Dated: September 27, 2016.

NEW ISSUE — BOOK-ENTRY ONLY

RATINGS: S&P (insured): “AA”

S&P (underlying): “A”See “RATINGS”

In the opinion of Orrick, Herrington & Sutcliffe LLP, Special Counsel to the District (“Special Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the portion of each Base Rental Payment designated as and constituting interest paid by the District under the Facilities Sublease and received by the Owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Special Counsel, interest evidenced by the Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Special Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of the Certificates, or the amount, accrual or receipt of the portion of each Base Rental Payment constituting interest. See “Tax Matters” herein.

$6,170,000 TRAVIS UNIFIED SCHOOL DISTRICT CERTIFICATES OF PARTICIPATION

(SERIES 2016B) EVIDENCING DIRECT, FRACTIONAL UNDIVIDED INTERESTS

OF THE OWNERS THEREOF IN BASE RENTAL PAYMENTS TO BE MADE BY THE TRAVIS UNIFIED SCHOOL DISTRICT

(SOLANO COUNTY, CALIFORNIA) Dated: Date of Delivery Due: September 1, as shown on inside cover

This cover page contains information for reference only. Investors must read the entire Official Statement to obtain information essential in making an informed investment decision. Capitalized terms used in this cover page shall have the meanings given such terms herein.

The Travis Unified School District Certificates of Participation (Series 2016B), in the aggregate principal amount of $6,170,000 (the “Certificates”) evidence direct, fractional undivided interests of the owners thereof (the “Owners”) in base rental payments (the “Base Rental Payments”) to be made by the Travis Unified School District (the “District”) for the use and occupancy of certain real property situated in the County of Solano, California (the “Facility”) pursuant to a facilities sublease dated as of October 1, 2016 (the “Facilities Sublease”), by and between the Public Property Financing Corporation of California (the “Corporation”), as lessor, and the District, as lessee. The proceeds of the Certificates will be used to (i) finance various construction and modernization projects at Scandia Elementary School and (ii) pay costs incurred in connection with execution and delivery of the Certificate. See “ESTIMATED SOURCES AND USES OF PROCEEDS” herein.

The Certificates will be executed and delivered under the provisions of a trust agreement dated as of October 1, 2016 (the “Trust Agreement”), by and among The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), the Corporation, and the District. The Corporation has assigned to the Trustee, for the benefit of the Owners, its rights to receive Base Rental Payments and its respective rights to enforce payment of said amounts when due in the event of a default by the District or otherwise to protect the interests of the Owners. A portion of the obligation represented by the Certificates is payable from certain funds held by the Trustee under the Trust Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES” herein.

Interest with respect to the Certificates is payable on each March 1 and September 1, commencing March 1, 2017. Principal with respect to the Certificates is payable on September 1 in each of the years and in the amounts set forth on the inside front cover page. See “THE CERTIFICATES – Payment.” The Certificates will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Certificates. See “THE CERTIFICATES – Form and Registration.”

The Certificates are subject to prepayment prior to their stated principal payment dates. See “THE CERTIFICATES – Prepayment.” The District has covenanted under the Facilities Sublease to make all Base Rental Payments and Additional Payments provided for therein, to

include all such Base Rental Payments as a separate line item in its annual budgets, and to make the necessary annual appropriations for all such Base Rental Payments. The District’s obligation to make Base Rental Payments is subject to complete or partial abatement during any period in which, by reason of material damage to, or destruction or condemnation of, the Facility, or any defect in title to the Facility, there is substantial interference with the District’s right to use and occupy any portion of the Facility. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Abatement” and “CERTAIN RISK FACTORS – Abatement” herein.

The scheduled payment of principal and interest evidenced by the Certificates when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the execution and delivery of the Certificates by BUILD AMERICA MUTUAL ASSURANCE COMPANY. See “CERTIFICATE INSURANCE” herein.

THE OBLIGATION OF THE DISTRICT TO MAKE THE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE

DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

The Certificates will be offered when, as and if executed and delivered by the Trustee and received by the Underwriter named below, subject to the approval of legality by Orrick, Herrington & Sutcliffe llp, Special Counsel to the District. Orrick, Herrington & Sutcliffe LLP has also served as disclosure counsel to the District with respect to this issue. Certain matters will be passed upon for the Corporation by Parker & Covert LLP, Tustin, California, and for the Underwriter by Quint & Thimmig LLP, Larkspur, California. It is anticipated that the Certificates will be available for delivery through the facilities of DTC, on or about October 12, 2016.

MATURITY SCHEDULE

$6,170,000 TRAVIS UNIFIED SCHOOL DISTRICT CERTIFICATES OF PARTICIPATION

(SERIES 2016B) Evidencing Direct, fractional Undivided Interests of the Owners Thereof

In Base Rental Payments To Be Made By the

TRAVIS UNIFIED SCHOOL DISTRICT (SOLANO COUNTY, CALIFORNIA)

Maturity Date(September 1)

Principal Amount

Interest Rate Yield

Base CUSIP†:894375

2017 $300,000 2.000% 0.870% DY7

2018 280,000 2.000 1.010 DZ4

2019 285,000 3.000 1.140 EA8

2020 295,000 3.000 1.250 EB6

2021 305,000 3.000 1.400 EC4

2022 315,000 4.000 1.550 ED2

2023 325,000 4.000 1.670 EE0

2024 340,000 4.000 1.790 EF7

2025 355,000 4.000 1.900 EG5

2026 365,000 4.000 2.020 EH3

2027 380,000 4.000 2.230(c) EJ9

2028 395,000 4.000 2.380(c) EK6

2029 415,000 4.000 2.540(c) EL4

2030 430,000 4.000 2.600(c) EM2

2031 445,000 4.000 2.650(c) EN0

2032 465,000 2.625 2.960 EP5

2033 475,000 2.750 3.010 EQ3

(c) Yield to call at par on September 1, 2026. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American

Bankers Association by S&P Capital IQ. Copyright(c) 2016 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the Corporation, the Underwriter or their respective agents or counsel assume responsibility for the accuracy of such numbers.

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

The Certificates are exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 3(a)2 thereof. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy Certificates in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation.

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

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

Build America Mutual Assurance Company (the “Insurer”) makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, the Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Insurer, supplied by the Insurer and presented under the heading “CERTIFICATE INSURANCE” and APPENDIX G – “SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “budget,” “project” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when their expectations, or events, conditions or circumstances on which such statements are based, occur.

The District maintains a website. However, the information presented there is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Certificates.

In connection with this offering, the Underwriter may over-allot or effect transactions which stabilize or maintain the market prices of the Certificates at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the Certificates to certain securities dealers and dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside front cover page hereof and said public offering prices may be changed from time to time by the Underwriter.

TRAVIS UNIFIED SCHOOL DISTRICT

GOVERNING BOARD

John Dickerson, PresidentAngela Weinzinger, Vice President

Riitta DeAnda, ClerkIvery Hood, Member

Jamilah Whiteside, Member

DISTRICT ADMINISTRATION

Kate Wren Gavlak, SuperintendentJamie Metcalf, Chief Business Officer

Anna Pimentel, Director, Fiscal Services

SPECIAL SERVICES

Special Counsel

Orrick, Herrington & Sutcliffe LLP San Francisco, California

Financial Advisor

Capitol Public Finance Group Roseville, California

Underwriter’s Counsel

Quint & Thimmig LLP Larkspur, California

Corporation Counsel

Parker & Covert LLP Tustin, California

Trustee

The Bank of New York Mellon Trust Company, N.A.Dallas, Texas

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TABLE OF CONTENTSPage

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INTRODUCTION ....................................................................................................................................................... 1General .................................................................................................................................................................... 1The District ............................................................................................................................................................. 1Security and Sources of Payment for the Certificates ............................................................................................. 2Certificate Insurance ............................................................................................................................................... 3Reserve Fund; Reserve Policy ................................................................................................................................ 3Description of the Certificates ................................................................................................................................ 3Offering and Delivery of the Certificates................................................................................................................ 3Certificate Owners’ Risks ....................................................................................................................................... 3Continuing Disclosure ............................................................................................................................................ 4Other Information ................................................................................................................................................... 4

THE CERTIFICATES ................................................................................................................................................. 4General .................................................................................................................................................................... 4Form and Registration ............................................................................................................................................ 4Payment .................................................................................................................................................................. 5Prepayment ............................................................................................................................................................. 5

THE PROJECT ........................................................................................................................................................... 8

THE FACILITY .......................................................................................................................................................... 8General .................................................................................................................................................................... 8Substitution or Release of Property ........................................................................................................................ 8

ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................... 9

BASE RENTAL PAYMENT SCHEDULE .............................................................................................................. 10

SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES ........................................................... 11General .................................................................................................................................................................. 11Base Rental Payments ........................................................................................................................................... 11Certificate Reserve Fund....................................................................................................................................... 12Additional Payments ............................................................................................................................................. 13Property Insurance ................................................................................................................................................ 13Abatement ............................................................................................................................................................. 15

CERTIFICATE INSURANCE .................................................................................................................................. 16Bond Insurance Policy .......................................................................................................................................... 16Build America Mutual Assurance Company ........................................................................................................ 16

CERTAIN RISK FACTORS ..................................................................................................................................... 18Security for the Certificates .................................................................................................................................. 18State Law Limitations on Appropriations ............................................................................................................. 18Abatement ............................................................................................................................................................. 18Seismic Factors ..................................................................................................................................................... 19Absence of Flood Insurance .................................................................................................................................. 19Drought Conditions in California ......................................................................................................................... 19Limited Recourse on Default ................................................................................................................................ 19No Liability of Corporation to Owners ................................................................................................................. 20Other Limitations on Liability .............................................................................................................................. 20No Acceleration Upon Default ............................................................................................................................. 20Substitution or Release of Property ...................................................................................................................... 20Bankruptcy ............................................................................................................................................................ 21Loss of Tax Exemption of the Certificates ........................................................................................................... 22Hazardous Substances ........................................................................................................................................... 23Economic Conditions in California....................................................................................................................... 23Self-Insurance ....................................................................................................................................................... 23

TABLE OF CONTENTS(continued)

Page

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THE CORPORATION .............................................................................................................................................. 24

DISTRICT FINANCIAL INFORMATION .............................................................................................................. 24General .................................................................................................................................................................. 24Governing Board................................................................................................................................................... 24Superintendent and Business Services Personnel ................................................................................................. 24State Funding of Education; State Budget Process ............................................................................................... 25Local Sources of Education Funding .................................................................................................................... 38Other District Revenues ........................................................................................................................................ 38Local Property Taxation ....................................................................................................................................... 39Tax Charges and Delinquencies ............................................................................................................................ 44Significant Accounting Policies and Audited Financial Reports .......................................................................... 45District Budget Process and County Review ........................................................................................................ 47District Debt .......................................................................................................................................................... 50Direct and Overlapping Debt ................................................................................................................................ 52Employment .......................................................................................................................................................... 54Retirement Benefits .............................................................................................................................................. 54Risk Pooling, Joint Powers Agreements and Joint Ventures ................................................................................ 59Investment of District Funds ................................................................................................................................. 59

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS ....................................................................................................................... 59

Limitations on Revenues....................................................................................................................................... 59Article XIIIB of the California Constitution ......................................................................................................... 60Article XIIIC and Article XIIID of the California Constitution ........................................................................... 60Statutory Limitations ............................................................................................................................................ 61Proposition 98 and Proposition 111 ...................................................................................................................... 61Proposition 30 ....................................................................................................................................................... 63Applications of Constitutional and Statutory Provisions ...................................................................................... 63Proposition 2 ......................................................................................................................................................... 63Future Initiatives ................................................................................................................................................... 64

TAX MATTERS ....................................................................................................................................................... 64

CERTAIN LEGAL MATTERS ................................................................................................................................ 66

CONTINUING DISCLOSURE ................................................................................................................................. 66

FINANCIAL ADVISOR ........................................................................................................................................... 67

RATINGS .................................................................................................................................................................. 67

ABSENCE OF MATERIAL LITIGATION .............................................................................................................. 67

UNDERWRITING .................................................................................................................................................... 68

MISCELLANEOUS .................................................................................................................................................. 68

APPENDIX A – SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS .......... A-1

APPENDIX B - FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 ................................................................................. B-1

APPENDIX C - FORM OF OPINION OF SPECIAL COUNSEL ...................................................................... C-1

APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE .................................................... D-1

APPENDIX E - SOLANO COUNTY INVESTMENT POOL ........................................................................... E-1

APPENDIX F - BOOK–ENTRY ONLY SYSTEM ............................................................................................ F-1

APPENDIX G - SPECIMEN MUNICIPAL BOND INSURANCE POLICY ..................................................... G-1

APPENDIX H - SPECIMEN CERTIFICATE RESERVE INSURANCE POLICY ........................................... H-1

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$6,170,000 TRAVIS UNIFIED SCHOOL DISTRICT

REFUNDING CERTIFICATES OF PARTICIPATION (SERIES 2016B)

Evidencing Direct, Fractional Undivided Interests of the Owners Thereof in Base Rental Payments to Be Made By the

TRAVIS UNIFIED SCHOOL DISTRICT (SOLANO COUNTY, CALIFORNIA)

_________________

INTRODUCTION

General

This Official Statement (which includes the cover page and Appendices hereto) (this “Official Statement”), provides certain information concerning the sale and delivery of Travis Unified School District Certificates of Participation (Series 2016B), in the aggregate principal amount of $6,170,000 (the “Certificates”). The Certificates evidence direct, fractional undivided interests of the registered owners thereof (the “Owners”) in certain base rental payments (the “Base Rental Payments”) to be made by the Travis Unified School District (the “District”) for the use of certain real property (the “Facility”) situated in the County of Solano, California (the “County”). See “THE FACILITY” herein. The Facility will be leased by the District from the Public Property Financing Corporation of California (the “Corporation”) pursuant to a facilities sublease, dated as of October 1, 2016 (the “Facilities Sublease”), by and between the Corporation, as lessor, and the District, as lessee. The District is leasing the Facility to the Corporation under a facilities lease, dated as of October 1, 2016 (the “Facilities Lease”). Unless otherwise defined herein, all capitalized terms used herein shall have the definitions set forth in the Trust Agreement or the Facilities Sublease. See APPENDIX A – “SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS – Certain Definitions” attached hereto.

The proceeds of the Certificates will be used to (i) finance various construction and modernization projects at Scandia Elementary School and (ii) pay costs incurred in connection with execution and delivery of the Certificates. See “THE PROJECT” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.

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

The District

The District was formed in January 1962. The District’s boundaries encompass an area which includes portions of the cities of Fairfield and Vacaville, as well as a section of unincorporated area in the County. Travis Air Force Base is also within the boundaries of the District. The District is located midway between San Francisco and Sacramento. Interstate 80 runs east and west between Sacramento and San Francisco and passes by the District. Napa County lies north of the District, while Contra Costa County lies to the south. The District maintains one high school, one continuation high school, one middle school, one community day school and five elementary schools.

2

For additional information concerning the District, including certain financial information, see “DISTRICT HISTORY, OPERATION AND FINANCIAL INFORMATION” herein. The District’s audited financial statements for the fiscal year ended June 30, 2015 are included as Appendix B, and should be read in their entirety.

Security and Sources of Payment for the Certificates

The Certificates are being executed and delivered pursuant to a trust agreement dated as of October 1, 2016 (the “Trust Agreement”), by and among the District, the Corporation, and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) and evidence direct, fractional undivided interest in the Base Rental Payments to be made by the District under the Facilities Sublease for the use of the Facility. See “THE FACILITY” herein. The Facilities Sublease will obligate the District, as lessee, to make Base Rental Payments and Additional Payments to the Corporation, as lessor.

Pursuant to an assignment agreement dated as of October 1, 2016 (the “Assignment Agreement”), the Corporation has assigned to the Trustee, for the benefit of the Owners, substantially all of its rights under the Facilities Sublease and the Facilities Lease, including its right to receive and collect scheduled Base Rental Payments from the District under the Facilities Sublease and its right, as may be necessary, to enforce payment of Base Rental Payments.

The District’s obligation to make Base Rental Payments is payable from the District’s general fund. The District is not authorized to levy any additional taxes for the payment of this obligation. The District covenants under the Facilities Sublease that as long as the Facility is available for the District’s use and occupancy, it will take such action as may be necessary to include all Base Rental Payments in its annual budgets and to make the necessary annual appropriations therefor.

Base Rental Payments are subject to complete or partial abatement during any period in which, by reason of material damage to, or destruction or condemnation of, the Facility, or any defect in title to the Facility, there is substantial interference with the District’s right to use and occupy any portion of the Facility. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Abatement” and “CERTAIN RISK FACTORS – Abatement” herein. Abatement of Base Rental Payments under the Facilities Sublease, to the extent payment is not made from alternative sources as described herein, while not an event of default under the Facilities Sublease, could result in all Certificate Owners receiving less than the full amount of principal and interest evidenced by the Certificates. To the extent proceeds of insurance are available or there are amounts available in the Certificate Reserve Fund or other funds established under the Trust Agreement (as described below), Base Rental Payments (or a portion thereof) may be made during periods of abatement.

THE OBLIGATION OF THE DISTRICT TO MAKE THE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

For more complete and detailed information, see “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES” herein. For a description of certain risks associated with the District’s ability to make Base Rental Payments for the Facility, see “CERTAIN RISK FACTORS” herein.

3

Certificate Insurance

As more fully described herein, concurrently with the execution and delivery of the Certificates, Build America Mutual Assurance Company (the “Insurer”) will issue its municipal bond insurance policy for the Certificates (the “Insurance Policy”). See “CERTIFICATE INSURANCE” herein. The Insurance Policy guarantees the scheduled payment of principal of and interest evidenced by the Certificates when due as set forth in the form of the Insurance Policy included as APPENDIX G – :SPECIMEN MUNICIPAL BOND INSURANCE POLICY” attached hereto.

Reserve Fund; Reserve Policy

The Certificate Reserve Fund has been established for the benefit of the Certificate Owners. Upon the execution and delivery of the Certificates, a municipal bond debt service reserve insurance policy (the “Reserve Policy”), in an amount equal to the initial Reserve Requirement, issued by Build America Mutual Assurance Company (the “Reserve Insurer”), will be deposited in the Certificate Reserve Fund for the Certificates. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Reserve Fund.”

Description of the Certificates

The Certificates will be executed in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of the Certificates will not receive certificates representing their ownership interests in the Certificates purchased. The Certificates will be delivered in denominations of $5,000 or any integral multiple thereof. Principal and interest payments evidenced by the Certificates are payable directly to DTC by the Trustee. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to DTC Participants for subsequent disbursement to the beneficial owners of the Certificates. See “THE CERTIFICATES – General” herein and APPENDIX F – “BOOK–ENTRY ONLY SYSTEM.”

Interest evidenced by the Certificates is payable semiannually on March 1 and September 1 of each year, commencing on March 1, 2017 (each, an “Interest Payment Date”). See “THE CERTIFICATES – General” herein.

The Certificates are subject to prepayment as described herein. See “THE CERTIFICATES – Prepayment” herein.

Offering and Delivery of the Certificates

The Certificates will be offered when, as and if executed, delivered and received by Hilltop Securities Inc. (the “Underwriter”), subject to the approval of legality by Orrick, Herrington & Sutcliffe LLP, Special Counsel to the District, and the satisfaction of certain other conditions. It is anticipated that the Certificates will be available in book-entry form for delivery through the facilities of DTC on or about October 12, 2016.

Certificate Owners’ Risks

Certain events could affect the ability of the District to make the Base Rental Payments when due. See “CERTAIN RISK FACTORS” for a description of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Certificates.

4

Continuing Disclosure

Pursuant to a continuing disclosure certificate, dated the date of delivery of the Certificates (the “Continuing Disclosure Certificate”), executed by the District, the District will covenant for the benefit of holders and beneficial owners of the Certificates to provide, or to cause to be provided, to the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access system or such other electronic system designated by the MSRB (the “EMMA System”) certain annual financial information and operating data relating to the District (the “Annual Report”) by not later than nine months following the end of the District’s fiscal year (currently ending June 30), commencing with the report for the 2015-16 fiscal year (which is due no later than March 31, 2017) and notice of the occurrence of certain enumerated events (each, a “Notice Event”) in a timely manner not in excess of ten business days after the occurrence of a Notice Event. The specific nature of the information to be contained in the Annual Report and the notices of Notice Events is set forth in APPENDIX D – “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). See “CONTINUING DISCLOSURE” herein.

Other Information

This Official Statement is current only as of its date, and the information contained herein is subject to change. This Official Statement contains brief descriptions of, among other things, the District, the Corporation, the Certificates, the Trust Agreement, the Facilities Lease, the Facilities Sublease, the Assignment Agreement, and certain other matters relating to the security for the Certificates. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to documents and agreements are qualified in their entirety by reference to such documents, and agreements and references herein to the Certificates are qualified in their entirety by reference to the form thereof included in the Trust Agreement. Subsequent to the delivery of the Certificates, copies of the Facilities Lease, the Facilities Sublease, the Assignment Agreement, the Trust Agreement and the Continuing Disclosure Certificate will be on file at one of the principal corporate offices of the Trustee in Los Angeles, California.

THE CERTIFICATES

General

The Certificates will be executed and delivered in the aggregate principal amount shown on the cover hereof, will be dated their date of delivery, and will evidence direct, fractional undivided interests of the Owners thereof in the Base Rental Payments from the date of the Certificates to their respective final Certificate Payment Dates or prior prepayment dates, in the amounts and representing interest at the rates set forth on the inside cover page of this Official Statement.

Form and Registration

The Certificates will be executed in book-entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of the Certificates will not receive certificates representing their ownership interests in the Certificates purchased. The Certificates will be delivered in denominations of $5,000 or any integral multiple thereof. Principal and interest payments evidenced by the Certificates are payable directly to DTC by the Trustee. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to DTC Participants for subsequent disbursement to the beneficial owners of the Certificates. See APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”

5

Payment

Interest represented by the Certificates will be payable on each Interest Payment Date, until payment of the principal amount represented by each respective Certificate on its scheduled Certificate Payment Date or upon prepayment prior thereto, calculated based on a 360-day year of twelve 30-day months. Each Certificate executed by the Trustee on any date prior to the close of business on February 15, 2017, shall evidence and represent interest from the date of delivery of such Certificate. The Certificates executed and delivered by the Trustee during the period from the 15th day of the month immediately preceding an Interest Payment Date and the close of business on such Interest Payment Date, shall evidence and represent interest from that Interest Payment Date. Each Certificate executed and delivered by the Trustee on any other date shall evidence and represent interest from the Interest Payment Date immediately preceding the date of its execution.

Interest represented by each Certificate will be payable to the person whose name appears on the Certificate registration books of the Trustee as the Owner thereof as of the close of business on the 15th day of the month preceding an Interest Payment Date, whether or not such 15th day is a business day, and will be paid by check in lawful money of the United States, mailed on each Interest Payment Date by first class mail to the Owner at the address appearing on the Certificate registration books. Upon the written request of the Owner of at least $1,000,000 in principal amount of the Certificates, submitted to the Trustee on or before the 15th day of the month preceding any Interest Payment Date, interest with respect to such Certificates shall be paid by wire transfer in immediately available funds to an account in the United States designated by such Owner in writing. So long as the DTC book-entry system is used for the Certificates, interest shall be paid to Cede & Co. as registered Owner in funds immediately available on the date due.

The principal evidenced and represented by the Certificates shall be payable on September 1 of each year shown on the inside cover hereof. The Certificates evidence direct, fractional undivided interests of the Owners thereof in the Base Rental Payments coming due on each Certificate Payment Date. Principal and premium, if any, evidenced and represented by the Certificates shall be payable on the Certificate Payment Dates or upon prepayment prior thereto by check in lawful money of the United States to the Owner thereof, upon the surrender thereof at the Principal Corporate Trust Office of the Trustee in Los Angeles, California.

Prepayment

Optional Prepayment. The Certificates payable with respect to principal on or after September 1, 2027, are subject to prepayment on any date on or after September 1, 2026, at the option of the District, as a whole, or in part, among such Certificate Payment Dates as the District may determine, or, if not so specified, in inverse order of Certificate Payment Dates, from any source of available funds, at a prepayment price equal to 100% of the principal amount thereof, plus accrued interest represented thereby to the date fixed for prepayment, without premium.

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Extraordinary Prepayment. The Certificates are also subject to prepayment on any date prior to their respective Certificate Payment Dates, as a whole, or in part by lot within each Certificate Payment Date (so that the aggregate annual amounts of principal represented by the Certificates which shall be payable after such prepayment date shall correspond to the principal component of the reduced Base Rental Payments resulting from the loss or taking of the Facility or portions thereof), from prepaid Base Rental Payments made by the District from funds received by the District due to such casualty loss or governmental taking or from the proceeds of title insurance, if such amounts are not used to repair or replace the Facility in accordance with the provisions of the Facilities Sublease, under the circumstances and upon the conditions and terms prescribed in the Trust Agreement and in the Facilities Sublease, at a prepayment price for Certificates equal to the sum of the principal amount represented thereby plus accrued interest represented thereby to the date fixed for prepayment, without premium. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Property Insurance” herein.

Selection of Certificates for Prepayment. Whenever less than all of the Outstanding Certificates payable on any one Certificate Payment Date are to be prepaid on any one date, the Trustee shall select the Certificates to be prepaid by lot in any manner that the Trustee deems fair, and the Trustee shall promptly notify the District in writing of the numbers of the Certificates so selected. For purposes of such selection, Certificates shall be deemed to be composed of $5,000 portions of principal amount, and any such portion may be separately prepaid.

Notice of Prepayment. Notice of prepayment shall be given as required in the Trust Agreement. Notice shall be mailed, first class postage prepaid, to the respective Owners of any Certificates designated for prepayment at their addresses appearing on the books required to be kept by the Trustee pursuant to the Trust Agreement not less than 30 nor more than 60 days prior to the prepayment date. Each notice of prepayment shall state the prepayment date, the prepayment place and the prepayment price, shall designate the serial numbers of the Certificates to be prepaid (unless all of the outstanding Certificates or all of the outstanding Certificates of any one Certificate Payment Date are to be prepaid) by giving the individual number of each Certificate or by stating that all Certificates between two stated numbers, both inclusive, have been called for prepayment, and shall require that such Certificates be then surrendered for prepayment; and shall also state that the interest represented by the Certificates designated for prepayment shall cease to accrue from and after such prepayment date and that on such prepayment date there will become due and payable on each of the Certificates designated for prepayment the prepayment price represented thereby. Such notice shall, in addition to setting forth the above information, in the case of each Certificate called for prepayment in part only, state the amount of the principal amount represented thereby which is to be prepaid. Any notice mailed as provided in the Trust Agreement shall be conclusively presumed to have been given, whether or not such Owner receives the notice. Notice of prepayment shall also be given as may be required by the Continuing Disclosure Certificate.

