District lies in Valley County, with less than 2% located in

Adams County. According to the U.S. Census Bureau, the District’s 2010 population was 7,494. The District operates schools in the communities of the County (two elementary schools, one middle

school, one alternative school, and one high school); and the Valley County Juvenile Detention (grades 7–12). The October 1 enrollment of the District is as follows:

% Increase School Year Total Over Prior Year

2012 (1) ................................... 940 1.8% 2011 ........................................ 923 (2.4) 2010 ........................................ 946 1.6 2009 ........................................ 931 (5.8) 2008 ........................................ 988 (2.1) 2007 ........................................ 1,009 (6.9) 2006 ........................................ 1,084 0.9 2005 ........................................ 1,074 6.1 2004 ........................................ 1,012 6.6 2003 ........................................ 949 (3.7) 2002 ........................................ 985 (0.0)

(1) Estimated by the District.

(Source: Idaho Department of Education.)

Form Of Government Board of Trustees. The determination of policies for the management of the District is the responsibility

of its Board the members of which are elected by the qualified electors within the District. The District is di-vided into five representative zones, and a member of the Board is elected from each of the five zones. Mem-bers serve four–year terms, which are staggered to provide continuity.

The Board is empowered, among other things, to: (i) implement core curriculum, (ii) administer tests

which measure the progress of each student, and create plans to improve the student’s progress, (iii) implement training programs for school administrators, (iv) purchase, sell and improve school sites, buildings and equipment; (v) construct and furnish school buildings; (vi) establish, locate and maintain ele-mentary, secondary and applied technology schools; (vii) maintain school libraries; (viii) make and enforce all necessary rules and regulations for the control and management of the public schools in the District; (ix) adopt bylaws and rules for its own procedure; and (x) appoint a superintendent of schools, business ad-ministrator, and such officers or employees as are deemed necessary for the promotion of the interests of the schools.

Superintendent. The Superintendent of Schools (the “Superintendent”) is appointed by the Board and is

responsible for the actual administration of the schools in the District. The powers and duties of the Superin-tendent are prescribed by the Board. Pursuant to State law, the Superintendent is required to prepare and sub-mit to the Board an annual budget itemizing anticipated revenues and expenditures for the next school year. The current Superintendent is employed by the Board for a three–year term.

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Business Manager. The Business Manager (the “Business Manager”) is appointed by the Board and re-ports to the Superintendent. The duties of the Business Manager, among others, are to (i) keep an account and prepare and publish an annual statement of moneys received by the District and amounts paid out of the treas-ury and (ii) have custody of the records and papers of the Board. The Business Manager is the custodian of all moneys belonging to the District and is required to prepare and submit to the Board a monthly report of the receipts and disbursements of the Business Manager’s office.

Current members of the Board, the Superintendent and the Business Manager and their respective terms

in office are as follows:

Years Expiration of Office Person in Service Current Term/Contract

Chairperson ...................................... Kathy Deinhardt–Hill 3 July 2013 Vice Chairperson ............................. Pattie Soucek 6 July 2015 Trustee ............................................. Mary Hart 8 July 2015 Trustee ............................................. Neal Thomson 12 July 2013 Trustee ............................................. Jon Walker 1 July 2015

Superintendent ................................. Dr. Glen Szymoniak 4 Appointed Business Manager ............................ Cheryl Moriarty 3 Appointed

Employee Workforce; Other Post–Employment Benefits; Pension System

The District currently employs approximately 150 full–time employees. The District is a member of the

Idaho State Public Employees’ Retirement System (“PERSI”). The District also participates in a deferred compensation plan. See “APPENDIX A—BASIC FINANCIAL STATEMENTS AND REQUIRED SUP-PLEMENTARY INFORMATION FOR FISCAL YEAR 2012–Notes To The Financial Statements–Note G. Retirement Plan.”

Other Post–Employment Benefits. The District does not pay for any post–employment benefits for retir-

ees. However, under Governmental Accounting Standards Board (GASB) Statement No. 45–Accounting and Financial Reporting by Employers for Post–employment Benefits Other Than Pensions, the District will have to report a liability for the “implied rate subsidy” for retirees. Retirees are allowed to stay on the District’s insurance policy until they qualify for Medicare. The retiree must pay the full cost of the premium, but pays the same rate as an active employee. The District has not completed the process of evaluating the financial impact that will result from the adoption of GASB Statement No. 45. As of the date of this OFFICIAL STATEMENT, the District does not anticipate that the impact will be significant to the District’s overall fi-nancial position. See “APPENDIX A—BASIC FINANCIAL INFORMATION AND REQUIRED SUPPLE-MENTARY INFORMATION FOR FISCAL YEAR 2012–Notes To The Financial Statements–Note G. Re-tirement Plan.”

Pension System. The District’s employees are covered under PERSI. PERSI is the administrator of a mul-

tiple–employer cost–sharing defined benefit public employee retirement system. A retirement board (the “PERSI Board”), appointed by the governor and confirmed by the legislature, manages the system which in-cludes selecting investment managers to direct the investment, exchange and liquidation of assets in the man-aged accounts and to establish policy for asset allocation and other investment guidelines. The retirement board is charged with the fiduciary responsibility of administering the plan.

PERSI membership is mandatory for eligible employees of participating employers. Employees must be:

(i) working 20 hours per week or more; (ii) teachers working a half–time contract or greater; or (iii) persons who are elected or appointed officials. Membership is mandatory for State agency and local school district employees, and membership by contract is permitted for participating political subdivisions such as cities and counties. On July 1, 2011, PERSI had 65,798 active members, 25,489 inactive members (of whom 10,468 are entitled to vested benefits), and 35,334 annuitants. PERSI collects contributions from employees and employ-

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ers to fund retirement, disability, death and separation benefits, as provided by Chapter 13, Title 59, and Idaho Code. As of July 1, 2011 there were 737 public employers in Idaho who were PERSI members.

As of July 1, 2011, PERSI’s actuarial value of assets total $11.36 billion and the actuarial liabilities fund-

ed by PERSI total $12.6 billion. This means that as of July 1, 2011 PERSI is 90.2% funded. GASB State-ment 25 (Reporting Standards for defined benefit pension plans) has replaced Projected Benefits Obligations as the measure of pension plan funding status. As required by GASB Statement 25, the PERSI Schedule of Funding Progress shows a Funded Ration of 90.2% of the PERSI Base Plan. The funded ratio includes the effect of a mandated cost of living adjustment (“COLA”) but not the additional discretionary COLA. The Schedule of Employer Contributions shows that PERSI employers have contributed at least 100% of the Ac-tuarially Required Contributions.

The employer contribution rate in effect on July 1, 2011 is 10.39% of pay for General Members and

10.73% of pay for Police Officer/Firefighter Members. The employee contribution rates are 6.23% of pay for General Members and 7.69% of pay for Police Officer/Firefighter Members.

Year of Change Total Rate (1)

Member Rate

Employer Rate

Member Rate

Employer Rate

2004 16.84% 7.65% 10.73% 6.23% 10.39%2008 16.88 7.65 10.73 6.23 10.392009 16.89 7.69 10.73 6.23 10.392010 16.89 7.69 10.73 6.23 10.392011 16.89 7.69 10.73 6.23 10.39

Fire and Police General and Teachers

Historical Changes in Contribution Rates

(1) Note that the actual weighted average total rates may differ slightly from these amounts due to shifts in the projected future sala-ries between Fire and Police together with General and Teacher members.

(Source: Public Employee Retirement System of Idaho.) PERSI general member contributions required and paid were $278,921, $287,266, and $285,350 for the

three years ended June 30, 2011, 2010 and 2009, respectively. The District’s employer contributions required and paid were $708,648, $748,648 and $718,029 for the

three years ended June 30, 2012, 2011 and 2010, respectively.

Actuarial Valuation and Funding Annual actuarial valuations for PERSI are provided by the private actuarial firm Milliman, which has

provided the actuarial valuations for PERSI since PERSI’s inception. As a result of the statutory requirement that the amortization period for the unfunded actuarial liability be 25 years or less, contribution rate increases for the three years beginning July 1, 2011, as proposed by the actuary, were reviewed and approved by the Retirement Board on December 8, 2009 and are shown below:

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General/ Teacher

Fire/ Police

General/ Teacher

Fire/ Police

Contribution Rates: 6.23% 7.69% 10.39% 10.73%

Planned Contribution Rates:Effective July 1, 2012 (1) 6.79 8.36 11.32 11.66Effective July 1, 2013 7.34 9.03 12.24 12.58Effective July 1, 2014 8.19 10.04 13.65 13.99

Member Employer

Contribution Rate Increases

(1) The proposed rate increase has been postponed until 2013, and each subsequent increase has been correspondingly postponed one year.

Source: Public Retirement System of Idaho 2011 Comprehensive Report for Fiscal Year Ended June 30, 2011. See “APPENDIX A—BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY

INFORMATION FOR FISCAL YEAR 2012–Notes To The Financial Statements–Note G. Retirement Plan.”

Risk Management The District manages its risks through the purchase of individual insurance policies through a commercial

insurance company. The District has flood and earthquake protection included in its insurance policies. As of the date of this OFFICIAL STATEMENT, all policies are current and in force. The District believes its risk management policies and coverages are normal and within acceptable coverage limits for the type of services the District provides.

Investment Of Funds

Chapter 12 of Title 67, Idaho Code, provides authorization for the investment of fund as well as specific

direction as to what constitutes an allowable investment. District procedures are consistent with the Idaho Code. The Code limits investments to the following general types: (i) certain revenue bonds, general obliga-tion bonds, local improvement district bonds and registered warrants of State and local governmental entities; (ii) time deposits accounts and tax anticipation and interest–bearing note; (iii) bonds, treasury bills, debentures or other similar obligations issued or guaranteed by agencies or instrumentalities of the government of the State of Idaho or the United states; and (iv) repurchase agreements.

Local governments, including the District, are also authorized to invest in the Local Government Invest-

ment Pool (“LGIP”), which is managed by the Idaho State Treasurer’s Office. Information on the LGIP in-vestments is available from the Idaho State Treasurer. The District does invest in the LGIP.

Investments are stated at cost, except for investments in the deferred compensation agency fund, which

are reported at market value. Interest income on such investments is recorded as earned in the General Fund of the District unless otherwise specified by law.

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Population

The % The % City Over Prior Period County Over Prior Period

2011 Estimate.................... 2,991 0.8% 9,638 (2.3)%

2010 Census ...................... 2,968 42.4% 9,862 28.9 2000 Census ...................... 2,084 3.9 7,651 25.2 1990 Census ...................... 2,005 (8.4) 6,109 9.0 1980 Census ...................... 2,188 24.5 5,604 55.3 1970 Census (1) ................ 1,758 23.5 3,609 (1.5)

(1) 1970 percent change as compared to 1960 Census.

(Source: U.S. Department of Commerce, Bureau of the Census.)

Economic Indicators of the County

Per Capita, Total Personal Income and Median Income

2010 2009 2008 2007 2006 Per Capita Income:

$35,395

Valley County $34,365 $32,720 $35,940 $36,014 % change from prior year 5.0% (9.0)% (0.2)% 1.7% 3.8%

State of Idaho $31,897 $30,997 $33,110 $32,607 $31,493 % change from prior year 2.9% (6.4)% 1.5% 3.5% 6.6%

Total Personal Income (in 000’s): Valley County $336,225 $334,323 $353,348 $357,579 $335,545

% change from prior year 0.6% (5.4)% (1.2)% 6.6% 12.1% State of Idaho $50,113,859 $48,182,944 $50,800,957 $49,076,810 $46,252,858

% change from prior year 4.0% (5.2)% 3.5% 6.1% 9.6%

Median Income: Valley County $45,248 $47,457 $50,798 $50,868 $42,582

% change from prior year (4.7)% (6.6)% (0.1)% 19.5% (2.0)% State of Idaho $43,259 $44,644 $47,561 $46,136 $42,846

% change from prior year (3.1)% (6.1)% 3.1% 7.7% 3.8%

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

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Largest Employers (1) The following is a list of the largest employers in the County:

Firm/Location Business Employees

Brundage Mountain Resort (McCall) ................ Resorts 150–250

The District (McCall/Donnelly) ......................... Education 130–225

Valley County (McCall) .................................... Local government administration 100–150 U.S. Forest Service (McCall) ............................. Administration of conservation programs 100–150 Cascade School District No. 422. (Cascade) ..... Education 100–150

City of McCall .................................................. Local government administration 50–100 Ridley’s Family Markets (McCall) .................... Supermarkets and other grocery 50–100

Cascade Rural Fire Protection District ............... Fire protection 20–50 City of Cascade .................................................. Local government administration 20–50 Donnelly Rural Fire Protection District ............. Fire protection 20–50 Idaho Dept. of Fish and Game (county–wide) ... Administration of conservation programs 20–50 Lumbermen’s Building Center (McCall) ........... Home center 20–50 McCall Fire Protection District .......................... Fire protection 20–50 Natural Resources Conservation (Cascade) ....... Administration of conservation programs 20–50 Rite Aid (McCall) .............................................. All other general merchandise stores 20–50 The Ashley Inn (Cascade) .................................. Hotels (except casino hotels) and motels 20–50 Valley County Hospital (Cascade) ..................... General medical and surgical hospital 20–50

(1) Information as of calendar year 2011.

(Source: Idaho Department of Labor, only Idaho businesses that have granted permission are included.)

Labor Market Data of the County and Employment by Industry (1)

2011 2010 2009 2008 2007

Total civilian work force .............................................. 4,608 4,625 4,634 4,786 5,006 Unemployed ................................................................. 699 730 590 400 194 Percent of labor force unemployed .............................. 15.2 15.8 12.7 8.4 3.9 Total employment ........................................................ 3,910 3,895 4,044 4,386 4,812

Total covered wages .................................................... 3,682 3,614 3,788 4,344 4,760

Agriculture ................................................................... 85 47 105 82 82 Mining .......................................................................... 17 18 11 13 27 Construction ................................................................. 247 261 296 491 688 Manufacturing .............................................................. 42 44 53 63 64 Trade, Utilities, and Transportation ............................. 648 624 628 695 750 Information .................................................................. 40 45 43 42 47 Financial activities ....................................................... 180 202 213 235 267 Professional and Business Services ............................. 108 120 136 203 238 Educational and Health Services.................................. 327 203 181 198 188 Leisure and Hospitality ................................................ 907 805 863 1,079 1,214 Other Services .............................................................. 114 121 103 110 103 Government.................................................................. 967 1,124 1,156 1,133 1,092

(1) All amounts shown are annual averages

(Source: Idaho Department of Labor.)

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Annual New Privately–Owned Residential Building Permits Within the County

Reported only Construction Year Buildings Units Cost

2011 ...................................................... 10 10 $ 2,335,398 2010 ...................................................... 4 4 1,077,609 2009 ...................................................... 47 47 9,564,264 2008 ...................................................... 71 71 15,605,171 2007 ...................................................... 132 138 32,116,142

(Source: U.S. Census Bureau, website: http://censtats.census.gov.)

Rate Of Unemployment—Annual Average

Valley State United Year County (1) of Idaho (1) States

2012 (2) ............................ 14.6% 7.4% 8.1%

2011 ................................. 15.2 8.7 9.0 2010 ................................. 15.8 8.8 9.6 2009 ................................. 12.7 7.4 9.3 2008 ................................. 8.4 4.7 5.8 2007 ................................. 3.9 3.0 4.6

(1) Source: State of Idaho Department of Labor. (2) Preliminary; subject to change. August 2012 only, seasonally adjusted.

(Source: U.S Bureau of Labor Statistics.)

DEBT STRUCTURE OF JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY) VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

Outstanding General Obligation Bonded Indebtedness

Original Current Principal Final Principal Series Purpose Amount Maturity Date Outstanding

2012 (1) ............... Refunding $19,540,000 August 1, 2026 $19,540,000 2006 (2) (3) ......... School building 28,500,000 August 1, 2016 (4) 5,750,000

Total Outstanding Direct Debt ...................................................................................... $25,290,000

(1) For purposes of this OFFICIAL STATEMENT, the 2012 Bonds will be considered issued and outstanding. Rated “Aaa” (State of Idaho Guaranty insured; “Aa2” underlying) by Moody’s as of the date of this OFFICIAL STATE-MENT.

(2) Rated “Aa2” underlying by Moody’s, as of the date of this OFFICIAL STATEMENT. These bonds are insured by Financial Guaranty Insurance Company.

(3) Portions of these bonds have been refunded by the 2012 Bonds. (4) Final maturity date after these bonds have been refunded by the 2012 Bonds.

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Other Financial Considerations Other than the outstanding general obligation bonds, the District has no other long–term debt or capital

leases outstanding.