At least 30 days before each prepayment date, the Trustee shall also give notice of prepayment containing the aforementioned information by (i) registered or certified mail, postage prepaid, (ii) facsimile transmission, receipt of which shall be confirmed by telephone or otherwise, (iii) overnight delivery service, or (iv) other means approved by the Trustee, to each of the Securities Depositories at their respective addresses (or at such other addresses and/or to such other securities depositories as may be designated in a Written Request of the District) and by first class mail or other means approved by the Trustee to the EMMA System.

The Trustee shall give notice of prepayment of any Certificates to be prepaid upon receipt of a Written Request of the District (which request shall be given to the Trustee at least 45 days prior to the date fixed for prepayment or such fewer number of days as is acceptable to the Trustee).

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Partial Prepayment of Certificates. Upon surrender of any Certificate prepaid in part only, the Trustee shall execute and deliver to the Owner thereof a new Certificate or Certificates representing the unprepaid principal amount of the Certificate surrendered.

Effect of Prepayment. Subject to the Trust Agreement, if notice of prepayment has been duly given as provided in the Trust Agreement and moneys sufficient for the payment of the prepayment price of the Certificates to be prepaid are on deposit in the Prepayment Fund, then on the prepayment date designated in such notice, those Certificates shall become payable at the prepayment price specified in such notice; and from and after the date so designated, interest represented by those Certificates shall cease to accrue, such Certificates shall cease to be entitled to any benefit or security under the Trust Agreement, and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the prepayment price represented thereby. The Trustee shall, upon surrender for payment of any of the Certificates to be prepaid, pay such Certificates at the prepayment price thereof. All Certificates prepaid pursuant to the provisions of the Trust Agreement are required to be cancelled by the Trustee and shall not be redelivered.

Rescission of Notice of Prepayment. The District may rescind any notice of prepayment for any reason on any date prior to the date fixed for prepayment by causing written notice of the rescission to be given to the owners of the Certificates so called for prepayment. Any prepayment and notice thereof shall be rescinded if for any reason on the date fixed for prepayment funds are not available for such purpose in an amount sufficient to pay in full on said date the principal, interest, and premium, if any, due on the Certificates called for prepayment. Notice of rescission of prepayment shall be given in the same manner in which notice of prepayment was originally given. The actual receipt by the owner of any Certificate of notice of such rescission shall not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice shall not affect the validity of the rescission.

Defeasance. If the District pays or causes to be paid or there is otherwise paid to the Owners of all Outstanding Certificates the interest and principal represented thereby at the times and in the manner stipulated in the Trust Agreement and therein, then such Owners shall cease to be entitled to the pledge of and lien on the Base Rental Payments as provided in the Trust Agreement, and all agreements and covenants of the Corporation, the District and the Trustee to such Owners shall thereupon cease, terminate and become void and shall be discharged and satisfied except only the obligation to pay the Certificates from the funds provided therefor.

Any Outstanding Certificates shall be deemed to have been paid within the meaning of and with the effect expressed in the Trust Agreement if there shall be irrevocably deposited with the Trustee Defeasance Securities (as defined in the Trust Agreement) in an amount sufficient (together with the increment, earnings and interest on such securities), in the opinion of an independent certified public accountant, to pay the interest and principal represented by such Certificates payable on their Payment Dates or on any dates of prepayment prior thereto, except that the Owners thereof shall be entitled to the principal and interest represented by such Certificates, and the District shall remain liable for such Base Rental Payments, but only out of such moneys or securities deposited with the Trustee as aforesaid for such payment.

After the payment of all the interest and principal represented by all Outstanding Certificates as provided in the Trust Agreement, the Trustee is required to execute and deliver to the Corporation and the District all such instruments as may be necessary or desirable to evidence the discharge and satisfaction of the Trust Agreement, and the Trustee shall pay over or deliver to the District all moneys or securities held by it pursuant hereto which are not required for the payment of the interest and principal and premium, if any, evidenced and represented by such Certificates and any unpaid fees and expenses of the Trustee.

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Unclaimed Moneys. Anything contained in the Trust Agreement to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of the interest, or principal represented by any of the Certificates which remain unclaimed for two years after the date when the payments represented by such Certificates have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest, and principal represented by such Certificates have become payable, shall at the Written Request of the District be repaid by the Trustee to the District as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of the interest and principal represented by such Certificates; provided, however, that before being required to make any such payment to the District, the Trustee may, at the expense and direction of the District, cause to be published once a week for two successive weeks in a Financial Newspaper a notice that such moneys remain unclaimed and that after a date named in such notice, which date shall not be less than 30 days after the date of the first publication of such notice, the balance of such moneys then unclaimed will be returned to the District.

THE PROJECT

Certain of the proceeds derived from the execution and delivery of the Certificates will be deposited into the Acquisition and Construction Fund and will be used by the District to fund a portion of the costs for the various construction, renovation, rehabilitation and modernization projects at Scandia Elementary School. The improvements are expected to include, the modernization of classrooms, the auditorium, and various buildings as well as adhering to Travis Air Force Base’s force protection requirements (collectively, the “Project”).

Remaining proceeds of the Certificates will be used to pay the costs incurred in connection with the execution and delivery of the Certificates. See “ESTIMATED SOURCES AND USES OF FUNDS” herein.

THE FACILITY

General

The Facility consists of a portion of Vanden High School which is located in the City of Fairfield, California. The initial construction of Vanden High School was completed in January 1965 for occupation. Vanden High School has an enrollment of approximately 1,600 students for the 2016-17 school year and serves ninth grade through twelfth grade. Vanden High School is located on a parcel of approximately 40 acres. The facilities at Vanden High School include 68 permanent classrooms.

The portion of Vanden High School comprising the leased Facility consists of Classroom Building C (“Building C”), Classroom Building D (“Building D”), Classroom Building Q (“Building Q”), Classroom Building P (“Building P”), Classroom Building R (“Building R”) and Parking Lot C (“Parking Lot C”). Collectively, the Facility comprises approximately 176,106 square feet. The insured value of the leased Facility is estimated at approximately $7,834,806, which includes $2,230,872 allocable to Building C, $984,753 allocable to Building D, $1,532,181 allocable to Building Q, $1,543,500 allocable to Building P, and $1,543,500 allocable to Building R. These figures exclude land acquisition and any costs associated with common campus features such as courtyards, storm water retention basin, and athletic fields and courts. There are no insured structures presently located on Parking Lot C.

Substitution or Release of Property

The Facilities Sublease provides that the District may substitute property as part of the Facility for purposes of the Facilities Lease and of the Facilities Sublease upon compliance with the conditions

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specified therein. The Facilities Sublease requires, among other things, that the District provide a written appraisal from an appraiser who may but need not be an employee of the District, (i) evidencing that the annual fair rental value of the substituted Facility which will constitute the Facility after such Substitution will be at least equal to 100% of the maximum amount of Base Rental Payments becoming due in the then current fiscal year or in any subsequent fiscal year and that the value of the substituted property is at least equal to that of the released property; and (ii) stating that the useful economic life of the substituted Facility is at least equal to the remaining term of the Facilities Sublease. See “CERTAIN RISK FACTORS – Substitution” herein.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds with respect to the Certificates and other available funds are shown below.

SOURCES

Principal Amount of Certificates $6,170,000.00

Plus Net Original Issue Premium 574,428.80

Total Sources $6,744,428.80

USES

Acquisition and Construction Fund $ 6,500,000.00

Underwriter’s Discount 43,190.00

Costs of Delivery(1) 201,238.80

Total Uses $6,744,428.80

(1) Includes legal, financial advisor, rating agency, trustee, title insurance and printing fees, premiums paid for the Insurance Policy and Reserve Policy, and other fees and miscellaneous costs of delivery.

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BASE RENTAL PAYMENT SCHEDULE

The following table sets forth the Payment Dates for the Certificates (assuming no prepayment of Base Rental Payments). See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Base Rental Payments” herein.

Payment Dates Principal

Component Interest

Component Aggregate

Base Rental Payment

March 1, 2017 -- $82,635.02 $82,635.02

September 1, 2017 $300,000 107,009.38 407,009.38

March 1, 2018 -- 104,009.38 104,009.38

September 1, 2018 280,000 104,009.38 384,009.38

March 1, 2019 -- 101,209.38 101,209.38

September 1, 2019 285,000 101,209.38 386,209.38

March 1, 2020 -- 96,934.38 96,934.38

September 1, 2020 295,000 96,934.38 391,934.38

March 1, 2021 -- 92,509.38 92,509.38

September 1, 2021 305,000 92,509.38 397,509.38

March 1, 2022 -- 87,934.38 87,934.38

September 1, 2022 315,000 87,934.38 402,934.38

March 1, 2023 -- 81,634.38 81,634.38

September 1, 2023 325,000 81,634.38 406,634.38

March 1, 2024 -- 75,134.38 75,134.38

September 1, 2024 340,000 75,134.38 415,134.38

March 1, 2025 -- 68,334.38 68,334.38

September 1, 2025 355,000 68,334.38 423,334.38

March 1, 2026 -- 61,234.38 61,234.38

September 1, 2026 365,000 61,234.38 426,234.38

March 1, 2027 -- 53,934.38 53,934.38

September 1, 2027 380,000 53,934.38 433,934.38

March 1, 2028 -- 46,334.38 46,334.38

September 1, 2028 395,000 46,334.38 441,334.38

March 1, 2029 -- 38,434.38 38,434.38

September 1, 2029 415,000 38,434.38 453,434.38

March 1, 2030 -- 30,134.38 30,134.38

September 1, 2030 430,000 30,134.38 460,134.38

March 1, 2031 -- 21,534.38 21,534.38

September 1, 2031 445,000 21,534.38 466,534.38

March 1, 2032 -- 12,634.38 12,634.38

September 1, 2032 465,000 12,634.38 477,634.38

March 1, 2033 -- 6,531.25 6,531.25

September 1, 2033 475,000 6,531.25 481,531.25

$6,170,000 $2,146,588.30 $8,316,588.30

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SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES

General

Each Certificate evidences direct, fractional undivided interest of the Owners thereof in the Base Rental Payments to be made by the District to the Trustee under the Facilities Sublease. The District has covenanted in the Facilities Sublease to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due thereunder in its annual budgets, to make necessary annual appropriations for all such Base Rental Payments and Additional Payments and to take such action annually as shall be required to provide funds in such year for such Base Rental Payments and Additional Payments. The Corporation, pursuant to the Assignment Agreement, has assigned all of its rights to receive Base Rental Payments to the Trustee for the benefit of the Owners of the Certificates. By the 15th day of the month immediately preceding each Interest Payment Date, the District is required to pay to the Trustee Base Rental Payments (to the extent required under the Facilities Sublease) which will be sufficient to pay the principal and interest represented by the Certificates due on such Interest Payment Date. The Facilities Sublease terminates on final stated date of maturity of the Certificates unless such term is extended or sooner terminated as provided therein. See APPENDIX A – “SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS.”

Except to the extent of amounts held by the Trustee in the Base Rental Payment Fund or in the Certificate Reserve Fund or otherwise available to the Trustee for payments in respect of the Certificates, during any period in which, by reason of material damage, destruction, title defect or condemnation, there is substantial interference with the use and possession by the District of any portion of the Facility, the Base Rental Payments will be abated in the proportion which the initial cost of that portion of the Facility rendered unusable bears to the initial cost of the whole of the Facility. Such abatement shall continue for the period commencing with the date of such damage, destruction, title defect or condemnation, and ending with the substantial completion of the work of repair or replacement of the portions of the Facility so damaged, destroyed, defective or condemned. See “CERTAIN RISK FACTORS – Abatement” herein.

Should the District default under the Facilities Sublease, the Trustee, as assignee of the Corporation under the Facilities Sublease, may terminate the Facilities Sublease, or may retain the Facilities Sublease and hold the District liable for all Base Rental Payments thereunder on an annual basis. See APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS – FACILITIES SUBLEASE – Default; Remedies.” Base Rental Payments may not be accelerated upon a default under the Facilities Sublease. See “CERTAIN RISK FACTORS.”

Base Rental Payments

Base Rental Payments are calculated on an annual basis, for the twelve-month periods commencing on September 2 and ending on September 1 of the following calendar year. Each annual Base Rental Payment is divided into two interest components, due on March 1 and September 1 of each rental payment period, and one principal component, due on September 1 of each rental payment period; provided, however, that the first Base Rental Payment period will commence on the date of delivery of the Certificates and shall end on September 1, 2017. Each Base Rental Payment installment will be payable on the 15th day of the month immediately preceding its due date and any interest or other income with respect thereto accruing prior to such due date will belong to the District and shall be returned by the Trustee to the District on March 1 and September 1 of each year, commencing March 1, 2017, or credited to rental due from the District under the Facilities Sublease. The interest components of the Base Rental Payments are required to be paid by the District as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the District under the Facilities Sublease, computed on the basis of a 360-day year composed of twelve 30-day months.

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Each annual Base Rental Payment (to be payable in two installments as aforesaid) will be for the use of the Facility for the twelve-month period commencing on September 1 of the period in which such installments are payable. If the term of the Facilities Sublease is extended pursuant to the Facilities Sublease, Base Rental Payment installments will continue to be due on March 1 and September 1 in each year, and payable as described in the Facilities Sublease, continuing to and including the date of termination of the Facilities Sublease, in an amount equal to the amount of Base Rental Payments payable for the twelve-month period commencing on the stated date of maturity of the Certificates.

Pursuant to the Trust Agreement, the Trustee is required to deposit the Base Rental Payments into the Base Rental Payment Fund when received from the District. On March 1 and September 1 of each year (commencing on March 1, 2017), the Trustee is required to deposit in the Interest Fund that amount of moneys representing the portion of the Base Rental Payments designated as interest components coming due on each such March 1 and September 1, respectively. Moneys in the Interest Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the interest represented by the Certificates when due and payable. On September 1 of each year (commencing on September 1, 2017), the Trustee is required to deposit in the Principal Fund that amount of moneys representing the portion of the Base Rental Payments designated as the principal component coming due on such September 1. Moneys in the Principal Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal represented by the Certificates when due and payable, including the mandatory prepayment of any Certificates representing the principal components of Base Rental Payments payable in more than one year.

THE OBLIGATION OF THE DISTRICT TO MAKE THE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Certificate Reserve Fund

The Certificate Reserve Fund is established pursuant to the Facilities Sublease and is required to be funded in an amount equal to the Reserve Requirement. Upon the execution and delivery of the Certificates, the District will initially fund the Certificate Reserve Fund with the deposit of the Reserve Policy.

If on any Interest Payment Date, the amount in the Certificate Reserve Fund exceeds the Certificate Reserve Fund Requirement, the Trustee, if the District is not then in default under the Facilities Sublease or under the Trust Agreement, is required to pay the amount of such excess to the District (or credit such amount to rental due or to be due from the District, as the District shall direct the Trustee), unless directed by the District to deposit any portion of such excess to the Trust Administration Fund. Except for such withdrawals, the District has agreed to apply the moneys on deposit in the Certificate Reserve Fund solely to Base Rental Payments due and payable by the District if and when rental shall be abated in accordance with the Facilities Sublease or when other moneys of the District are not otherwise available to make such Base Rental Payments.

The District has pledged and granted a lien on and a security interest in the Certificate Reserve Fund to the Trustee in order to secure the District’s obligation to pay the Base Rental Payments as provided in the Facilities Sublease. If, at any time, the balance in the Certificate Reserve Fund is reduced below the Certificate Reserve Fund Requirement, the first Base Rental Payments thereafter payable by the

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District and not needed to pay the interest and principal components payable to the Certificate Owners on the next Base Rental Payment due date are required to be used to increase the balance in the Certificate Reserve Fund to the required Certificate Reserve Fund Requirement. At the termination of the Facilities Sublease in accordance with its terms, any balance remaining in the Certificate Reserve Fund will be released from the foregoing pledge, lien and security interest and will be transferred to such other fund or account of the District, or otherwise used by the District for any other lawful purposes, as the District may direct.

The term “Certificate Reserve Fund Requirement” means the least of (i) the maximum annual amount of Base Rental Payments remaining to be made by the District pursuant to the Facilities Sublease during any twelve-month period, (ii) 125% of the average annual Base Rental Payments, and (iii) 10% of the principal amount of the Certificates Outstanding; provided, however, that all or a part of such Certificate Reserve Fund Requirement may be provided by depositing in the Certificate Reserve Fund a policy of insurance issued by a municipal bond insurance company, obligations insured by which have a rating, at the time of deposit, by Standard and Poor’s which is in one of the two highest ratings categories or by a Letter of Credit issued by a Qualified Bank.

Additional Payments

Under the Facilities Sublease, the District agrees to pay additional amounts (collectively, the “Additional Payments”) required for the payment of all expenses, compensation and indemnification of the Trustee payable by the District under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other charges required to be paid by the District to comply with the terms of the Certificates or of the Trust Agreement; but not including in Additional Payments amounts required to pay the principal or interest represented by the Certificates.

Property Insurance

The Facilities Sublease requires the District to cause to be maintained, throughout the term of the Facilities Sublease, insurance against loss or damage to any structures constituting any part of the Facility by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance, sprinkler system leakage insurance, and earthquake insurance (but only if earthquake insurance is available at reasonable cost on the open market from reputable insurance companies), except that the District need not obtain earthquake insurance on any portion of the Facility the design and construction of which comply with the provisions of the Field Act (codified at California Education Code Section 17280 and following). Such extended coverage insurance will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance is required to be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Facility, excluding the cost of excavations, of grading and filling, and of the land (except that such earthquake insurance may be subject to a deductible clause of not to exceed ten percent of said replacement cost for any one loss and except that such other insurance may be subject to deductible clauses for any one loss of not to exceed $100,000), or in the alternative, is required to be in an amount and in a form sufficient (together with moneys in the Certificate Reserve Fund), in the event of total or partial loss, to enable all Certificates then Outstanding to be prepaid. The District maintains basic property insurance through the North Bay Schools Insurance Authority, a joint powers authority which provides property and liability coverage to its several school district members. See “DISTRICT DEBT STRUCTURE—Joint Powers Arrangements/Insurance” herein.

As an alternative to providing the casualty insurance described above, the District may provide a self-insurance method or plan of protection, if such self-insurance method or plan of protection is

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acceptable to the Insurer, if and to the extent such self-insurance method or plan of protection will afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State other than the District. Before such other method or plan may be provided by the District, and annually thereafter so long as such method or plan is being provided to satisfy the requirements of the Facilities Sublease, a certificate of an actuary, insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facilities Sublease and, when effective, would afford reasonable coverage for the risks required to be insured against there is required to be filed with the Trustee. A certificate of the District setting forth the details of such substitute method or plan is also required to be filed with the Trustee. In the event of loss covered by any such self-insurance method, the liability of the District under the Facilities Sublease will be limited to the amounts in the self-insurance reserve fund or funds created under such method.

In the event of any damage to or destruction of any part of the Facility, caused by the perils covered by such insurance, if in the judgment of the District the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Facility, the Trustee, except as provided in the Facilities Sublease, is required to cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facility, and the Trustee is required to hold said proceeds separate and apart from all other funds, in a special fund to be designated the “Insurance and Condemnation Fund,” to the end that such proceeds are required to be applied to the repair, reconstruction or replacement of the Facility to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee is required to permit withdrawals of said proceeds from time to time, as provided in the Facilities Sublease, upon receiving a written request of the District for such purposes. Any balance of said proceeds not required for such repair, reconstruction or replacement is required to be treated by the Trustee as Base Rental Payments and applied in the manner provided by the Trust Agreement. Alternatively, the District, at its option, with the written consent of the Trustee, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to prepay the amount of Outstanding Certificates attributable to the portion of the Facility so destroyed or damaged (determined by reference to the proportion which the acquisition and construction cost of such portion of the Facility bears to the acquisition and construction cost of the Facility), may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facility and thereupon is required to cause said proceeds to be used for the prepayment of Outstanding Certificates pursuant to the provisions of the Trust Agreement.

Pursuant to the Facilities Sublease, the District has covenanted to promptly apply for federal disaster aid or State disaster aid in the event that the Facility is damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid are required to be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facility, or, at the option of the District, to prepay Outstanding Certificates if such use of such disaster aid is permitted.

The Facilities Sublease requires the District to cause to be maintained, throughout the term of the Facilities Sublease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facility as the result of any of the hazards covered by the insurance required by the Facilities Sublease, in an amount sufficient to pay the part of the total rent under the Facilities Sublease attributable to the portion of the Facility rendered unusable (determined by reference to the proportion which the construction cost of such portion bears to the construction cost of the Facility) for a period of at least 24 months, except that such insurance need be maintained as to the peril of earthquake only if such insurance is available at reasonable cost on the open market from reputable insurance companies, and further except that the District need not obtain such insurance as to the peril of

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earthquake on any portion of the Facility the design and construction of which comply with the provisions of the Field Act. Any proceeds of such insurance is required to be used by the Trustee to reimburse to the District any rental theretofore paid by the District under the Facilities Sublease attributable to such portion of the Facility for a period of time during which the payment of rental under the Facilities Sublease is abated, and any proceeds of such insurance not so used is required to be applied to Base Rental Payments and Additional Payments, to the extent required for such purpose. The District is required to use its best efforts to provide sufficient construction funds and to make all required lease payments in excess of the amount of such insurance, if necessary, in order to ensure completion of the reconstruction, repair, or restoration of the Facility.

The District is also required to obtain certain liability insurance coverage in protection of the Trustee as described under APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS – Facilities Sublease – Insurance.”

The District is required under the Facilities Sublease to obtain title insurance on the Facility, in the form of a lender’s leasehold title policy, in an amount equal to the aggregate principal component of unpaid Base Rental Payments, issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances, as defined in the Facilities Sublease, naming the Trustee as insured under the policy.

Abatement

Except to the extent of (a) amounts held by the Trustee in the Base Rental Payment Fund or in the Certificate Reserve Fund, (b) amounts received in respect of use and occupancy insurance, and (c) amounts, if any, otherwise legally available to the Trustee for payments in respect of the Certificates, during any period in which, by reason of material damage, destruction, title defect or condemnation, there is substantial interference with the use and possession by the District of any portion of the Facility, rental payments due under the Facilities Sublease with respect to the Facility will be abated in the proportion which the initial cost of that portion of the Facility rendered unusable bears to the initial cost of the whole of the Facility. In the event the District assigns, transfers or subleases any or all of the Facility or other rights under the Facilities Sublease, as permitted thereby, for purposes of determining the annual fair rental value available to pay Base Rental Payments and Additional Rental, annual fair rental value of the Facility will first be allocated to the Facilities Sublease. Any abatement of rental payments pursuant to the Facilities Sublease will not be considered an event of default as defined therein. Pursuant to the Facilities Sublease, the District has waived the benefits of Civil Code Sections 1932(2) and 1933(4) and any and all other rights to terminate the Facilities Sublease by virtue of any such interference and the Facilities Sublease will continue in full force and effect. Such abatement will continue for the period commencing with the date of such damage, destruction, title defect or condemnation and ending with the substantial completion of the work of repair or replacement of the portions of the Facility so damaged, destroyed, defective or condemned.

In the event that rental is abated, in whole or in part, pursuant to the Facilities Sublease due to damage, destruction, title defect or condemnation of any part of the Facility and the District is unable to repair, replace or rebuild the Facility from the proceeds of insurance, if any, the District has agreed to apply for any appropriate state and/or federal disaster relief in order to obtain funds to repair, replace or rebuild the Facility.

Abatement of Base Rental Payments under the Facilities Sublease, to the extent payment is not made from alternative sources as set forth below, could result in all Certificate Owners receiving less than the full amount of principal and interest evidenced by the Certificates. To the extent proceeds of insurance are available or there are amounts available in the Certificate Reserve Fund or other funds established

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under the Trust Agreement (as described below), Base Rental Payments (or a portion thereof) may be made during periods of abatement.

CERTIFICATE INSURANCE

Bond Insurance Policy

Concurrently with the execution and delivery of the Certificates, the Insurer will issue its Insurance Policy for the Certificates. The Insurance Policy guarantees the scheduled payment of principal of and interest evidenced by the Certificates when due as set forth in the form of the Insurance Policy included as an exhibit to this Official Statement.

The Insurance Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Build America Mutual Assurance Company

The Insurer is a New York domiciled mutual insurance corporation. The Insurer provides credit enhancement products solely to issuers in the U.S. public finance markets. The Insurer will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of the Insurer is liable for the obligations of the Insurer.

The address of the principal executive offices of the Insurer is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com.

The Insurer is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.

The Insurer’s financial strength is rated “AA/Stable” by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC (“S&P”). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of the Insurer should be evaluated independently. The rating reflects the S&P’s current assessment of the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Certificates, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of the Insurer in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Certificates. The Insurer only guarantees scheduled principal and scheduled interest payments payable by the issuer of the Certificates on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Insurance Policy), and the Insurer does not guarantee the market price or liquidity of the Certificates, nor does it guarantee that the rating on the Certificates will not be revised or withdrawn.

Capitalization of the Insurer

The Insurer’s total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2016 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $485.9 million, $53.4 million and $432.5 million, respectively.

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The Insurer is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by the Insurer, subject to certain limitations and restrictions.

The Insurer’s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on the Insurer’s website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to the Insurer at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published.

The Insurer makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, the Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Insurer, supplied by the Insurer and presented under the heading “CERTIFICATE INSURANCE”.

Additional Information Available from the Insurer

Credit Insights Videos. For certain the Insurer-insured issues, the Insurer produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors the Insurer’s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on the Insurer‘s website at buildamerica.com/creditinsights/. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

Credit Profiles. Prior to the pricing of bonds that the Insurer has been selected to insure, the Insurer may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by the Insurer, any pre-sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. The Insurer pre-sale and final Credit Profiles are easily accessible on the Insurer’s website at buildamerica.com/obligor/. The Insurer will produce a Credit Profile for all bonds insured by the Insurer, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and the Insurer assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by the Insurer; they have not been reviewed or approved by the issuer of or the underwriter for the Certificates, and the issuer and underwriter assume no responsibility for their content.

The Insurer receives compensation (an insurance premium) for the insurance that it is providing with respect to the Certificates. Neither the Insurer nor any affiliate of the Insurer has purchased, or committed to purchase, any of the Certificates, whether at the initial offering or otherwise.

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CERTAIN RISK FACTORS

The following section describes certain risk factors affecting the payment of and security for the Certificates. The following discussion of possible risks is not meant to be an exhaustive list of the risks associated with the purchase of the Certificates and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the Certificates. There can be no assurance that other risk factors will not become material in the future.

Security for the Certificates

The obligation of the District to make the Base Rental Payments does not constitute a debt of the District or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the District or the State is obligated to levy or pledge any form of taxation or for which the District or the State has levied or pledged any form of taxation.

The obligation of the District to make Base Rental Payments is in consideration of the right of the District to the continued use and occupancy of the Facility. In the event of substantial interference with the District’s use and occupancy, the obligation of the District may be abated in whole or in part as described herein. See “ – Abatement” herein.

Although the Facilities Sublease does not create a pledge, lien or encumbrance upon the funds of the District, the District has covenanted in the Facilities Sublease that, for so long as the Facility is available for its use during the term of the Facilities Sublease, the District will make the necessary annual appropriations within its budget for the Base Rental Payments. The District is currently liable and may become further liable in the future on other obligations payable from general revenues, some of which may have a priority over the Base Rental Payments. To the extent that additional obligations are incurred by the District, the funds available to make Base Rental Payments will be decreased.

State Law Limitations on Appropriations

Article XIIIB of the California Constitution limits the amount that local governments can appropriate annually. However, by statute, California school districts have priority to use the State’s appropriations limit, if needed to be able to spend district revenues. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”

Abatement

In the event of substantial interference with the District’s right to use and occupy any portion of the Facility by reason of material damage to, or destruction or condemnation of, Facility, or any defect in title to the Facility, Base Rental Payments will be subject to abatement. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Abatement.” In the event that such portion of the Facility, if damaged or destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the District’s rental interruption insurance will be available in lieu of Base Rental Payments, plus the period for which funds are available from the Certificate Reserve Fund or other funds and accounts established under the Trust Agreement, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such portion of the Facility or prepayment of the Certificates, there could be insufficient funds to make payments to Certificate Owners in full.

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Seismic Factors

The District, like most regions in the State, and the Facility are located in an area of seismic activity from movements along active fault zones and, therefore, could be subject to potentially destructive earthquakes. Additionally, numerous minor faults transect the area. Seismic hazards encompass both potential surface rupture and ground shaking. The occurrence of severe seismic activity in the area of the District could result in substantial damage and interference with the District’s right to use and occupy all or a portion of the Facility, which could result in the Base Rental Payments being subject to abatement. See “–Abatement” above. The District is not required by the Facilities Sublease or otherwise to obtain or maintain earthquake insurance for the Facility. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Insurance.”

Absence of Flood Insurance

The District is not required under the Facilities Sublease to maintain flood insurance on the Facility. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Insurance” herein. The District does not currently insure against the risks of flood with respect to the Facility.

Drought Conditions in California

The State of California is currently in the fourth year of “exceptional drought conditions” (the most severe drought classification) according to the U.S. Drought Monitor. On January 17, 2014, California Governor Edmund G. Brown (the “Governor”) proclaimed a drought emergency in the State and asked Californians to voluntarily reduce water use by 20%. In addition, eight of the last nine years, including water year 2015 (October 1 through September 30) have been below average runoff, which has resulted in chronic and significant shortages to municipal, industrial, agricultural and wildlife refuge supplies, and historically low groundwater levels. In April 2014, the Governor formed a task force to respond to the drought. On April 1, 2015, the Governor signed an Executive Order (the “April 2015 Executive Order”) that, among other measures, requires the State of California Water Resources Control Board (the “SWRCB”) to implement mandatory reduction in cities and towns across the State to reduce water use by 25% as compared to 2013 through February 2016. However, District can make no prediction on the impact of the drought upon economic activity within its boundaries or the extent to which there will be a material adverse impact on its finances, the majority of which come from State Aid. See “DISTRICT HISTORY, OPERATION AND FINANCIAL INFORMATION – State Funding of Education; State Budget Process” herein.

Limited Recourse on Default

If the District defaults on its obligations to make Base Rental Payments, the Trustee, as assignee of the Corporation, will have the right, without terminating the Facilities Sublease or the District’s right to possession of the Facility, to collect each installment of Base Rental Payments as the same become due and enforce any other terms or provisions hereof to be kept or performed by the District, regardless of whether or not the District has abandoned the Facility. The Facilities Sublease provides that the District will remain liable and agrees to keep or perform all covenants and conditions in the Facilities Sublease contained to be kept or performed by the District, and to pay the full amount of the Base Rental Payments to the end of the term of the Facilities Sublease; and further agrees to pay said Base Rental Payments punctually at the same time and in the same manner as provided in the Facilities Sublease, notwithstanding the fact that the Corporation may have received in previous years or may receive thereafter in subsequent years Base Rental Payments in excess of the Base Rental Payments specified in the Facilities Sublease.

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If the District defaults on its obligations to make Base Rental Payments, the Trustee, as assignee of the Corporation’s rights under the Facilities Sublease, would be required to seek a separate judgment each year for that year’s defaulted Base Rental Payments. Any such suit would be subject to limitations on legal remedies against school districts in the State, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Base Rental Payments were due and against funds needed to serve the public welfare and interest.

Pursuant to the Facilities Sublease, so long as the Insurer is not in default thereunder, the Insurer will control all remedies upon an event of default under the Facilities Sublease subject to the provisions set forth therein. For a description of the events of default and permitted remedies of the Trustee (as assignee of the Corporation) contained in the Facilities Sublease and the Trust Agreement, see APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS – Facilities Sublease – Event of Default and Remedies.”

No Liability of Corporation to Owners

Except as expressly provided in the Trust Agreement, the Corporation shall not have any obligation or liability to the Owners of the Certificates with respect to the payment when due of the Base Rental Payments by the District, or with respect to the performance by the District of other agreements and covenants required to be performed by it contained in the Facilities Sublease or the Trust Agreement, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Trust Agreement.

Other Limitations on Liability

Although the District will covenant to budget and appropriate annually to provide for Base Rental Payments, the District has not pledged its full faith and credit to such payment. In the event that the District’s revenue sources are less than its total obligations in any year, the District could choose to pay other District expenditures before paying any or all of the annual Base Rental Payments.

No Acceleration Upon Default

In the event of a default, there is no available remedy of acceleration of the Base Rental Payments due over the term of the Facilities Sublease. The District will only be liable for Base Rental Payments on an annual basis, and the Trustee would be required to seek a separate judgment in each fiscal year for that fiscal year’s Base Rental Payments.

Substitution or Release of Property

The Facilities Sublease provides that the District may substitute property as part of the Facility for purposes of the Facilities Lease and of the Facilities Sublease upon compliance with the conditions specified therein. The Facilities Sublease requires that the District demonstrate that the annual fair rental value of the substituted Facility which will constitute the Facility after such substitution will be at least equal to 100% of the maximum amount of Base Rental Payments becoming due in the then current fiscal year or in any subsequent fiscal year and that the value of the substituted property is at least equal to that of the released property at the time of such substitution. However, all or a portion of the property comprising the Facility could be replaced with property that becomes less valuable subsequent to the substitution or could be removed altogether. Such a substitution or release could have an adverse impact on the security for the Certificates, particularly if an event requiring abatement of Base Rental Payments were to occur subsequent to such substitution or release.

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Bankruptcy

Generally. In addition to the limitations on remedies contained in the Facilities Sublease and the Trust Agreement, the rights and remedies provided in the Facilities Sublease and the Trust Agreement may be limited by and are subject to provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect the enforcement of creditors’ rights.

Bankruptcy of District. The District may be eligible to become a debtor in a Chapter 9 bankruptcy case. If the District were to go into bankruptcy, it may be able to reject the Facilities Lease or the Facilities Sublease or assume the Facilities Lease or the Facilities Sublease, despite any provision of the Facilities Lease or the Facilities Sublease that makes the bankruptcy or insolvency of the District an event of default thereunder.

If the District rejects the Facilities Sublease, the District’s obligation to pay Base Rental Payments and Additional Payments will terminate. The Trustee on behalf of the Owners of the Certificates will have a claim for damages in the bankruptcy case, but this claim for damages may be significantly limited.

If the District rejects the Facilities Lease, the rights of the Trustee and the Owners of the Certificates to receive Base Rental Payments and Additional Payments may terminate, even if the District remains in possession of the Facility. While the Trustee on behalf of the Owners of the Certificates may have a claim in the District’s bankruptcy, this claim for damages may be significantly limited, and the Owners of the Certificates could suffer substantial losses.

The Trustee and the Owners of the Certificates may be prohibited from taking any action to enforce any of their rights or remedies against the District or its property, unless the permission of the bankruptcy court was first obtained. This could prevent the Trustee from making payments to the Owners of the Certificates from funds in the possession of the Trustee.

Actions could be taken in a bankruptcy of the District that could adversely affect the exclusion of interest evidenced by the Certificates from gross income for federal income tax purposes. In addition, there may be other possible effects of the bankruptcy of the District that could result in delays or reductions in payments of the principal and interest evidenced by the Certificates, or in other losses to the Owners of the Certificates.

Regardless of any specific adverse determinations in a bankruptcy case of the District, the fact of such a bankruptcy case could have an adverse effect on the liquidity and value of the Certificates.

Bankruptcy of Corporation. While the Corporation covenants in the Facilities Sublease that it will not engage in any activities inconsistent with the purposes for which the Corporation is organized, the Corporation is not a special-purpose bankruptcy-remote entity, and could become a debtor in a bankruptcy case. The District and the Corporation intend the assignment to the Trustee of all of Corporation’s right, title, and interest to receive the Base Rental Payments and Additional Payments to be an absolute sale and not the grant of a security interest in such property to secure a borrowing of the Corporation. Nonetheless, if the Corporation were to become a debtor in a bankruptcy case, and a party in interest (including the Corporation itself) was to take the position that the transfer of the Base Rental Payments and Additional Payments to the Trustee should be recharacterized as the grant of a security interest in such property, then delays in payments on the Certificates could result. If a court were to adopt such position, then delays or reductions in payments evidenced by the Certificates, or other losses to the Owners of the Certificates, could result.

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Because the Corporation is not assigning all its rights under the Facilities Lease and the Facilities Sublease to the Trustee, if the Corporation goes into bankruptcy, the Corporation may be able to obtain authorization from the bankruptcy court to sell to a third party all rights under the Facilities Lease and the Facilities Sublease, including the Base Rental Payments and Additional Payments, free and clear of rights of the Trustee and the Owners of the Certificates. While the Trustee (and thus the Owners of the Certificates) should be entitled to receive the value of the Base Rental Payments and Additional Payments as determined by the bankruptcy court, the bankruptcy court’s valuation may be substantially different that the value placed on such payments by the Owners of the Certificates, and the Owners of the Certificates may suffer a loss.

Similarly, because the Corporation is not assigning all its rights under the Facilities Lease and the Facilities Sublease, it may be able to reject the Facilities Lease and the Facilities Sublease or assume the Facilities Lease or the Facilities Sublease despite any provision of the Facilities Lease or the Facilities Sublease which makes the bankruptcy or insolvency of the Corporation an event of default thereunder. If the Corporation rejects the Facilities Lease or the Facilities Sublease, the rights of the Trustee and the Owners of the Certificates to receive Base Rental Payments and Additional Payments may be terminated. Under such circumstances, the Owners of the Certificates could suffer substantial losses, and any claim for damages may be significantly limited. If the Corporation assumes the Facilities Lease and the Facilities Sublease, it may be able to assign them to a third party, notwithstanding the provisions of the transaction documents.

The Trustee and the Owners of the Certificates may be prohibited from taking any action to enforce any of their rights or remedies against the Corporation or its property, unless the permission of the bankruptcy court was first obtained. This could prevent the Trustee from making payments to the Owners of the Certificates from funds in the possession of the Trustee. In addition, the provisions of the transaction documents that require the District to make payments directly to the Trustee, rather than to the Corporation, may no longer be enforceable, and all payments may be required to be made to the Corporation.

Actions could be taken in a bankruptcy case of the Corporation which could adversely affect the exclusion of interest evidenced by the Certificates from gross income for federal income tax purposes. In addition, there may be other possible effects of the bankruptcy of the Corporation that could result in delays or reductions in payments of the principal and interest evidenced by the Certificates, or in other losses to the Owners of the Certificates.

Regardless of any specific adverse determinations in a bankruptcy case of the Corporation, the fact of such a bankruptcy case could have an adverse effect on the liquidity and value of the Certificates.

Loss of Tax Exemption of the Certificates

As described under the heading “TAX MATTERS,” certain acts or omissions of the District in violation of its covenants in the Trust Agreement and the Facilities Sublease, as well as certain other matters, could result in the interest evidenced by the Certificates being includable in gross income for purposes of federal income taxation retroactive to the date of delivery of the Certificates. Should such an event of taxability occur, the Certificates would not be subject to a special prepayment and would remain Outstanding until maturity or until prepaid under the provisions contained in the Trust Agreement. See “TAX MATTERS.”

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Hazardous Substances

The existence or discovery of hazardous materials may limit the beneficial use of the Facility. In general, the owners and lessees of the Facility may be required by law to remedy conditions of such parcel relating to release or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also similarly stringent. Under many of these laws, the owner or lessee is obligated to remedy a hazardous substance condition of the property whether or not the owner or lessee had anything to do with creating or handling the hazardous substance.

Further it is possible that the beneficial use of the Facility may be limited in the future resulting from the current existence on the Facility of a substance currently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the current existence on the Facility of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method in which it is handled. All of these possibilities could significantly limit the beneficial use of the Facility.

The District is unaware of the existence of hazardous substances on the Facility sites which would materially interfere with the beneficial use thereof.

Economic Conditions in California

State income tax and other receipts can fluctuate significantly from year to year, depending on economic conditions in the State and the nation. Because much of the District’s revenues derive from payments from the State, the District’s revenues can vary significantly from year to year, even in the absence of significant education policy changes. Decreases in the State’s general fund revenues may significantly affect appropriations made by the State to school districts, including the District. See “DISTRICT HISTORY, OPERATION AND FINANCIAL INFORMATION – State Funding of Education; State Budget Process” and “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” herein.

Self-Insurance

Pursuant to and under the circumstances described in the Facilities Sublease, the District is permitted to self-insure for standard comprehensive public entity liability insurance. See “SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES – Property Insurance.” However, no assurance can be given that such self-insurance at the time of any casualty or loss will be adequate to cover any claims that might arise. The Facilities Sublease does not permit the District to self-insure for rental interruption insurance.

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THE CORPORATION

The Public Property Financing Corporation of California, a nonprofit public benefit corporation, was incorporated on April 18, 1991 pursuant to the Nonprofit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporation Code). The Corporation was organized for the primary purpose of providing financial assistance to school districts and other public agencies in California by acquiring, constructing, improving and financing various facilities, land and equipment, and by leasing facilities, land and equipment for the use of such public agencies. The Corporation’s principal place of business is located at 2945 Townsgate Road, Suite 200, Westlake Village, California 91361.

The Corporation functions as an independent entity and its policies are determined by a Board of Directors. The Corporation has no financial liability to the owners of the Certificates with respect to the payment of Base Rental Payments by the District or with respect to the performance by the District of the other agreements and covenants it is required to perform. The Corporation’s articles of incorporation and by-laws empower the Corporation to act as lessee under the Facilities Lease and lessor under the Facilities Sublease.

DISTRICT FINANCIAL INFORMATION

General

The District was formed in January 1962. The District’s boundaries consist of approximately 46 square miles and encompass an area which includes portions of the cities of Fairfield and Vacaville, as well as a section of unincorporated area in the County. Travis Air Force Base is also within the boundaries of the District. The District is located midway between San Francisco and Sacramento. Interstate 80 runs east and west between Sacramento and San Francisco and passes by the District. Napa County lies north of the District, while Contra Costa County lies to the south.

The District maintains 5 elementary schools, 1 middle school, 1 high school, 1 education center and 1 community day school. Enrollment for fiscal year 2015-16 is approximately 5,396 students. The District operates under the jurisdiction of the Solano County Superintendent of Schools

Governing Board

The District is governed by a Governing Board (the “Governing Board”) consisting of five members. The members are elected to four-year terms in staggered years. The name, office and the month and year of the expiration of the term of each member of the Governing Board are described below.

Name Office Current Term Expires

John Dickerson President November 2018 Angela Weinzinger Vice President November 2016 Riitta DeAnda Clerk November 2018 Ivery Hood Member November 2016 Jamilah Whiteside Member November 2018

Superintendent and Business Services Personnel

The Superintendent of the District is appointed by the Governing Board and reports to the Governing Board. The Superintendent is responsible for management of the District’s day-to-day operations and supervises the work of other key District administrators. Kate Wren Gavlak was appointed Superintendent in 2005. Information concerning the Superintendent and the Chief Business Officer is set forth below.

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Kate Wren Gavlak, Superintendent. Kate Wren Gavlak has been the Superintendent at Travis Unified School District since August 2005. As the Superintendent, she is the Chief Executive Officer of the five-member Governing Board. Ms. Gavlak is responsible for implementing all policies and regulations in the District through supervision, management and direction of more than 500 staff members and nine schools, two of which are located on Travis Air Force Base. She is responsible for preparing and implementing the District’s budget and lobbies with State and federal sources for continued funding of programs and services. Prior to arriving at the District, Ms. Gavlak served as Superintendent at Palos Verde Unified School District in Blythe, California. She has worked throughout the State including, among other locations, the communities of Lindsay, Santa Maria, San Luis Obispo, San Mateo, and Ridgecrest. Ms. Gavlak grew up in Ventura County and participated in 4-H, Future Farmers of America and sailing along the coast. Ms. Gavlak is a dedicated, highly-motived educator with more than 30 years of experience and a varied background encompassing a broad range of professional positions: classroom teacher, lead teacher, department chair, assistant principal, principal, state-level project coordinator, assistant superintendent (curriculum and instruction), and Superintendent. She has proven her ability to build and lead teams with clearly defined goals, focused on student learning and the needs of students, with an exceptionally strong background in curriculum and instruction, as well as business and finance. In addition, she is a recognized leader at local, State and national levels on issues concerning impact aid and military families. Ms. Gavlak currently serves as the California Commissioner and Chair for the Military Interstate Children’s Compact Commission, the President of the California Association of Federally Impacted School and board member of both the Military Impacted Schools Association and the National Association of Federally Impacted Schools.

Jamie Metcalf, Chief Business Officer. Ms. Metcalf began her term as the Chief Business Officer (“CBO”) in July 2016. Ms. Metcalf is in her ninth year at the District. During her time with the District, she worked as the Human Resources Analyst overseeing position control for all classified personnel she was appointed to Assistant Director, Fiscal Services, where her responsibilities included balancing the District’s budget, and then to Chief Business Officer in July 2016. Ms. Metcalf has a Bachelor’s degree in Business with coursework in Accounting and Financial Analysis. Ms. Metcalf’s skills and knowledge include, among other thinsg, mastering of the current business operating system Escape, highly skilled in Excel, Word, and PowerPoint, working knowledge of all aspects of Travis USD support operations, Food Service, Transportation, Operations, Maintenance, New Construction, Purchasing, Human Resources, Information Technology, Accounting, and Budgeting, and a demonstrated initiative and ability to lead operational departments.

State Funding of Education; State Budget Process

General. As is true for all school districts in California, the District’s operating income consists primarily of two components: a State portion funded from the State’s general fund in accordance with the Local Control Funding Formula (see “− Allocation of State Funding to School Districts; Local Control Funding Formula” herein) and a local portion derived from the District’s share of the 1% local ad valorem tax authorized by the State Constitution (see “− Local Sources of Education Funding” herein). In addition, school districts may be eligible for other special categorical funding from State and federal government programs. The District budgeted to receive approximately 78.7% of its general fund revenues from State funds (excluding the local portion derived from the District’s share of the local ad valoremtax), budgeted at approximately $42.3 million in fiscal year 2016-17. Such amount includes both the State funding provided under the LCFF as well as other State revenues. See “−Allocation of State Funding to School Districts; Local Control Funding Formula – Attendance and LCFF” and “−Other District Revenues – Other State Revenues” below. As a result, decreases or deferrals in State revenues, or in State legislative appropriations made to fund education, may significantly affect the District’s revenues and operations.

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Under Proposition 98, a constitutional and statutory amendment adopted by the State’s voters in 1988 and amended by Proposition 111 in 1990 (now found at Article XVI, Sections 8 and 8.5 of the Constitution), a minimum level of funding is guaranteed to school districts, community college districts, and other State agencies that provide direct elementary and secondary instructional programs. Recent years have seen frequent disruptions in State personal income taxes, sales and use taxes, and corporate taxes, making it increasingly difficult for the State to meet its Proposition 98 funding mandate, which normally commands about 45% of all State general fund revenues, while providing for other fixed State costs and priority programs and services. Because education funding constitutes such a large part of the State’s general fund expenditures, it is generally at the center of annual budget negotiations and adjustments.

Beginning in fiscal year 2011-12, local property tax dollars applicable to the District’s revenue limit funding were used to backfill certain cities and counties, resulting in a negative Educational Revenue Augmentation Fund. Such negative Educational Revenue Augmentation Fund is repaid to the District with State aid dollars. See “– Local Sources of Education Funding” below for information.

In connection with the State Budget Act for fiscal year 2013-14, the State and local education agencies therein implemented a new funding formula for school finance system called the Local Control Funding Formula (the “Local Control Funding Formula” or “LCFF”). Funding from the LCFF replaced the revenue limit funding system and most categorical programs. See “– Allocation of State Funding to School Districts; Local Control Funding Formula” herein for more information.

State Budget Process. According to the State Constitution, the Governor must propose a budget to the State Legislature no later than January 10 of each year, and a final budget must be adopted no later than June 15. Historically, the budget required a two-thirds vote of each house of the State Legislature for passage. However, on November 2, 2010, the State’s voters approved Proposition 25, which amended the State Constitution to lower the vote requirement necessary for each house of the State Legislature to pass a budget bill and send it to the Governor. Specifically, the vote requirement was lowered from two–thirds to a simple majority (50% plus one) of each house of the State Legislature. The lower vote requirement also applies to trailer bills that appropriate funds and are identified by the State Legislature “as related to the budget in the budget bill.” The budget becomes law upon the signature of the Governor, who may veto specific items of expenditure. Under Proposition 25, a two–thirds vote of the State Legislature is still required to override any veto by the Governor. School district budgets must generally be adopted by July 1, and revised by the school board within 45 days after the Governor signs the budget act to reflect any changes in budgeted revenues and expenditures made necessary by the adopted State budget. The Governor signed the fiscal year 2016-17 State budget on June 27, 2016.

When the State budget is not adopted on time, basic appropriations and the categorical funding portion of each school district’s State funding are affected differently. Under the holding of White v. Davis (also referred to as Jarvis v. Connell), a State Court of Appeal decision reached in 2002, there is no constitutional mandate for appropriations to school districts without an adopted budget or emergency appropriation, and funds for State programs cannot be disbursed by the State Controller until that time, unless the expenditure is (i) authorized by a continuing appropriation found in statute, (ii) mandated by the State Constitution (such as appropriations for salaries of elected State officers), or (iii) mandated by federal law (such as payments to State workers at no more than minimum wage). The State Controller has consistently stated that basic State funding for schools is continuously appropriated by statute, but that special and categorical funds may not be appropriated without an adopted budget. Should the State Legislature fail to pass a budget or emergency appropriation before the start of any fiscal year, the District might experience delays in receiving certain expected revenues. The District is authorized to borrow temporary funds to cover its annual cash flow deficits, and as a result of the White v. Davis decision, the District might find it necessary to increase the size or frequency of its cash flow borrowings, or to borrow

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earlier in the fiscal year. The District does not expect the White v. Davis decision to have any long-term effect on its operating budgets.

Aggregate State Education Funding. The Proposition 98 guaranteed amount for education is based on prior-year funding, as adjusted through various formulas and tests that take into account State proceeds of taxes, local property tax proceeds, school enrollment, per-capita personal income, and other factors. The State’s share of the guaranteed amount is based on State general fund tax proceeds and is not based on the general fund in total or on the State budget. The local share of the guaranteed amount is funded from local property taxes. The total guaranteed amount varies from year to year and throughout the stages of any given fiscal year’s budget, from the Governor’s initial budget proposal to actual expenditures to post-year-end revisions, as better information regarding the various factors becomes available. Over the long run, the guaranteed amount will increase as enrollment and per capita personal income grow.

If, at year-end, the guaranteed amount is calculated to be higher than the amount actually appropriated in that year, the difference becomes an additional education funding obligation, referred to as “settle-up.” If the amount appropriated is higher than the guaranteed amount in any year, that higher funding level permanently increases the base guaranteed amount in future years. The Proposition 98 guaranteed amount is reduced in years when general fund revenue growth lags personal income growth, and may be suspended for one year at a time by enactment of an urgency statute. In either case, in subsequent years when State general fund revenues grow faster than personal income (or sooner, as the Legislature may determine), the funding level must be restored to the guaranteed amount, the obligation to do so being referred to as “maintenance factor.”

Although the California Constitution requires the State to approve a balanced State Budget Act each fiscal year, the State’s response to fiscal difficulties in some years has had a significant impact upon the Proposition 98 minimum guarantee and the treatment of settle-up payments with respect to years in which the Proposition 98 minimum guarantee was suspended. The State has sought to avoid or delay paying settle-up amounts when funding has lagged the guaranteed amount. In response, teachers’ unions, the State Superintendent and others sued the State or Governor in 1995, 2005, 2009 and 2011 to force them to fund schools in the full amount required. The settlement of the 1995 and 2005 lawsuits has so far resulted in over $4 billion in accrued State settle-up obligations. However, legislation enacted to pay down the obligations through additional education funding over time, including the Quality Education Investment Act of 2006, have also become part of annual budget negotiations, resulting in repeated adjustments and deferrals of the settle-up amounts.

The State has also sought to preserve general fund cash while avoiding increases in the base guaranteed amount through various mechanisms: by treating any excess appropriations as advances against subsequent years’ Proposition 98 minimum funding levels rather than current year increases; by temporarily deferring apportionments of Proposition 98 funds from one fiscal year to the next; by permanently deferring apportionments of Proposition 98 funds from one fiscal year to the next; by suspending Proposition 98, as the State did in fiscal year 2004-05, fiscal year 2010-11, fiscal year 2011-12 and fiscal year 2012-13; and by proposing to amend the State Constitution’s definition of the guaranteed amount and settle-up requirement under certain circumstances.

The District cannot predict how State income or State education funding will vary over the term to maturity of the Certificates, and the District takes no responsibility for informing owners of the Certificates as to actions the State Legislature or Governor may take affecting the current year’s budget after its adoption. Information about the State budget and State spending for education is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An

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impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State of California official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on school districts in the State, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the District, and the District can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

Rainy Day Fund; Senate Bill 858. In connection with the 2014-15 State Budget, the Governor proposed certain amendments to the State Constitution with respect to the rainy day fund (the “Rainy Day Fund”) through a ballot proposition (“Proposition 2”) which was submitted for and approved at the November 2014 Statewide election. In connection with voter approval of Proposition 2, Senate Bill 858 (2014) (“SB 858”) amended the Education Code to, among other things, limit the amount of reserves that may be maintained by a school district subject to certain State budget matters. See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS – Proposition 2” herein.