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Series 2012 Series 2006 Totals$19,540,000 $28,500,000 Total Total Total

Principal Interest Principal Interest Principal Interest Debt Service

2012..................... 0$ 0$ 1,100,000$ 1,215,531$ 1,100,000$ 1,215,531$ 2,315,531$

2013..................... 0 148,952 1,275,000 725,316 1,275,000 874,268 2,149,2682014..................... 50,000 754,750 1,350,000 228,375 1,400,000 983,125 2,383,1252015..................... 50,000 753,750 1,400,000 166,500 1,450,000 920,250 2,370,2502016..................... 50,000 752,750 1,475,000 101,813 1,525,000 854,563 2,379,5632017..................... 50,000 751,750 1,525,000 34,313 1,575,000 786,063 2,361,063

2018..................... 1,605,000 727,175 0 0 (1) 1,605,000 727,175 2,332,1752019..................... 1,660,000 678,200 0 0 (1) 1,660,000 678,200 2,338,2002020..................... 1,715,000 619,000 0 0 (1) 1,715,000 619,000 2,334,0002021..................... 1,790,000 539,950 0 0 (1) 1,790,000 539,950 2,329,9502022..................... 1,875,000 448,325 0 0 (1) 1,875,000 448,325 2,323,325

2023..................... 1,960,000 352,450 0 0 (1) 1,960,000 352,450 2,312,4502024..................... 2,070,000 251,700 0 0 (1) 2,070,000 251,700 2,321,7002025..................... 2,155,000 167,625 0 0 (1) 2,155,000 167,625 2,322,6252026..................... 2,225,000 101,925 0 0 (1) 2,225,000 101,925 2,326,9252027..................... 2,285,000 34,275 0 0 (1) 2,285,000 34,275 2,319,275

19,540,000 7,082,577 8,125,000 2,471,847 27,665,000 9,554,424 37,219,424

(1) Principal and interest have been refunded by the 2012 Bonds.

Debt Service Schedule of Outstanding General Obligation Bonds by Fiscal Year

Fiscal Year

Ending

June 30

Totals.................

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Overlapping General Obligation Debt

Entity’s (1) District’s District’s General District’s 2012 Taxable Portion of Tax- Per- Obligation Portion of Taxing Entity Value able Value centage Debt G.O. Debt

Overlapping: Adams County ......... $ 397,696,197 $ 16,896,246 4.2% $985,000 $ 41,370 Valley County .......... 2,702,109,827 1,930,750,462 84.5 515,000 435,175

Total Overlapping ................................................................................................................. 476,545

Underlying Underlying debt ....... .............................. .............................. .......... ................................... 0

Total Underlying ................................................................................................................... 0

Total Overlapping and Underlying General Obligation Debt ............................................... $476,545

Total Overlapping General Obligation Debt ....................................................................... $ 476,545 Total Direct General Obligation Bonded Indebtedness ...................................................... 25,290,000

Total Direct and Overlapping General Obligation Debt ..................................................... $25,766,545

(1) Taxable value used in this table excludes homeowners exemption and urban renewal increment.

Debt Ratios

The following table sets forth the ratios of general obligation debt that is expected to be paid from taxes

levied specifically for such debt and not from other revenues over the market value of property within the Dis-trict and the population of the District. The State’s general obligation debt is not included in the debt ratios because the State currently levies no property tax for payment of general obligation debt.

To 2012 To 2010 To 2012 Full Population Taxable Market Estimate Per Value (1) Value (2) Capita (3)

Direct General Obligation Debt ...................................... 1.10% 1.02 % $3,374

Direct and Overlapping General Obligation Debt .......... 1.12 1.04 3,438

(1) Based on a 2012 Net Taxable Market Value of $2,301,808,035, which value excludes homeowners’ exemptions and urban renewal increment.

(2) Based on a 2012 Full Taxable Value of $2,482,774,430, which value includes homeowners’ exemptions and urban renewal increment.

(3) Based on a 2010 District population estimate of 7,494 (Source: The US Census Bureau.) (Source: State Tax Commission as to full and market values.)

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General Obligation Legal Debt Limit And Additional Debt Incurring Capacity Section 33–1103, Idaho Code, establishes limits on bonded indebtedness for school districts in Idaho. The

general obligation indebtedness of the District is limited by State law to 5% of the market value of taxable property in the District. The legal debt limit and additional debt incurring capacity of the District are based on the full taxable value for 2012, and are calculated as follows:

2012 Full Taxable Value ......................................................................................... $2,482,774,430

“Full Taxable Value” time 5% equals the “Debt Limit” .......................................... $297,932,932 Less: current outstanding general obligation debt .................................................... (25,290,000)

Estimated additional debt incurring capacity ........................................................... $272,642,932

No Defaulted Obligations The District has never failed to pay principal of and interest on its bond obligations when due.

FINANCIAL INFORMATION REGARDING JOINT SCHOOL DISTRICT NO. 421 (McCALL–DONNELLY)

VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

Fund Structure; Accounting Basis The accounting policies of the District conform to all generally accepted accounting principles for gov-

ernmental units in general and the State’s school districts’ accounting policies in particular. The accounts of the District are organized on the basis of funds or groups of accounts, each of which is considered to be a sep-arate set of self–balancing accounts that comprise its assets, liabilities, fund equity, revenues and expendi-tures. District resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped in the financial statements. See “APPENDIX A—BASIC FINANCIAL STATEMENTS AND RE-QUIRED SUPPLEMENTARY INFORMATION FOR FISCAL YEAR 2012–Notes To The Financial State-ments–Note A—Summary of Significant Accounting Policies” below.

Budgets And Budgetary Accounting

The District operates within the budget requirements for school districts as specified by State law and as

interpreted by the State Superintendent of Public Instruction. No later than 28 days prior to its annual meeting (the annual meeting is the date of its regular July meeting in each year) the board of trustees of each school district shall have prepared a budget, in form prescribed by the state superintendent of public instruction, and shall have called and caused to be held a public hearing thereon, and at such public hearing, or at a special meeting held no later than 14 days after the public hearing, shall adopt a budget for the ensuing year.

Undistributed Reserve in School District Budget A board of trustees of any school district may create and establish a general fund contingency reserve

within the annual school district budget. The general fund contingency reserve may not exceed 5% of the total general fund budget, or the equivalent value of one “support unit” as defined and described under the Idaho Code. Disbursements from said fund may be made by resolution from time to time as the board of trustees determines necessary for contingencies that may arise. The balance of said fund shall not be accumulated be-

26

yond the budgeted fiscal year. If any money remains in the contingency reserve it shall be treated as an item of income in the following year’s budget.

Financial Summaries

The summaries contained herein were extracted from the District’s basic financial statements and required

supplementary information for Fiscal Years 2008 through 2012. The summaries have not been audited. See “APPENDIX A—BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTAL INFOR-MATION FOR FISCAL YEAR 2012” below.

The District’s Annual Financial Report for Fiscal Years 2008 through 2012 complies with the require-

ments of the Governmental Accounting Standards Board Statement No. 34 (“GASB 34”). The summaries, from year to year, may not be comparable due to changes in accounting procedures that were necessary to comply with GASB 34.

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2012 2011 2010 2009 2008Assets

Current AssetsCash & investments………………………………………… 7,620,880$ 8,717,581$ 9,766,581$ 4,322$ 282,317$ Investments………………………………………………… – – – 15,580,984 26,824,726Receivables

Local sources……………………………………..……… 3,307,822 3,648,433 3,192,010 2,953,291 2,918,284State sources……………………………………………… 73,119 770,187 571,592 595,218 607,623Federal sources…………………………………………… 527,604 439,931 347,679 134,026 71,482

Total current assets……………………………………… 11,529,425 13,576,132 13,877,862 19,267,841 30,704,432Noncurrent Assets

Nondepreciable capital assets……………………………… 35,951,835 33,880,583 33,045,930 – – Depreciable net capital assets……………………………… 3,910,692 4,187,372 4,489,071 31,141,263 17,884,138

Total assets…………………………………… 51,391,952$ 51,644,087$ 51,412,863$ 50,409,104$ 48,588,570$

Liabilities: Current liabilities Accounts payable……………………………………………… 71,801$ 105$ 335,262$ 200,000$ 1,152,447$ Salaries and benefits…………………………………………. 1,109,258 1,102,633 969,003 1,032,159 1,054,544Deferred revenue……………………………………………… 249,661 230,336 284,373 85,716 34,927Accrued interest on long–term debt…………………………… 496,617 516,325 516,325 529,067 539,790Current portion of long–term debt……………………………… 1,275,000 1,100,000 350,000 825,000 705,000

Total current liabilities……………………………………… 3,202,337 2,949,399 2,454,963 2,671,942 3,486,708Noncurrent liabilities:

Long–term debt–net of current portion……………………… 25,375,000 26,650,000 27,750,000 28,100,000 28,925,000Total liabilities………………………………… 28,577,337 29,599,399 30,204,963 30,771,942 32,411,708

Net Assets: Invested in capital assets, net of related

debt………………………………………………………… 12,715,910 9,801,630 8,918,676 1,687,196 (12,285,652)Restricted for:

Special programs…………..………………………………… 347,189 546,271 736,213 815,904 1,207,216Debt service………………………………………………… 2,506,427 2,361,824 1,617,688 2,089,159 2,215,952Capital projects…………..………………………………… 3,613,076 5,318,277 4,637,960 10,322,857 21,593,373

Unrestricted………………...………………………………… 3,632,013 4,016,686 5,297,363 4,722,046 3,445,973

Total net assets……………………..………… 22,814,615 22,044,688 21,207,900 19,637,162 16,176,862

Total liabilities and net assets………………… 51,391,952$ 51,644,087$ 51,412,863$ 50,409,104$ 48,588,570$

(Source: Information extracted from the District's basic financial statements and required supplementary information which have been audited

Joint School District No. 421

Statement of Net Assets

Primary Government

(This summary has not been audited)

Fiscal Year Ended June 30

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2012 2011 2010 2009 2008Governmental activities

Instructional programs:Elementary………………………………………………… (1,997,821)$ (2,144,421)$ (1,962,563)$ (1,859,586)$ (1,858,387)$ Secondary………………………………………………… (2,752,910) (2,891,675) (2,779,682) (2,848,328) (2,891,885)Alternative………………………………………………… (226,575) (201,519) (217,990) (196,705) (219,813)Exceptional child………………………………………… (535,954) (551,590) (656,649) (634,714) (609,782)Gifted and talented………………………………………… (33,973) (27,472) (35,527) (31,226) (32,060)Interscholastic……………………………………………… (200,633) (202,783) (188,993) (190,396) (188,929)School activities…………………………………………… (23,716) (23,744) (23,867) (27,441) (19,862)Detention center…………………………………………… (31,737) (69,705) (75,899) (73,781) (72,077)

Support services: Attendance, guidance and health care…………………… (252,236) (278,408) (253,807) (259,081) (274,092)Special services…………………………………………… (148,633) (132,965) (130,756) (129,121) (118,922)Instruction improvement…………………………………… (236,532) (151,956) (247,446) (132,262) (359,011)Educational media………………………………………… (189,014) (187,773) (190,804) (189,797) (185,212)Instructional technology…………………………………. (118,035) (106,708) (244,575) (276,994) (117,541)Board of Education...……………..……………………… (84,155) (77,207) (39,687) (49,479) (50,643)District Administration…………………………………… (173,206) (220,410) (190,650) (235,655) (189,671)School Administration…………………………………… (709,430) (796,094) (768,019) (703,604) (645,147)Business Operation………………………………………… (122,576) (153,859) (114,418) (107,200) (100,852)Central service…………………………………………… (72,184) – – – – Administrative technology………………………………… (196,602) (209,544) (164,035) (106,182) (57,040)Buildings–care and upkeep…………………………..…… (801,274) (878,818) (745,066) (136,934) (700,584)Maintenance–buildings and equipment…………………… – – – (631,229) (485,159)Maintenance–non-student occupied…..…………………… (39,108) (25,941) (45,339) – – Maintenance–student occupied……………..……………… (316,501) (303,472) (314,639) – – Maintenance–grounds……………………………………… (179,511) (604,517) (242,559) (198,659) (220,850)Transportation–pupil to school…………………………… (729,282) (694,349) (675,781) – – Transportation–activity…………………………………… (113,714) (126,776) (99,706) – – Transportation–general…………………………………… (21,916) (18,098) (18,792) (746,479) (616,509)

Non–instructional programs Child nutrition……………………………………………… (106,650) (145,025) (124,668) (116,103) (106,521)Capital assets……………………………………………… – – 137,651 163,311 (420,082)Capital assets student occupied…………………………… (285,722) (301,699) – – – Capital assets non-student occupied……………………… – (9,610) – – – Debt service–interest……………………………………… (1,198,841) (1,249,838) (1,256,358) (1,283,068) (1,308,622)

Total governmental activities…………………… (11,898,441) (12,785,976) (11,670,624) (11,000,713) (11,849,253)

General revenues: Local taxes…………………………………………………… 8,002,075 7,354,239 7,020,131 6,313,190 6,436,154Other local revenue………………………………………… 212,593 221,785 1,808,645 1,556,518 815,646State sources………………………………………………… 4,296,591 4,906,780 6,006,999 6,010,650 3,057,331Federal sources…………………………………………. 157,109 758,558 – – –

Total general revenues…………………………… 12,668,368 13,241,362 14,835,775 13,880,358 10,309,131

Change in net assets………………………………………… 769,927 1,570,738 2,986,522 4,056,642 1,540,122

Net assets–beginning (restated)………………...……………… 22,044,688 19,637,162 13,190,340 9,133,698 7,491,696

Net assets–ending……………………..………………………… 22,814,615$ 21,207,900$ 16,176,862$ 13,190,340$ 5,951,574$

(Source: Information taken from the District’s basic financial statements and supplementary information. This summary itself has not been audited.)

Joint School District No. 421

Statement of Activities (1)

Primary Government

(This summary has not been audited)

Net (Expense) Revenue and Changes in Net AssetsFiscal Year Ended June 30

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2012 2011 2010 2009 2008Assets

Assets: Cash & investments……………………………… 2,128,358$ 1,498,804$ 2,991,247$ 5,597,153$ 4,956,831$ Receivables:

Local sources…………………………………. 2,334,437 2,629,337 2,493,513 2,249,723 2,079,029State sources…………………………………… 64,808 761,773 560,651 543,476 592,164

Due from other funds……………………………. 276,066 167,351 194,013 1,321 127,123

Total assets……………………………… 4,803,669$ 5,057,265$ 6,239,424$ 8,391,673$ 7,755,147$ Liabilities and Fund Balances

Liabilities:Cash overdraft…………………………………… 71,679$ 105$ $ – 2,698,164$ 3,292,594$ Salaries and benefits……………………………… 1,059,290 1,040,474 942,061 971,463 1,016,580Deferred revenue………………………………… 686,243 1,258,883 1,150,353 1,002,842 865,871

Total liabilities…………………………… 1,817,212 2,299,462 2,092,414 4,672,469 5,175,045Fund Balances

Unreserved…………………………………………… 2,986,457 2,757,803 4,147,010 3,719,204 2,580,102Total fund balance and other credits……… 2,986,457 2,757,803 4,147,010 3,719,204 2,580,102Total liabilities, fund balance and othercredit……………………………………… 4,803,669$ 5,057,265$ 6,239,424$ 8,391,673$ 7,755,147$

Fiscal Year Ended June 30

Joint School District No. 421

All Fund Types and Account Groups—Balance Sheet

Governmental Fund Types—General Fund

(This summary has not been audited)

(Source: Information extracted from the District's basic financial statements and required supplementary information for Fiscal Years 2012 through 2008. This summary itself has not been audited.)