Assembly Bill 1469. As part of the 2014-15 State Budget, the Governor signed Assembly Bill 1469 (“AB 1469”) which implemented a new funding strategy for the California State Teachers’ Retirement System (“CalSTRS”) and increased employer contribution rates commencing in fiscal year 2014-15. See “– Retirement Benefits – CalSTRS” herein for more information about CalSTRS and AB 1469.

2015-16 State Budget. The Governor signed the fiscal year 2015-16 State budget (the “2015-16 State Budget”) on June 24, 2015. The 2015-16 State Budget represents a multiyear plan that is balanced and that continues to focus on paying down budgetary debt from prior years and setting aside reserves. The 2015-16 State Budget increases spending on education, health care, in-home supportive services, workforce development, drought assistance and the judiciary. The 2015-16 State Budget projects $115 billion in revenues and transfers, a 3% increase over fiscal year 2014-15. By the end of fiscal year 2015-16, the State’s Rainy Day Fund is expected to have a balance of approximately $3.5 billion. Under the 2015-16 State Budget, the State is expected to repay the remaining $1 billion in deferrals to schools and community colleges, make the final payment on the $15 billion in Economic Recovery Bonds used to cover budget deficits since 2002, and reduce outstanding mandate liabilities owed to schools and community colleges by $3.8 billion.

As it relates to K-12 education, the 2015-16 State Budget provides total funding of $83.2 billion ($49.7 billion in general funds and $33.5 billion in other funds). The 2015-16 State Budget provides Proposition 98 funding for all K-14 education of $68.4 billion, an increase of $7.6 billion over fiscal year 2014-15. Since fiscal year 2011-12, Proposition 98 funding for K-12 education has grown by more than $18.6 billion, representing an increase of more than $3,000 per student.

Certain budget adjustments for K-12 programs include the following:

• Local Control Funding Formula. An increase of $6 billion in Proposition 98 general funds to continue the State’s transition to the Local Control Funding Formula. This formula commits most new funding to districts serving English language learners, students from low-income families and youth in foster care. This increase will close the remaining funding implementation gap by more than 51%.

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• Career Technical Education. The 2015-16 State Budget establishes the Career Technical Education (“CTE”) Incentive Grant Program and provides $400 million, $300 million and $200 million Proposition 98 general funds in fiscal years 2015-16, 2016-17, and 2017-18, respectively, for local education agencies to establish new or expand high quality CTE programs.

• Educator Support. An increase of $500 million in one-time Proposition 98 general funds for educator support. Of this amount, $490 million is for activities that promote educator quality and effectiveness, including beginning teacher and administrator support and mentoring, support for teachers who have been identified as needing improvement, and professional development aligned to the State academic content standards. These funds will be allocated to school districts, county offices of education, charter schools, and the State special schools in an equal amount per certificated staff and are available for expenditure over the next three years.

• Special Education. The 2015-16 State Budget includes $60.1 million in Proposition 98 general funds ($50.1 million ongoing and $10 million one-time) to implement selected program changes recommended by the task force, making targeted investments that improve service delivery and outcomes for all disabled students, with a particular emphasis on early education.

• K-12 High-Speed Internet Access. An increase of $50 million in one-time Proposition 98 funds to support additional investments in internet connectivity and infrastructure, building on the $26.7 million in one-time Proposition 98 funding that was provided in fiscal year 2014-15. This second installment of funding will further upgrade internet infrastructure to reflect the increasing role that technology plays in classroom operations to support teaching and learning.

• K-12 Mandates. An increase of $3.2 billion in one time Proposition 98 general funds to reimburse K-12 local educational agencies for the costs of State mandated programs. These funds are expected to provide a significant down payment on outstanding mandate debt, while providing school districts, county offices of education and charter schools with discretionary resources to support critical investments such as Common Core implementation.

• K-12 Deferrals. The 2015-16 State Budget provides $897 million Proposition 98 in general funds to eliminate deferrals consistent with the revenue trigger included in the fiscal year 2014-15 State budget.

The complete 2015-16 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

2016-17 State Budget. The Governor signed the fiscal year 2016-17 State budget (the “2016-17 State Budget”) on June 27, 2016. The 2016-17 State Budget sets forth a balanced budget for Fiscal Year 2016-17 and allocates funds from Proposition 2 to pay down outstanding budgetary borrowing and retirement liabilities of the State and University of California. The 2016-17 State Budget estimates that total resources available in fiscal year 2015-16 totaled approximately $120.45 billion (including a prior year balance of $3.4 billion) and total expenditures in fiscal year 2015-16 totaled approximately $115.57 billion. The 2016-17 State Budget projects total resources available for fiscal year 2016-17 of $125.18

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billion, inclusive of revenues and transfers of $120.31 billion and a prior year balance of $4.87 billion. The 2016-17 State Budget projects total expenditures of $122.47 billion, inclusive of non-Proposition 98 expenditures of $71.42 billion and Proposition 98 expenditures of $51.05 billion. The 2016 17 State Budget proposes to allocate $966 million of the General Fund’s projected fund balance to the Reserve for Liquidation of Encumbrances and $1.75 billion of such fund balance to the State’s Special Fund for Economic Uncertainties. In addition, the 2016-17 State Budget estimates the Rainy Day Fund will have a fund balance of $6.71 billion.

Certain budgeted adjustments for K-12 education set forth in the 2016-17 State Budget include the following:

• School District Local Control Funding Formula. The 2016-17 State Budget includes an increase of more than $2.9 billion to continue the implementation of the Local Control Funding Formula. The 2016-17 State Budget proposes to commit most new funding to Supplemental Grants and Concentration Grants. The Governor estimates that the budgeted increase will bring the total Local Control Funding Formula implementation to 96%.

• Proposition 98 Minimum Guarantee. The 2016-17 State Budget includes Proposition 98 funding of $71.9 billion, inclusive of State and local funds, for fiscal year 2016-17. Such amount is expected to satisfy the Proposition 98 minimum guarantee for fiscal year 2016-17.

• Mandate Claims. The 2016-17 State Budget proposes to allocate approximately $1.3 billion in one-time moneys to reduce outstanding mandate claims by K-12 local education agencies. The State expects such funds to be used for activities including, among others, deferred maintenance, professional development, induction for beginning teachers, instructional materials, technology and the implementation of new educational standards.

• College Readiness Block Grant. The 2016-17 State Budget includes a one-time increase of $200 million to the Proposition 98 General Fund for grants to school districts and charter schools that serve high school students. The State will direct grant recipients to such funds be used to support access to higher education and transition to higher education.

• Integrated Teacher Preparation Grant Program. The 2016-17 State Budget includes a one-time allocation of $10 million from the Proposition 98 portion of the General Fund to the Integrated Teacher Preparation Grant Program, which provides competitive grants to colleges and universities to develop or improve teacher credential programs.

• Classified School Employees Credentialing Program. The 2016-17 State Budget includes a one-time allocation of $20 million from the Proposition 98 portion of the General Fund to establish a credentialing program that recruits non-certified school employees and prepares them to become certificated classroom teachers.

• California Center on Teacher Careers. The 2016-17 State Budget includes a one-time increase of $5 million of Proposition 98 General Fund to establish a multi-year competitive grant, which will be awarded to a local education agency to establish and operate the California Center on Teaching Careers. The California Center on Teaching Careers, once established, will recruit individuals to the teaching profession, host a

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referral database for teachers seeking employment, develop and distribute recruitment publications, conduct outreach activities to high school and college students, provide statewide public service announcements related to teacher recruitment, and provide prospective teachers information on credential requirements, financial aid and loan assistance programs.

• California Collaborative for Educational Excellence. The 2016-17 State Budget provides a one-time increase of $24 million to the Proposition 98 portion of the General Fund for the California Collaborative for Educational Excellence to, among other things, support statewide professional development training relating to evaluation methods and metrics and implement a pilot program related to advising and assisting local education agencies on improving pupil outcomes.

• Safe Drinking Water in Schools. The 2016-17 State Budget includes an increase of $9.5 million of one-time Proposition 98 General Fund to create a grant program to improve access to safe drinking water for schools located in isolated areas and economically disadvantaged areas. The program will be developed and administered by the State Water Resources Control Board in consultation with the California Department of Education.

• Charter School Startup Grants. The 2016-17 State Budget allocates an increase of $20 million of one-time Proposition 98 General Fund resources to support operational startup costs for new charter schools in 2016 and 2017. Such allocation is expected to partially offset the loss of federal funding previously available for such purpose.

• Multi-Tiered Systems of Support. The 2016-17 State Budget allocates an increase of $20 million of one-time Proposition 98 General Fund resources to build upon the $10 million investment included in the 2015-16 State Budget for an increased number of local educational agencies to provide academic and behavioral supports in a coordinated and systematic way. The State expects such funds to, among other things, assist local education agencies as they provide services that support academic, behavioral, social and emotional needs and improve outcomes for students.

• Proposition 47. Proposition 47 (2014) requires a portion of any State savings which have resulted from the State’s reduced penalties for certain non-serious and non-violent property and drug offenses, to be allocated to K-12 truancy and dropout prevention, victim services, and mental health and drug treatment. The 2016-17 State Budget includes an increase of $18 million on a one-time basis to the Proposition 98 portion of the General Fund allocated to a grant program for truancy and dropout prevention.

The complete 2016-17 State Budget is available from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted therein, and such information is not incorporated herein by such reference.

Changes in State Budget. The District cannot predict the impact that the 2016-17 State Budget, or subsequent budgets, will have on its finances and operations. The 2016-17 State Budget may be affected by national and State economic conditions and other factors which the District cannot predict.

Future Budgets and Budgetary Actions. The District cannot predict what future actions will be taken by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education.

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The State budget will be affected by national and State economic conditions and other factors beyond the District’s ability to predict or control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State’s ability to fund schools during fiscal year 2016-17 and in future fiscal years. Certain factors, like an economic recession, could result in State budget shortfalls in any fiscal year and could have a material adverse financial impact on the District.

Prohibitions on Diverting Local Revenues for State Purposes. Beginning in 1992-93, the State satisfied a portion of its Proposition 98 obligations by shifting part of the property tax revenues otherwise belonging to cities, counties, special districts, and redevelopment agencies, to school and community college districts through a local Educational Revenue Augmentation Fund (“ERAF”) in each county. Local agencies, objecting to invasions of their local revenues by the State, sponsored a statewide ballot initiative intended to eliminate the practice. In response, the State Legislature proposed an amendment to the State Constitution, which the State’s voters approved as Proposition 1A at the November 2004 election. That measure was generally superseded by the passage of an initiative constitutional amendment at the November 2010 election, known as “Proposition 22.”

The effect of Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services. It prevents the State from redirecting redevelopment agency property tax increment to any other local government, including school districts, or from temporarily shifting property taxes from cities, counties and special districts to schools, as in the ERAF program. This is intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. One effect of this amendment will be to deprive the State of fuel tax revenues to pay debt service on most State bonds for transportation projects, reducing the amount of State general fund resources available for other purposes, including education.

Prior to the passage of Proposition 22, the State invoked Proposition 1A to divert $1.935 billion in local property tax revenues in 2009-10 from cities, counties, and special districts to the State to offset State general fund spending for education and other programs, and included another diversion in the adopted 2009-10 State budget of $1.7 billion in local property tax revenues from local redevelopment agencies, which local redevelopment agencies have now been dissolved (see “−Dissolution of Redevelopment Agencies” below). Redevelopment agencies had sued the State over this latter diversion. However, the lawsuit was decided against the California Redevelopment Association on May 1, 2010. Because Proposition 22 reduces the State’s authority to use or shift certain revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget in some years—such as reducing State spending or increasing State taxes, and school and community college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s general fund.

Dissolution of Redevelopment Agencies. The adopted State budget for fiscal 2011-12, as signed by the Governor of the State on June 30, 2011, included as trailer bills Assembly Bill No. 26 (First Extraordinary Session) (“AB1X 26”) and Assembly Bill No. 27 (First Extraordinary Session) (“AB1X 27”), which the Governor signed on June 29, 2011. AB1X 26 suspended most redevelopment agency activities and prohibited redevelopment agencies from incurring indebtedness, making loans or grants, or entering into contracts after June 29, 2011. AB1X 26 dissolved all redevelopment agencies in existence and designated “successor agencies” and “oversight boards” to satisfy “enforceable obligations” of the former redevelopment agencies and administer dissolution and wind down of the former redevelopment agencies. Certain provisions of AB1X 26 are described further below.

In July 2011, various parties filed an action before the Supreme Court of the State of California (the “Court”) challenging the validity of AB1X 26 and AB1X 27 on various grounds (California

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Redevelopment Association v. Matosantos). On December 29, 2011, the Court rendered its decision in Matosantos upholding virtually all of AB1X 26 and invalidating AB1X 27. In its decision, the Court also modified various deadlines for the implementation of AB1X 26. The deadlines for implementation of AB1X 26 below take into account the modifications made by the Court in Matosantos.

On February 1, 2012, and pursuant to Matosantos, AB1X 26 dissolved all redevelopment agencies in existence and designated “successor agencies” and “oversight boards” to satisfy “enforceable obligations” of the former redevelopment agencies and administer dissolution and wind down of the former redevelopment agencies. With limited exceptions, all assets, properties, contracts, leases, records, buildings and equipment, including cash and cash equivalents of a former redevelopment agency will be transferred to the control of its successor agency and, unless otherwise required pursuant to the terms of an enforceable obligation, distributed to various related taxing agencies pursuant to AB1X 26.

AB1X 26 requires redevelopment agencies to continue to make scheduled payments on and perform obligations required under its “enforceable obligations.” For this purpose, AB1X 26 defines “enforceable obligations” to include “bonds, including the required debt service, reserve set-asides, and any other payments required under the indenture or similar documents governing the issuance of outstanding bonds of the former redevelopment agency” and “any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy.” AB1X 26 specifies that only payments included on an “enforceable obligation payment schedule” adopted by a redevelopment agency shall be made by a redevelopment agency until its dissolution. However, until a successor agency adopts a “recognized obligation payment schedule” the only payments permitted to be made are payments on enforceable obligations included on an enforceable obligation payment schedule. A successor agency may amend the enforceable obligation payment schedule at any public meeting, subject to the approval of its oversight board.

Under AB1X 26, commencing February 1, 2012, property taxes that would have been allocated to each redevelopment agency if the agencies had not been dissolved will instead be deposited in a “redevelopment property tax trust fund” created for each former redevelopment agency by the related county auditor-controller and held and administered by the related county auditor-controller as provided in AB1X 26. AB1X 26 generally requires each county auditor-controller, on May 16, 2012 and June 1, 2012 and each January 16 and June 1 (now each January 2 and June 1 pursuant to AB 1484, as described below) thereafter, to apply amounts in a related redevelopment property tax trust fund, after deduction of the county auditor-controller’s administrative costs, in the following order of priority:

• To pay pass-through payments to affected taxing entities in the amounts that would have been owed had the former redevelopment agency not been dissolved; provided, however, that if a successor agency determines that insufficient funds will be available to make payments on the recognized obligation payment schedule and the county auditor-controller and State Controller verify such determination, pass-through payments that had previously been subordinated to debt service may be reduced;

• To the former redevelopment agency’s successor agency for payments listed on the successor agency’s recognized obligation payment schedule for the ensuing six-month period;

• To the former redevelopment agency’s successor agency for payment of administrative costs; and

• Any remaining balance to school entities and local taxing agencies.

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It is possible that there will be additional legislation proposed and/or enacted to “clean up” various inconsistencies contained in AB1X 26 and there may be additional legislation proposed and/or enacted in the future affecting the current scheme of dissolution and winding up of redevelopment agencies currently contemplated by AB1X 26. For example, AB 1484 was signed by the Governor on June 27, 2012, to clarify and amend certain aspects of AB1X 26. AB 1484, among other things, attempts to clarify the role and requirements of successor agencies, provides successor agencies with more control over agency bond proceeds and properties previously owned by redevelopment agencies and adds other new and modified requirements and deadlines. AB 1484 also provides for a “tax claw back” provision, wherein the State is authorized to withhold sales and use tax revenue allocations to local successor agencies to offset payment of property taxes owed and not paid by such local successor agencies to other local taxing agencies. This “tax claw back” provision has been challenged in court by certain cities and successor agencies. The District cannot predict the outcome of such litigation and what effect, if any, it will have on the District. Additionally, no assurances can be given as to the effect of any such future proposed and/or enacted legislation on the District.

Future Budgets and Budgetary Actions. The District cannot predict what future actions will be taken by the State Legislature and the Governor to address changing State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for education. The State budget will be affected by national and State economic conditions and other factors beyond the District’s ability to predict or control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State’s ability to fund schools during future fiscal years. Certain factors, like an economic recession, could result in State budget shortfalls in any fiscal year and could have a material adverse financial impact on the District.

Allocation of State Funding to School Districts; Local Control Funding Formula. Prior to the implementation of the Local Control Funding Formula in fiscal year 2013-14, under California Education Code Section 42238 and following, each school district was determined to have a target funding level: a “base revenue limit” per student multiplied by the district’s student enrollment measured in units of average daily attendance. The base revenue limit was calculated from the district’s prior-year funding level, as adjusted for a number of factors, such as inflation, special or increased instructional needs and costs, employee retirement costs, especially low enrollment, increased pupil transportation costs, etc. Generally, the amount of State funding allocated to each school district was the amount needed to reach that district’s base revenue limit after taking into account certain other revenues, in particular, locally generated property taxes. This is referred to as State “equalization aid.” To the extent local tax revenues increased due to growth in local property assessed valuation, the additional revenue was offset by a decline in the State’s contribution; ultimately, a school district whose local property tax revenues exceeded its base revenue limit was entitled to receive no State equalization aid, and received only its special categorical aid, which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the Constitution. Such districts were known as “basic aid districts,” which are now referred to as “community funded districts.” School districts that received some equalization aid were commonly referred to as “revenue limit districts,” which are now referred to as “LCFF districts.” The District is an LCFF district.

Beginning in fiscal year 2013-14, the LCFF replaced the revenue limit funding system and most categorical programs, and distributes combined resources to school districts through a base grant (“Base Grant”) per unit of average daily attendance (“A.D.A.”) with additional supplemental funding (the “Supplemental Grant”) allocated to local educational agencies based on their proportion of English language learners, students from low-income families and foster youth. The LCFF has an eight year implementation program to incrementally close the gap between actual funding and the target level of funding, as described below. The LCFF includes the following components:

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• A Base Grant for each local education agency. The Base Grants are based on four uniform, grade-span base rates. For Fiscal Year 2016-17, the LCFF provided to school districts and charter schools: (a) a Target Base Grant for each LEA equivalent to $7,820 per A.D.A. for kindergarten through grade 3; (b) a Target Base Grant for each LEA equivalent to $7,189 per A.D.A. for grades 4 through 6; (c) a Target Base Grant for each LEA equivalent to $7,403 per A.D.A. for grades 7 and 8; (d) a Target Base Grant for each LEA equivalent to $8,801 per A.D.A. for grades 9 through 12. However, the amount of actual funding allocated to the Base Grant, Supplemental Grants and Concentration Grants will be subject to the discretion of the State. This amount includes an adjustment of 10.4% to the Base Grant to support lowering class sizes in grades K-3, and an adjustment of 2.6% to reflect the cost of operating career technical education programs in grades 9-12.

• A 20% Supplemental Grant for the unduplicated number of English language learners, students from low-income families and foster youth to reflect increased costs associated with educating those students.

• An additional Concentration Grant of up to 50% of a local education agency’s Base Grant, based on the number of English language learners, students from low-income families and foster youth served by the local education agency that comprise more than 55% of enrollment.

• An Economic Recovery Target (the “ERT”) that is intended to ensure that almost every local education agency receives at least their pre-recession funding level (i.e., the fiscal year 2007-08 revenue limit per unit of A.D.A.), adjusted for inflation, at full implementation of the LCFF. Upon full implementation, local education agencies would receive the greater of the Base Grant or the ERT.

Under the new formula, for community funded districts, local property tax revenues would be used to offset up to the entire allocation under the new formula. However, community funded districts would continue to receive the same level of State aid as allocated in fiscal year 2012-13.

Local Control Accountability Plans. A feature of the LCFF is a system of support and intervention for local educational agencies. School districts, county offices of education and charter schools are required to develop, implement and annually update a three-year local control and accountability plan (“LCAP”). Each LCAP must be developed with input from teachers, parents and the community, and should describe local goals as they pertain to eight areas identified as state priorities, including student achievement, parent engagement and school climate, as well as detail a course of action to attain those goals. Moreover, the LCAPs must be designed to align with the district’s budget to ensure adequate funding is allocated for the planned actions.

Each school district must submit its LCAP annually on or before July 1 for approval by its county superintendent. The county superintendent then has until August 15 to seek clarification regarding the contents of the LCAP, and the school district must respond in writing. The county superintendent can submit recommendations for amending the LCAP, and such recommendations must be considered, but are not mandatory. A school district’s LCAP must be approved by its county superintendent by October 8 of each year if such superintendent finds (i) the LCAP adheres to the State template, and (ii) the district’s budgeted expenditures are sufficient to implement the strategies outlined in the LCAP.

Performance evaluations are to be conducted to assess progress toward goals and guide future actions. County superintendents are expected to review and provide support to the school districts under

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their jurisdiction, while the State Superintendent of Public Instruction performs a corresponding role for county offices of education. The California Collaborative for Education Excellence (the “Collaborative”), a newly established body of educational specialists, was created to advise and assist local education agencies in achieving the goals identified in their LCAPs. For local education agencies that continue to struggle in meeting their goals, and when the Collaborative indicates that additional intervention is needed, the State Superintendent of Public Instruction would have authority to make changes to a local education agency’s LCAP.

Attendance and Base Revenue Limit. The following table sets forth the District’s actual A.D.A., enrollment and base revenue limit per unit of A.D.A. for fiscal years 2011-12 and 2012-13 for grades K-12. The A.D.A. and enrollment numbers reflected in the following table include special education but exclude adult education. See “−Attendance and LCFF” for information regarding the District’s A.D.A. subsequent to fiscal year 2013-14.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Average Daily Attendance, Enrollment And Base Revenue Limit Fiscal Years 2011-12 and 2012-13

Fiscal Year Enrollment(2)

Average Daily Attendance(1)

Base Revenue Limit Per Unit of Average

Daily Attendance

2011-12(3) 5,391 5,184 $6,465.72 2012-13(4) 5,466 5,293 6,677.72

(1) Reflects enrollment as of October report submitted to the California Basic Educational Data System (“CBEDS”) in each school year.

(2) A.D.A. for the second period of attendance, typically in mid-April of each school year. (3) The District had a 20.602% base revenue limit deficit factor and a 2.24% cost of living adjustment in

fiscal year 2011-12, which resulted in a funded base revenue limit per unit of A.D.A. of $5,188.48. (4) The District had a 22.272% base revenue limit deficit factor and a 3.243% cost of living adjustment in

fiscal year 2012-13, which resulted in a funded base revenue limit per unit of A.D.A. of $5,190.46.

Source: Travis Unified School District

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Attendance and LCFF. The following table sets forth the District’s A.D.A., enrollment (including percentage of students who are English language learners, from low-income families and/or foster youth (collectively, “EL/LI Students”), and targeted Base Grant per unit of A.D.A. for fiscal years 2013-14 through 2016-17. The A.D.A. and enrollment numbers reflected in the following table include special education but exclude adult education.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Average Daily Attendance, Enrollment And Targeted Base Grant Fiscal Years 2013-14 through 2016-17

A.D.A./Base Grant Enrollment Enrollment(7)

Fiscal Year K-3 4-6 7-8 9-12

Total A.D.A.

Total Enrollment

Unduplicated Percent of

EL/LI Students

2013-14 A.D.A.(2): 1,633.35 1,194.37 853.76 1,683.68 5,365.16 5,503 29.8%

Targeted Base Grant(3): $7,675 $7,056 $7,266 $8,638 -- -- --

2014-15(1) A.D.A.(2): 1,580.12 1,195.81 815.70 1,659.50 5,251.13 5,398 33.0%

Targeted Base Grant(3)(4): $7,740 $7,116 $7,328 $8,712 -- --

2015-16(1) A.D.A.(2): 1,528.45 1,194.82 867.50 1,673.68 5,264.45 5,395 33.0%

Targeted Base Grant(3)(5): $7,083 $7,189 $7,403 $8,578 -- -- --

2016-17(1) A.D.A.(2): 1,569.97 1,232.86 892.58 1,726.28 5,421.69 5,422 32.36%

Targeted Base Grant(3)(6): $7,083 $7,189 $7,403 $8,578 -- -- --

(1) Figures are projections.(2) A.D.A. for the second period of attendance, typically in mid-April of each school year.(3) Such amounts represent the targeted amount of Base Grant per unit of A.D.A., and do not include any supplemental and concentration grants

under the LCFF. Such amounts are not expected to be fully funded in fiscal years 2013-14 and 2014-15.(4) Targeted fiscal year 2014-15 Base Grant amounts reflect a 0.85% cost of living adjustment from targeted fiscal year 2013-14 Base Grant

amounts. (5) Targeted fiscal year 2015-16 Base Grant amounts reflect a 1.02% cost of living adjustment from targeted fiscal year 2014-15 Base Grant

amounts. (6) Targeted fiscal year 2016-17 Base Grant amount reflects a 0.00% cost-of-living adjustment from targeted fiscal year 2015-16 Base Grant

amounts. (7) Reflects enrollment as of October report submitted to the California Department of Education through California Basic Educational Data System

(“CBEDS”) for the 2013-14 and 2014-15 school years and California Longitudinal Pupil Achievement Data System (“CALPADS”) for the 2015-16 school year. For purposes of calculating Supplemental and Concentration Grants, a school district’s fiscal year 2013-14 percentage of unduplicated EL/LI Students will be expressed solely as a percentage of its fiscal year 2013-14 total enrollment. For fiscal year 2014-15, the percentage of unduplicated EL/LI Students enrollment will be based on the two-year average of EL/LI Students enrollment in fiscal years 2013-14 and 2014-15. Beginning in fiscal year 2015-16, a school district’s percentage of unduplicated EL/LI Students will be based on a rolling average of such school district’s EL/LI Students enrollment for the then-current fiscal year and the two immediately preceding fiscal years

Source: Travis Unified School District.

The District received approximately $40.7 million (unaudited) in aggregate revenues reported under LCFF sources in fiscal year 2015-16, and has budgeted to receive approximately $43.1 million in aggregate revenues under the LCFF in fiscal year 2016-17 (or approximately 80.1% of its general fund revenues in fiscal year 2016-17). Such amounts include supplemental grants estimated to be approximately $40.7 million in fiscal year 2015-16, and budgeted to be $43.1 million in fiscal year 2016-17. The District did not receive any concentration grants during fiscal year 2015-16.

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Local Sources of Education Funding

The principal component of local revenues is a school district’s property tax revenues, i.e., each district’s share of the local 1% property tax, received pursuant to Sections 75 and following and Sections 95 and following of the California Revenue and Taxation Code. California Education Code Section 42238(h) itemizes the local revenues that are counted towards the amount allocated under the LCFF (and formerly, the base revenue limit) before calculating how much the State must provide in State aid. The more local property taxes a district receives, the less State aid it is entitled to receive. Prior to the implementation of the LCFF, a school district whose local property tax revenues exceeded its base revenue limit was entitled to receive no State aid, and received only its special categorical aid which is deemed to include the “basic aid” of $120 per student per year guaranteed by Article IX, Section 6 of the Constitution. Such districts were known as “basic aid districts,” which are now referred to as “community funded districts.” School districts that received some State aid were commonly referred to as “revenue limit districts.” The District was a revenue limit district and is now referred to as an LCFF district.

Under the LCFF, local property tax revenues are used to offset up to the entire State aid collection under the new formula; however, community funded districts would continue to receive, at a minimum, the same level of State aid as allotted in fiscal year 2012-13. See “−Allocation of State Funding to School Districts: Local Control Funding Formula” herein for more information.

Local property tax revenues account for approximately 12.3% of the District’s aggregate revenues reported under LCFF sources in fiscal year 2015-16 and are budgeted to be approximately $5.5 million, or 10.2% of total general fund revenues in fiscal year 2016-17.

For a discussion of legal limitations on the ability of the District to raise revenues through local property taxes, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below.

Effect of Changes in Enrollment. Changes in local property tax income and A.D.A. affect LCFF districts and community funded districts differently.

In an LCFF district, increasing enrollment increases the total amount distributed under the LCFF and thus generally increases a district’s entitlement to State equalization aid, while increases in property taxes do nothing to increase district revenues, but only offset the State funding requirement of equalization aid. Operating costs increase disproportionately slowly to enrollment growth; and only at the point where additional teachers and classroom facilities are needed. Declining enrollment has the reverse effect on LCFF districts, generally resulting in a loss of State equalization aid, while operating costs decrease slowly and only when, for example, the district decides to lay off teachers or close schools.

In community funded districts, the opposite is generally true: increasing enrollment increases the amount to which the district would be entitled were it an LCFF district, but since all LCFF income (and more) is already generated by local property taxes, there is no increase in State income, other than the $120 per student in basic aid, as described above. Meanwhile, as new students impose increased operating costs, property tax income is stretched further. Declining enrollment does not reduce property tax income, and has a negligible impact on State aid, but eventually reduces operating costs, and thus can be financially beneficial to a community funded district.

Other District Revenues

Federal Revenues. The federal government provides funding for several District programs, including special education programs. Federal revenues, most of which are restricted, comprise

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approximately 8.54% (or approximately $4.59 million) of the District’s general fund budgeted revenues for fiscal year 2016-17.

Other State Revenues. In addition to State apportionments for Proposition 98 funding through the Local Control Funding Formula, the District receives other State revenues which comprise approximately 8.8% (or approximately $4.75 million) of the District’s general fund budgeted revenues for fiscal year 2016-17. A significant portion of such other State revenues are amounts the District expects to receive from State lottery funds, which may not be used for non-instructional purposes, such as the acquisition of real property, the construction of facilities, or the financing of research. School districts receive lottery funds proportional to their total A.D.A. The District’s State lottery revenue is budgeted at approximately $0.99 million for fiscal year 2016-17.

Other Local Revenues. In addition to ad valorem property taxes, the District receives additional local revenues from items such as interest earnings and other local sources. Other local revenues comprise approximately 2.52% (or approximately $1.35 million) of the District’s general fund budgeted revenues for fiscal year 2016-17.

Local Property Taxation

General. Taxable property located in the District has a 2015-16 assessed value of $2,514,184,090. All property (real, personal and intangible) is taxable unless an exemption is granted by the California Constitution or United States law. Under the State Constitution, exempt classes of property include household and personal effects, intangible personal property (such as bank accounts, stocks and bonds), business inventories, and property used for religious, hospital, scientific and charitable purposes. The State Legislature may create additional exemptions for personal property, but not for real property. Most taxable property is assessed by the assessor of the county in which the property is located. Some special classes of property are assessed by the State Board of Equalization, as described under the heading, “–State-Assessed Property” below.

Taxes are levied for each fiscal year on taxable real and personal property assessed as of the preceding January 1, at which time the lien attaches. The assessed value is required to be adjusted during the course of the year when property changes ownership or new construction is completed. State law also affords an appeal procedure to taxpayers who disagree with the assessed value of any property. When necessitated by changes in assessed value during the course of a year, a supplemental assessment is prepared so that taxes can be levied on the new assessed value before the next regular assessment roll is completed.

State-Assessed Property. Under the State Constitution, the State Board of Equalization assesses property of State-regulated transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting or selling gas or electricity. The Board of Equalization also is required to assess pipelines, flumes, canals and aqueducts lying within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local jurisdictions in the county, including school districts, and taxed by the local county tax officials in the same manner as for locally assessed property. Taxes on privately owned railway cars, however, are levied and collected directly by the Board of Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricity-generating property to non-utility companies, as often occurred under electric power deregulation in California, affects how those assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State-assessed property located in the District to non-utility companies will increase the assessed value of property in the District, since the property’s value will no longer be divided among all taxing jurisdictions

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in the County. The transfer of property located and taxed in the District to a State-assessed utility will have the opposite effect: generally reducing the assessed value in the District, as the value is shared among the other jurisdictions in the County. The District is unable to predict future transfers of State-assessed property in the District and the County, the impact of such transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the State’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing agencies, including the District.

Classification of Locally Taxed Property. Locally taxed property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and property (real or personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. All other property is “unsecured,” and is assessed on the “unsecured roll.” Secured property assessed by the State Board of Equalization is commonly identified for taxation purposes as “utility” property.

Assessed Valuation of Property Within District. Shown in the following table are the assessed valuations of property in the District for fiscal years 2011-12 through 2015-16.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Assessed Valuations Fiscal Years 2011-12 through 2015-16

Fiscal Year Local Secured Utility Unsecured Total Valuation Percentage

Change

2011-12 $1,828,510,496 $422,580 $49,053,915 $1,877,986,991 -- 2012-13 1,807,720,197 437,956 60,258,901 1,868,417,054 (0.51)% 2013-14 1,978,433,614 437,956 67,578,912 2,046,450,482 9.53 2014-15 2,257,471,202 437,956 68,290,894 2,326,200,052 13.67 2015-16 2,445,045,206 437,956 68,700,928 2,514,184,090 8.08

Source: California Municipal Statistics, Inc.

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

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Assessed Valuation by Jurisdiction. The following table describes the percentage and value of the total assessed value of the District that resides in the cities and unincorporated portions of the County for fiscal year 2015-16, as shown below.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Fiscal Year 2015-16 Assessed Valuation by Jurisdiction(1)

Jurisdiction Assessed Valuationin School District

% of School District

Assessed Valuation of Jurisdiction

% of Jurisdiction in School District

City of Fairfield $1,028,303,287 40.90% $11,711,900,798 8.78% City of Vacaville 1,444,693,327 57.46 10,720,816,716 13.48 Unincorporated Solano County 41,187,476 1.64 4,790,133,300 0.86 Total District $2,514,184,090 100.00%

Solano County $2,514,184,090 100.00% $46,456,739,358 5.41%

(1) Before deduction of redevelopment incremental valuation.

Source: California Municipal Statistics, Inc.

Assessed Valuation by Land Use. The following table gives a distribution of taxable property located in the District on the 2015-16 tax roll by principal purpose for which the land is used, and the assessed valuation and number of parcels for each use.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Assessed Valuation and Parcels by Land Use Fiscal Year 2015-16

Non-Residential:

2015-16 Assessed Valuation(1)

Percent of Total

No. of Parcels

Percent of Total

Agricultural/Rural $ 52,425,825 2.14% 127 1.68% Commercial/Office 27,405,750 1.12 42 0.56 Vacant Commercial 2,394,131 0.10 9 0.12 Industrial 291,564,743 11.92 40 0.53 Vacant Industrial 20,598,554 0.84 23 0.31 Government/Social/Institutional 0 0.00 4 0.05 Miscellaneous 1,316,522 0.05 391 5.19

Subtotal Non-Residential $395,705,525 16.18% 636 8.44%

Residential:

Single Family Residence $1,874,322,642 76.66% 6,239 82.76% Condominium 18,795,457 0.77 127 1.68 Mobile Home 259,235 0.01 8 0.11 2+ Residential Units/Apartments 60,291,739 2.47 4 0.05 Vacant Residental 95,670,608 3.91 525 6.96

Subtotal Residential $2,049,339,681 83.82% 6,903 91.56%

Total $2,445,045,206 100.00% 7,539 100.00%

(1) Local secured assessed valuation, excluding tax-exempt property.

Source: California Municipal Statistics, Inc.

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Assessed Valuation of Single Family Homes. The following table shows the assessed valuation of single family homes located in the District for fiscal year 2015-16.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Per Parcel Fiscal Year 2015-16 Assessed Valuation of Single Family Homes

No. of Parcels

2015-16 Assessed Valuation

Average Assessed Valuation

Median Assessed Valuation

Single Family Residential 6,239 $1,874,322,642 $300,420 $295,357

Fiscal Year 2015-16

Assessed Valuation No. of

Parcels(1)% of Total

Cumulative % of Total

Total Valuation

% of Total

Cumulative % of Total

$0 – $49,999 10 0.160% 0.160% 139,159 0.007% 0.007% $50,000 – $99,999 8 0.128 0.289 289,960 0.015 0.023

$100,000 – $149,999 19 0.305 0.593 1,214,304 0.065 0.088 $150,000 – $199,999 70 1.122 1.715 6,254,128 0.334 0.421 $200,000 – $249,999 95 1.523 3.238 10,964,449 0.585 1.006 $250,000 – $299,999 127 2.036 5.273 17,532,459 0.935 1.942 $300,000 – $349,999 274 4.392 9.665 44,593,200 2.379 4.321 $350,000 – $399,999 455 7.293 16.958 85,568,596 4.565 8.886 $400,000 – $449,999 564 9.040 25.998 120,413,875 6.424 15.311 $450,000 – $499,999 575 9.216 35.214 136,172,290 7.265 22.576 $500,000 – $549,999 531 8.511 43.725 139,034,186 7.418 29.994 $550,000 – $599,999 469 7.517 51.242 134,797,077 7.192 37.185 $600,000 – $649,999 618 9.905 61.148 192,344,206 10.262 47.447 $650,000 – $699,999 515 8.255 69.402 173,550,888 9.259 56.707 $700,000 – $749,999 437 7.044 76.406 158,515,834 8.457 65.164 $750,000 – $799,999 429 6.876 83.283 165,851,523 8.849 74.013 $800,000 – $849,999 273 4.376 87.658 112,460,141 6.000 80.013 $850,000 – $899,999 204 3.270 90.928 89,320,409 4.765 84.778 $900,000 – $949,999 174 2.789 93.717 79,842,973 4.260 89.038 $950,000 – $999,999 107 1.715 95.432 52,158,780 2.783 91.821

$1,000,000 and greater 285 4.568 100.000 153,304,205 8.179 100.000

Total 6,239 100.000% 1,874,322,642 100.000%

(1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.

Source: California Municipal Statistics, Inc.

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Largest Taxpayers in District. The twenty taxpayers with the greatest combined ownership of taxable property in the District on the fiscal year 2015-16 tax roll, and the assessed valuation of all property owned by those taxpayers in all taxing jurisdictions within the District, are shown below.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Largest Fiscal Year 2015-16 Local Secured Taxpayers

Property Owner Primary Land Use

2015-16 Assessed

Valuation Percent of

Total(1)

1. Ball Metal Beverage Container Corp. Industrial $66,988,105 2.74% 2. US Real Estate LP Industrial 45,435,725 1.86 3. The Clorox International Co. Industrial 43,177,277 1.77 4. National Can Corporation Industrial 29,315,984 1.20 5. Richmond American Homes MD Inc. Residential Development 26,416,514 1.08 6. LBM Partnership LP Industrial 24,244,353 0.99 7. Travis Housing LP Apartments 23,980,828 0.98 8. River Run Vacaville Apartments 23,573,172 0.96 9. Canon Station LLC Agricultural 16,567,730 0.68 10. A&T Ranches Agricultural 15,842,815 0.65 11. Macro Plastics Inc. Industrial 14,422,060 0.59 12. Seasons at Vacaville Inv. LLC Assisted Living Facility 13,362,739 0.55 13. Pehanick Pockets LP Industrial 9,705,974 0.40 14. Jim Lin Residential Land 9,002,769 0.37 15. Western Pacific Housing Inc. Residential Development 7,631,820 0.31 16. Carlsen Investments LLC Industrial 7,307,384 0.30 17. KB Home South Bay Inc. Residential Development 7,015,302 0.29 18. Crystal Geyser Water Company Industrial 6,429,238 0.26 19. Peabody LLC Industrial 6,311,444 0.26 20. Jim C. Cassil Industrial 5,815,841 0.24

$402,547,074 16.46%

(1) 2015-16 Local Secured Assessed Valuation: $2,445,045,206 Source: California Municipal Statistics, Inc.

The more property (by assessed value) owned by a single taxpayer, the more tax collections are exposed to weakness in the taxpayer’s financial situation and ability or willingness to pay property taxes. Furthermore, assessments may be appealed by taxpayers seeking a reduction as a result of economic and other factors beyond the District’s control. See “−Appeals of Assessed Valuation; Blanket Reductions of Assessed Values” above.

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Tax Rates. The following table shows ad valorem property tax rates for the last five fiscal years in a typical Tax Rate Area of the District (TRA 3-59). TRA 3-59 comprises approximately 12.3% of the total fiscal year 2015-16 assessed value of the District.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Typical Tax Rate per $100 Assessed Valuation (TRA 3-59)(1)

Fiscal Years 2011-12 through 2015-16

2011-12 2012-13 2013-14 2014-15 2015-16

General $1.000000 $1.000000 $1.000000 $1.000000 $1.000000 Solano County Community College District 0.020156 0.020598 0.039549 0.036716 0.034918 State Water Project 0.020000 0.020000 0.020000 0.020000 0.020000 City of Fairfield 0.007100 0.006500 0.004700 0.004500 0.004500

Total Tax Rate $1.047256 $1.047098 $1.064249 $1.061216 $1.059418

Source: California Municipal Statistics, Inc.

(1) 2015-16 assessed valuation of TRA 3-59 is $300,461,145.

Tax Charges and Delinquencies

General. A school district’s share of the 1% countywide tax is based on the actual allocation of property tax revenues to each taxing jurisdiction in the county in fiscal year 1978-79, as adjusted according to a complicated statutory scheme enacted since that time. Revenues derived from special ad valorem taxes for voter-approved indebtedness are reserved to the taxing jurisdiction that approved and issued the debt, and may only be used to repay that debt.

The county treasurer-tax collector prepares the property tax bills. Property taxes on the regular secured assessment roll are due in two equal installments: the first installment is due on November 1, and becomes delinquent after December 10. The second installment is due on February 1 and becomes delinquent after April 10. If taxes are not paid by the delinquent date, a 10% penalty attaches and a $10 cost is added to unpaid second installments. If taxes remain unpaid by June 30, the tax is deemed to be in default, and a $15 fee for being transferred to redemption applies. Interest then begins to accrue at the rate of 1.5% per month. The property owner has the right to redeem the property by paying the taxes, accrued penalties, and costs within five years of the date the property went into default. If the property is not redeemed within five years, it is subject to sale at a public auction by the county treasurer-tax collector.

Property taxes on the unsecured roll are due in one payment based on the lien date, January 1, and become delinquent after August 31. A 10% penalty attaches to delinquent taxes on assessments on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue on November 1. To collect unpaid taxes, the county treasurer-tax collector records a tax lien and may seize and/or sell personal property, improvements and possessory interests of the taxpayer. The county treasurer-tax collector may also bring a civil suit against the taxpayer for payment. The date on which taxes on supplemental assessments are due depends on when the supplemental tax bill is mailed.

Teeter Plan. The County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 and following of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency levying property taxes in the County, including the District, receives the full amount of uncollected taxes credited to its fund (including delinquent taxes, if any), in the same manner as if the full amount due from taxpayers had been collected. In return, the County receives and retains delinquent payments, penalties

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and interest as collected that would have been due the local agency. The County applies the Teeter Plan to taxes levied for repayment of school district bonds.

The Teeter Plan is to remain in effect unless the County Board of Supervisors orders its discontinuance or unless, prior to the commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its discontinuance from two-thirds of the participating revenue districts in the County. The Board of Supervisors may also, after holding a public hearing on the matter, discontinue the Teeter Plan with respect to any tax levying agency or assessment levying agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and assessments levied on the secured roll in that agency.

Significant Accounting Policies and Audited Financial Reports

The State Department of Education imposes by law uniform financial reporting and budgeting requirements for K-12 districts. Financial transactions are accounted for in accordance with the Department of Education’s California School Accounting Manual. This manual, according to Section 41010 of the Education Code, is to be followed by all California school districts, including the District. Significant accounting policies followed by the District are explained in Note 1 to the District’s audited financial statements for the fiscal year ended June 30, 2015, which are included as Appendix B.

Independently audited financial reports are prepared annually in conformity with generally accepted accounting principles for educational institutions. The annual audit report is generally available about six months after the June 30 close of each fiscal year. The following tables contain data abstracted from financial statements prepared by the District’s independent auditor, Vavrinek, Trine, Day & Co., LLP, Certified Public Accountants, Rancho Cucamonga, California, for fiscal years 2010-11 through 2014-15.

Vavrinek, Trine, Day & Co., LLP, Certified Public Accountants, has not been requested to consent to the use or to the inclusion of its reports in this Official Statement, and it has not audited or reviewed this Official Statement. The District is required by law to adopt its audited financial statements after a public meeting to be conducted no later than January 31 following the close of each fiscal year.

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The following tables show the statement of revenues, expenditures and changes in fund balances for the District’s general fund for the fiscal years 2010-11 through 2014-15.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Statement of General Fund Revenues, Expenditures and Changes in Fund Balance Fiscal Years 2010-11 through 2014-15

REVENUES

2010-11 Actuals

2011-12 Actuals

2012-13 Actuals

2013-14 Actuals

2014-15 Actuals

Revenue Limit/LCFF Sources: (1) $ 27,064,900 $ 27,115,559 $ 27,869,666 $ 33,222,814 $ 36,882,935 Federal sources 7,108,804 5,966,941 5,604,040 5,177,891 6,071,527 Other State sources 5,145,824 5,372,085 5,681,267 3,427,606 3,547,539

Other local sources 1,741,907 1,858,922 1,703,583 1,830,956 2,082,628

Total Revenues 41,061,435 40,313,507 40,858,556 43,659,267 48,584,629

EXPENDITURES Current

Instruction 23,732,695 24,860,129 24,402,083 26,547,716 27,781,933 Instruction-related activities:

Supervision of instruction 906,366 1,174,091 1,399,618 1,498,761 1,300,983 Instructional library, media and tech. 1,117,160 863,706 850,055 1,309,996 1,390,642 School site administration 2,290,566 2,353,378 2,295,316 2,470,140 2,689,447

Pupil services: Home-to-school transportation 1,211,022 1,242,048 1,198,992 1,247,951 1,263,894 Food services -- -- -- -- 68,666 All other pupil services 2,350,483 2,291,373 2,253,303 2,242,319 2,448,789

Administration: Data processing 187,122 185,141 190,543 338,472 745,960 All other administration 2,096,378 2,263,120 2,014,236 2,322,267 2,813,950

Plant Services 3,514,242 3,575,377 3,494,408 3,657,857 4,059,595 Facility acquisition and construction 14,076 72,481 3,246 6,050 1,691 Ancillary services 257,300 221,378 239,823 254,066 251,665 Community services -- -- -- -- -- Other outgo 597,119 666,023 543,779 987,998 897,440 Enterprise services -- -- -- --

Debt service: Principal 298,224 310,333 322,935 335,202 349,691

Interest and other 63,838 51,729 39,127 26,860 16,962

Total Expenditures 38,636,591 40,130,307 39,247,464 43,245,655 46,081,308

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,424,844 183,200 1,611,092 413,612 2,503,321

OTHER FINANCING SOURCES (USES) Transfer In 46,733 4,154 5,007 -- 42,183 Other sources – proceeds from capital

leases/debt issuance -- -- -- -- --

Transfers out -- -- -- (535,488) (3,729,692)

Net Financing Sources (Uses) 46,733 4,154 5,007 (535,488) (3,687,509)

Net Change in Fund Balance 2,471,577 187,354 1,616,099 (121,876) (1,184,188)

Fund Balance, July 1 4,454,167 7,102,728 7,290,082 8,906,181 8,784,305

Fund Balance, June 30 $ 7,102,728 $ 7,290,082 $ 8,906,181 $ 8,784,305 $ 7,600,117

(1) The LCFF was implemented beginning in fiscal year 2013-14. Source: Travis Unified School District Audited Financial Reports for fiscal years 2010-11 through 2014-15.

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The following table shows the general fund balance sheet of the District for fiscal years 2010-11 through 2014-15.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Summary of General Fund Balance Sheet Fiscal Years 2010-11 through 2014-15

Fiscal Year 2010-11

Fiscal Year 2011-12

Fiscal Year 2012-13

Fiscal Year 2013-14

Fiscal Year 2014-15

ASSETS

Deposits and Investments $ 153,052 $ 1,057,177 $ 6,674,969 $ 4,814,476 $ 11,017,480 Receivables 8,518,584 11,501,699 9,517,380 6,406,716 1,796,773 Due from other funds 57,687 10,971 68,505 - 171,213 Prepaid expenditures - - 10,313 1,624 7,011 Stores inventories 33,191 44,710 37,333 25,621 32,488 Other current assets 1,647 720 -- -- -

Total Assets $ 8,764,161 $ 12,615,277 $ 16,308,500 $ 11,248,437 $ 13,024,965

Liabilities: Accounts Payable $ 1,130,307 $ 1,521,220 $ 1,873,906 $ 2,064,520 $ 1,298,490 Due to other funds 90 3,653,326 5,398,498 116,815 3,801,164 Due to other governments -- -- -- 16,463 -- Other current liabilities 181,604 -- -- -- -- Unearned/deferred revenue 349,432 150,649 129,915 266,334 325,194

Total Liabilities 1,661,433 5,325,195 2,464,132 2,464,132 5,424,848

FUND BALANCES

Nonspendable 83,838 95,430 97,646 77,245 89,499 Restricted 201,316 284,809 539,781 914,396 1,002,734 Committed 1,134,750 1,221,088 169,745 179,692 179,692 Assigned 922,479 3,367,715 2,558,201 4,659,881 1,667,053 Unassigned 4,760,345 2,321,040 5,540,808 2,953,091 4,661,139

Total Fund Balance 7,102,728 7,290,082 8,906,181 8,784,305 7,600,117

Total Liabilities and Fund Balances $ 8,764,161 $ 12,615,277 $ 16,308,500 $ 11,248,437 $ 13,024,965

Source: Travis Unified School District Audited Financial Reports for fiscal years 2010-11 through 2014-15.

District Budget Process and County Review

State law requires school districts to maintain a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts. Under current law, a school district governing board must adopt and file with the county superintendent of schools a tentative budget by July 1 in each fiscal year. The District is under the jurisdiction of the County of Solano Superintendent of Schools.

The county superintendent must review and approve, conditionally approve, conditionally approve or disapprove the budget no later than August 15. The county superintendent is required to examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Education and identify technical corrections necessary to bring the budget into compliance with the established standards. If the budget is disapproved, it is returned to the District with recommendations for revision. The District is then required to revise the budget, hold a public hearing thereon, adopt the revised budget, and file it with the county superintendent no later than September 8. Pursuant to State law, the county superintendent has available various remedies by which to impose and enforce a budget that

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complies with State criteria, depending on the circumstances, if a budget is disapproved. After approval of an adopted budget, the school district’s administration may submit budget revisions for governing board approval.

Subsequent to approval, the county superintendent will monitor each district under its jurisdiction throughout the fiscal year pursuant to its adopted budget to determine on an ongoing basis if the district can meet its current or subsequent year financial obligations. If the county superintendent determines that a district cannot meet its current or the subsequent year’s obligations, the county superintendent will notify the district’s governing board of the determination and may then do either or both of the following: (a) assign a fiscal advisor to enable the district to meet those obligations, or (b) if a study and recommendations are made and a district fails to take appropriate action to meet its financial obligations, the county superintendent will so notify the State Superintendent of Public Instruction, and then may do any or all of the following for the remainder of the fiscal year: (i) request additional information regarding the district’s budget and operations; (ii) develop and impose, after also consulting with the district’s governing board, revisions to the budget that will enable the district to meet its financial obligations; and (iii) stay or rescind any action inconsistent with such revisions. However, the county superintendent may not abrogate any provision of a collective bargaining agreement that was entered into prior to the date upon which the county superintendent assumed authority.

A State law adopted in 1991 (known as “A.B. 1200”) imposed additional financial reporting requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the county superintendent (on December 15, for the period ended October 31, and by mid-March for the period ended January 31) as to its ability to meet its financial obligations for the remainder of the then-current fiscal year and, based on current forecasts, for the subsequent fiscal year. The county superintendent reviews the certification and issues either a positive, negative or qualified certification. A positive certification is assigned to any school district that will meet its financial obligations for the current fiscal year and subsequent two fiscal years. A negative certification is assigned to any school district that is deemed unable to meet its financial obligations for the remainder of the fiscal year or subsequent fiscal year. A qualified certification is assigned to any school district that may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. A school district that receives a qualified or negative certification may not issue tax and revenue anticipation notes or certificates of participation without approval by the county superintendent. In the last five fiscal years, the District has not received a qualified or negative certification in connection with its interim financial reports, except for a qualified certification for its first and second interim reports for fiscal year 2012-13 and a negative certification for its first interim report and second interim report for fiscal year 2011-12.