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2012 2011 2010 2009 2008Revenues:

Local taxes……………………………………… 5,686,563$ 5,528,454$ 5,634,247$ 5,611,832$ 5,710,313$ Other local revenue……………………………… 220,213 148,241 232,542 203,085 375,991State revenue…………………………………… 4,721,591 5,152,336 4,872,566 5,895,914 6,012,263Federal revenue………………………………… 8,711 9,657 763,470 9,025 9,108

Total revenues………………………… 10,637,078 10,838,688 11,502,825 11,719,856 12,107,675

Expenditures:Instructional programs:

Elementary…………………………………… 1,997,821 2,144,421 1,935,518 1,880,101 1,845,172Secondary……………………………………… 2,784,136 2,881,338 2,835,452 2,906,341 2,881,926Alternative…………………………………… 226,575 201,519 217,990 196,705 219,813Exceptional child……………………………… 535,954 551,590 656,649 634,714 609,782Gifted and talented…………………………… 33,973 27,472 35,527 31,226 32,060Interscholastic………………………………… 200,633 202,783 188,993 190,396 188,929School activities……………………………… 23,716 23,744 23,867 27,441 19,862Detention center……………………………… 31,737 69,705 75,899 73,781 72,077

Support service programs:Attendance, guidance and health care………… 252,236 278,408 253,807 259,081 274,092Special services……………………………… 148,633 132,965 130,756 129,121 118,922Instruction–improvement……………………… 236,532 151,956 245,190 122,262 222,624Educational media…………………………… 189,014 187,773 190,804 189,797 185,212Instructional technology……………………… 118,035 101,342 92,824 136,055 117,541Board of Education…………………………… 84,155 77,207 39,687 49,479 50,643District Administration……………………… 173,206 220,410 208,617 248,710 189,671School Administration………………………… 709,430 796,094 768,019 757,857 645,147Business operations…………………………… 122,576 153,859 114,418 107,200 100,852Central services……………………………… 72,184 – – – – Administrative technology…………………… 196,602 209,544 159,131 106,182 57,040Buildings–care and upkeep…………………… 801,274 878,818 930,634 838,950 738,832Maintenance–non-student occupied…………… 39,858 32,147 37,766 – – Maintenance–student occupied……………… 331,414 303,472 208,194 – – Maintenance–buildings and equipment……… – – – 234,114 202,406Maintenance–grounds………………………… 173,291 193,932 201,257 198,659 220,850Transportation–pupil to school……………… 729,282 694,349 675,781 – – Transportation–activity……………………… 113,714 126,776 99,886 – – Transportation–general……………………… 21,916 18,098 18,792 746,479 616,509

Non–instructional programs: Child nutrition………………………………… 60,527 68,173 59,561 58,045 50,612

Total expenditures…………………… 10,408,424 10,727,895 10,405,019 10,122,696 9,660,574Excess (deficiency) of revenues over (under)

expenditures……………………………………… 228,654 110,793 1,097,806 1,597,160 2,447,101Other financing sources (uses):

Operating transfers out………………………… – (1,500,000) (670,000) (458,058) (2,379,022)Operating transfers, net……………………… – (1,500,000) (670,000) (458,058) (2,379,022)

Excess (deficiency) of revenues and other resources over (under) expenditures…………… 228,654 (1,389,207) 427,806 1,139,102 68,079

Fund balance July 1………………………………… 2,757,803 4,147,010 3,719,204 2,580,102 2,512,023

Fund balance June 30……………………………… 2,986,457$ 2,757,803$ 4,147,010$ 3,719,204$ 2,580,102$

(Source: Information extracted from the District's basic financial statements and required supplementary information which havebeen audited.)

Fiscal Year Ended June 30

Joint School District No. 421

Statement of Revenues, Expenditures and Changes in Fund BalanceGovernmental Fund Types—General Fund

(This summary has not been audited)

30

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TAXES AND STATE FUNDING

Overview This section describes the process for levying and collecting taxes as well as receipt of State resources.

Significant recent changes to State funding sources are described below and under the heading entitled “State of Idaho Public Finance.”

Operating Resources. The District receives revenues from three primary sources for operations: Local

sources, State sources and Federal sources. In Fiscal Year 2012, Local sources (property taxes) represented 56% of the District’s total General Fund revenues, State sources represented 44% and Federal sources repre-sented less than 1%. The District’s tax levy is certified to the Boards of County Commissioners in September. Each of the County Treasurers disburse tax receipts to the District approximately one month after the statutory payable dates.

Resources for Capital Projects.  The District may pay for capital improvements from unappropriated

resources, voter–approved general obligation bonds, voter–approved special plant facilities levies, and donations. General obligation bond levies and special plant facilities levies are property tax levies that are certified above and beyond all other amounts certified to be levied and collected.

Tax Levy And Collection

The District’s taxes are collected by the County and Adams County (collectively, the “Counties”) in

which the assessed property is located. Prior to the second Monday in September, the District certifies its levy for all funds, including the debt service fund, to the Boards of County Commissioners of the Counties. These levies are based on the equalized or adjusted valuations assessed within the District. These levies are then in-corporated within the total levy for all local governments units for each property owner. Taxes become due on December 20 but may be paid in installments on December 20 and June 20. Payment is made to the treasurers of the Counties and transmitted to the District monthly. A penalty of 2% is applied to taxes paid after the De-cember 20 and June 20 payment dates plus interest at the rate of 1% per month, calculated from January 1 of the year following the date of the levy, on the amount of the unpaid installment plus the penalty. Delinquent taxes on property outstanding for three years subject the property to a county tax deed, and said property can be auctioned off for tax purposes.

Ad Valorem Tax System

Property taxes are established and collected by individual counties and taxing districts to provide local

services and do not generate revenue for State use. The State has the responsibility of overseeing property tax procedures to make sure they comply with State laws. In addition, the Idaho State Tax Commission (the “State Tax Commission”) is responsible for valuing public utilities, railroad car companies and railroads which, collectively, are called operating property.

Property taxes apply to homes (including manufactured housing), farms, businesses, industry, ware-

houses, offices, most privately owned real estate, and operating property, as well as personal property such as machinery and equipment, farm implements and office furniture and equipment. Exemptions from property tax include inventories, livestock, stored property in transit, pollution control facilities, household belongings, clothing, property licensed motor or recreational vehicles, and most property belonging to religious, fraternal and educational organizations and institutions. Partial exemptions are available for residential improvement and the speculative value of agricultural land. Partial tax credits are available to elderly, widowed and disa-bled homeowners.

Timberland is taxed according to the acreage involved and rural electrical associations pay a 3 ½% tax on

adjusted gross revenue instead of property tax. Counties collect the tax, which is computed by the State Tax Commission and apportioned on a wire mile basis.

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Complaints or disagreement concerning assessed values of real or personal property should be taken to the assessors of the respective county. If differences are not resolved at this level, a property owner may pro-ceed through the County Board of Equalization, State Board of Tax Appeals or District Court, and the Idaho State Supreme Court (the “State Supreme Court”). Operating property assessments must be appealed to the State Tax Commission, then through the courts.

Certain property acts in the Idaho Code provide that all real and personal property within the District are

to be subject to assessment as of January 1 of each year, unless otherwise provided by law. All taxes levied upon real property shall be a lien upon the real property assessed. All taxes levied upon personal property shall be a lien upon the real property of the owner.

Homeowner’s Exemption

The homeowner’s exemption provides a permanent exemption from ad valorem taxation for 50% of the

market value for assessment purposes of a homeowner’s primary residence including up to one acre of the land value, up to a maximum of $81,000 (the “Homeowner’s Exemption”) for tax year 2013 (reduced from $83,974 for Tax Year 2012). The maximum amount of the Homeowner’s Exemption is adjusted annually by the percentage change in the Idaho housing price index as determined by the United States office of Federal Housing Enterprise Oversight.

School District Levies

Tax Levy Procedure. Prior to the commencement of each Fiscal Year, the Board adopts a resolution to

adopt its annual budget and approve submission of its property tax levies to the Boards of County Commis-sioners of the Counties. The budget and tax levy process is described under “Financial Factors” herein. The District’s tax levy is certified to the Boards of County Commissioners in September. The County Treasurers disburse tax receipts to the District approximately one month after the statutory payable dates. The District may levy the following ad valorem taxes for the following purposes:

Regular M&O Levy. Through Fiscal Year 2006, property taxes included a maintenance and operation

levy (the “Regular M&O Levy”) that was available to the District for its normal operations and its cost of maintaining facilities. The Idaho Legislature, convening in special session on August 25, 2006, adopted the Property Tax Relief Act of 2006 (the “Act of 2006”), which eliminated the Regular M&O Levy for non–charter districts and replaced it with State funding through an increase to the statewide sales and use tax and a one–time appropriation of surplus and reserve funds in Fiscal Year 2007. The District is not a charter district and may no longer levy a Regular M&O Levy. However, the 2006 Act also adopted a “Budget Stabilization M&O Levy” for certain districts with high market values that allowed such districts to continue a property tax levy for maintenance and operation expenses. The levy is a fixed dollar levy that cannot be increased but can be decreased with a majority vote of the Board. The District is levying $5,658,712 for Fiscal Year 2013.

Supplemental M&O Levy. Subject to voter approval school districts can levy and collect a supple-

mental maintenance and operation levy (the “Supplemental M&O Levy”). The Supplemental M&O Levy may be authorized for up to two years for a non–charter district through an election approved by a simple majority of the district electors voting in such an election. The District currently has a Supplemental M&O Levy.

Emergency, Judgment and Tort. Taxes may be levied and collected for the purpose of paying for a

specific, unanticipated expenditure, judgment, or legal claim for which funds were not budgeted in the prior year. The District has levied a tort levy in each of the past five years.

Tuition. When a pupil leaves the school district of his residence to attend a nonresident school, the re-

ceiving district is authorized to charge for the tuition of its nonresident pupils where tuition has not been waived. The resident district is authorized pursuant to Section 33–1408, Idaho Code, to make a levy

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above the maintenance and operation levy for the purpose of paying tuition costs of its students who, un-der the authorization of the board of trustees of the district, attend school in another district either in or out of Idaho. The District currently does not have a Tuition Levy and has not had one in the past five years.

Plant Facilities and Bond. Plant facilities and bond levy receipts are used to pay for specific capital projects. The District currently has a Bond Levy and has in each of the past five years. The District does not have a Plant Facilities Levy.

Historical Tax Rates

Tax Rate 2011–12 2010–11 2009–10 2008–09 2007–08

Budget Stabilization Main. & Oper .... .002277385 .002048077 .001417625 .001202697 .001291302 Supplemental Maint. & Oper. ............. .000000000 .000000000 .000000000 .000000000 .000000000 Emergency .......................................... .000000000 .000000000 .000000000 .000000000 .000000000 Tort Liability ....................................... .000020991 .000018678 .000012928 .000010968 .000011432

Subtotal ............................................ .002298376 .002066755 .001430553 .001213665 .001302734

Bond Levy .......................................... .000992431 .000838068 .000400041 .000393786 .000266043

Total All Funds ............................. .003290807 .002904823 .001830594 .001607451 .001568777

(1) The Regular Maintenance and Operations levy was eliminated in 2006; however, the District is able to levy a Budget Stabiliza-tion Maintenance and Operations levy.

(Source: Idaho State Department of Education.)

Comparative Total School District Tax Rates

Tax Rate Tax Levying District 2011–12 2010–11 2009–10 2008–09 2007–08

Council, No. 13 ................................... .000604525 .000588686 .000071864 .000553535 .000586247 Meadows Valley, No. 11 .................... .001379882 .001283327 .001155884 .001295538 .001144697 Cambridge Joint, No. 432 ................... .001640508 .001639583 .001387826 .001858442 .002073511 Cascade, No. 422 ................................ .002713124 .001429391 .001247616 .000471235 .000450677 The District ......................................... .003290807 .002904823 .001830594 .001607451 .001568777 Garden Valley, No. 71 ........................ .003678800 .003685682 .002435103 .002480753 .000945955

(Source: Tax Levies for School Purposes, State Superintendent of Public Instruction.)

(The remainder of this page has been intentionally left blank.)

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Market Value Of Property Of The District

Total District—All Counties

Full % change Taxable % change Market over Market over Year (1) Value (2) prior year Value prior year

2012 ................................... $2,482,774,430 (6.4)% $2,301,808,035 (6.4)% 2011 ................................... 2,652,639,733 (11.2) 2,458,395,098 (12.0)% 2010 ................................... 2,985,839,790 (30.0) 2,792,939,367 (30.1) 2009 ................................... 4,267,498,828 (14.1) 3,994,071,381 (15.1) 2008 ................................... 4,966,787,423 8.0 4,705,018,320 7.7

(1) Values are through September. Includes Adams County and the County. (2) Includes homeowner’s exemption value and urban renewal increment.

(Source: State Tax Commission.)

Adams County

Full % change Taxable % change Market over Market over Year (1) Value prior year Value prior year

2012 ................................... $18,915,027 1.5% $16,896,246 2.0% 2011 ................................... 18,630,131 (8.8) 16,562,759 (8.4)% 2010 ................................... 20,426,244 (5.2) 18,088,351 (5.0) 2009 ................................... 21,535,649 (0.3) 19,032,497 (1.4) 2008 ................................... 21,610,386 (8.0) 19,294,463 (9.6)

Valley County

Full % change Taxable % change Market over Market over Year (1) Value (2) prior year Value prior year

2012 ................................... $2,463,859,403 (6.5)% $2,284,911,789 (6.4)% 2011 ................................... 2,634,009,602 (11.2) 2,441,832,339 (12.0) 2010 ................................... 2,965,413,546 (30.2) 2,774,851,016 (30.2) 2009 ................................... 4,245,963,179 (14.1) 3,975,038,884 (15.2) 2008 ................................... 4,945,177,037 7.7 4,685,723,857 7.5 __________________________

(1) Value is through September. (2) Includes homeowner’s exemption value and urban renewal increment.

(Source: State Tax Commission.)

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Tax Collection Record Of The District

Tax Levy Amount % Year (1) (2) In Dollars Collected Collected

2011 .................................................. $8,208,553 $7,824,014 95.3% 2010 ................................................. 8,160,811 7,963,411 97.6 2009 ................................................. 7,459,195 7,292,573 97.8 2008 ................................................. 7,709,656 7,707,167 100.0 2007 ................................................. 7,019,903 7,019,169 100.0 __________________________

(1) Valley County only (Adams County is not included). (2) The value is through September of each year listed. (Source: Valley County Treasurer.)

Some Of The Largest Taxpayers

The following list represents some of the largest taxpayers in the District.

% of District’s 2012 2012 Tax– Taxpayer Type of Business Taxable Value able Value

Sabala Whitetail LLC .............................. Resort $ 27,189,377 1.2% Idaho Power Company ............................. Electrical utility 25,510,732 1.1 Tamarack Resort LLC .............................. Resort 20,757,933 0.9 JR Simplot Company ............................... Real estate 16,968,640 0.7 Individual ................................................. Individual residence 13,592,830 0.6 McCall Associates LLC ........................... Real estate 8,707,660 0.4 Individual ................................................. Individual residence 6,044,130 0.3 McCall Cottage LLC ................................ Real estate 5,853,710 0.3 Idazona LLC ............................................ Developer 5,704,450 0.2 Alpine Village Company ......................... Real estate 5,000,260 0.2

Totals ................................................................................................ $135,329,722 5.9%

(Source: Valley County Assessor.)

STATE OF IDAHO SCHOOL FINANCE

General The Legislature appropriates state and federal monies for support of public school districts (the “Schools

Appropriation”). The Schools Appropriations are deposited into the “Public School Income Fund” for further distribution by the DOE to school districts.

The State sets an annual budget based on the State’s fiscal year which begins on July 1 and ends on the

following June 30. Both the executive and legislative branches play a role in the budget setting process. All State agencies, including the DOE, submit a budget request to the Division of Financial Management (the “DFM”) in the Governor’s office and to the Legislative Services Office not later than September 1 of each year. The Governor, through DFM, then prepares a proposed budget for the subsequent fiscal year, and the

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Governor submits this budget recommendation to the Legislature within five days after the commencement of the annual legislative session in early January. The Governor’s budget recommendation is based on revenue projections developed by DFM.

A joint committee composed of the Senate Finance Committee and the House Appropriations Committee

(“JFAC”) then initiates legislative action on the state budget. Taking into account the Governor’s recommen-dation, JFAC hears presentations of, or reviews without hearings, budget requests of all State agencies and drafts a series of appropriation bills that are sent to the entire legislative body. The JFAC budget is based on the revenue projections of a joint legislative economic outlook committee. Upon passage by each legislative body, the appropriation bills for each agency are sent to the Governor for signature. The Governor has “line–item” veto power for distinct appropriations. The Idaho Constitution requires a balanced budget, stating that appropriations must match the projected revenues currently provided for by law.

The Legislature usually adjourns before April 15, once it has adopted a budget, set appropriations for the

upcoming fiscal year, and, if necessary, revised the current fiscal year’s budget. The appropriations, as enact-ed by the Legislature, constitute the limit for each agency’s authorized expenditures, subject to limited flexi-bility for emergency situations and/or unanticipated revenue.

If during the course of a fiscal year the Governor determines anticipated revenues expected to be available

fail to meet the Legislature’s authorized expenditures, the Governor may issue an executive order to reduce the spending authority on file in the office of the State Controller for any department, agency, or institution of the State.

Beginning July 1, 2003, the State established an Education Stabilization Fund (the “Stabilization Fund”).

The Stabilization Fund acts as a reserve account from which the State can draw funds to make up revenue shortfalls and into which funds are deposited in times of surplus.

Appropriations to Public Schools

After increasing slightly in Fiscal Year 2010, the Schools Appropriation has declined in both Fiscal

Year 2011 and Fiscal Year 2012. The State utilized one–time monies from federal American Recovery and Reinvestment Act (“ARRA”) funds and State endowment funds to minimize reduction in appropriations from the State General Fund that were prompted by the economic downturn and corresponding declines in State revenues. For Fiscal Year 2013, the Schools Appropriation has increased slightly. Fiscal Year 2013 shows a decrease in monies from federal funds and a 4.6% increase in appropriations from the State General Fund.