For school districts under fiscal distress, the county superintendent of schools is authorized to take a number of actions to ensure that the school district meets its financial obligations, including budget revisions. However, the county superintendent is not authorized to approve any diversion of revenue from ad valorem taxes levied to pay debt service on district general obligation bonds. A school district that becomes insolvent may, upon the approval of a fiscal plan by the county superintendent of schools, receive an emergency appropriation from the State, the acceptance of which constitutes an agreement to submit to management of the school district by a Superintendent appointed administrator.

In the event the State elects to provide an emergency appropriation to a school district, such appropriation may be accomplished through the issuance of “State School Fund Apportionment Lease Revenue Bonds” to be issued by the California Infrastructure and Economic Development Bank, on behalf of the school district. State law provides that so long as such bonds are outstanding, the recipient school district (via its State-appointed administrator) cannot file for bankruptcy.

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The following table summarizes the District’s adopted general fund budgets for fiscal years 2013-14 through 2016-17 and unaudited actuals for fiscal years 2013-14 through 2015-16.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

General Fund Budgets for Fiscal Years 2013-14 through 2016-17, Unaudited Actuals for Fiscal Years 2013-14 and 2014-15

and Estimated Actuals for Fiscal Year 2015-16

2013-14 Original Adopted Budget(1)

2013-14 Unaudited

Actuals

2014-15 Original

Adopted Budget

2014-15 Unaudited

Actuals

2015-16Original Adopted Budget

2015-16 Unaudited

Actuals

2016-17 Original

Adopted Budget

REVENUESRevenue Limit/LCFF Sources(2) $28,005,496.00 $33,222,814.82 $36,523,992.00 $36,882,935.07 $41,269,046.00 $40,876,259.92 $43,062,858.00 Federal Revenue 5,205,380.00 5,259,518.41 5,314,521.00 6,071,526.99 4,382,749.00 4,893,871.15 4,589,509.00 Other State Revenue 4,496,097.00 2,378,505.52 1,102,976.00 3,547,538.66 4,255,833.00 6,584,891.20 4,754,118.38 Other Local Revenue 1,388,743.00 1,748,424.22 1,401,989.00 2,078,576.31 1,922,925.00 2,132,213.71 1,352,805.00

TOTAL REVENUES 39,095,716.00 42,609,262.97 44,343,478.00 48,580,577.03 51,830,553.00 54,487,235.98 53,759,290.38

EXPENDITURESCertificated Salaries 20,535,508.00 21,136,251.69 22,361,854.00 21,706,222.01 25,063,211.00 23,384,024.42 25,296,649.08 Classified Salaries 6,804,553.00 6,862,292.72 7,109,182.00 7,207,117.22 8,169,121.00 8,413,096.23 9,345,703.49 Employee Benefits 6,049,119.00 6,305,761.12 6,808,306.00 8,039,236.62 7,861,431.00 8,839,432.30 10,550,976.88 Books and Supplies 1,970,043.00 2,810,497.50 2,272,228.92 3,297,519.90 2,751,765.00 4,007,023.32 2,741,091.32 Services, Other Operating Expenses 3,730,942.00 3,719,560.09 4,063,881.00 4,276,758.07 5,292,538.00 5,189,348.87 5,148,849.32 Capital Outlay 39,956.00 79,947.34 20,141.00 350,287.98 626,448.00 985,811.23 452,384.27 Other Outgo (excluding Direct

Support/Indirect Costs) 1,069,855.00 1,350,060.03 1,576,429.00 1,264,091.98 1,503,155.00 920,037.44 1,057,750.00

Other Outgo – Transfers of Indirect Costs

(60,667.00) (67,821.18) (59,047.00) (59,926.66) (63,607.00) (65,056.86) (81,021.00)

TOTAL EXPENDITURES 40,139,309.00 42,196,549.31 44,152,974.92 46,081,307.12 51,204,062.00 51,673,716.95 54,512,383.36

EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES

(1,043,593.00) 412,713.66 190,503.08 2,499,269.91 626,491.00 2,813,519.03 (753,092.98)

OTHER FINANCING SOURCES (USES)

Inter-fund Transfers In -- -- -- 42,183.03 -- 43,504.59 -- Inter-fund Transfers Out -- (535,488.13) (2,983,255.00) (3,729,692.00) (2,699,555.00) (2,799,555.00) (719,692.00) Other Sources (Uses) -- -- -- -- -- -- -- Contributions -- -- -- -- -- -- --

TOTAL, OTHER FINANCING SOURCES (USES)

-- (535,488.13) (2,983,255.00) (3,687,508.97) (2,073,064.00) (2,756,050.41) (719,692.00)

NET INCREASE (DECREASE) IN FUND BALANCE

(1,043,593.00) (122,774.47) (2,792,751.92) (1,188,239.06) -- 57,468.62 (1,472,784.98)

BEGINNING BALANCE, as of July 1

$7,420,764.82 $8,877,397.04 $6,615,033.39 8,755,409.38 7,571,071.83 7,571,071.83 4,857,261.34

Audit Adjustments -- -- -- -- -- -- As of July 1 – Audited 7,420,764.82 $8,877,397.04 6,615,033.39 8,755,409.38 7,571,071.83 7,571,071.83 4,857,261.34

Other Restatements -- 786.81 -- 3,901.51 -- -- --

Adjusted beginning Balance $7,420,764.82 8,755,409.38 $6,615,033.39 8,759,310.89 7,571,071.83 7,571,071.83 4,857,261.34

ENDING BALANCE $6,377,171.82 8,755,409.38 $3,822,281.47 7,571,071.83 5,498,007.83 7,628,540.45 3,384,476.36

Unrestricted Ending Balance $6,012,052.34 $7,841,012.99 $3,822,191.43 $6,568,338.32 $1,002,733.51 $6,181,124.63 $2,900,904.72 Restricted Ending Balance $ 365,119.48 $8,755,409.38 $ 90.04 $1,002,733.51 $4,495,274.32 $1,447,415.82 $ 483,571.64

(1) Figures are projections. (3) The LCFF was implemented beginning in fiscal year 2013-14.

Sources: Travis Unified School District adopted general fund Budgets for fiscal years 2013-14 through 2016-17; unaudited actuals for fiscal years 2013-14 and 2014-15; and estimated actuals for fiscal year 2015-16.

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District Debt

Long-Term Debt Summary. A schedule of the District’s long-term obligations for the year ended June 30, 2015, consisted of the following:

Balance (July 1, 2014) Additions Deductions

Balance (June 30, 2015)

Due in One Year

Certificates of participation(1) $33,745,000 $ -- $785,000 $32,960,000 $840,000 Capitalized lease obligations 439,311 -- 349,691 89,620 89,620 Compensated absences 207,675 74,372 -- 282,047 -- Net OPEB Obligation 559,167 214,239 140,994 632,412 -- Total $34,951,153 $288,611 $1,275,685 $33,964,079 $929,620

Source: Travis Unified School District Audited Financial Report for fiscal year 2014-15.

(1) Does not reflect the execution and delivery of the 2016 Refunding COPs in the aggregate principal amount of $19,625,000 in February 2016, the proceeds of which were applied to prepay the 2007 COPs (defined herein). See “ – Certificates of Participation” below.

Certificates of Participation. In July 2007, the Corporation executed and delivered the 2007 Refunding Certificates of Participation in the initial aggregate principal amount of in the initial aggregate principal amount of $12,995,000 (the “2007 Refunding COPs”). A portion of the proceeds of the 2007 Refunding COPs were used to provide funds to prepay base rental payments in connection with the District’s 2003 Certificates of Participation. The 2007 Refunding COPs evidence payments through September 1, 2027, and are outstanding in the aggregate principal amount of $9,350,000 as of August 1, 2016.

In February 2016, the Corporation executed and delivered the Refunding Certificates of Participation (Series 2016) in the aggregate principal amount of $19,625,000 (the “2016 Refunding COPs”) were used to provide funds to prepay base rental payments in connection with the District’s 2006 Certificates of Participation. The 2016 Refunding COPs evidence payments through September 1, 2036, and are outstanding in the aggregate principal amount of $19,625,000 as of August 1, 2016.

Tax and Revenue Anticipation Notes and Interim Borrowing. The District has not issued and does not expect to issue any tax and revenue anticipation notes in fiscal year 2016-17. The District does not expect to participate in the County’s interim borrowing program for school districts in the County in fiscal year 2016-17. The District may, however, issue tax and revenue anticipation notes or may participate in the County’s interim borrowing program in future fiscal years as and when necessary to supplement cash flow.

Compensated Absences. Accumulated unpaid employee vacation for the District at June 30, 2015, amounted to $282,047.

Capital Leases. The District has entered into agreements to lease various facilities and equipment. Such agreements are, in substance, purchases (capital leases) and are reported as capital lease obligations. The District’s liability on Facilities Subleases is summarized in Note 8 to the District’s financial statements attached hereto as APPENDIX B − “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015.”

Other Post-Employment Benefits (OPEBs). In addition to the retirement plan benefits with CalSTRS and CalPERS, the District provides certain post-retirement healthcare benefits, in accordance with District employment contracts. The District’s post-employment healthcare plan (the “Plan”) is a single-employer defined benefit healthcare plan administered by the District. The Plan provides vision, medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan, as of

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July 1, 2015, consisted of 7 retirees and beneficiaries currently receiving benefits and 428 active plan members who may be eligible to receive benefits in the future.

The Governmental Accounting Standards Board released its Statement Number 45 (“Statement Number 45”), which requires municipalities to account for other post-employment benefits (meaning other than pension benefits) (“OPEB”) liabilities much like municipalities are required to account for pension benefits. The expense is generally accrued over the working career of employees, rather than on a pay-as-you-go basis, which has been the practice for most municipalities and public sector organizations. OPEBs generally include post-employment health benefits (medical, dental, vision, prescription drug and mental health), life insurance, disability benefits and long term care benefits. Statement Number 45 became effective for the District beginning in fiscal year 2008-09.

The contribution requirements of Plan members and the District are established and may be amended by the District and the California School Employees Association, Chapter 454 with respect to classified members, the Travis Unified Teachers’ Association with respect to certificated members, and unrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements. As of June 30, 2015, the net OPEB obligation was $632,412. The District’s annual required contribution for fiscal year 2016-17 is $191,872, and the estimated cost of OPEB benefits for fiscal year 2016-17 is $108,657, which is equivalent to the pay-as-you-go amount. The District has not established an irrevocable trust to prefund its OPEB liability, and no prefunding of the benefits has been made by the District. See Note 11 to the District’s financial statements attached hereto as APPENDIX B − “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015” for more information as of June 30, 2015.

Demsey Filliger & Associates, has prepared an actuarial valuation covering the District’s retiree health benefits and reports that, as of July 1, 2012, the District had an actuarial accrued liability of $1,414,036 and an unfunded actuarial accrued liability of the same amount as no prefunding of the benefits has been made by the District. The actuarial valuation used the projected unit credit method with a service prorate as the actuarial cost method based on a 30-year, level dollar, open period amortization. The actuarial valuation is based on various assumptions, including a discount rate of 4.0% and demographic assumptions with respect to pre-retirement turnover, pre-retirement mortality, post-retirement mortality, marital status, coverage end age and retiree plan selection. A copy of the latest actuarial valuation is available from the District, but the District may impose a charge for copying, handling and mailing any requested document.

The following table sets forth the District’s total OPEB contributions for fiscal years 2012-13, the estimated contribution for fiscal year 2015-16, and the budgeted contribution for fiscal year 2016-17.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

OPEB Contributions Fiscal Years 2012-13 through 2016-17

Fiscal Year Contribution

2012-13 $ 46,939 2013-14 96,558 2014-15 108,657 2015-16(1) -- 2016-17(2) --

(1) Estimated. (2) Budgeted. Source: Travis Unified School District.

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Direct and Overlapping Debt

Set forth below is a schedule of direct and overlapping debt prepared by California Municipal Statistics Inc. and effective August 1, 2016. The table is included for general information purposes only. The District has not reviewed this table for completeness or accuracy and makes no representations in connection therewith. The first column in the table names each public agency which has outstanding debt as of the date of the schedule and whose territory overlaps the District in whole or in part. Column 2 shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in column 3, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

The schedule generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

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TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Statement of Direct and Overlapping Bonded Debt

2015-16 Assessed Valuation: $2,514,184,090

OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 8/1/16 Solano County Community College District 5.639% $11,694,111 Fairfield Municipal Park, Improvement District No. 1 0.710 29,927 City of Fairfield Zone of Benefit Obligations 8.780 754,799 California Statewide Communities Development Authority 1915 Act Bonds 100.000 1,818,849 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $14,297,686

DIRECT AND OVERLAPPING GENERAL FUND DEBT: Solano County Certificates of Participation 5.412% $ 5,122,729 Solano County Pension Obligation Bonds 5.412 3,020,437 Solano County Office of Education Certificates of Participation 5.412 38,696 Solano Community College District Certificates of Participation 5.639 596,184 Travis Unified School District Certificates of Participation 100.000 28,975,000 (1)

City of Fairfield Pension Obligations 8.780 3,057,196 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $40,810,242

COMBINED TOTAL DEBT $55,107,928 (2)

(1) Excludes the Certificates. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital

lease obligations.

Ratios to 2015-16 Assessed Valuation: Combined Direct Debt ($28,975,000) ......................... 1.15%

Overlapping Tax and Assessment Debt .......................... 0.57% Combined Total Debt ..................................................... 2.19%

Source: California Municipal Statistics, Inc.

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Employment

As of June 30, 2016, District has budgeted 520 full-time equivalent (“FTE”) employees consisting of 285.6 certificated FTE employees, 195.1 classified FTE employees, 39.3 management, supervisor and confidential FTE employees. For the year ended June 30, 2016, the total certificated and classified payrolls is budgeted to be approximately $25.3 million and $9.3 million, respectively, from the General Fund.

District employees are represented by employee bargaining units as follows:

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Labor Organizations

Name of Bargaining Unit Number of FTE

Employees Represented Current Contract Expiration

Date

California School Employees Association, Chapter 454 194 June 30, 2018 Travis Unified Teachers’ Association 257 June 30, 2018 Association of Travis Management (Certificated) 19 June 30, 2018; June 30, 2017(1)

Association of Travis Management (Classified) 17 June 30, 2016(2)

Association of Travis Management (Supervisory)(3) -- N/A

Source: Travis Unified School District.

(1) The term of the contracts for the Superintendent and the Assistant Superintendent and Chief Business Officer are scheduled to end on June 30, 2018 and June 30, 2017, respectively.

(2) No classified members of the Association of Travis Management have contracts with the District. (3) Represented employees are included among the certificated and classified employees set forth above. No supervisory/other members of

Association of Travis Management have contracts with the District.

Retirement Benefits

The District participates in retirement plans with CalSTRS, which covers all full-time certificated District employees, and the State Public Employees’ Retirement System (“CalPERS”), which covers certain classified employees. Classified school personnel who are employed four or more hours per day may participate in CalPERS.

CalSTRS. Contributions to CalSTRS are fixed in statute. For fiscal year 2013-14, teachers contributed 8% of salary to CalSTRS, while school districts contributed 8.25%. In addition to the teacher and school contributions, the State contributed 4.517% of teacher payroll to CalSTRS (calculated on payroll data from two fiscal years ago). Unlike typical defined benefit programs, however, neither the CalSTRS employer nor the State contribution rate varies annually to make up funding shortfalls or assess credits for actuarial surpluses. The State does pay a surcharge when the teacher and school district contributions are not sufficient to fully fund the basic defined benefit pension (generally consisting of 2% of salary for each year of service at age 60 referred to herein as “pre-enhancement benefits”) within a 30-year period. However, this surcharge does not apply to systemwide unfunded liability resulting from recent benefit enhancements.

As of June 30, 2015, an actuarial valuation (the “2015 CalSTRS Actuarial Valuation”) for the entire CalSTRS defined benefit program showed an estimated unfunded actuarial liability of $76.20 billion, an increase of approximately $3.48 million from the June 30, 2014 valuation. The funded ratios of the actuarial value of valuation assets over the actuarial accrued liabilities as of June 30, 2015, June 30, 2014 and June 30, 2013, based on the actuarial assumptions, were approximately 68.5%, 68.5% and

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66.9%, respectively. Future estimates of the actuarial unfunded liability may change due to market performance, legislative actions and other experience that may differ from the actuarial assumptions. The following are certain of the actuarial assumptions set forth in the 2015 CalSTRS Actuarial Valuation: measurement of accruing costs by the “Entry Age Normal Actuarial Cost Method,” 7.50% investment rate of return, 4.50% interest on member accounts, 3.75% projected wage growth, and 3.00% projected inflation. The 2015 CalSTRS Actuarial Valuation also assumes that all members hired on or after January 1, 2013 are subject to the provisions of PEPRA (as defined herein). See “−Governor’s Pension Reform” below for a discussion of the pension reform measure signed by the Governor in August 2012 expected to help reduce future pension obligations of public employers with respect to employees hired on or after January 1, 2013. Future estimates of the actuarial unfunded liability may change due to market performance, legislative actions, changes in actuarial assumptions and other experiences that may differ from the actuarial assumptions.

As indicated above, there was no required contribution from teachers, schools districts or the State to fund the unfunded actuarial liability for the CalSTRS defined benefit program and only the State legislature can change contribution rates. The 2015 CalSTRS Actuarial Valuation noted that, as of June 30, 2015, the contribution rate, inclusive of contributions from the teachers, the school districts and the State, was equivalent to 33.439% over the next 30 years.

As part of the 2014-15 State Budget, the Governor signed Assembly Bill 1469 which implements a new funding strategy for CalSTRS, increasing the employer contribution rate in fiscal year 2014-15 from 8.25% to 8.88% of covered payroll. Such rate would increase by 1.85% beginning in fiscal year 2015-16 until the employer contribution rate is 19.10% of covered payroll as further described below. Teacher contributions will also increase from 8.00% to a total of 10.25% of pay, phased in over the next three years. The State’s total contribution will also increase from approximately 3% in fiscal year 2013-14 to 6.30% of payroll in fiscal year 2016-17, plus the continued payment of 2.5% of payroll annual for a supplemental inflation protection program for a total of 8.80%. In addition, AB 1469 provides the State Teachers Retirement Board with authority to modify the percentages paid by employers and employees for fiscal year 2021-22 and each fiscal year thereafter to eliminate the CalSTRS unfunded liability by June 30, 2046. The State Teachers Retirement Board would also have authority to reduce employer and State contributions if they are no longer necessary.

Pursuant to Assembly Bill 1469, school district’s contribution rates will increase in accordance with the following schedule:

Effective Date (July 1)

School District Contribution Rate

2014 8.88% 2015 10.73 2016 12.58 2017 14.43 2018 16.28 2019 18.13 2020 19.10

Source: Assembly Bill 1469.

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The following table sets forth the District’s total employer contributions to CalSTRS for fiscal years 2011-12 through 2015-16 and the budgeted contribution for fiscal year 2016-17.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Contributions to CalSTRS for Fiscal Years 2011-12 through 2016-17

Fiscal Year Contribution

2011-12 $1,602,391 2012-13 1,648,560 2013-14 1,724,138 2014-15 3,578,038 2015-16(1) 3,930,082 2016-17(2) 4,802,778

(1) Unaudited actuals for fiscal year 2015-16. (2) Original adopted budget for fiscal year 2016-17. Source: Travis Unified School District.

The District’s total employer contributions to CalSTRS for fiscal years 2011-12 through 2015-16 were equal to 100% of the required contributions for each year. With the implementation of AB 1469, the District anticipates that its contributions to CalSTRS will increase in future fiscal years as compared to prior fiscal years.

The District, nonetheless, is unable to predict all factors or any changes in law that could affect its required contributions to CalSTRS in future fiscal years.

CalSTRS produces a comprehensive annual financial report and actuarial valuations which include financial statements and required supplementary information. Copies of the CalSTRS comprehensive annual financial report and actuarial valuations may be obtained from CalSTRS. The information presented in these reports is not incorporated by reference in this Official Statement.

CalPERS. All qualifying classified employees of K-12 districts in the State are members in CalPERS, and all of such districts participate in the same plan. As such, all such districts share the same contribution rate in each year. However, unlike school districts’ participating in CalSTRS, the school districts’ contributions to CalPERS fluctuate each year and include a normal cost component and a component equal to an amortized amount of the unfunded liability. Accordingly, the District cannot provide any assurances that the District’s required contributions to CalPERS in future years will not significantly vary from any current projected levels of contributions to CalPERs.

According to the CalPERS Schools Actuarial Valuation as of June 30, 2014, the CalPERS Schools plan had a funded ratio of 86.6% on a market value of assets basis. The funded ratio, on a market value basis, as of June 30, 2014, June 30, 2013, June 30, 2012, June 30, 2011 and June 30, 2010 was 80.6%, 80.5%, 75.5%, 78.7% and 69.5%. In April 2013, the CalPERS Board of Administration approved changes to the CalPERS amortization and smoothing policy intended to reduce volatility in employer contribution rates. Beginning with the June 30, 2013 actuarial valuation, CalPERS employed a new amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period (as compared to the current policy of spreading investment returns over a 15-year period with experience gains and losses paid for over a rolling 30-year period). Such changes, the implementation of which are delayed until fiscal year 2015-16 for the State, schools and all public agencies, are expected to increase contribution rates in the near term but lower contribution rates in the long term. In November 2015, the CalPERS Board of

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Administration approved a proposal pursuant to which the discount rate would be reduced by a minimum of 0.05 percentage points to a maximum of 0.25 percentage points in years when investment returns outperform the current discount rate of 7.5% by at least four percentage points.

In April 2016, CalPERS approved an increase to the contribution rate for school districts from 11.847% during fiscal year 2015-16 to 13.888% during fiscal year 2016-17. In addition, the CalPERS Finance and Administration Committee has reported that the Schools Actuarial Valuation as of June 30, 2015, which is expected to be released in summer 2016, will indicate that the funded ratio as of June 30, 2015 is approximately 77.5% on a market value of assets basis.

In February 2014, the CalPERS Board of Administration adopted actuarial demographic assumptions that take into account public employees living longer. Such assumptions are expected to increase costs for the State and public agency employers (including school districts), which costs will be amortized over 20 years and phased in over three years beginning in fiscal year 2014-15 for the State and amortized over 20 years and phased in over five years beginning in fiscal year 2016-17 for the employers. These new assumptions will apply beginning with the June 30, 2015 valuation for the schools pool, setting employer contribution rates for fiscal year 2016-17. CalPERS estimates that the new demographic assumptions could cost public agency employers up to 9% of payroll for safety employees and up to 5% of payroll for miscellaneous employees at the end of the five year phase in period. To the extent, however, that future experiences differ from CalPERS’ current assumptions, the required employer contributions may vary.

The following table sets forth the District’s total employer contributions to CalPERS for fiscal years 2011-12 through 2015-16 and the budgeted contribution for fiscal year 2016-17.

TRAVIS UNIFIED SCHOOL DISTRICT (Solano County, California)

Contributions to CalPERS for Fiscal Years 2011-12 through 2016-17

Fiscal Year Contribution

2011-12 $696,794 2012-13 725,072 2013-14 736,298 2014-15 852,183 2015-16(1) 952,296 2016-17(2) 1,260,299

(1) Unaudited actuals for fiscal year 2015-16. (2) Original adopted budget for fiscal year 2016-17. Source: Travis Unified School District.

The District’s total employer contributions to CalPERS for fiscal years 2011-12 through 2015-16 were equal to 100% of the required contributions for each year. With the change in actuarial assumptions described above, the District anticipates that its contributions to CalPERS will increase in future fiscal years as the increased costs are phased in. The implementation of PEPRA (see “−Governor’s Pension Reform” below), however, is expected to help reduce certain future pension obligations of public employers with respect to employees hired on or after January 1, 2013. The District cannot predict the impact these changes will have on its contributions to CalPERS in future years.

CalPERS produces a comprehensive annual financial report and actuarial valuations that include financial statements and required supplementary information. Copies of the CalPERS comprehensive annual financial report and actuarial valuations may be obtained from CalPERS Financial Services

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Division. The information presented in these reports is not incorporated by reference in this Official Statement.

Governor’s Pension Reform. On August 28, 2012, Governor Brown and the State Legislature reached agreement on a new law that reforms pensions for State and local government employees. AB 340, which was signed into law on September 12, 2012, established the California Public Employees’ Pension Reform Act of 2012 (“PEPRA”) which governs pensions for public employers and public pension plans on and after January 1, 2013. For new employees, PEPRA, among other things, caps pensionable salaries at the Social Security contribution and wage base, which is $110,100 for 2012, or 120% of that amount for employees not covered by Social Security, increases the retirement age by two years or more for all new public employees while adjusting the retirement formulas, requires state employees to pay at least half of their pension costs, and also requires the calculation of benefits on regular, recurring pay to stop income spiking. For all employees, changes required by PEPRA include the prohibition of retroactive pension increases, pension holidays and purchases of service credit. PEPRA applies to all State and local public retirement systems, including county and district retirement systems. PEPRA only exempts the University of California system and charter cities and counties whose pension plans are not governed by State law. Although the District anticipates that PEPRA would not increase the District’s future pension obligations, the District is unable to determine the extent of any impact PEPRA would have on the District’s pension obligations at this time. Additionally, the District cannot predict if PEPRA will be challenged in court and, if so, whether any challenge would be successful.

The District is unable to predict what the amount of State pension liabilities will be in the future, or the amount of the contributions which the District may be required to make. CalSTRS and CalPERS are more fully described in Note 12 to the District’s financial statements attached hereto as APPENDIX B − “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015.”

GASB 67 and 68. In June 2012, the Governmental Accounting Standards Board approved a pair of related statements, Statement Number 67, Financial Reporting for Pension Plans (“Statement Number 67”), which addresses financial reporting for pension plans, and Statement Number 68, Accounting and Financial Reporting for Pensions (“Statement Number 68”), which establishes new accounting and financial reporting requirements for governments that provide their employees with pensions. The guidance contained in these statements will change how governments calculate and report the costs and obligations associated with pensions. Statement Number 67 replaces the current requirements of Statement Number 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, for most public employee pension plans, and Statement Number 27 replaces the current requirements of Statement Number 27, Accounting for Pensions by State and Local Governmental Employers, for most government employers. The new statements also replace the requirements of Statement Number 50, Pension Disclosures, for those governments and pension plans. Certain of the major changes include: (i) the inclusion of unfunded pension liabilities on the government’s balance sheet (such unfunded liabilities are currently typically included as notes to the government’s financial statements); (ii) full pension costs would be shown as expenses regardless of actual contribution levels; (iii) lower actuarial discount rates would be required to be used for most plans for certain purposes of the financial statements, resulting in increased liabilities and pension expenses; and (iv) shorter amortization periods for unfunded liabilities would be required to be used for certain purposes of the financial statements, which generally would increase pension expenses. Statement Number 67 became effective beginning in fiscal year 2013-14, and Statement Number 68 became effective beginning in fiscal year 2014-15.