In Fiscal Year 2010 the State reduced the general fund portion of the Schools Appropriation; however it

was replaced with $33,515,800 in one–time ARRA Stimulus Funds and a $49,255,500 transfer from the Sta-bilization Fund allowing the total appropriation for Fiscal Year 2010 to increase slightly over the Fiscal Year 2009 Schools Appropriation. The Fiscal Year 2011 Schools Appropriation decreased by 7.5% reflecting (i) the Legislature’s estimate of continuing weakness in general fund revenues in Fiscal Year 2011, (ii) the ex-haustion of the ARRA Stimulus Funds, (iii) and a one–time increase in dedicated funds by utilizing certain endowment funds. The Fiscal Year 2012 Schools Appropriation decreased by 1.3% reflecting (i) an increase of 7.7% from State general fund revenues and (ii) a decrease of dedicated funds related to the one–time en-dowment funds utilized in Fiscal Year 2011 and not available for the Fiscal Year 2012 Schools Appropriation. The Fiscal Year 2013 School Appropriation increased by a total of 0.4% reflected (i) an increase of 4.6% from State general fund revenues and (ii) a decrease of dedicated funds of approximately 2.4%; and (iii) an 18.2% decrease in revenues from federal funds.

The Schools State Appropriations for Fiscal Year 2009 through Fiscal Year 2013 are presented in the fol-

lowing table for the years indicated:

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Fiscal Year 2013 2012 2011 2010 2009

General Fund $1,279,818,600 $1,223,580,400 $1,214,280,400 $1,148,615,300 $1,333,445,100 Transfer from Public Education Stabilization Fund 0 0 0 49,255,500 85,097,600 (1) Dedicated Funds (2) 66,873,000 68,547,400 91,054,700 64,146,200 64,405,700 Federal Funds 220,121,100 268,941,500 269,587,100 269,588,500 215,000,000 Title 14 ARRA Stimulus Funds

0 0 7,406,300 179,248,800 0

Total State Appropriation $1,566,813,100 $1,561,069,300 (3) $1,582,328,500 $1,710,854,300 $1,697,948,400

(1) Because the State received ARRA Stimulus Funds for education, the 2009 Legislature appropriated $85,097,000 back to the Sta-bilization Fund from the general fund to replenish this amount, and reserve for future use.

(2) Includes Lottery Receipts, Endowment Fund Receipts, Miscellaneous Receipt Balances, and Cigarette Taxes & Lottery Income. (3) Does not include Maintenance of Effort monies. See “Federal Education Maintenance of Effort Requirements” below.

Federal Education Maintenance of Effort Requirements

Upon acceptance of certain money authorized under Title 14 of the Recovery Act, the State made assur-

ances to the federal government that the State would maintain the level of State support for public school dis-tricts and higher education for fiscal years 2009, 2010 and 2011, at least at the level provided for in fiscal year 2006. Subsequently, the State guaranteed that if it could not meet this initial requirement, it would request a waiver of this provision. The waiver requires the State to ensure that the percentage of State revenues appro-priated for public school districts for fiscal year 2011 will not fall below the same percentage of State reve-nues for the same purpose as in fiscal year 2010 (the “Maintenance of Effort Requirement”). State revenues for Fiscal Year 2011 exceeded the forecast, and therefore the State appropriated $59,934,000 from the State General Fund to the Public School Income Fund which was the amount necessary to meet the Maintenance of Effort Requirement. This transfer was distributed to public schools as discretionary funds in July 2011 and was required to be included in Fiscal Year 2011 revenues of the public school districts. The Legislature made no provision for a similar contribution to public schools from the surplus at the end of Fiscal Year 2012. Ra-ther, the Legislature indicated its intent to treat surpluses in future years to make a deposit into the Stabiliza-tion Fund.

The State funding schedule for Fiscal Year 2013 distributions and after is as follows:

State Funding Schedule

Payment Date Payment Amount (1)

August 15 30% October 1 30%

November 15 20% February 15 10%

May 15 10% July 15 Final payment adjustment for

the Fiscal Year ending the pre-vious June 30.

(1) Percentages are an approximation of the distribution to be received, final amounts may vary.

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Summary Of State And Federal Funds During the past five years the District received the following in state funds.

Fiscal Year Ended June 30 2012 2011 2010 2009 2008 State Support

General Fund ......................... $4,721,591 $5,152,336 $4,872,566 $5,895,914 $6,012,263 Other Governmental Funds .... 65,653 31,923 93,603 168,310 182,757

Total ................................... $4,787,244 $5,184,259 $4,966,169 $6,064,224 $6,195,020

% change over prior year ..... (7.7)% 4.4% (18.1)% (2.1)% 0.8%

Federal Support

Forest Reserve Fund ........... $440,406 $441,661 $ 452,267 $ 471,426 $ 617,336 Other Governmental Funds . 307,713 380,263 370,952 306,790 325,308 Child Nutrition Fund ........... 185,111 173,623 166,111 147,589 110,562 General Fund ...................... 8,711 9,657 763,470 9,025 9,108

Total ................................... $941,941 $1,005,204 $1,752,800 $934,830 $1,062,314

% change over prior year ..... (6.3)% (42.7)% 87.5% (12.0)% (3.9)%

(Source: Information taken from the District’s audited financial statements. This summary has not been audited.) See “FINANCIAL INFORMATION REGARDING JOINT SCHOOL DISTRICT NO. 421 (McCALL–

DONNELLY), VALLEY AND ADAMS COUNTIES—Five–Year Financial Summaries” above.

Reform Legislation The 2011 Legislature enacted a series of bills making significant changes in the public education system

in Idaho (the “Reform Legislation”) which currently have referendums on the November 6 ballot to overturn each bill (see “Reform Legislation–Referendum Petitions to Overturn School Modernization and Reform Leg-islation; Effects of Emergency Clauses” herein). Although these bills may impact the general funding of school districts in Idaho, the District does not expect the Reform Legislation to adversely affect the District’s ability to pay debt service on the 2012 Bonds which is funded from local property tax funds.

The Reform Legislation includes three primary components: modifications to the labor relations and pro-

fessional negotiations process and entitlements; changes to teacher contracts, including instituting a pay for performance based system; and technology initiatives to modernize the delivery of education to students.

Senate Bill 1108 (2011), as amended by House Bill 335, eliminates continuing contract provisions for all

new teachers and replaces these provisions with one or two–year termed contracts. Teachers under continuing contracts currently will retain these provisions as part of their contract. In addition, Senate Bill 1108 contains mandates that fifty percent of the performance evaluation of district superintendents and other professional staff of districts includes feedback from parents and objective measures of growth in student achievement; eliminates seniority or contract status of employees as a factor in reduction in force decisions; gives principals more control over the new professional staff assigned to their building; provides that districts must provide liability insurance options to teachers; eliminates the 99% average daily attendance protection feature of the state funding formula and replaces it with a 10% severance fee to be paid to any professional staff whose po-sition must be eliminated due to lost enrollment; eliminates the early retirement incentive program; limits the length of negotiated labor agreements to one year and eliminates evergreen clauses from negotiated labor agreements; and limits collective bargaining to salaries and benefits, with all labor negotiations to be conduct-

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ed in public meetings and all documents subject to public writings disclosure laws. As amended, this bill took effect upon passage and approval.

The 2012 Legislature amended the provisions of Senate Bill 1108 (2011) to provide technical corrections

and clarification and to allow teachers with fewer than three years of service to be eligible for leadership awards.

The 2009 and 2010 Legislatures enacted legislation to allow districts to reopen salary and benefit provi-

sions in negotiated agreements upon the determination of a “financial emergency” as defined in such enact-ments (the “Financial Emergency Legislation”). Because Senate Bill 1108 limits the length of negotiated agreements to one year, Senate Bill 1108 repealed the Financial Emergency Legislation.

Senate Bill 1110 (2011), as amended by House Bill 336, provides for a pay–for–performance system. The

plan rewards certificated teachers and administrators on a school–wide basis for student achievement as de-termined by academic growth based on yearly comparison of results of state–mandated achievement tests. Local districts also may reward performance of certificated employees based on student test scores and stu-dent graduation and dropout rates, percentage of graduates attending postsecondary education or entering mil-itary service, federally–approved adequate yearly progress, number of students successfully completing dual credit or advanced placement classes or involved in extracurricular activities, class projects, portfolios, suc-cessful completion of special student assignment, parental involvement, teacher–assigned grades and student attendance rate and various criteria by local districts as approved by the DOE. Teachers with specified certifi-cates and endorsements may also be rewarded for teaching in hard to fill positions, with such certificates and endorsements ranked by the state board of education based on difficulty of districts’ ability to recruit and re-tain such personnel, or as additionally designated by district boards. District boards may reward certified em-ployees based on leadership roles, including, but not limited to: mentoring, creating curriculum, grant writing, peer teaching coach, data analysis, research projects, and obtaining national board certification. As amended, this legislation took effect upon passage and approval.

The 2012 Legislature amended the provisions of Senate Bill 1110 (2011) to provide certain clarifications

and specifically to clarify the State–paid employee benefit apportionments for the public employee retirement system and social security are apportioned from funds allocated for pay–for–performance, that academic growth calculations may be based on cohorts of students with similar scores, that school administrators may only earn up to 1.0 local Student Achievement Awards share, and that funds must be distributed to districts by no later than November 15, and to move back the implementation date for the requirement that at least 5% of certificated district staff pay be based on student performance to contracts signed on or after July 1, 2012.

Senate Bill 1184 (2011), as amended by House Bill 345, provides that the DOE will post a fiscal report

card for each school district and each school district will post its budget and master labor agreements through its website, in addition to itemization of expenditures. With respect to teachers, the bill increases the state’s minimum teacher salary to $29,655 for Fiscal Year 2011, or $30,000 thereafter, funds the automatic increase of pay to teachers for Fiscal Year 2012, and restores the one year of education credits that had been frozen as of June 30, 2011. The bill allows districts flexibility in the “use it or lose it” portion of salary based appor-tionment, giving districts the flexibility to manage with decreased funding. Districts will be authorized to keep the positions and funding associated with salary based apportionment if not fully utilized up to 7% in Fiscal Year 2012, 9.5% in Fiscal Year 2013, and 11% in Fiscal Year 2014. The bill reallocates dollars from the funding formula to other areas within the public schools budget. The adjustment ranges from 1.67% to 6.42% over the next five years. The bill creates a funding formula to reestablish funding for instructional technology as well as the necessary professional development for teachers.

For more exposure to online learning and informational environments, the bill provides that high school

teachers will be provided with mobile computing devices beginning with the 2012–2013 school year, with one–third of high school students to have access to mobile computing devices beginning with the 2013–2014 school year until all students have access to such devices by 2015–2016. The state will pay for the repair,

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maintenance, security, and support of the devices, from the overall budget determined by the Legislature. Dis-tricts will determine how students utilize the devices. Districts that already have one–to–one computing de-vice ratios will be allocated discretionary funding instead of devices. In addition, the bill creates a taskforce to be appointed by the state superintendent to study and develop plans for implementation of online courses, one–to–one mobile computing devices, and other advanced technology in the classroom. Findings, plans and recommendations of the task force were due from the State Board of Education no later than Janu-ary 31, 2012.

The bill requires the State Board of Education to create digital citizenship standards, and to consider add-

ing online courses as a graduation requirement for the class of 2016. In addition, the bill provides a minimum of $3.5 million in Fiscal Years 2013 and 2014 for the Idaho Digital Learning Academy (“IDLA”) (current funding is $5 million).

The bill provides a funding formula that provides the necessary resources for the pay for performance

plan, and new formulas for funding dual credit courses for eligible students and for providing additional re-sources for school districts to implement the state’s increased graduation requirement for math and science courses beginning in Fiscal Year 2012, from the overall budget determined by the Legislature.

In addition, the bill allows public post–secondary institutions to operate public charter high schools pur-

suant to the Idaho public charter schools statutes. As amended, this legislation took effect upon passage and approval, except that the IDLA took effect one

day later. The 2012 Legislature amended Senate Bill 1184 (2011) to provide technical corrections and clarification

and to implement some of the recommendations of the task force, including changes to the formulate and the provision of classified staff position to assist schools with meeting the math and science requirements, to al-low students to participate in due credit courses prior to their final semester without first meeting their senior math requirement, to limit the number of online courses in which a parent can enroll their child to no more than 50% without school district permission, and to require online course providers to report attendance to each student’s school. In addition, the 2012 Legislature removed certain reduction in salary–based apportion-ment for Fiscal Year 2013 and beyond that were originally included in Senate Bill 1184 (2011) to General Fund savings to pay for education reforms. Any increased appropriation, starting in Fiscal Year 2014, must first be used to pay for growth and the statutory cost of pay–for–performance, public school technology, and the next implementation phase for one–to–one mobile computing devices with the dual credit program, prior to funding increase for any other items within the public schools budget. With regard to minimum teacher salaries, the 2012 legislation requires that minimum teacher salary will increase at twice the rate of base sala-ries in the future, and after both the base and minimum salary have re–attained their Fiscal Year 2009 funding level (the law previously provided for a 1.5 times increase). The 2012 Legislature also created a web-based clearinghouse of approval online courses, based on recommendations by the task force.

Legislative Reform Litigation. On April 27, 2011, the Idaho Education Association, together with certain

other interested groups, filed a complaint in the Fourth Judicial District Court, Case No. CVOC 2011–08212, contesting Senate Bill 1108 in its entirety. The Complaint alleges Senate Bill 1108 is unconstitutional, and further that the provisions terminating existing labor contracts and the termination of the early retirement pro-gram for teachers constitutes an unconstitutional impairment of contract rights. On October 5, 2011, the Dis-trict Court entered an order granting summary judgment in favor of the defendants, thus dismissing the case. On November 8, 2011, the plaintiffs timely filed an appeal to the Idaho Supreme Court under Docket No. 39361–2011. Briefing by the parties is complete and the appeal has been assigned to the Idaho Supreme Court. The date for oral argument has not been scheduled..

Referendum Petitions to Overturn School Modernization and Reform Legislation; Effect of Emergency

Clauses. On March 18, 2011, a citizens group, “Idahoans for Responsible Education Reform,” filed referen-

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dum petitions with the Idaho Secretary of State’s office seeking voter referenda on Senate Bills 1108 and 1110, and the same group, on April 8, 2011, filed a referendum petition on Senate Bill No. 1184. The Idaho Attorney General has approved each of the petitions as to form, and the supporters have gathered the required 47,432 signatures from registered voters in order to submit the legislation to the voters for approval or rejec-tion at the November 2012, general election.

Section 34–1803, Idaho Code, provides that, if a valid referendum petition is filed not more than sixty

days after the final adjournment of the session of the state legislature which passed the bill on which the refer-endum is demanded, the measure so referred to the people shall take effect and become law when it is ap-proved by the majority of the votes cast thereon and not otherwise. However, the Idaho Supreme Court has held that, if a bill includes an emergency clause, it becomes effective immediately and continues in effect un-til the next general election (and thereafter, if approved by the voters). As discussed above, all of the 2011 school modernization and reform bills, as amended, contain emergency clauses. Therefore, they go into effect immediately and will remain in effect, regardless of the outcome of the petition drive on the referendum peti-tions, unless and until the voters reject them at the November 2012 general election.

The 2012 legislation relating to the Reform Legislation provides that, if the Reform Legislation is rejected

through voter referendum, the provisions of the 2012 legislation will be null and void.

2012 Legislative Actions House Bill 426, as amended, creates a new program in the “8 in 6 Program” whereby the DOE will pay

for a portion of the cost of summer online courses and online overload courses, provided a student meets cer-tain requirements set forth in the bill. SDE shall pay $225 per one–credit course, provided that the IDLA re-ceives a state guarantee or appropriation of at least $5 million for Fiscal Year 2013, the State shall pay no moneys for the program for that fiscal year, and IDLA shall provide the courses necessary to meet the pro-gram. The State agrees to pay for no more than two courses per student, and participation is limited to no more than 10% of students.

The Initiative Process

Article I, Section 3 of the Idaho Constitution provides that the people of the State have reserved to them-

selves the power of initiative and referendum, pursuant to which measures to enact or repeal laws can be placed on the statewide general election ballot for consideration by the voters. The initiative and referendum powers relate only to laws; the Idaho Supreme Court has ruled that the Idaho Constitution cannot be amended by initiative or referendum.

In 1997, the Idaho Legislature enacted significant procedural prerequisites including signature distribution

requirements, to qualify an initiative or referendum measure for submittal to the electors. Any person may file a proposed measure with the signatures of 20 qualified electors of the State with the Idaho Secretary of State's office. The Idaho Attorney General is required by law to review and make recommendations (if any) on the petition to the petitioner before issuing a certificate of review to the Secretary of State. The petitioner then, within 15 working days, files the measure with the Secretary of State for assignment of a ballot title and sub-mittal to the Attorney General. The Attorney General, within 10 working days thereafter, shall provide a bal-lot title for the measure. Any elector that submitted written comments who is dissatisfied with the ballot title certified by the Attorney General may petition the Idaho Supreme Court seeking a revision of the certified ballot title.

Once the ballot title has been certified and the form of the petition has been approved by the Secretary of

State, the proponents of the measure shall print the petition and, during an 18 month circulation period or until April 30 in an election year, whichever occurs first, may start gathering the petition signatures necessary to place the proposed measure on the ballot.

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To be placed on a general election ballot, not less than four months prior to the election, the proponents must submit to the Secretary of State petitions signed by a number of qualified voters equal to at least 6% of the qualified electors, i.e., registered voters, at the immediately previous general election. There were approx-imately 790,067 registered voters for the November 2, 2010 general election, so to qualify for the Novem-ber 6, 2012 general election a petition must contain signatures of a total of approximately 47,432 registered voters.

Proponents of measures are permitted to compensate persons obtaining signatures for the petition, but in

such instances the petition must contain a notice of such payment to the elector whose signature is being sought.

Historical Initiative Petitions

According to the Elections Division of the Idaho Secretary of State, the number of initiative petitions that

have qualified for the ballot in the past decade, and the number that have passed in the general elections in the years since 1992 are as follows:

Historic Initiative Petitions

Year of General Election

Number of Initiatives that Qualified

Number of Initia-tives that Passed

2012 0 0 2010 0 0 2008 0 0 2006 2 0 2004 0 0 2002 1 1 2000 0 0 1998 1 1 1996 4 1 1994 2 1 1992 1 0

Source: Elections Division, Idaho Secretary of State; 2011 Initiative History Elections Division.

Current Initiative Petitions No initiatives qualified to attain ballot status for the November 2012 ballot and the deadline to submit ad-

ditional petitions has passed. There are; however, three propositions being considered at the November 2012 general election. See “State of Idaho School Finance–Reform Legislation–Referendum Petitions to Overturn School Modernization and Reform Legislation; Effect of Emergency Clauses.”

LEGAL MATTERS

Absence Of Litigation Concerning The 2012 Bonds At closing, the District will deliver a certificate of no litigation that will be signed by the Chairperson of

the Board and the Superintendent, to certify that to the best of their knowledge, there is no pending or threat-ened litigation that would legally stop, enjoin, or prohibit the issuance, sale or delivery of the 2012 Bonds.

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Tax Exemption In the opinion of Hawley Troxell Ennis & Hawley LLP, Bond Counsel, assuming continuous compliance

with certain covenants described below, interest on the 2012 Bonds is not included in gross income under pre-sent federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is exempt from all State of Idaho income taxes under present State income tax laws, and interest on the 2012 Bonds is not included in alternative minimum taxable income as defined in Section 55(b )(2) of the Code under present federal income tax laws except that such interest is required to be included in calculat-ing the “adjusted current earnings” adjustment applicable to corporations for purposes of computing the alter-native minimum taxable income of corporations as described below. The Code imposes several requirements that must be met with respect to the 2012 Bonds in order for the interest thereon to be excluded from gross income and alternative minimum taxable income (except to the extent of the aforementioned adjustment ap-plicable to corporations).

Certain of these requirements must be met on a continuous basis throughout the term of the 2012 Bonds.

These requirements include: (i) limitations as to the use of proceeds of the 2012 Bonds, and (ii) limitations on the extent to which the proceeds of the 2012 Bonds may be invested in higher yielding investments. The Board will covenant that they will take all steps to comply with the requirements of the Code to the extent necessary to maintain the exclusion of interest on the 2012 Bonds from gross income and alternative mini-mum taxable income (except to the extent of the aforementioned adjustments applicable to corporations) un-der present federal income tax laws. Bond Counsel’s opinion as to the exclusion of interest on the 2012 Bonds from gross income and alternative minimum taxable income (to the extent described above) is rendered in reliance on these covenants, and assumes continuous compliance therewith. The failure or inability of the Board to comply with these requirements could cause the interest on the 2012 Bonds to be included in gross income, alternative minimum taxable income or both from the date of issuance.

Section 55 of the Code contains a 20% alternative minimum tax on the alternative minimum taxable in-

come of corporations. Under the Code, for taxable years beginning after 1989, 75% of the excess of a corpo-ration’s “adjusted current earnings” over the corporation’s alternative minimum taxable income (determined without regard to this adjustment and the alternative tax net operating loss deduction) is included in the corpo-ration’s alternative minimum taxable income for purposes of the alternative minimum tax applicable to the corporation. “Adjusted current earnings” includes interest on the 2012 Bonds.

The Code contains numerous provisions that may affect an investor's decision to purchase the

2012 Bonds. Beneficial Owners should be aware that the ownership of tax exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax–exempt obligations, foreign corporations doing business in the United States and certain “Subchapter S” corporations, may result in adverse federal tax consequences. Bond Coun-sel’s opinion relates only to the exclusion of interest on the 2012 Bonds from gross income and alternative minimum taxable income as described above and will state that no opinion is expressed regarding other feder-al tax consequences arising from the receipt or accrual of interest on ownership of the 2012 Bonds. Beneficial Owners should consult their own tax advisors as to the applicability of these consequences.

Amendments to the federal tax laws could be proposed or enacted in the future, and there can be no assur-

ance that any such future amendments which may be made to the federal tax laws will not adversely affect the value of the 2012 Bonds, the exclusion of interest on the 2012 Bonds from gross income or alternative mini-mum taxable income or both from the date of issuance of the 2012 Bonds or any other date, or result in other adverse federal tax consequences.

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 includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the

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Service will commence an audit of the 2012 Bonds. If an audit is commenced, under current procedures the Service may treat the District as the taxpayer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the 2012 Bonds until the audit is concluded, regardless of the ultimate outcome.

State Of Idaho Income Tax

Bond Counsel is also of the opinion that interest on the 2012 Bonds is exempt from State of Idaho indi-

vidual income taxes under currently existing law.

Premium Bonds The initial public offering price of certain maturities of the 2012 Bonds (the “Premium Bonds”), as shown

on the front cover, are issued at original offering prices in excess of their original principal amount. The dif-ference between the amount of the Premium Bonds at the original offering price and the principal amount payable at maturity represents “bond premium” under the Code. As a result of requirements of the Code relat-ing to the amortization of bond premium, under certain circumstances an initial owner of a Bond may realize a taxable gain upon disposition of such a bond, even though such bond is sold or redeemed for an amount equal to the original owner's cost of acquiring such bond. All owners of 2012 Bonds are advised that they should consult with their own tax advisors with respect to the tax consequences of owning and disposing of 2012 Bonds, whether the disposition is pursuant to a sale of the 2012 Bonds or other transfer, or redemption.

Tax Legislative Changes

Current law may change so as directly or indirectly to reduce or eliminate the benefit of the exclusion of

interest on the 2012 Bonds from the gross income for federal income tax purposes. Any proposed legislation, whether or not enacted, could also affect the value and liquidity of the 2012 Bonds. Prospective purchasers of the 2012 Bonds should consult with their own tax advisors with respect to the effects of any proposed or fu-ture legislation.

General

The authorization and issuance of the 2012 Bonds are subject to the approval of Hawley Troxell Ennis &

Hawley LLP, Boise, State of Idaho, Bond Counsel. Certain legal matters will be passed upon for the District by Eberharter–Maki & Tappen PA, Boise, Idaho. The approving opinion of Bond Counsel will be delivered with the 2012 Bonds. A copy of the opinion of Bond Counsel in substantially the form set forth in “APPEN-DIX B—PROPOSED FORM OF OPINION OF BOND COUNSEL” of this OFFICIAL STATEMENT will be made available upon request from the contact person as indicated under “INTRODUCTION—Contact Per-sons” above.

Bond Counsel has not participated in the preparation of this OFFICIAL STATEMENT. The employment

of Bond Counsel is limited to the review of the transcripts of legal proceedings authorizing the issuance of the 2012 Bonds and the legality of the source of payment of the 2012 Bonds, and to the issuance of the legal opin-ion, in conventional form, relating solely to the validity of the 2012 Bonds pursuant to such authority and the excludability of interest on the 2012 Bonds for income tax purposes as described above. Except for said legal matters, which will be specifically covered in its opinion, Bond Counsel has assumed no responsibility for the accuracy or completeness of any information furnished to any person in connection with or any offer or sale of the 2012 Bonds in the OFFICIAL STATEMENT or otherwise.

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MISCELLANEOUS

Bond Ratings As of the date of this OFFICIAL STATEMENT, the 2012 Bonds have been rated “Aaa” by Moody’s

based upon the Guaranty Act. Moody’s rates all bond issues guaranteed under the Guaranty Act “Aaa”. An explanation of the above ratings may be obtained from Moody’s. The Board has not directly applied to S&P or Fitch Ratings for a rating on the 2012 Bonds.

The 2012 Bonds have an “Aa2” underlying rating from Moody’s. Such ratings do not constitute a recommendation by the rating agencies to buy, sell or hold the

2012 Bonds. Such ratings reflect only the views of Moody’s and any desired explanation of the significance of such ratings should be obtained from Moody’s. Generally, a rating agency bases its rating on the infor-mation and materials furnished to it and on investigations, studies and assumptions of its own.

There is no assurance that the ratings given 2012 Bonds will continue for any given period of time or that

the ratings will not be revised downward or withdrawn entirely by the rating agencies if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2012 Bonds.

Escrow Verification

Grant Thornton LLP, Minneapolis, Minnesota, Certified Public Accountants, will verify the accuracy of

the mathematical computations concerning the adequacy of the maturing principal amounts of and interest earned on the obligations of the United States of America, together with other escrowed moneys to be placed in the Escrow Account to pay when due pursuant to prior redemption the redemption price of, and interest on the 2006 Refunded Bonds and the mathematical computations of the yield on the 2012 Bonds and the yield on the government obligations purchased with a portion of the proceeds of the sale of the 2012 Bonds. Such veri-fications shall be based in part upon information supplied by the successful bidder(s).

Financial Advisor

The District has entered into an agreement with the Financial Advisor whereunder the Financial Advisor

provides financial recommendations and guidance to the District with respect to preparation for sale of the 2012 Bonds, timing of sale, tax–exempt bond market conditions, costs of issuance and other factors related to the sale of the 2012 Bonds. The Financial Advisor has read and participated in the drafting of certain portions of this OFFICIAL STATEMENT and has supervised the completion and editing thereof. The Financial Advi-sor has not audited, authenticated or otherwise verified the information set forth in the OFFICIAL STATE-MENT, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information, and the Financial Advisor makes no guaranty, warranty or other representa-tion respecting accuracy and completeness of the OFFICIAL STATEMENT or any other matter related to the OFFICIAL STATEMENT.

Independent Auditors

The financial statements of the District as of June 30, 2012 and for the year then ended, included in this

OFFICIAL STATEMENT, have been audited by Folke CPAs, P.C., Payette, Idaho (“Folke”) as stated in its report in “APPENDIX A––BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION FOR FISCAL YEAR 2012.”

Folke has not participated in the preparation or review of this OFFICIAL STATEMENT. Based upon

Folke’s non–participation, they have not consented to the use of their name in this OFFICIAL STATEMENT.

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Accuracy and Completeness of the Official Statement This OFFICIAL STATEMENT has been approved by the District for distribution to the successful bid-

der(s) of the 2012 Bonds. The District’s officials will provide to the original purchaser of the 2012 Bonds at the time of delivery of the 2012 Bonds, a certificate confirming to the purchaser that, to the best of their knowledge and belief, the OFFICIAL STATEMENT, with respect to the 2012 Bonds, at the time of the sale and delivery of the 2012 Bonds, was true and correct in all material respects and did not at any time contain an untrue statement of a material fact or omit to state a material fact required to be stated, where necessary to make the statements, in light of the circumstances under which they were made, not misleading.

Additional Information

All quotations contained herein from and summaries and explanations of the State Constitution, statutes,

programs and laws of the State, court decisions and the Resolution, do not purport to be complete, and refer-ence is made to said State Constitution, statutes, programs, laws, court decisions and the Resolution for full and complete statements of their respective provisions.

Any statements in this OFFICIAL STATEMENT involving matters of opinion, whether or not expressly

so stated, are intended as such and not as representation of fact. The appendices attached hereto are an integral part of this OFFICIAL STATEMENT and should be read

in conjunction with the foregoing material. This OFFICIAL STATEMENT and its distribution and use has been duly authorized by the District. Board of Trustees of Joint School District No. 421 (McCall–Donnelly)

Valley and Adams Counties, State of Idaho /s/ Kathy Deinhardt–Hill

Kathy Deinhardt–Hill Chairperson of the Board of Trustees

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(This page has been intentionally left blank.)

A–1

APPENDIX A

BASIC FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION FOR FISCAL YEAR 2012

The basic financial statements and required supplementary information for Fiscal Year 2012 are con-

tained herein. Copies of current and prior financial statements are available upon request from the contact persons as indicated under “INTRODUCTION—Contact Persons” above.

(The remainder of this page has been intentionally left blank.)

Folke CPAs, P.C. Timothy S. Folke –Kurt R. Folke

P.O. Box 100, Payette, Idaho 83661 www.folkecpas.com, folkecpas@srvinet.com

P: 208-642-1417, F: 208-642-1582

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Independent Auditor’s Report Board of Trustees McCall-Donnelly Joint School District No. 421 We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of McCall-Donnelly Joint School District No. 421(the School) as of and for the year ended June 30, 2012, which collectively comprise the School’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the School's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the School as of June 30, 2012 and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated July 18, 2012 on our consideration of the School's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the budgetary information listed as required supplemental information in the table of contents be presented to supplement the basic financial statements. Such information, although not required to be a part of the basic financial statements, is required by the Governmental Accounting

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Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Management has not presented the management’s discussion and analysis information that governmental accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, and historical context. Our opinion on the basic financial statements is not affected by this missing information. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School’s financial statements as a whole. The accompanying combining fund financial statements, and the schedule of expenditures of federal awards (as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations), are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Folke CPAs, P.C. July 18, 2012

BASIC FINANCIAL STATEMENTS

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Net Assets

June 30, 2012

Governmental Activities

AssetsCurrent Assets

Cash & Investments $7,620,880Receivables:

Local Sources 3,307,822State Sources 73,119Federal Sources 527,604Total Current Assets 11,529,425

Noncurrent AssetsNondepreciable Capital Assets 35,951,835Depreciable Net Capital Assets 3,910,692

Total Noncurrent Assets 39,862,527Total Assets $51,391,952

LiabilitiesCurrent Liabilities

Accounts Payable $71,801Salaries & Benefits Payable 1,109,258Deferred Revenue 249,661Accrued Interest 496,617Long-Term Debt, Current 1,275,000

Total Current Liabilities 3,202,337Noncurrent Liabilities

Long-Term Debt, Noncurrent 25,375,000Total Noncurrent Liabilities 25,375,000

Total Liabilities 28,577,337

Net AssetsInvested in Capital Assets, Net of Related Debt 12,715,910Restricted:

Special Programs 347,189Debt Service 2,506,427Capital Projects 3,613,076

Unrestricted 3,632,013Total Net Assets 22,814,615Total Liabilities and Net Assets $51,391,952

See Accompanying Notes 3

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Activities

Year Ended June 30, 2012

Net (Expense)Revenue AndChanges inNet Assets

Operating Capital Charges For Grants And Grants And Governmental

Functions/Programs Expenses Services Contributions Contributions ActivitiesGovernmental ActivitiesInstructional Programs

Elementary School $2,041,456 $43,635 ($1,997,821)Secondary School 2,830,043 $31,226 45,907 (2,752,910)Alternative School 226,575 (226,575)Exceptional Child 795,541 259,587 (535,954)Preschool Exceptional 4,491 4,491 0Gifted & Talented 33,973 (33,973)Interscholastic 200,633 (200,633)School Activity 23,716 (23,716)Detention Center 31,737 (31,737)

Support Service ProgramsAttendance - Guidance - Health 252,236 (252,236)Special Services 148,633 (148,633)Instructional Improvement 358,805 2,273 $120,000 (236,532)Educational Media 189,014 (189,014)Instruction-Related Technology 257,695 109,549 30,111 (118,035)Board of Education 84,155 (84,155)District Administration 173,996 790 (173,206)School Administration 709,430 (709,430)Business Operation 133,993 11,417 (122,576)Central Service 72,184 (72,184)Administrative Technology 303,102 106,500 (196,602)Buildings - Care 801,274 (801,274)Maintenance - Non-Student Occupied 39,858 750 (39,108)Maintenance - Student Occupied 331,414 14,913 (316,501)Maintenance - Grounds 179,867 356 (179,511)Pupil-To-School Transportation 729,282 (729,282)Pupil-Activity Transportation 113,714 (113,714)General Transportation 25,800 3,884 (21,916)