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Risk Pooling, Joint Powers Agreements and Joint Ventures

The District participates in joint powers agreements (“JPAs”) with the North Bay Schools Insurance Authority (“NBSIA”), which provide various types of insurances for its member districts as requested. The JPAs are governed by boards consisting of a representative from each member district. The relationships between the District, the pool, and the JPAs are such that they are not component units of the District for financial reporting purposes. See Note 14 to the District’s financial statements attached hereto as APPENDIX B − “FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015.”

Investment of District Funds

Substantially all of the District’s operating funds are held by the County Treasurer Tax Collector in the County’s pooled investment fund and invested on behalf of the District pursuant to law and the County’s investment policy.

See APPENDIX E – “SOLANO COUNTY INVESTMENT POOL” attached hereto for a description of the County’s investment policy, current portfolio holdings and valuation procedures.

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Limitations on Revenues

General. On June 6, 1978, California voters approved Proposition 13 (“Proposition 13”), which added Article XIIIA to the State Constitution (“Article XIIIA”). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valoremtaxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

County of Orange v. Orange County Assessment Appeals Board No. 3. Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restoration of value of the damaged property. The constitutionality of this procedure was challenged in a lawsuit brought in 2001 in the Orange County Superior Court, and in similar lawsuits brought in other counties, on the basis that the decrease in assessed value creates a new “base year value” for purposes of Proposition 13 and that subsequent increases in the assessed value of a

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property by more than 2% in a single year violate Article XIIIA. On appeal, the California Court of Appeal upheld the recapture practice in 2004, and the State Supreme Court declined to review the ruling, leaving the recapture law in place.

Legislation Implementing Article XIIIA. Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

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

Article XIIIB of the California Constitution

An initiative to amend the State Constitution entitled “Limitation of Government Appropriations” was approved on September 6, 1979, thereby adding Article XIIIB to the State Constitution (“Article XIIIB”). Under Article XIIIB state and local governmental entities have an annual “appropriations limit” and are not permitted to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

The District annually budgets appropriations from “proceeds of taxes” (sometimes referred to as the “Gann limit”). The District’s Gann limit for the 2015-16 fiscal year is equal to the allowable limit of approximately $38.4 million. The District estimates an appropriations limit for the 2016-17 fiscal year of approximately $41.4 million. Any proceeds of taxes received by the District in excess of the allowable limit are absorbed into the State’s allowable limit.

Article XIIIC and Article XIIID of the California Constitution

On November 5, 1996, the voters of the State of California approved Proposition 218, popularly known as the “Right to Vote on Taxes Act.” Proposition 218 added to the California Constitution Articles XIIIC and XIIID (“Article XIIIC” and “Article XIIID,” respectively), which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and collect both existing and future taxes, assessments, fees and charges.

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According to the “Title and Summary” of Proposition 218 prepared by the California Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. Article XIIID deals with assessments and property-related fees and charges, and explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

The District does not impose any taxes, assessments, or property-related fees or charges which are subject to the provisions of Proposition 218. It does, however, receive a portion of the basic 1% ad valorem property tax levied and collected by the County pursuant to Article XIIIA of the California Constitution. The provisions of Proposition 218 may have an indirect effect on the District, such as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District.

Statutory Limitations

On November 4, 1986, State voters approved Proposition 62, an initiative statute limiting the imposition of new or higher taxes by local agencies. The statute (a) requires new or higher general taxes to be approved by two-thirds of the local agency’s governing body and a majority of its voters; (b) requires the inclusion of specific information in all local ordinances or resolutions proposing new or higher general or special taxes; (c) penalizes local agencies that fail to comply with the foregoing; and (d) required local agencies to stop collecting any new or higher general tax adopted after July 31, 1985, unless a majority of the voters approved the tax by November 1, 1988.

Appellate court decisions following the approval of Proposition 62 determined that certain provisions of Proposition 62 were unconstitutional. However, the California Supreme Court upheld Proposition 62 in its decision on September 28, 1995 in Santa Clara County Transportation Authority v. Guardino. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court’s decision, such as whether the decision applies retroactively, what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities.

Proposition 98 and Proposition 111

On November 8, 1988, voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). The Accountability Act changed State funding of public education below the university level, and the operation of the State’s Appropriations Limit. The Accountability Act guarantees State funding for K-12 districts and community college districts (collectively, “K-14 districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-87, which percentage is equal to 40.9%, or (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for growth in enrollment and inflation.

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Since the Accountability Act is unclear in some details, there can be no assurance that the Legislature or a court might not interpret the Accountability Act to require a different percentage of general fund revenues to be allocated to K-14 districts than the 40.9%, or to apply the relevant percentage to the State’s budgets in a different way than is proposed in the Governor’s Budget. In any event, the Governor and other fiscal observers expect the Accountability Act to place increasing pressure on the State’s budget over future years, potentially reducing resources available for other State programs, especially to the extent the Article XIIIB spending limit would restrain the State’s ability to fund such other programs by raising taxes.

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

On June 5, 1990, California voters approved Proposition 111 (Senate Constitutional Amendment 1), which further modified the Constitution to alter the spending limit and education funding provisions of Proposition 98. Most significantly, Proposition 111 (1) liberalized the annual adjustments to the spending limit by measuring the “change in the cost of living” by the change in State per capita personal income rather than the Consumer Price Index, and specified that a portion of the State’s spending limit would be adjusted to reflect changes in school attendance; (2) provided that 50% of the “excess” tax revenues, determined based on a two-year cycle, would be transferred to K-14 districts with the balance returned to taxpayers (rather than the previous 100% but only up to a cap of 4% of the districts’ minimum funding level), and that any such transfer to K-14 districts would not be built into the school districts’ base expenditures for calculating their entitlement for State aid in the following year and would not increase the State’s appropriations limit; (3) excluded from the calculation of appropriations that are subject to the limit appropriations for certain “qualified capital outlay projects” and certain increases in gasoline taxes, sales and use taxes, and receipts from vehicle weight fees; (4) provided that the Appropriations Limit for each unit of government, including the State, would be recalculated beginning in the 1990-91 fiscal year, based on the actual limit for fiscal year 1986-87, adjusted forward to 1990-91 as if Senate Constitutional Amendment 1 had been in effect; and (5) adjusted the Proposition 98 formula that guarantees K-14 districts a certain amount of general fund revenues, as described below.

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

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Proposition 30

On November 6, 2012, voters approved Proposition 30, also referred to as the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment. Proposition 30 temporarily (a) increased the personal income tax on certain of the State’s income taxpayers by one to three percent for a period of seven years beginning with the 2012 tax year and ending with the 2019 tax year, and (b) increased the sales and use tax by one-quarter percent for a period of four years beginning on January 1, 2013 and ending with the 2016 tax year. The revenues generated from such tax increases are included in the calculation of the Proposition 98 minimum funding guarantee (see “– Proposition 98 and Proposition 111” above). The revenues generated from such temporary tax increases are deposited into a State account created pursuant to Proposition 30 (the Education Protection Account), and 89% of the amounts therein are allocated to school districts and 11% of the amounts therein are allocated to community college districts.

The Proposition 30 tax increases are temporary and expire at the end of the 2016 and 2019 tax years. The District cannot predict the effect the loss of the revenues generated from such temporary tax increases will have on total State revenues and the effect on the Proposition 98 formula for funding schools.

Voters in the State will consider the California Tax Extension to Fund Education and Healthcare Initiative (“Proposition 55”) at the statewide election to be held in November 2016. If approved, Proposition 55 would extend by twelve years the temporary personal income tax increases enacted by Proposition 30 and allocate tax revenues to school districts and community colleges in the State.

Applications of Constitutional and Statutory Provisions

The application of Proposition 98 and other statutory regulations has become increasingly difficult to predict accurately in recent years. For a discussion of how the provisions of Proposition 98 have been applied to school funding see “DISTRICT HISTORY, OPERATION AND FINANCIAL INFORMATION – State Funding of Education; State Budget Process.”

Proposition 2

General. Proposition 2, which included certain constitutional amendments to the Rainy Day Fund and, upon its approval, triggered the implementation of certain provisions which could limit the amount of reserves that may be maintained by a school district, was approved by the voters in the November 2014 election.

Rainy Day Fund. The Proposition 2 constitutional amendments related to the Rainy Day Fund (i) require deposits into the Rainy Day Fund whenever capital gains revenues rise to more than 8% of general fund tax revenues (and the 2014-15 State Budget notes that capital gains revenues are expected to account for approximately 9.8% of general fund revenues in fiscal year 2014-15); (ii) set the maximum size of the Rainy Day Fund at 10% of general fund revenues; (iii) for the next 15 years, require half of each year’s deposit to be used for supplemental payments to pay down the budgetary debts or other long-term liabilities and, thereafter, require at least half of each year’s deposit to be saved and the remainder used for supplemental debt payments or savings; (iv) allow the withdrawal of funds only for a disaster or if spending remains at or below the highest level of spending from the past three years; (v) require the State to provide a multiyear budget forecast; and (vi) create a Proposition 98 reserve (the Public School System Stabilization Account) to set aside funds in good years to minimize future cuts and smooth school spending. The State may deposit amounts into such account only after it has paid all amounts owing to school districts relating to the Proposition 98 maintenance factor for fiscal years prior to fiscal year 2014-

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15. The State, in addition, may not transfer funds to the Public School System Stabilization Account unless the State is in a Test 1 year under Proposition 98 or in any year in which a maintenance factor is created.

SB 858. Senate Bill 858 (“SB 858”) became effective upon the passage of Proposition 2. SB 858 includes provisions which could limit the amount of reserves that may be maintained by a school district in certain circumstances. Under SB 858, in any fiscal year immediately following a fiscal year in which the State has made a transfer into the Public School System Stabilization Account, any adopted or revised budget by a school district would need to contain a combined unassigned and assigned ending fund balance that (a) for school districts with an A.D.A. of less than 400,000, is not more than two times the amount of the reserve for economic uncertainties mandated by the Education Code, or (b) for school districts with an A.D.A. that is more than 400,000, is not more than three times the amount of the reserve for economic uncertainties mandated by the Education Code. In certain cases, the county superintendent of schools may grant a school district a waiver from this limitation on reserves for up to two consecutive years within a three-year period if there are certain extraordinary fiscal circumstances.

The District, which has an A.D.A. of less than 400,000, is required to maintain a reserve for economic uncertainty in an amount equal to 3% of its general fund expenditures and other financing uses. The District does not expect SB 858 to adversely affect its ability to pay principal and interest evidenced by the Certificates as and when due.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID, as well as Propositions 62, 98, 111 and 218, were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting District revenues or the District’s ability to expend revenues.

TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP, special counsel to the District (“Special Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the portion of each Base Rental Payment designated as and constituting interest paid by the District under the Facilities Sublease and received by the Owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Special Counsel is of the further opinion that interest evidenced by the Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest evidenced by the Certificates is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Special Counsel is set forth in Appendix C hereto.

To the extent the issue price of any scheduled principal payment of the Certificates is less than the amount payable on the scheduled principal payment date of such Certificates (excluding amounts stated to be interest and payable at least annually over the term of such Certificates), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest evidenced by the Certificates which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular scheduled principal payment date of the Certificates is the first price at which a substantial amount of such scheduled principal payment date of the Certificates is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of

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underwriters, placement agents or wholesalers). The original issue discount with respect to any schedule principal payment date of the Certificates accrues daily over the term to the scheduled principal payment date of such Certificates on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Certificates to determine taxable gain or loss upon disposition (including sale, redemption, or payment on scheduled principal date) of such Certificates. Beneficial Owners of the Certificates should consult their own tax advisors with respect to the tax consequences of ownership of Certificates with original issue discount, including the treatment of Beneficial Owners who do not purchase such Certificates in the original offering to the public at the first price at which a substantial amount of such Certificates is sold to the public.

Certificates purchased, whether at original execution and delivery thereof or otherwise, for an amount higher than their principal evidenced thereby payable on the scheduled principal payment date thereof (or, in some cases, at their earlier prepayment date) (“Premium Certificates”) will be treated as having amortizable premium. No deduction is allowable for the amortizable premium in the case of obligations, like those evidenced by the Premium Certificates, the interest with respect to which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Certificate, will be reduced by the amount of amortizable premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Certificates should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.

The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest evidenced by obligations such as the Certificates. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest evidenced by the Certificates will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest evidenced by the Certificates being included in gross income for federal income tax purposes, possibly from the date of original execution and delivery of the Certificates. The opinion of Special Counsel assumes the accuracy of these representations and compliance with these covenants. Special Counsel has not undertaken to determine (or to inform any person), whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Special Counsel’s attention after the date of execution and delivery of the Certificates may adversely affect the value of, or the tax status of interest evidenced by, the Certificates. Accordingly, the opinion of Special Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Special Counsel is of the opinion that interest evidenced by the Certificates is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest evidenced by, the Certificates may otherwise affect a Certificate holder’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Special Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest evidenced by the Certificates to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest evidenced by obligations like the

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Certificates to some extent for high income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Special Counsel is expected to express no opinion.

The opinion of Special Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Special Counsel’s judgment as to the proper treatment of the Certificates for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Special Counsel cannot give and has not given any opinion or assurance about the future activities of the District, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code.

Special Counsel’s engagement with respect to Certificates ends with the execution and delivery of the Certificates, and, unless separately engaged, Special Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Certificates in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the Certificates for audit, or the course or result of such audit, or an audit of obligations presenting similar tax issues may affect the market price for, or the marketability of, the Certificates, and may cause the District or the Beneficial Owners to incur significant expense.

CERTAIN LEGAL MATTERS

Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Special Counsel to the District, will render its opinion with respect to the legality of the Facilities Sublease and the Trust Agreement. A copy of its legal opinion will accompany the original delivery of each Certificate. The form of the legal opinion proposed to be delivered by Special Counsel is included as Appendix C to this Official Statement. Special Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the District by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, as Disclosure Counsel to the District; for the Corporation by Parker & Cover LLP, Tustin, California; and for the Underwriter by Quint & Thimmig LLP, Larkspur, California.

CONTINUING DISCLOSURE

Pursuant to the Continuing Disclosure Certificate executed by the District, the District will covenant for the benefit of holders and beneficial owners of the Certificates to provide, or to cause to be provided, to the MSRB through the EMMA System or such other electronic system designated by the MSRB the Annual Report by not later than nine months following the end of the District’s fiscal year (currently ending June 30), commencing with the report for the 2015-16 fiscal year (which is due no later than March 31, 2017) and notice of the occurrence of certain enumerated events (“Notice Events”) in a timely manner not in excess of ten business days after the occurrence of such a Notice Event. The specific nature of the information to be contained in the Annual Report and the notices of Notice Events is set forth in APPENDIX D – “FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”).

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In the previous five years, the District failed on one occasion to file audited financial statements in a timely and complete manner in connection with a continuing disclosure undertaking. Within the past five years, the District did not file a notice of such failure to provide such annual financial information in a timely manner, on or before the date specified in its continuing disclosure undertakings. In addition, the District failed to file rating changes with respect to the rating of a bond insurer in a timely manner. The District has since filed the required information to the MSRB through the EMMA System.

FINANCIAL ADVISOR

Capitol Public Finance Group (the “Financial Advisor”), has been engaged by the District to perform financial services in connection with the delivery of the Certificates and certain other financial matters. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. The Financial Advisor is not contractually obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

RATINGS

S&P has assigned its underlying ratings of “A” to the Certificates. Rating agencies generally base their ratings on their own investigations, studies and assumptions. The rating reflects only the view of the rating agency furnishing the same, and any explanation of the significance of such rating should be obtained only from the rating agency providing the same. Such rating is not a recommendation to buy, sell or hold the Certificates. There is no assurance that any rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency providing the same, if, in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Certificates. The Underwriter and the District have not undertaken any responsibility after the offering of the Certificates to assure the maintenance of the rating or to oppose any such revision or withdrawal.

In addition, S&P is expected to assign its insured ratings of “AA” (stable outlook) to the Certificates with the understanding that, upon delivery of the Certificates, the Insurance Policy will be issued by the Insurer. See “CERTIFICATE INSURANCE.” Such rating is expected to be assigned solely as a result of the issuance of the Insurance Policy and would reflect only S&P’s view of the claims-paying ability and financial strength of the Insurer. Neither the Underwriter nor the District has made any independent investigation of the claims-paying ability of the Insurer and no representation is made that the insured rating of the Certificates based upon the purchase of the Insurance Policy will remain the same. The existence of the Insurance Policy will not, of itself, negatively affect the underlying rating. However, any downward revision or withdrawal of any rating of the Insurer may have an adverse effect on the market price or marketability of the Certificates.

ABSENCE OF MATERIAL LITIGATION

At the time of delivery of and payment for the Certificates, the District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or governmental or public entity pending or, to the best knowledge of the District, threatened against the District (i) which affects or seeks to prohibit, restrain or enjoin the execution or delivery of the Certificates, the Facilities Sublease, the Facilities Lease, the Trust Agreement, the Assignment Agreement or the Continuing Disclosure Certificate, (ii) contesting the validity of the Facilities Sublease, the Facilities Lease, the Trust Agreement or the Continuing Disclosure Certificate, the powers of the District to enter into or perform its obligations under the Facilities Sublease, the Facilities Lease, the Trust Agreement or the Continuing Disclosure Certificate, or the existence or powers of the District, or (iii) which, if determined adversely to the District, would materially impair the District’s ability to meet

its obligations under the Facilities Sublease or materially and adversely affect the District's financial condition.

The District does have claims pending against it. The aggregate amount of the uninsured liabilities of the District which may result from all claims will not, in the opinion of the District, materially affect the District's finances or impair its ability to make Base Rental Payments under the Facilities Sublease.

UNDERWRITING

The Certificates are to be purchased by the Underwriter. The Underwriter has agreed, subject to certain terms and conditions set forth in the Certificate Purchase Agreement, dated September 27, 20 I 6, by and between the Underwriter and the District, to purchase the Certificates at a purchase price of $6,701,238.80 (which represents the aggregate principal amount of the Certificates, plus $574,428.80 of net original issue premium, and less $43,190.00 of Underwriter's discount). The Underwriter· will purchase all the Certificates if any are purchased. The Certificates may be offered and sold to certain dealers (including dealers depositing said Certificates into investment trusts) and others at prices lower than the initial public offering price, and the public offering price may be changed from time to time by the Underwriter.

MISCELLANEOUS

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed a.s a contract or agreement between the District and the purchasers or Owners of any of the Certificates.

The execution and delivery of this Official Statement has been duly authorized by the District.

TRAVIS UNIFIED SCHOOL DISTRICT

By: ----"'~cc/,,;,:=.=e:;_.;.;..M=e=tc=a=lf,__ _____ _ Chief Business Official

OHSUSA:765534378

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APPENDIX A

SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS

The following summary discussion of selected features of the Facilities Lease, the Facilities Sublease, the Assignment Agreement and the Trust Agreement, all dated as of October 1, 2016, is intended to be read in conjunction with the discussion of such documents contained elsewhere in this Official Statement. This summary discussion does not purport to be a complete statement of said provisions and prospective purchasers of the Certificates are referred to the complete texts of said documents, copies of which are available upon request from the Trustee.

CERTAIN DEFINITIONS

Capitalized terms used in this Official Statement and not elsewhere defined are defined in this Appendix, as excerpted from the Facilities Sublease or the Trust Agreement, to which reference is made, unless the context otherwise requires. The following definitions are equally applicable to both the singular and plural forms.

“Additional Payments” means all amounts payable to the Corporation or the Trustee or any other person from the District, as provided in the Facilities Sublease (and as described below under “FACILITIES SUBLEASE—Payment of Rental—Additional Rental”).

“Applicable Environmental Laws” means and will include, but will not be limited to, CERCLA, RCRA, the Federal Water Pollution Control Act, 33 USC §§ 1251 et seq., the Clean Air Act, 42 USC § 7401 et seq., HWCL, HSAA, the Porter-Cologne Act, the Air Resources Act, Cal. Health & Safety Code §§ 3900 et seq., the Safe Drinking Water & Toxic Enforcement Act, Cal. Health & Safety Code §§ 25249.5, and the regulations thereunder, and any other local, state and/or federal laws or regulations, whether currently in existence or enacted subsequent to the delivery of the Certificates, that govern:

(i) the existence, cleanup and/or remedy of contamination on property;

(ii) the protection of the environment from spilled, deposited or otherwise emplaced contamination;

(iii) the control of hazardous wastes; or

(iv) the use, generation, transport, treatment, removal or recovery of Hazardous Substances, including building materials.

“Assignment Agreement” means that certain Assignment Agreement by and between the Corporation and the Trustee, dated as of October 1, 2016.

“Authorized Corporate Representative” means the President, the Vice President, the Treasurer, the Secretary, the Executive Director, the Assistant Executive Director, the Assistant Treasurer or Assistant Secretary of the Corporation, and any other person authorized by the Board of Directors of the Corporation to act on behalf of the Corporation under or with respect to the Trust Agreement.

“Authorized District Representative” means the Superintendent or Chief Business Officer of the District, Director, Fiscal Services or any delegate of any of the aforementioned officers duly appointed in writing, or any other officer of the District duly authorized by the Governing Board of the District in writing to the Trustee for that purpose.

“Base Rental Payments” means the base rental payments with interest components and principal components payable to the District under and pursuant to the Facilities Sublease.

“Base Rental Payment Fund” means the fund by that name established pursuant to the Trust Agreement.

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“Business Day” means any day other than a day when the Principal Corporate Trust Office of the Trustee is required or authorized by applicable law to be closed.

“Certificate” means any of the Travis Unified School District Certificates of Participation (Series 2016B) executed and delivered by the Trustee pursuant to the Trust Agreement and then Outstanding.

“Certificate of the Corporation” means an instrument in writing signed by the President, the Vice President, the Treasurer, Executive Director, Assistant Executive Director, the Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation, or by any other officer of the Corporation duly authorized by the Corporation in writing to the Trustee for that purpose. If and to the extent required by the provisions of the Trust Agreement, each Certificate of the Corporation will include the statement provided in the applicable section of the Trust Agreement.

“Certificate of the District” means an instrument in writing signed by an Authorized District Representative. If and to the extent required by the provisions of the Trust Agreement, each Certificate of the District will include the statement provided in the applicable section of the Trust Agreement.

“Certificate Payment Date” means, with respect to any Certificate, the September 1 designated therein, which is the date on which the principal component of the Base Rental Payments evidenced and represented thereby will become due and payable.

“Certificate Payment Schedule” means the schedule of Base Rental Payments payable to the Corporation from the District pursuant to the Facilities Sublease.

“Certificate Reserve Fund” means the Certificate Reserve Fund established pursuant to the Facilities Sublease.

“Certificate Reserve Fund Requirement” initially means $491,868.76 and subsequently means the least of (i) the maximum amount of Base Rental Payments remaining to be made by the District pursuant to the Facilities Sublease during any twelve-month period ending on September 1, (ii) 125% of the average annual Base Rental Payments, and (iii) 10% of the principal amount of the Certificates Outstanding; provided, however, that all or a part of such Certificate Reserve Fund Requirement may be provided by depositing in the Certificate Reserve Fund a policy of insurance issued by a municipal bond insurance company, obligations insured by which have a rating, at the time of deposit, by Standard and Poor’s of “AA,” or by a Letter of Credit issued by a Qualified Bank.

“Code” means the Internal Revenue Code of 1986, as amended.

“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate executed and delivered by the District, dated the date of issuance and delivery of the Certificates, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

“Corporation” means the Public Property Financing Corporation of California, a nonprofit public benefit corporation duly organized and existing under and by virtue of the laws of the State of California, any surviving, resulting or transferee entity thereof and, except where the context requires otherwise, any assignee of the Corporation.

“Costs of Delivery” means all items of expense directly or indirectly payable by or reimbursable to the District or the Corporation and related to the authorization, execution and delivery of the Facilities Sublease, the Facilities Lease, the Assignment Agreement and the Trust Agreement and the related sale of the Certificates, including, but not limited to, costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, filing and recording fees, initial fees, legal fees and charges of the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, fees and charges for preparation, execution and safekeeping of the Certificates and any other cost, charge or fee in connection with the original execution and delivery of the Certificates.

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“Defeasance Securities” will mean the following:

1. Cash.

2. U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series – (“ SLGs”)).

3. Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself.

4. Resolution Funding Corp. (“REFCORP”) strips. Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable.

5. Subject to the prior written consent of the Insurer, pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P. If, however, the issue is only rated by S&P (i.e., there is no Moody’s rating) then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or, subject to the prior written consent of the Insurer, AAA rated pre-refunded municipals to satisfy this condition.

6. Obligations issued by the following agencies which are backed by the full faith and credit of the U.S.:

a. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership

b. Farmers Home Administration (FmHA)

c. Federal Financing Bank

d. General Services Administration

e. Participant Certificates

f. U.S. Maritime Administration Guaranteed Title XI financing

g. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds

“District” means the Travis Unified School District, a unified school district duly organized under the Constitution and laws of the State of California and a political subdivision of the State.

“EMMA” means the Electronic Municipal Market Access system established by the Municipal Securities Rulemaking Board available at www.emma.msrb.org.

“Event of Default” under the Facilities Sublease means any of those actions described as such below under the caption “FACILITIES SUBLEASE—Defaults; Remedies”.

“Facilities Lease” means that certain lease, entitled “Facilities Lease” and dated as of October 1, 2016, between the District, as lessor, and the Corporation, as lessee, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions thereof and of the Trust Agreement.

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“Facilities Sublease” means that certain lease, entitled “Facilities Sublease,” by and between the Corporation and the District, dated as of October 1, 2016, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions of the Trust Agreement and the Facilities Sublease.

“Facility” means that certain real property situated in the County of Solano, State of California, described in Exhibit A attached to the Facilities Sublease, which the District has acquired title to in the name of the Roseland School District, a public corporation together with any additional real property added thereto by any supplement or amendment thereto pursuant to the terms of the Facilities Sublease and the Trust Agreement; subject, however, to any conditions, reservations, and easements of record or known to the District.

“Field Act” means Sections 17280 et seq. of the Education Code.

“Governing Board” means the governing board of the District or any successor thereto.