Non-Instructional ProgramsChild Nutrition 371,448 79,687 185,111 (106,650)Capital Assets - Student Occupied 285,722 (285,722)Capital Assets - Non-Student Occupied 0Debt Service - Principal 0Debt Service - Interest 1,198,841 (1,198,841)

Total $12,948,628 $111,663 $655,227 $283,297 (11,898,441)

General RevenuesLocal Taxes 8,002,075Other Local Revenues 212,593State Revenues 4,296,591Federal Revenues 157,109

Total 12,668,368

Change in Net Assets 769,927

Net Assets - Beginning 22,044,688Net Assets - Ending $22,814,615

Program Revenues

See Accompanying Notes 4

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Balance Sheet - Governmental Funds

June 30, 2012

Page 1 of 3

Forest Child DebtGeneral Reserve Nutrition Service

Fund Fund Fund FundAssets

Cash & Investments $2,128,358 $1,758,606 $1,533,042Receivables:

Local Sources 2,334,437 973,385State Sources 64,808Federal Sources

Due From Other Funds 276,066Total Assets $4,803,669 $1,758,606 $0 $2,506,427

LiabilitiesAccounts Payable $71,679Due To Other Funds $22,537Salaries & Benefits Payable 1,059,290 18,150Deferred Revenue 686,243 $267,504

Total Liabilities 1,817,212 $0 40,687 267,504

Fund BalancesRestricted:

Special ProgramsDebt Service 2,238,923Capital Projects 1,758,606

Unassigned 2,986,457 (40,687)Total Fund Balances 2,986,457 1,758,606 (40,687) 2,238,923Total Liabilities and Fund Balances $4,803,669 $1,758,606 $0 $2,506,427

See Accompanying Notes 5

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Balance Sheet - Governmental Funds

June 30, 2012

Page 2 of 3

Other TotalConstruction Governmental Governmental

Fund Funds FundsAssets

Cash & Investments $1,854,470 $346,404 $7,620,880Receivables:

Local Sources 0 3,307,822State Sources 8,311 73,119Federal Sources 527,604 527,604

Due From Other Funds 0 276,066Total Assets $1,854,470 $882,319 $11,805,491

LiabilitiesAccounts Payable $122 $71,801Due To Other Funds 253,529 276,066Salaries & Benefits Payable 31,818 1,109,258Deferred Revenue 249,661 1,203,408

Total Liabilities $0 535,130 2,660,533

Fund BalancesRestricted:

Special Programs 347,189 347,189Debt Service 0 2,238,923Capital Projects 1,854,470 0 3,613,076

Unassigned 0 2,945,770Total Fund Balances 1,854,470 347,189 9,144,958Total Liabilities and Fund Balances $1,854,470 $882,319 $11,805,491

See Accompanying Notes 6

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Balance Sheet - Governmental Funds

June 30, 2012

Page 3 of 3

Reconciliation of Total Governmental Fund Balances to NetAssets of Governmental Activities

Total Governmental Fund Balances $9,144,958

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

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 39,862,527

Certain receivables are not available to pay for current period expenditures and therefore are deferred in the funds. 953,747

Certain liabilities, including accrued interest, are not due and payable in the current period and therefore are not reported in the funds. (27,146,617)

Net Assets of Governmental Activities $22,814,615

See Accompanying Notes 7

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Revenues, Expenditures, and Changes in

Fund Balances - Governmental FundsYear Ended June 30, 2012

Page 1 of 3

Forest Child DebtGeneral Reserve Nutrition Service

Fund Fund Fund FundRevenues

Local Taxes $5,686,563 $2,489,603Other Local Revenue 220,213 $79,757State Revenue 4,721,591Federal Revenue 8,711 440,406 185,111

Total Revenues 10,637,078 440,406 264,868 2,489,603ExpendituresInstructional Programs

Elementary School 1,997,821Secondary School 2,784,136Alternative School 226,575Exceptional Child 535,954Preschool ExceptionalGifted & Talented 33,973Interscholastic 200,633School Activity 23,716Detention Center 31,737

Support Service ProgramsAttendance - Guidance - Health 252,236Special Services 148,633Instructional Improvement 236,532 120,000Educational Media 189,014Instruction-Related Technology 118,035 30,111Board of Education 84,155District Administration 173,206School Administration 709,430Business Operation 122,576 11,417Central Service 72,184Administrative Technology 196,602 106,500Buildings - Care 801,274Maintenance - Non-Student Occupied 39,858Maintenance - Student Occupied 331,414 14,913Maintenance - Grounds 173,291 356Pupil-To-School Transportation 729,282Pupil-Activity Transportation 113,714General Transportation 21,916

Non-Instructional ProgramsChild Nutrition 60,527 310,921Capital Assets - Student OccupiedCapital Assets - Non-Student OccupiedDebt Service - Principal 1,100,000Debt Service - Interest 1,218,549

Total Expenditures 10,408,424 283,297 310,921 2,318,549Excess (Deficiency) of Revenues

Over Expenditures 228,654 157,109 (46,053) 171,054Other Financing Sources (Uses)

Transfers InTransfers Out

Total Other Financing Sources (Uses) 0 0 0 0Net Change in Fund Balances 228,654 157,109 (46,053) 171,054Fund Balances - Beginning 2,757,803 1,601,497 5,366 2,067,869Fund Balances - Ending $2,986,457 $1,758,606 ($40,687) $2,238,923

See Accompanying Notes 8

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Revenues, Expenditures, and Changes in

Fund Balances - Governmental FundsYear Ended June 30, 2012

Page 2 of 3

Other TotalConstruction Governmental Governmental

Fund Funds FundsRevenues

Local Taxes $0 $8,176,166Other Local Revenue $5,441 106,884 412,295State Revenue 65,653 4,787,244Federal Revenue 307,713 941,941

Total Revenues 5,441 480,250 14,317,646ExpendituresInstructional Programs

Elementary School 43,635 2,041,456Secondary School 45,907 2,830,043Alternative School 0 226,575Exceptional Child 259,587 795,541Preschool Exceptional 4,491 4,491Gifted & Talented 0 33,973Interscholastic 0 200,633School Activity 0 23,716Detention Center 0 31,737

Support Service ProgramsAttendance - Guidance - Health 0 252,236Special Services 0 148,633Instructional Improvement 2,273 358,805Educational Media 0 189,014Instruction-Related Technology 109,549 257,695Board of Education 0 84,155District Administration 790 173,996School Administration 0 709,430Business Operation 0 133,993Central Service 0 72,184Administrative Technology 0 303,102Buildings - Care 0 801,274Maintenance - Non-Student Occupied 0 39,858Maintenance - Student Occupied 1,449,293 0 1,795,620Maintenance - Grounds 622,308 0 795,955Pupil-To-School Transportation 0 729,282Pupil-Activity Transportation 0 113,714General Transportation 3,884 25,800

Non-Instructional ProgramsChild Nutrition 0 371,448Capital Assets - Student Occupied 0 0Capital Assets - Non-Student Occupied 0 0Debt Service - Principal 0 1,100,000Debt Service - Interest 0 1,218,549

Total Expenditures 2,071,601 470,116 15,862,908Excess (Deficiency) of Revenues

Over Expenditures (2,066,160) 10,134 (1,545,262)Other Financing Sources (Uses)

Transfers In 203,850 0 203,850Transfers Out (203,850) (203,850)

Total Other Financing Sources (Uses) 203,850 (203,850) 0Net Change in Fund Balances (1,862,310) (193,716) (1,545,262)Fund Balances - Beginning 3,716,780 540,905 10,690,220Fund Balances - Ending $1,854,470 $347,189 $9,144,958

See Accompanying Notes 9

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Revenues, Expenditures, and Changes in

Fund Balances - Governmental FundsYear Ended June 30, 2012

Page 3 of 3

Reconciliation of the Statement of Revenues, Expenditures, andChanges in Fund Balances - Governmental Funds to theStatement of Activities

Net Change in Fund Balances - Total Governmental Funds ($1,545,262)

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

p p y pHowever, in the statement of activities the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the excess of capital outlays over (under) depreciation expense in the current period. 1,794,572

Revenues in the statement of activities that do not provide current financial resources are deferred in the funds. (599,091)

Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term debt in the statement of net assets. 1,100,000

In the statement of activities, interest is accrued on long-term debt, but the expenditure is reported when due in the 19,708

Change in Net Assets of Governmental Activities $769,927

See Accompanying Notes 10

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Fiduciary Net Assets

June 30, 2012

Employee Private Purpose Agency Funds -Benefit Trust Funds - Student

Trust Fund Scholarship Activity TotalAssets

Cash & Investments $151,398 $16,368 $147,835 $315,601Total Assets $151,398 $16,368 $147,835 $315,601

LiabilitiesDue to Student Groups $147,835 $147,835

Total Liabilities $0 $0 $147,835 147,835

Net AssetsRestricted:

Scholarships 16,368 16,368Employees 151,398 151,398

Total Net Assets 151,398 16,368 0 167,766Total Liabilities and Net Assets $151,398 $16,368 $147,835 $315,601

See Accompanying Notes 11

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Statement of Changes in Fiduciary Net Assets

Year Ended June 30, 2012

Employee Private PurposeBenefit Trust Funds -

Trust Fund Scholarship TotalAdditions

Contributions $1,200 $2,665 $3,865Investment Income (Loss) 3,955 336 4,291

Total Additions 5,155 3,001 8,156

DeductionsDistributions 100,839 100,839Plan Expenses 0Scholarships Awarded 2,400 2,400

Total Deductions 100,839 2,400 103,239

Change in Net Assets (95,684) 601 (95,083)

Net Assets - Beginning 247,082 15,767 262,849Net Assets - Ending $151,398 $16,368 $167,766

See Accompanying Notes 12

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

13

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity – McCall-Donnelly Joint School District No. 421 (the School) provides public school educational services as authorized by Section 33 of Idaho Code. The School's boundaries for taxing and school enrollment purposes are located within Valley and Adams Counties. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to school districts. The significant accounting policies of the School are described below. Basic Financial Statements - Government-Wide Statements – The School’s basic financial statements include both government-wide (reporting the School as a whole) and fund financial statements (reporting the School’s major funds). Both government-wide and fund financial statements categorize primary activities as either governmental or business type. Currently, all the School’s activities are categorized as governmental activities. In the government-wide statement of net assets, the activities columns (a) are presented on a consolidated basis by column, (b) and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The School’s net assets may be reported in three parts - invested in capital assets, net of related debt (when related debt exists), restricted net assets, and unrestricted net assets. The School first utilizes restricted resources to finance qualifying activities. The government-wide statement of activities reports both the gross and net cost of each of the School’s functions. The functions are also supported by general government revenues as reported in the statement of activities. The statement of activities reduces gross expenses (including depreciation when recorded) by related program revenues and operating and capital grants. Program revenues must be directly associated with the function. Internal activity between funds (when two or more funds are involved) is eliminated in the government-wide statement of activities. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reports capital-specific grants. The net costs (by function) are normally covered by general revenues. The School reports expenditures in accordance with the State Department of Education’s "Idaho Financial Accounting Reporting Management System" (IFARMS). IFARMS categorizes all expenditures by function, program and object. Accordingly, there is no allocation of indirect costs. The government-wide focus is more on the sustainability of the School as an entity and the change in the School’s net assets resulting from the current year’s activities. Fiduciary funds are not included in the government-wide statements. Basic Financial Statements - Fund Financial Statements – The financial transactions of the School are reported in individual funds in the fund financial statements. Each fund is accounted

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

14

for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. The emphasis in fund financial statements is on the major funds. Nonmajor funds by category are summarized into a single column. Generally accepted accounting principles set forth minimum criteria (percentage of assets, liabilities, revenues, and expenditures/expenses of the funds) for the determination of major funds. Major governmental funds of the School include: General Fund – The general fund is the School’s primary operating fund. It is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds – Special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Major special revenue funds include the child nutrition fund, which serves to account for providing nutritional meals to students (including subsidized meals), and the forest reserve fund, which is used primarily for major capital outlay. Debt Service Fund – The debt service fund is used to account for the accumulation of funds for the periodic payment of principal and interest on long term debt. Capital Projects Funds – Capital projects funds are used to account for the acquisition of major capital assets. Major capital project funds include the construction fund, used to account for bond proceeds and related construction costs. Fiduciary funds of the School include: Private Purpose Trust Funds – Private purpose trust funds are used to account for the assets, and related income producing and disbursement activities, for which the School acts as a scholarship trustee. Employee Benefit Trust Funds – Employee benefit trust funds are used to account for the assets, and related income producing and disbursement activities, for which the School acts as a trustee for certain benefits of its employees. Agency Funds – Agency funds are used to account for assets held by the School on behalf of students. Basis of Accounting – Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. Activities in the government-wide financial statements are presented on the accrual basis of accounting and are required to follow both governmental accounting standards board pronouncements and financial accounting standards board pronouncements issued through

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

15

November 30, 1989. Revenues are recognized when earned and expenses are recognized when incurred. The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual (when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or within thirty days after year end. Expenditures are recorded when the related fund liability is incurred. Exceptions to this general rule include principal and interest on long-term debt which, if any, are recognized when due and payable. The School may report deferred revenue on its financial statements. For the fund financial statements, deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. In subsequent periods, when both revenue recognition criteria are met, the revenue is recognized. For both the government-wide and fund financial statements, certain grant revenues are only recognized to the extent they have been used for qualifying expenditures; any excess revenues are reported as deferred revenue. Cash and Investments – Nearly all the cash and investment balances of the School’s funds are pooled for investment purposes. The individual funds’ portions of the pooled cash and investments are reported in each fund as cash and investments. Interest earned on pooled cash and investments is allocated to the various funds in proportion to each fund’s respective investment balance. Investments include monies invested in the local government investment pool are stated at fair value using either quoted market prices or best available estimate. The reported value of the local government investment pool is materially the same as the fair value of its shares. Receivables – Receivables are reported net of any estimated uncollectible amounts. Inventories – Material supplies on hand at year end are stated at cost using the first-in, first-out method. Capital Assets and Depreciation – Significant capital asset acquisitions with an original cost of $1,000 or more are recorded at cost if purchased or fair value if contributed. Minor repairs and maintenance are expensed as incurred. Depreciation over the estimated useful lives of all depreciable assets is recorded using the straight line method. Compensated Absences and Post-Retirement Benefits – The School provides certain compensated absences to its employees. The estimated amount of compensation for future amounts is deemed to be immaterial and, accordingly, no liability is recorded. Government accounting standards board statement 45 requires employers to accrue future estimated post-retirement benefits on the employer’s government-wide financial statements when such benefits are deemed material to the employer. The future estimated post-retirement benefits are deemed immaterial to the School, and accordingly, are not reflected on the government-wide financial statements.

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

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Net Assets – Net assets is the difference between assets and liabilities. Net assets invested in capital assets - net of related debt, are capital assets net of accumulated depreciation and reduced by any outstanding debt related to the financing of those assets. Restricted net assets are net assets less related debt that are subject to constraints on their use by creditors, grantors, contributors, legislation, and other parties. All other net assets are reported as unrestricted. Fund Balance Classifications – Restrictions of the fund balance indicate portions that are legally or contractually segregated for a specific future use. Nonspendable portions of the fund balance are those amounts that are not expected to be converted into cash. Committed portions represent amounts that can only be used for specific purposes pursuant to formal action (i.e. board approval) of the reporting entity’s governing body. Assigned portions represent amounts that are constrained by the government’s intent to be used for a specific purpose. Assigned fund balance classifications are not actively used by the entity. Remaining fund balances are reported as unassigned. When expenditures are incurred that qualify for either restricted or unrestricted resources, the School first utilizes restricted resources. When expenditures are incurred that qualify for either committed or assigned or unassigned resources, the School first utilizes committed resources. Property Taxes – The School is responsible for levying property taxes, but the taxes are collected by the respective county. Taxes are levied by the second Monday in September for each calendar year. Taxes are due in two installments – December 20th and June 20th. A lien is filed on real property three years from the date of delinquency. Contingent Liabilities – Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the School expects such amounts, if any, to be immaterial. Interfund Activity – Interfund activity is reported either as loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Concentrations of Credit Risk – The School maintains its cash at insured financial institutions. Periodically, balances may exceed federally insured limits. The School does not have a formal policy concerning concentrations of credit risk.

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

17

Risk Management – The School is exposed to various risks related to its operations. Insurance is utilized to the extent practical to minimize these risks. Nonmonetary Transactions – Items received via food commodities programs are recognized at their stated fair market value. Subsequent Events – Subsequent events were evaluated through the date of the auditor’s report, which is the date the financial statements were available to be issued. B. CASH AND INVESTMENTS Cash and investments consist of the following at year end: Cash - Deposits $427,194Investments - Local Government Investment Pool 7,509,287

Total $7,936,481

Deposits – At year end, the carrying amounts of the School's deposits were $427,194 and the bank balances were $745,789. Of the bank balances, $460,002 was insured, and the remainder was uninsured and uncollateralized. Investments – State statutes authorize government entities to invest in certain bonds, notes, accounts, investment pools, and other obligations of the state, U.S. Treasury, and U.S. corporations pursuant to Idaho Code 67-1210 and 67-1210A. These statutes are designed to help minimize the custodial risk that deposits may not be returned in the event of the failure of the issuer or other counterparty, interest rate risk resulting from fair value losses arising from rising interest rates, or credit risks that an issuer or other counterparty will not fulfill its obligations. The School's investment policy complies with state statutes. The local government investment pool is managed by the state treasurer's office and is invested in accordance with state statutes and regulations. Government accounting standards board statement 40 requires government entities to disclose credit quality ratings, concentration of credit risk, and interest rate risk on investment balances. Investments in the local government investment pool and deferred compensation plan (comprised of mutual funds and unrated collectively) are, due to their nature, not required to be rated in terms of credit quality, and are excluded from the other disclosure requirements. These investments include insured or registered investments or investments for which the securities are held by the School or its agent in the School's name. Collateralized securities in the local government investment pool are held in trust by a safekeeping bank.

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

18

C. RECEIVABLES Receivables consist of the following at year end:

Special DebtGeneral Revenue Service

Fund Funds FundLocal Sources

Local Taxes $2,326,991 $973,385Other Local Sources 7,446

Total $2,334,437 $973,385

State SourcesFoundation Program $64,808Special Programs $8,311

Total $64,808 $8,311

Federal SourcesSpecial Programs $527,604

Total $527,604

D. DEFERRED REVENUE Deferred revenue consists of the following at year end:

GovernmentFund Wide

Financial FinancialDescription Statements StatementsProperty Taxes $953,747Grant Advances 249,661 $249,661

Total $1,203,408 $249,661

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

19

E. CAPITAL ASSETS A summary of capital assets for the year is as follows:

Beginning Ending Balance Increases Decreases Balance

Nondepreciable Capital AssetsLand $310,155 $310,155Construction in Progress 33,570,428 $2,071,252 35,641,680

Total 33,880,583 2,071,252 $0 35,951,835

Depreciable Capital AssetsBuildings 8,942,572 8,942,572Equipment 2,267,134 9,042 2,276,176

Subtotal 11,209,706 9,042 0 11,218,748Accumulated Depreciation

Buildings 5,480,501 180,816 5,661,317Equipment 1,541,833 104,906 1,646,739

Subtotal 7,022,334 285,722 0 7,308,056Total 4,187,372 (276,680) 0 3,910,692

Net Capital Assets $38,067,955 $1,794,572 $0 $39,862,527

Depreciation expense of $285,722 was charged to the capital assets – student occupied program. F. LONG-TERM DEBT At year end, the School’s bonded debt was as follows:

Outstanding2006 - $28,500,000 - general obligation bonds for capital improvementsdue in annual principal installments and semiannual interest paymentswith interest at 4.46% - 4.50% through 2027, secured by future taxes, paidthrough the debt service fund $26,650,000

Total $26,650,000

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

20

Maturities on the bonds are estimated as follows:

YearEnded Principal Interest

6/30/13 $1,275,000 $1,164,7876/30/14 1,350,000 1,107,3196/30/15 1,400,000 1,045,4436/30/16 1,475,000 980,7576/30/17 1,525,000 913,2566/30/18-22 8,750,000 3,448,4666/30/23-27 10,875,000 1,268,439

Total $26,650,000 $9,928,467

Changes in long-term debt are as follows:

Beginning Ending Due WithinDescription Balance Increases Decreases Balance One Year2006 G.O. Bonds $27,750,000 $1,100,000 $26,650,000 $1,275,000

Total $27,750,000 $0 $1,100,000 $26,650,000 $1,275,000

Interest and related costs during the year amounted to $1,198,841 and were charged to the debt service – interest program. G. RETIREMENT PLAN Public Employee Retirement System of Idaho (PERSI) - The PERSI Base Plan, a cost sharing multiple-employer public retirement system, was created by the Idaho State Legislature. It is a defined benefit plan requiring that both the member and the employer contribute. The Plan provides benefits based on members’ years of service, age, and compensation. In addition, benefits are provided for disability, death, and survivors of eligible members or beneficiaries. The authority to establish and amend benefit provisions is established in Idaho Code. Designed as a mandatory system for eligible state and school district employees, the legislation provided for other political subdivisions to participate by contractual agreement with PERSI. After 5 years of credited service, members become fully vested in retirement benefits earned to date. Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. For each month of credited service, the annual service retirement allowance is 2.0% (2.3% police/firefighter) of the average monthly salary for the highest consecutive 42 months. PERSI issues publicly available standalone financial reports that include audited financial statements and required supplementary information. These reports may be obtained from PERSI’s website www.persi.idaho.gov.

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421 Notes to Financial Statements

21

The actuarially determined contribution requirements of the School and its employees are established and may be amended by the PERSI Board of Trustees. For the year ended June 30, 2012, the required contribution rate as a percentage of covered payrolls for members was 6.23% for general members and 7.69% for police/firefighters. The employer rate as a percentage of covered payroll was 10.39% for general members and 10.73% for police/firefighter members. Additionally, PERSI administers the Sick Leave Insurance Reserve Fund which collects salary-based contributions for state and school employees while employed and pays insurance premiums at retirement based on a portion of the accumulated balance of their unused sick leave. State and school employers pre-fund this termination payment with contributions during active employment. The School's employer contributions required and paid were $708,648, $748,648, and $718,029, for the three years ended June 30, 2012, 2011, and 2010 respectively. H. INTERFUND BALANCES AND TRANSFERS Interfund balances at year end consist of the following:

Child NonmajorNutrition Governmental Total

Due To FundGeneral $22,537 $253,529 $276,066

Total $22,537 $253,529 $276,066

Due From Fund

These interfund balances resulted from the time lag between when expenditures are incurred in a fund and when the fund is reimbursed for such expenditures. Interfund transfers during the year consist of the following:

Fund Transfer In Transfer Out PurposeConstruction $203,850 Capital OutlayNonmajor Funds $203,850 Support

Total $203,850 $203,850

I. DEFERRED COMPENSATION PLAN The School offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan is funded with employee contributions only.

REQUIRED SUPPLEMENTAL INFORMATION

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Budgetary Comparison Schedule - General and Major Special Revenue Funds

Year Ended June 30, 2012

Page 1 of 3

Final BudgetVariance

Actual PositiveGeneral Fund Original Final Amounts (Negative)Revenues

Local Taxes $5,650,317 $5,650,317 $5,686,563 $36,246Other Local Revenue 103,500 103,500 220,213 116,713State Revenue 4,819,558 4,819,558 4,721,591 (97,967)Federal Revenue 9,500 9,500 8,711 (789)

Total Revenues 10,582,875 10,582,875 10,637,078 54,203ExpendituresInstructional Programs

Elementary School 1,945,527 1,945,527 1,997,821 (52,294)Secondary School 2,806,248 2,806,248 2,784,136 22,112Alternative School 180,395 180,395 226,575 (46,180)Exceptional Child 555,616 555,616 535,954 19,662Preschool Exceptional 0 0 0 0Gifted & Talented 40,072 40,072 33,973 6,099Interscholastic 202,964 202,964 200,633 2,331School Activity 29,180 29,180 23,716 5,464Detention Center 40,213 40,213 31,737 8,476

Support Service ProgramsAttendance - Guidance - Health 260,142 260,142 252,236 7,906Special Services 149,248 149,248 148,633 615Instructional Improvement 116,402 116,402 236,532 (120,130)Educational Media 203,628 203,628 189,014 14,614Instruction-Related Technology 91,851 91,851 118,035 (26,184)Board of Education 108,135 108,135 84,155 23,980District Administration 225,353 225,353 173,206 52,147School Administration 731,579 731,579 709,430 22,149Business Operation 132,685 132,685 122,576 10,109Central Service 90,819 90,819 72,184 18,635Administrative Technology 199,344 199,344 196,602 2,742Buildings - Care 896,344 896,344 801,274 95,070Maintenance - Non-Student Occupied 47,500 47,500 39,858 7,642Maintenance - Student Occupied 238,394 238,394 331,414 (93,020)Maintenance - Grounds 285,955 285,955 173,291 112,664Pupil-To-School Transportation 669,500 669,500 729,282 (59,782)Pupil-Activity Transportation 128,969 128,969 113,714 15,255General Transportation 21,000 21,000 21,916 (916)

Non-Instructional ProgramsChild Nutrition 59,812 59,812 60,527 (715)Capital Assets - Student Occupied 126,000 126,000 0 126,000Capital Assets - Non-Student Occupied 0 0 0 0Debt Service - Principal 0 0 0 0Debt Service - Interest 0 0 0 0

Total Expenditures 10,582,875 10,582,875 10,408,424 174,451 *Excess (Deficiency) of Revenues

Over Expenditures 0 0 228,654 228,654Other Financing Sources (Uses)

Transfers In 0 0 0 0Transfers Out 0 0 0

Total Other Financing Sources (Uses) 0 0 0 0Net Change in Fund Balances 0 0 228,654 228,654Fund Balances - Beginning 2,521,010 2,521,010 2,757,803 236,793Fund Balances - Ending $2,521,010 $2,521,010 $2,986,457 $465,447

*Total expenditures (over) under appropriations.

Budgeted Amounts(GAAP Basis)

See Auditor's Report 22

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Budgetary Comparison Schedule - General and Major Special Revenue Funds

Year Ended June 30, 2012

Page 2 of 3

Final BudgetVariance

Actual PositiveForest Reserve Fund Original Final Amounts (Negative)Revenues

Other Local Revenue $2,500 $2,500 $0 ($2,500)Federal Revenue 379,750 379,750 440,406 60,656

Total Revenues 382,250 382,250 440,406 58,156ExpendituresInstructional Programs

Elementary School 0 0 0 0Secondary School 0 0 0 0Alternative School 0 0 0 0

Support Service ProgramsInstructional Improvement 120,000 120,000 120,000 0Instruction-Related Technology 25,000 25,000 30,111 (5,111)Business Operation 17,000 17,000 11,417 5,583Administrative Technology 106,500 106,500 106,500 0Buildings - Care 0 0 0 0Maintenance - Non-Student Occupied 0 0 0 0Maintenance - Student Occupied 0 0 14,913 (14,913)Maintenance - Grounds 0 0 356 (356)

Non-Instructional ProgramsCapital Assets - Student Occupied 0 0 0 0Capital Assets - Non-Student Occupied 0 0 0 0

Total Expenditures 268,500 268,500 283,297 (14,797) *Excess (Deficiency) of Revenues

Over Expenditures 113,750 113,750 157,109 43,359Other Financing Sources (Uses)

Transfers In 0 0 0 0Transfers Out 0 0 0 0

Total Other Financing Sources (Uses) 0 0 0 0Net Change in Fund Balances 113,750 113,750 157,109 43,359Fund Balances - Beginning 1,459,245 1,459,245 1,601,497 142,252Fund Balances - Ending $1,572,995 $1,572,995 $1,758,606 $185,611

*Total expenditures (over) under appropriations.

Budgeted Amounts(GAAP Basis)

See Auditor's Report 23

McCALL-DONNELLY JOINT SCHOOL DISTRICT NO. 421Budgetary Comparison Schedule - General and Major Special Revenue Funds

Year Ended June 30, 2012

Page 3 of 3

Final BudgetVariance

Actual PositiveChild Nutrition Fund Original Final Amounts (Negative)Revenues

Other Local Revenue $85,500 $85,500 $79,757 ($5,743)Federal Revenue 140,000 140,000 185,111 45,111

Total Revenues 225,500 225,500 264,868 39,368ExpendituresNon-Instructional Programs

Child Nutrition 225,500 225,500 310,921 (85,421)Total Expenditures 225,500 225,500 310,921 (85,421) *

Excess (Deficiency) of RevenuesOver Expenditures 0 0 (46,053) (46,053)

Other Financing Sources (Uses)Transfers In 0 0 0 0Transfers Out 0 0 0 0

Total Other Financing Sources (Uses) 0 0 0 0Net Change in Fund Balances 0 0 (46,053) (46,053)Fund Balances - Beginning (65,048) (65,048) 5,366 70,414Fund Balances - Ending ($65,048) ($65,048) ($40,687) $24,361

*Total expenditures (over) under appropriations.

Budgeted Amounts(GAAP Basis)

See Auditor's Report 24

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APPENDIX B

PROPOSED FORM OF OPINION OF BOND COUNSEL Upon the delivery of the 2012 Bonds, Hawley Troxell Ennis & Hawley LLP, Bond Counsel, proposes

to issue their final approving opinion in substantially the following form:

(The remainder of this page has been intentionally left blank.)

877 Main Street, Suite 1000 P.O. Box 1617

Boise, Idaho 83701-1617 TT 208.344.6000

hawleytroxell.com

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[Date of Delivery]

Joint School District No. 421 (McCall-Donnelly) 120 Idaho Street McCall, Idaho 83638 BMO Capital Markets Chicago, Illinois

Re: Joint School District No. 421 (McCall-Donnelly), Valley and Adams Counties, State of Idaho General Obligation Refunding Bonds, Series 2012

This is to certify that we have acted as Bond Counsel in connection with the issuance by Joint School District No. 421 (McCall-Donnelly), Valley and Adams Counties, State of Idaho (the “District”), of its $19,540,000 General Obligation Refunding Bonds, Series 2012 (the “Bonds”), dated the date hereof, and issued pursuant to a Resolution of the District adopted November 1, 2012 (the “Resolution”). We have examined the Constitution and laws of the State of Idaho and such certified proceedings and other papers as we deem necessary to render this opinion.

Our services as Bond Counsel have been limited to the preparation of the legal proceedings and supporting certificates authorizing the issuance of the Bonds under the applicable laws of the State of Idaho and to a review of the transcript of such proceedings and certifications. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Our examination has been limited to the foregoing as they exist or are in effect as of the date hereof. Our opinion is limited to the matters expressly set forth herein, and we express no opinion concerning any other matters.

The Bonds bear interest from their date at the rates per annum set forth below payable on August 1 and February 1 in each year, commencing February 1, 2013, and mature on the dates in each of the designated years and in the principal amounts set forth below:

Joint School District No. 421 (McCall-Donnelly) [Date of Delivery] Page 3

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August 1 Year

Principal Amount $

Interest Rate %

2013 50,000 2.00 2014 50,000 2.00 2015 50,000 2.00 2016 50,000 2.00 2017 1,605,000 3.00 2018 1,660,000 3.00 2019 1,715,000 4.00 2020 1,790,000 5.00 2021 1,875,000 5.00 2022 1,960,000 5.00 2023 2,070,000 5.00 2024 2,155,000 3.00 2025 2,225,000 3.00 2026 2,285,000 3.00

The Bonds are issuable as fully registered bonds in the denomination of $5,000 or any

integral multiple thereof. The Bonds are subject to optional call for redemption prior to maturity.

The Bonds are being issued under the authority of chapter 11 of Title 33, chapters 2, 5 and 9 of Title 57 and Section 57-504, Idaho Code, as amended, for the purpose of refunding $19,625,000 aggregate principal amount of the outstanding General Obligation School Bonds, Series 2006 (the “Refunded Bonds”) of the District. The District has directed U.S. Bank National Association, as escrow agent (the “Escrow Agent”), to apply a portion of the proceeds of the sale of the Bonds, together with other available funds of the District, to the purchase of certain obligations of the United States of America (the “Escrow Securities”) as set forth in Attachment I to the Escrow Agreement dated November 20, 2012, between the District and Escrow Agent (the “Escrow Agreement”), and deposit such Escrow Securities together with a cash deposit in trust in an escrow account (the “Escrow Account”) created under the Escrow Agreement. Under the Escrow Agreement, the Escrow Agent will apply the principal of the Escrow Securities and the interest thereon, together with the cash deposit, to the payment of principal of and interest on the Refunded Bonds as such principal and interest become due thereon pursuant to stated maturity or call for redemption.

We have relied upon an accountant’s report of Grant Thornton LLP, Certified Public Accountants, as to the accuracy of the mathematical computations (i) concerning the adequacy of the maturing principal of and interest on the Investment Securities, together with the other moneys in the Escrow Account, to pay when due pursuant to stated maturity or call for redemption principal of and interest on the Refunded Bonds, and (ii) of the yield on the Bonds

Joint School District No. 421 (McCall-Donnelly) [Date of Delivery] Page 4

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and the yield on the Escrow Securities purchased with a portion of the proceeds of the sale of the Bonds. We have relied on calculations made by Zions Bank Public Finance, as financial advisor to the District, for the calculation of savings in debt service to be realized by the District as a result of refunding the Refunded Bonds.

Based upon the foregoing, we are of the opinion that, under existing law:

1. The Bonds have been duly authorized, executed, and delivered under the Constitution and the laws of the State of Idaho.

2. The Bonds are valid and legally binding general obligations of the District, enforceable in accordance with their terms except to the extent such enforcement is limited by the bankruptcy laws of the United States of America and by the reasonable exercise of the sovereign police power of the State of Idaho.

3. Provision has been made for the levy and collection each year of ad valorem taxes on all the taxable property within the District sufficient to pay the principal of and interest on the Bonds as the same become due, and all of the taxable property in the District is subject to the levy of ad valorem taxes to pay the same without limitation as to rate or amount.

4. The interest on the Bonds is not includable in gross income of the owners of the Bonds for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. The foregoing opinion set forth in this paragraph 4 assumes that the District will comply with certain covenants in the Resolution relating to requirements of the Internal Revenue Code of 1986, as amended (the “Code”).

5. To the extent that interest on the Bonds is not includable in gross income of the owners thereof for federal income tax purposes, interest on the Bonds is exempt from taxes imposed by the Idaho Income Tax Act, as amended.

6. Based upon the certificate of eligibility issued to the District by the Treasurer of the State of Idaho, payment of the interest and the principal of the Bonds when due is guaranteed by the sales tax collected by the State of Idaho under the provisions of the Idaho School Bond Guaranty Act, Title 33, chapter 53, Idaho Code. In addition, based upon the certificate of approval of credit enhancement issued to the District by the State of Idaho Endowment Fund Investment Board, payment of the principal of and interest on the Bonds when due is guaranteed by the school district bond credit enhancement program under Title 57, chapter 7, Idaho Code.

7. Upon the issuance of the Bonds and the application of the proceeds thereof to advance refund the Refunded Bonds in accordance with the Resolution and the Escrow

Joint School District No. 421 (McCall-Donnelly) [Date of Delivery] Page 5

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Agreement, the Refunded Bonds shall be deemed duly paid and discharged for the purposes of the indebtedness limitation contained in Section 33-1103, Idaho Code, and all other purposes.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium, and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

Ownership of tax-exempt obligations, including the Bonds, may result in collateral federal income tax consequences to certain taxpayers. Prospective purchasers of the Bonds should consult their own tax advisors as to the applicability of any such collateral consequences.

Very truly yours,

HAWLEY TROXELL ENNIS & HAWLEY LLP

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APPENDIX C

PROPOSED FORM OF INFORMATION REPORTING AGREEMENT

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JOINT SCHOOL DISTRICT NO. 421 (McCALL-DONNELLY), VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

INFORMATION REPORTING AGREEMENT

Re: $19,540,000 initial principal amount of General Obligation Refunding Bonds, Series 2012 (Idaho State Bond Guaranty and Credit Enhancement Programs), dated November 20, 2012 (the "Bonds") of Joint School District No. 421 (McCall-Donnelly), Valley and Adams Counties, State of Idaho (the "Issuer") and issued pursuant to a Resolution authorizing the issuance and confirming the sale of the Bonds (the "Resolution")

THIS INFORMATION REPORTING AGREEMENT (the "Agreement") is executed and delivered by the Issuer and Zion Bank Public Finance, as disclosure agent (hereinafter “Disclosure Agent”) as of the date set forth below in order for the Issuer to authorize and direct the Disclosure Agent, as the agent of the Issuer, to make certain information available to the public in compliance with Section (b)(5)(i) of Rule 15c2-12, as hereinafter defined.

WITNESSETH:

1. Background. The Issuer issued the Bonds pursuant to the Resolution. The CUSIP number assigned to the final maturity of the Bonds is 919278CQ2.

2. Appointment of Disclosure Agent. The Issuer hereby appoints the Disclosure Agent and any successor Disclosure Agent acting as such under the Resolution as its agent under this Agreement to disseminate the financial information and notices furnished by the Issuer hereunder in the manner and at the times as herein provided and to discharge the other duties assigned.

3. Information to be Furnished by the Issuer. The Issuer hereby covenants for the benefit of the registered and beneficial owners of the Bonds that, as long as the Bonds are outstanding under the Resolution, the Issuer will deliver the following information to the Disclosure Agent:

a. Within 180 days after the end of the Issuer's fiscal year (June 30 of each year), the audited financial statements of the Issuer prepared in accordance with generally-accepted accounting principles, together with the report thereon of the Issuer's independent auditors, beginning with fiscal year ending June 30, 2013. If audited financial statements are not available by the time specified herein, unaudited financial statements will be provided and audited financial statements will be provided when, and if, available. The Issuer shall include with each submission a written representation addressed to the Disclosure Agent to the effect that

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the financial statements are the financial statements required by this Agreement and that they comply with the applicable requirements of this Agreement. For the purposes of determining whether information received from the Issuer is the required financial statements, the Disclosure Agent shall be entitled conclusively to rely on the Issuer's written representation made pursuant to this Section.

b. Within 180 days after the end of the Issuer's fiscal year, the other financial, statistical and operating data for said fiscal year of the Issuer in the form and scope similar to the financial, statistical and operating data contained in the Issuer's Official Statement, specifically the tables and/or information contained under the following headings and subheadings of the Official Statement:

JOINT SCHOOL DISTRICT NO. 421 (McCALL-DONNELLY), VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

General - enrollment table DEBT STRUCTURE OF JOINT SCHOOL DISTRICT NO. 421 (McCALL-

DONNELLY), VALLEY AND ADAMS COUNTIES, STATE OF IDAHO Outstanding General Obligation Bonded Indebtedness Overlapping General Obligation Debt Debt Ratios General Obligation Legal Debt Limit and Additional Debt Incurring Capacity

FINANCIAL INFORMATION REGARDING JOINT SCHOOL DISTRICT NO. 421 (McCALL-DONNELLY), VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

Financial Summaries (five-year summaries)

TAXES AND STATE FUNDING Historical Tax Rates Market Value of Property of the District Tax Collection Record of the District Some of the Largest Taxpayers

c. The Disclosure Agent shall provide notice to the Issuer of its requirement to provide the information listed in Sections 3.a. and 3.b. at least thirty (30) days prior to the date such information is to be provided to the Disclosure Agent by the Issuer. Any or all of the items listed above in Sections 3.a. or 3.b. may be incorporated by reference from other documents, including official statements of debt issues of the Issuer which have been previously submitted to the Repository or the SEC. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such document incorporated by reference.

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d. Within ten (10) business days after the occurrence of the event, notice of any of the following events with respect to the Bonds:

(1) Principal and interest payment delinquencies;

(2) Nonpayment-related defaults, if material;

(3) Unscheduled draws on debt service reserves reflecting financial difficulties;

(4) Unscheduled draws on credit enhancements reflecting financial difficulties;

(5) Substitution of credit or liquidity providers, or their failure to perform;

(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;

(7) Modifications to rights of security holders, if material;

(8) Bond calls, if material, and tender offers:

(9) Defeasances;

(10) Release, substitution or sale of property securing repayment of the securities, if material;

(11) Rating changes;

(12) Bankruptcy, insolvency, receivership or similar event of the obligated person;1

(13) 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

1 For the purposes of the event identified in paragraph (12) above, 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 governing 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.

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agreement relating to any such actions, other than pursuant to its terms, if material;

(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material; and

(15) In a timely manner, notice of a failure of the Issuer or the obligated person to provide the required annual financial information specified in Sections 3.a. and 3.b. above, on or before the date specified therein.

e. Although the Disclosure Agent disclaims any affirmative obligation to monitor occurrences affecting the Issuer, the Disclosure Agent shall promptly advise the Issuer whenever, in the course of performing its duties under the Resolution, the Disclosure Agent identifies an occurrence which would require the Issuer to provide a notice of the occurrence of any of the events listed in Section 3.d. above; provided that the failure of the Disclosure Agent so to advise the Issuer of such occurrence shall not constitute a breach by the Disclosure Agent of any of its duties and responsibilities hereunder.

4. Manner and Time by Which Information is to be made Public by the Disclosure Agent.

a. The information required to be delivered to the Disclosure Agent pursuant to Sections 3.a. and 3.b. hereof shall be referred to as the Continuous Disclosure Information (the "Continuous Disclosure Information"), and the notices required to be delivered to the Disclosure Agent pursuant to Section 3.d. hereof shall be referred to as the Event Information (the "Event Information").

b. After the receipt of any Continuous Disclosure Information or any Event Information, the Disclosure Agent will deliver the information as provided in the following Section 4.c.

c. It shall be the Disclosure Agent's duty

(1) to deliver the Continuous Disclosure Information to the Repository once it is received from the Issuer not later than five (5) days after receipt thereof;

(2) to deliver the Event Information to the Repository immediately upon receipt from the Issuer and within ten (10) business days of the occurrence of the subject event;

(3) to determine the identity and address of the then existing Repository to which Continuous Disclosure Information and Event Information must be sent under rules and regulations promulgated by the MSRB or by the SEC.

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d. The Disclosure Agent shall have no duty or obligation to disclose to the Repository any information other than (i) Continuous Disclosure Information that the Disclosure Agent actually has received from the Issuer and (ii) Event Information about which the Disclosure Agent has received notice from the Issuer. Any such disclosures shall be required to be made only as and when specified in this Agreement. The Disclosure Agent's duties and obligations are only those specifically set forth in this Agreement, and the Disclosure Agent shall have no implied duties or obligations.

e. All Continuous Disclosure Information and Event Information, or other financial information and notices pursuant to this undertaking are to be provided to the Repository in electronic PDF format (word-searchable) as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB.

5. Indemnification.

a. The Disclosure Agent shall have no obligation to examine or review the Continuous Disclosure Information and shall have no liability or responsibility for the accurateness or completeness of the Continuous Disclosure Information disseminated by the Disclosure Agent hereunder. The Continuous Disclosure Information shall contain a legend to such effect.

b. The Issuer hereby agrees to hold harmless and to indemnify the Disclosure Agent, its employees, officers, directors, agents and attorneys from and against any and all claims, damages, losses, liabilities, reasonable costs and expenses whatsoever (including attorneys' fees and expenses, whether incurred before trial, at trial, or on appeal, or in any bankruptcy or arbitration proceedings), which may be incurred by the Disclosure Agent by reason of or in connection with the disclosure of information in accordance with this Agreement, except to the extent such claims, damages, losses, liabilities, costs or expenses result directly from the willful or negligent conduct of the Disclosure Agent in the performance of its duties under this Agreement.

6. Compensation. The Issuer hereby agrees to compensate the Disclosure Agent for the services provided and the expenses incurred pursuant to this Agreement in an amount to be agreed upon from time to time hereunder. Such compensation shall be in addition to any fees previously agreed upon with respect to the fiduciary services of the Disclosure Agent in its capacity as the Disclosure Agent.

7. Enforcement. The obligations of the Issuer under this Agreement shall be for the benefit of the registered and beneficial holders of the Bonds. Any holder of the Bonds then outstanding, including any Beneficial Owner of the Bonds (as defined in the Resolution), may enforce specific performance of such obligations by any judicial proceeding available. However, any failure by the Issuer to perform in accordance with this Agreement shall not constitute a default under the Resolution. Neither the Issuer nor the Disclosure Agent shall have any power or duty to enforce this Agreement.

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This Agreement shall inure solely to the benefit of the Issuer, the Disclosure Agent and the holders and beneficial owners from time to time of the Bonds and shall create no rights in any other person or entity.

8. Definitions. As used herein, the following terms shall have the following meanings:

"MSRB" shall mean the Municipal Securities Rulemaking Board.

“obligated person” as defined in Rule 15c2-12 shall mean any person, including an issuer of municipal securities, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all, or part of the obligations on the municipal securities to be sold in the offering (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities.

"Official Statement" shall mean the final official statement relating to the Bonds dated November 1, 2012.

"Repository" shall mean MSRB through its Electronic Municipal Market Access system (“EMMA”) at http://emma.msrb.org, or such other nationally recognized municipal securities information repository recognized by the SEC from time to time pursuant to the Rule.

"Rule 15c2-12" shall mean Rule 15c2-12, as amended, promulgated by the SEC under the Securities Exchange Act of 1934, as amended.

"SEC" shall mean the Securities and Exchange Commission.

9. Amendments and Termination. This Agreement may be amended with the mutual agreement of the Issuer and the Disclosure Agent and without the consent of any registered or beneficial holders of the Bonds under the following conditions:

a. the amendment is 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 the obligated person or type of business conducted;

b. this Agreement, as amended, would have complied with the requirements of Rule 15c2-12 at the time of the primary offering, after taking into account any amendments or interpretations of Rule 15c2-12, as well as any change in circumstances; and

c. the amendment does not materially impair the interests of holders of the Bonds.

Any party to this Agreement may terminate this Agreement by giving written notice of an intent to terminate to the other parties at least thirty (30) days prior to such termination, provided

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that no such termination shall relieve the obligation of the Issuer to comply with Rule 15c2-12(b)(5) either through a successor agent or otherwise.

The undertaking contained in this Agreement shall be in effect from and after the issuance and delivery of the Bonds and shall extend to the earlier of (i) the date all principal and interest on the Bonds shall have been paid pursuant to the terms of the Resolution; (ii) the date that the Issuer shall no longer constitute an "obligated person" within the meaning of Rule 15c2-12; or (iii) the date on which those portions of Rule 15c2-12 that require this written undertaking (a) are held to be invalid by a court of competent jurisdiction in a nonappealable action, (b) have been repealed retroactively, or (c) in the opinion of counsel who is an expert in federal securities laws, acceptable to the Issuer or the Disclosure Agent, otherwise, do not apply to the Bonds. The Issuer shall notify the Repository if this Agreement is terminated pursuant to (iii), above.

10. Successor Disclosure Agent. Upon the transfer of the duties created under the Resolution from the current Disclosure Agent to a successor Disclosure Agent, such successor Disclosure Agent shall succeed to the duties under this Agreement without any further action on the part of any party, and the then current Disclosure Agent shall have no further duties or obligations upon the transfer to a successor Disclosure Agent. Such Successor Disclosure Agent may terminate this Agreement or cause it to be amended as provided in paragraph 9.

11. Additional Information. Nothing in this Agreement shall be deemed to prevent the Issuer from disseminating (or cause the Disclosure Agent to disseminate) any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Continuous Disclosure Information or notice of the occurrence of any Event Information, in addition to that which is required by this Agreement. If the Issuer chooses to include any information in any Continuous Disclosure Information or Event Information in addition to that which is specifically required by this Agreement, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Continuous Disclosure Information or notice of occurrence of any Event Information.

If the Issuer provides to the Disclosure Agent information relating to the Issuer or the Bonds, which information is not designated as Event Information, and directs the Disclosure Agent to provide such information to the Repository, the Disclosure Agent shall provide such information in a timely manner to the Repository.

12. Notices. Notices and the required information under this Agreement shall be given to the parties at their addresses set forth below under their signatures or at such places as the parties to this Agreement may designate from time to time.

13. Counterparts. This Agreement may be executed in one or more counterparts, and each such instrument shall constitute an original counterpart of this Agreement.

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14. Governing Law. This Agreement shall be governed by the laws of the State of Idaho.

IN WITNESS WHEREOF, the Issuer and the Disclosure Agent have caused this Agreement to be executed and delivered by a duly authorized officer of each of them, all as of this _____ day of November, 2012.

ISSUER: JOINT SCHOOL DISTRICT NO. 421 (McCALL- DONNELLY), VALLEY AND ADAMS COUNTIES, STATE OF IDAHO

By Chair

DISCLOSURE AGENT: ZIONS BANK PUBLIC FINANCE

By Title:________________________________

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APPENDIX D

BOOK–ENTRY SYSTEM 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 Sec-tion 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 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 securi-ties 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 cer-tificates. 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, Na-tional 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 com-panies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Par-ticipant, either directly or indirectly (“Indirect Participants”). DTC has an S&P 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 dtcc.com.

Purchases of 2012 Bonds under the DTC system must be made by or through Direct Participants,

which will receive a credit for the 2012 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2012 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 pur-chase. 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 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants act-ing on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in 2012 Bonds, except in the event that use of the book–entry system for the 2012 Bonds is discontinued.

To facilitate subsequent transfers, all 2012 Bonds deposited by Direct Participants with DTC are reg-

istered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2012 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 2012 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2012 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping ac-count of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Partici-

pants 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 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2012 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Benefi-cial Owners of 2012 Bonds may wish to ascertain that the nominee holding the 2012 Bonds for their ben-

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efit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be pro-vided directly to them.

Redemption notices shall be sent to DTC. If less than all of the 2012 Bonds within an issue are being

redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to

2012 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 2012 Bonds are credited on the record date (identified in a listing attached to the Om-nibus Proxy).

Redemption proceeds, distributions and dividend payments on the 2012 Bonds will be made to Cede

& Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s prac-tice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detailed in-formation from the District or the Paying Agent, on payable date in accordance with their respective hold-ings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by stand-ing 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 distributions and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or 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 services as depository with respect to the 2012 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, 2012 Bond certificates are required to be printed and deliv-ered.

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, 2012 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 accu-racy thereof.

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