“Hazardous Substance” means any substance which shall, at any time, be listed as “hazardous” or “toxic” or in the regulations implementing the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), 42 USC §§ 9601 et seq., the Resource Conservation and Recovery Act (“RCRA”), 42 USC §§ 6901 et seq., the California Hazardous Waste Control Law (“HWCL”), Cal. Health and Safety Code §§ 25100 et seq., Hazardous Substance Account Act (“HSAA”), Cal. Health & Safety Code §§ 25300 et seq., or the Porter-Cologne Water Quality Control Act (the “Porter-Cologne Act”), Cal. Water Code §§ 13000 et seq., or which has been or shall be determined at any time by any agency or court to be a hazardous or toxic substance regulated under Applicable Environmental Laws. The term “Hazardous Substance” shall also include, without limitation, raw materials, building components, the products of any manufacturing or other activities on the subject property, wastes, petroleum, and source, special nuclear or by-product material as defined by the Atomic Energy Act of 1954, as amended (42 USC §§ 3011, et seq., as amended) and any hazardous, toxic or regulated substances or related materials as defined in the Emergency Planning and Community Right-to-Know Act, as amended (42 U.S.C. Section 110001, et seq.) (“Title III”), the Clean Water Act, as amended (33 U.S.C. Section 1321, et seq.) (“CWA”), the Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.) (the “CAA”), and the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601 et seq.) (“TSCA”).

“Insurance Policy” means the insurance policy, and any endorsement thereto, issued by the Insurer guaranteeing the scheduled payment of principal and interest evidenced by the Certificates when due, or any insurance policy substituted for said insurance policy.

“Insurance Business Day” means any day other than (a) a Saturday or Sunday, (b) any day on which the offices of the Trustee or the Insurer are closed, and (c) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the City of New York, New York.

“Insurer” means, with respect to the Certificates, Build America Mutual Assurance Company or any successor thereto or assignee thereof.

“Insurer’s Fiscal Agent” means a fiscal agent appointed by the Insurer for purposes of, and in accordance with the terms contained in, the Insurance Policy.

“Insurer Rate” means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, New York as its prime or base lending rate (“Prime Rate”) (any change in such Prime Rate to be effective on the date such changes are announced by JPMorgan Chase Bank) plus 3% and (ii) the then applicable highest rate of interest on the Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. In the event JPMorgan Chase Bank, N.A. ceases to announce its Prime Rate, the Prime Rate will be the prime or base lending rate of such other bank, banking association or trust company as the Insurer, in its sole and absolute discretion, will designate. Interest at the Insurer Rate on any amount owing to the Insurer will be computed on the basis of the actual number of days elapsed in a year of 360 days.

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“Interest Payment Date” means a date on which interest evidenced and represented by the Certificates becomes due and payable, being March 1 and September 1 of each year to which reference is made (commencing on March 1, 2017).

“Interest Fund” means the fund by that name established pursuant to the Trust Agreement.

“Letter of Credit” means an irrevocable and unconditional letter of credit, a standby purchase agreement, a line of credit or other similar credit arrangement issued by a Qualified Bank to provide all or a portion of the Certificate Reserve Fund Requirement and submitted to and reviewed and approved by Standard & Poor’s and the Insurer.

“Moody’s Investors Service” or “Moody’s” means Moody’s Investors Service, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation is dissolved or liquidated or no longer performs the functions of a statistical rating organization, then the term “Moody’s Investors Service” will be deemed to refer to any other nationally recognized statistical rating organization selected by the District.

“Opinion of Counsel” means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District.

“Outstanding,” when used as of any particular time with reference to Certificates, means (subject to the provisions of the Trust Agreement pertaining to Certificates owed or held by or for the account of the District) all Certificates except --

(1) Certificates cancelled by the Trustee or delivered to the Trustee for cancellation;

(2) Certificates paid or deemed to have been paid within the meaning of the defeasance section of the Trust Agreement; and

(3) Certificates in lieu of or in substitution for which other Certificates will have been executed and delivered by the Trustee.

“Owner” means any person who is the registered owner of any Outstanding Certificate.

“Payment Date” means any Certificate Payment Date or any Interest Payment Date.

“Permitted Encumbrances” means (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the District may, pursuant to the Facilities Sublease, permit to remain unpaid; (2) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of recordation of the Facilities Sublease in the office of the County Recorder of Solano County and which the District certifies in writing will not materially impair the use of the Facility; (3) the Facilities Lease, as it may be amended from time to time; (4) the Facilities Sublease, as it may be amended from time to time; (5) the Assignment Agreement, as it may be amended from time to time; (6) any right or claim of any mechanic, laborer, materialman, supplier or vendor whether or not filed or perfected in the manner prescribed by law; (7) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Facilities Sublease and to which the Corporation and the District consent in writing; (8) liens relating to special assessments levied with respect to the Facility; and (9) liens existing under the Leroy F. Greene State School Lease - Purchase Program or other similar program of the State of California.

“Permitted Investments” means any of the following to the extent then permitted by the general laws of the State of California applicable to investments by school districts including, without limitation, the provisions of California Government Code Section 5922(d) (provided that the Trustee has no obligation to verify the legality of any Permitted Investment):

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(1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America.

(2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

(a) U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership

(b) Farmers Home Administration (FmHA) Certificates of beneficial ownership

(c) Federal Financing Bank

(d) Federal Housing Administration Debentures (FHA)

(e) General Services Administration Participation Certificates

(f) Government National Mortgage Association (GNMA or Ginnie Mae) GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (these obligations are not acceptable for certain cash-flow sensitive issues)

(g) U.S. Maritime Administration Guaranteed Title XI financing

(h) U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed

public housing notes and bonds

(3) The Local Agency Investment Fund in the Treasury of the State of California.

(4) The Solano County Treasurer’s pooled investment fund, as the same may be invested under California law and the investment policy of the Treasurer of the County of Solano, as the same may be amended from time to time;

(5) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies which are not backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

(a) Federal Home Loan Bank System Senior debt obligations

(b) Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) Participation Certificate Senior debt obligations

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(c) Federal National Mortgage Association (FNMA or Fannie Mae) Mortgage-backed securities and senior debt obligations

(d) Student Loan Marketing Association (SLMA or Sallie Mae) Senior debt obligations

(e) Resolution Funding Corp. (REFCORP) obligations

(f) Farm Credit System Consolidated systemwide bonds and notes

(6) Money market mutual funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of “AAAm-G”; “AAA-m”; or “AA-m” and if rated by Moody’s rated “Aaa”, “Aa1” or “Aa2”, including funds for which the Trustee, its parent holding company, if any, or any affiliates or subsidiaries of the Trustee receive and retain a fee for services provided to the fund, whether providing investment advisory, transfer agency, custodian or other management services or otherwise.

(7) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks, which may include the Trustee and its affiliates. The collateral must be held by a third party and the Owners must have a perfected first security interest in the collateral.

(8) Certificates of deposit (including those placed by a third party pursuant to an agreement between the District and the Trustee), bank deposit products, trust funds, trust accounts, overnight bank deposits, interest bearing deposits, interest bearing money market accounts, time deposits, bankers’ acceptances, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF, which may include the Trustee and its affiliates.

(9) Investment agreements, including GIC’s, forward purchase agreements and reserve fund put agreements.

(10) Commercial paper rated, at the time of purchase, “Prime –1” by Moody’s and “A-1” or better by S&P.

(11) Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such rating agencies.

(12) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime – 1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P.

(13) Repurchase or reverse repurchase agreements (“Repos”) for 30 days or less must follow the following criteria.

Repos provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date.

(a) Repos must be between the Trustee and a dealer bank or securities firm (which bank may include the Trustee or any of its affiliates).

(i) Primary dealers on the Federal Reserve reporting dealer list which are rated “A” or better by S&P and “A2” or better by Moody’s, or

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(ii) Banks rated “A” or better by S&P and “A2” or better by Moody’s,

(iii) or any other entity rated “A” or better by S&P and “A2” or better by Moody’s and acceptable to the Insurer.

(b) The written repurchase agreement must include the following:

(i) Securities which are acceptable for transfer are:

(A) Direct obligations of the United States of America referred to in Section (1) above, or

(B) Obligations of federal agencies referred to in Section (2) above

(C) Obligations of FNMA and FHLMC

(ii) The term of the Repos may be up to 30 days.

(iii) The collateral must be delivered to the District, Trustee or third party acting as agent for the Trustee is before/simultaneous with payment (perfection by possession of certificated securities).

(iv) Valuation of collateral.

(A) The securities must be valued weekly, marked-to-market at current market price plus accrued interest.

(B) The value of collateral must be equal to 104% of the amount of cash transferred by the District to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by the District, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%.

(14) A legal opinion which must be delivered to the District that states that the Repo meets guidelines under state law for legal investment of public funds.

“Prepayment Fund” means the fund by that name established pursuant to the Trust Agreement

“Principal Corporate Trust Office” means initially the trust office of the Trustee in Dallas, Texas, or such other or additional offices as may be designated from time to time by the Trustee, and will include the office of any successor Trustee designated as such by the successor, except that with respect to presentation of Certificates for payment or for registration of transfer and exchange such term will mean the office or agency of the Trustee at which, at any particular time, its corporate trust agency business will be conducted.

“Principal Fund” means the fund by that name established pursuant to the Trust Agreement.

“Project Costs” means all costs of acquisition and construction of the Project and of expenses incident thereto (or for making reimbursements to the Corporation or the District or any other person, firm or corporation for such costs theretofore paid by him or it), including, but not limited to, architectural and engineering fees and expenses, interest during construction, furnishings and equipment, tests and inspection, surveys, land acquisition, insurance premiums, losses during construction not insured against because of deductible amounts, costs of accounting, feasibility, environmental and other reports, inspection costs, permit fees, and charges and fees in connection with the foregoing. Project Costs may also include Costs of Delivery.

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“Project” means the acquisition, construction, rehabilitation, furnishing, equipping or improving of school grounds and buildings of the District.

“Qualified Bank” means a state or national bank or trust company or savings and loan association or a foreign bank with a domestic branch or agency which is organized and in good standing under the laws of the United States or any state thereof or any foreign country, which (together with its parent corporation) has a capital and surplus of $75,000,000 or more and which has an uncollateralized unsecured short term debt rating by Moody’s Investors Service of at least “A1” and by Standard and Poor’s Rating Services of at least “A-1.”

“Rebate Fund” means the Rebate Fund established pursuant to the Trust Agreement.

“Record Date” means, with respect to any Payment Date, the close of business on the 15th day of the month immediately preceding the applicable Payment Date, whether or not such day is a Business Day.

“Related Documents” means the Trust Agreement, Facilities Lease, Facilities Sublease and Assignment Agreement.

“Reserve Policy” means the debt service reserve insurance policy, and any endorsement thereto, issued by the Insurer and deposited into the Certificate Reserve Fund in satisfaction of the Certificate Reserve Requirement in accordance with the Trust Agreement.

“Securities Depositories” means all organizations registered with the Securities and Exchange Commission as securities depositories.

“Standard & Poor’s” or “S&P” means Standard & Poor’s Global Ratings and its successors and assigns, except that if such entity is dissolved or liquidated or no longer performs the functions of a statistical rating organization, then the term Standard & Poor’s will be deemed to refer to any other nationally recognized statistical rating organization selected by the District.

“Tax Certificate” means the certificate relating to Section 103 of the Code, executed by the District on the date of delivery of the Certificates, as originally delivered and as it may be amended from time to time.

“Trust Administration Fund” means the fund by that name established in the Trust Agreement.

“Trust Agreement” means the trust agreement pursuant to which the Trustee will execute and deliver the Certificates, dated as of October 1, 2016, by and among the Trustee, the Corporation and the District, as originally executed or as it may from time to time be supplemented, modified or amended.

“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place under the Trust Agreement.

“Written Request of the District” means an instrument in writing signed by the Authorized District Representative.

“Written Requisition of the District” means an instrument in writing addressed to the Trustee requesting payment from funds held by the Trustee under the Trust Agreement, signed by an Authorized District Representative.

Each such Written Requisition will be sufficient evidence to the Trustee if it states the following:

(a) that obligations in the stated amounts have been incurred by the District and that each item thereof is a proper charge against the funds named therein; and

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(b) that there has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the persons named in such Written Requisition, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law.

CERTAIN PROVISIONS OF THE FACILITIES LEASE

The District is the owner of the Facility. Pursuant to the Facilities Lease, the District has leased the Facility to the Corporation for a term commencing on October 1, 2016 and ending on September 1, 2033, unless extended or sooner terminated as provided in the Facilities Lease. If on September 1, 2033, the Certificates executed and delivered by the Trustee pursuant to the Trust Agreement will not have been fully paid, or if the rental payable under the Facilities Sublease has been abated or otherwise will not have been fully paid at any time and for any reason, or any amounts owing to the Insurer will not have been fully paid, then the term of the Facilities Lease will be extended until 10 days after the Certificates and all amounts owing to the Insurer will be fully paid, except that the term of the Facilities Lease will not exceed September 1, 2043. If prior to September 1, 2033, the Certificates have been fully paid, the term of Facilities Lease will end ten days after such payment or ten days after written notice by the District to the Corporation, whichever is earlier.

The District covenants that it is the owner in fee of the Facility, as described in the Facilities Lease. The District further covenants and agrees that if for any reason this covenant proves to be incorrect, the District will either institute eminent domain proceedings to condemn the property or institute a quiet title action to clarify the District’s title, and will diligently pursue such action to completion. The District further covenants and agrees that it will hold the Corporation harmless from any loss, cost or damages resulting from any breach by the District of these covenants.

The Facilities Lease will not be amended, modified or supplemented without the prior written consent of the Insurer, which consent will not be unreasonably withheld.

As a material inducement to the Insurer, the Corporation and the District agree that the Insurer will be a third party beneficiary to the Facilities Lease.

CERTAIN PROVISIONS OF THE FACILITIES SUBLEASE

The District and the Corporation have entered into the Facilities Sublease providing for the lease to the District of the Facility. The Facilities Sublease, dated as of October 1, 2016, will be executed prior to the delivery of the Certificates.

Lease of Facility

Pursuant to the Facilities Sublease, the Corporation leases the Facility to the District and the District hires the Facility from the Corporation on the conditions and terms set forth in the Facilities Sublease, however, to all easements, encumbrances, and restrictions that exist at the time of the commencement of the term of the Facilities Sublease. The District agrees and covenants during the term of the Facilities Sublease that, except as in the provided in the Facilities Sublease, it will use the Facility for public and District purposes so as to afford the public the benefits contemplated by the Facilities Sublease and so as to permit the Corporation to carry out its agreements and covenants contained in the Trust Agreement, and the District further agrees and covenants during the term of the Facilities Sublease, except as otherwise provided in the Facilities Sublease, that it will not abandon or vacate the Facility.

The leasing by the District to the Corporation of the Facility pursuant to the Facilities Lease will not effect or result in a merger of the District’s leasehold estate pursuant to the Facilities Sublease and its fee estate as lessor under the Facilities Lease, and the Corporation will continue to have and hold a leasehold estate in said Facility

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pursuant to the Facilities Lease throughout the term of the Facilities Sublease and the term of the Facilities Sublease. As to said Facility, the Facilities Sublease will be deemed and constitute a sublease.

Term

The term of the Facilities Sublease will commence on the date of delivery of the Certificates, and will end on September 1, 2033, unless such term is extended or sooner terminated as in the provided in the Facilities Sublease.

If on September 1, 2033, the Certificates will not be fully paid, or if the rental payable under the Facilities Sublease will have been abated at any time and for any reason, or if any amounts owing to the Insurer will not be fully paid, then the term of the Facilities Sublease will be extended until ten days after all Certificates and all amounts owing to the Insurer will be fully paid, except that the term of the Facilities Sublease will not exceed September 1, 2043. If prior to September 1, 2043, all Certificates and all amounts owing to the Insurer, if any, will be fully paid, or provision therefor made, the term of the Facilities Sublease will end ten days thereafter or ten days after written notice by the District to the Corporation, whichever is earlier.

Substitution

The District may, with the prior written consent of the Insurer, substitute property as part of the Facility for purposes of the Facilities Lease and of the Facilities Sublease, but only after the District will have filed with the Trustee, with copies to each rating agency then providing a rating for the Certificates, all of the following:

(a) Executed copies of the Facilities Lease, the Facilities Sublease or amendments thereto containing the description of the substituted Facility, including the legal description of the Facility as modified if necessary;

(b) A Certificate of the District with copies of the Facilities Lease, the Facilities Sublease and the Assignment Agreement, if needed, or amendments thereto containing the description of the substituted Facility stating that such documents have been duly recorded in the official records of the County Recorder of the County of Solano;

(c) A Certificate of the District, accompanied by a written appraisal from an appraiser, who may but need not be an employee of the District, (i) evidencing that the annual fair rental value of the substituted Facility which will constitute the Facility after such substitution will be at least equal to 100% of the maximum amount of Base Rental Payments becoming due in the then current fiscal year or in any subsequent fiscal year and that the value of the substituted property is at least equal to that of the released property; and (ii) stating that the useful economic life of the substituted Facility is at least equal to the remaining term of the Facilities Sublease.

(d) With respect to the substituted Facility, insurance naming the Trustee as the insured and insuring the fee or leasehold estate of the Trustee in such substituted property subject only to such exceptions as do not substantially interfere with the District’s right to use and occupy such substituted property and as will not result in an abatement of Base Rental Payments payable by the District under the Facilities Sublease, as certified by the District.

(e) A Certificate of the District stating that the substituted Facility is ready for immediate use and occupancy by the District.

(f) A Certificate of the District stating that the essentiality of the substituted Facility is comparable to that of the existing Facility.

(g) A letter from the applicable rating agencies that such substitution will not cause any underlying rating on the Certificates to be reduced or withdrawn.

(h) An Opinion of Counsel stating that such substitution and amendment or modification of the Facilities Sublease and of the Facilities Lease (i) is authorized or permitted by the Constitution and laws of the State

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of California and the Trust Agreement and complies with the Trust Agreement and the terms of the Facilities Sublease or under the Facilities Lease, as applicable; (ii) will, upon the execution and delivery of the Facilities Sublease, be valid and binding upon the Trustee, as assignee of the Corporation, and the District in accordance with its terms; and (iii) will not cause the interest component of the Base Rental Payments to be included in gross income for federal income tax purposes.

Base Rental Payments

The District agrees to pay to the Trustee, as assignee of the Corporation, as Base Rental Payments under the Facilities Sublease (subject to the provisions of the Facilities Sublease) annual rental payments with principal and interest components, the interest components being payable semi-annually, in accordance with the Certificate Payment Schedule attached to the Facilities Sublease. Base Rental Payments will be calculated on an annual basis, for the twelve-month periods commencing on September 2 and ending on September 1 of the following calendar year, and each annual Base Rental Payment will be divided into two interest components, due on March 1 and September 1 of each rental payment period, and one principal component, due on September 1 of each rental payment period; provided, however, that the first Base Rental Payment period will commence on the date of delivery of the Certificates, and will end on September 1, 2017. Each Base Rental Payment installment will be payable on the 15th day of the month immediately preceding its due date and any interest or other income with respect thereto accruing prior to such due date will belong to the District and will be returned by the Trustee to the District on March 1 and September 1 of each year, or credited to rental due from the District under the Facilities Sublease. The interest components of the Base Rental Payments will be paid by the District as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the District under the Facilities Sublease, computed on the basis of a 360-day year composed of twelve 30-day months. Each annual Base Rental Payment (to be payable in two installments as aforesaid) will be for the use of the Facility for the twelve-month period commencing on September 1 of the period in which such installments are payable. If the term of the Facilities Sublease will have been extended pursuant to the Facilities Sublease, Base Rental Payment installments will continue to be due on March 1 and September 1 in each year, and payable as provided in the Facilities Sublease, continuing to and including the date of termination of the Facilities Sublease, in an amount equal to the amount of Base Rental Payments payable for the twelve-month period commencing September 1, 2032. Upon such extension of the Facilities Sublease, the principal and interest components of the Base Rental Payments will be established so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest on the extended principal components at a rate equal to the rate of interest on the principal component of the Base Rental Payment payable on September 1, 2033.

If at any time the Base Rental Payments under the Facilities Sublease will not have been paid by the District, for any reason whatsoever, and no other source of funds will have been available to make the payments of principal and interest represented by the Certificates to the persons entitled to receive such payments (or if the Policy has been drawn on to make payments as provided therein), the principal and interest components of the Base Rental Payments will be recalculated by the District to reflect interest on the unpaid principal components at the rate or rates specified in the Trust Agreement, and a revised Exhibit B to the Facilities Sublease will be prepared by the District and supplied to the Trustee reflecting such reallocation.

Additional Payments

The District will also pay such amounts (in the Facilities Sublease called the “Additional Payments”) as will be required for the payment of all expenses, compensation and indemnification of the Trustee payable by the District under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other charges required to be paid by the District to comply with the terms of the Certificates or of the Trust Agreement including amounts payable to the Insurer; but not including in Additional Payments amounts required to pay the principal or interest represented by the Certificates.

Such Additional Payments will be billed to the District by the Trustee from time to time pursuant to the Trust Agreement. Amounts so billed will be paid by the District within 15 days after receipt of the bill by the District. The District reserves the right to audit billings for Additional Payments although exercise of such right will in no way affect the duty of the District to make full and timely payment for all Additional Payments. Any

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payments of Additional Payments not expended upon receipt will be held by the Trustee in the Trust Administration Fund pursuant to the Trust Agreement.

Fair Rental Value

Base Rental Payments for each rental period during the term of the Facilities Sublease will constitute the total rental for said rental period and will be paid by the District in each rental payment period for and in consideration of the right of use and occupancy of, and continued quiet use and enjoyment of, the Facility during each such period for which said rental is to be paid. The parties to the Facilities Sublease have agreed and determined that such total rental payable for each twelve-month period beginning September 1 represents the fair rental value of the Facility for each such period. In making such determination, consideration has been given to the insured value of the Facility, other obligations of the parties under the Facilities Sublease, the uses and purposes which may be served by the Facility and the benefits therefrom which will accrue to the District and the general public.

Payment Provisions

Each installment of rental payable under the Facilities Sublease will be paid in lawful money of the United States of America to the Trustee at the Principal Corporate Trust Office of the Trustee, or such other place as the Trustee will designate. Any such installment of rental accruing under the Facilities Sublease which will not be paid when due and payable under the terms of the Facilities Sublease will bear interest at the rate of 12% per annum, or such lesser maximum rate of interest as may be permitted by law, from the date when the same is due under the Facilities Sublease until the same will be paid. Notwithstanding any dispute between the Corporation and the District (or with any other party), the District will make all rental payments when due without deduction or offset of any kind and will not withhold any rental payments pending the final resolution of such dispute. In the event of a determination that the District was not liable for said rental payments or any portion of the Facilities Sublease, said payments or excess of payments, as the case may be, will be credited against subsequent rental payments due under the Facilities Sublease or refunded at the time of such determination. Amounts required to be deposited by the District with the Trustee pursuant to the Facilities Sublease on any date will be reduced to the extent of amounts on deposit in the Base Rental Payment Fund, the Interest Fund or the Principal Fund created pursuant to the Trust Agreement and available therefor.

All payments received will be applied first to the interest components of the Base Rental Payments due under the Facilities Sublease, then to the principal components of the Base Rental Payments due under the Facilities Sublease and thereafter to all Additional Payments due under the Facilities Sublease, but no such application of any payments which are less than the total rental due and owing will be deemed a waiver of any default under the Facilities Sublease.

Rental is subject to abatement as provided in the Facilities Sublease.

Nothing contained in the Facilities Sublease will prevent the District from making from time to time contributions or advances to the Corporation for any purpose now or hereafter authorized by law, including the making of repairs to, or the restoration of, the Facility in the event of damage to or the destruction of the Facility.

Appropriations Covenant

The District covenants to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due under the Facilities Sublease in its annual budgets, to make necessary annual appropriations for all such Base Rental Payments and Additional Payments and to take such action annually as will be required to provide funds in such year for such Base Rental Payments and Additional Payments. The District will deliver to the Trustee and the Insurer within thirty (30) days after the adoption of the budget for each fiscal year, and in any event no later than September 1 in the calendar year in which the District adopts such budget, a Certificate of the District stating that the District budget for such year provides for the Base Rental Payments and Additional Payments due under the Facilities Sublease in such year. The covenants on the part of the District in the Facilities Sublease contained will be deemed to be and will be construed to be duties imposed by law and it will be

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the duty of each and every public official of the District to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the District to carry out and perform its covenants and agreements in the Facilities Sublease.

Rental Abatement

Except to the extent of (a) amounts held by the Trustee in the Base Rental Payment Fund or in the Certificate Reserve Fund, (b) amounts received in respect of use and occupancy insurance, and (c) amounts, if any, otherwise legally available to the Trustee for payments in respect of the Certificates, during any period in which, by reason of material damage, destruction, title defect or condemnation, there is substantial interference with the use and possession by the District of any portion of the Facility, rental payments due under the Facilities Sublease with respect to the Facility will be abated in the proportion which the initial cost of that portion of the Facility rendered unusable bears to the initial cost of the whole of the Facility. The District and the Corporation will calculate such abatement and will provide the Trustee and the Insurer with a certificate setting forth such calculation and the basis therefor. In the event the District will assign, transfer or sublease any or all of the Facility or other rights under the Facilities Sublease, as permitted by the Facilities Sublease, for purposes of determining the annual fair rental value available to pay Base Rental Payments and Additional Rental, annual fair rental value of the Facility will first be allocated to the Facilities Sublease. Any abatement of rental payments pursuant to the Facilities Sublease will not be considered an event of default as defined in Article VI of the Facilities Sublease. The District waives the benefits of Civil Code Sections 1932(2) and 1933(4) and any and all other rights to terminate the Facilities Sublease by virtue of any such interference and the Facilities Sublease will continue in full force and effect. Such abatement will continue for the period commencing with the date of such damage, destruction, title defect or condemnation and ending with the substantial completion of the work of repair or replacement of the portions of the Facility so damaged, destroyed, defective or condemned.

In the event that rental is abated, in whole or in part, pursuant to the Facilities Sublease due to damage, destruction, title defect or condemnation of any part of the Facility and the District is unable to repair, replace or rebuild the Facility from the proceeds of insurance, if any, the District agrees to apply for any appropriate state and/or federal disaster relief in order to obtain funds to repair, replace or rebuild the Facility.

Deposit of Proceeds of Certificates

The parties to the Facilities Sublease agree that the proceeds of the Certificates will be deposited or transferred as provided in the Trust Agreement.

Maintenance and Utilities

During the term of the Facilities Sublease, all maintenance and repair, both ordinary and extraordinary, of the Facility will be the responsibility of the District, which will at all times maintain or otherwise arrange for the maintenance of the Facility for the purposes intended, and the District is required to pay for or otherwise arrange for the payment of all utility services supplied to the Facility, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and is required to pay for or otherwise arrange for payment of the cost of the repair and replacement of the Facility resulting from ordinary wear and tear or want of care on the part of the District or any assignee or sublessee of the Facilities Sublease or any other cause and is required to pay for or otherwise arrange for the payment of all insurance policies required to be maintained with respect to the Facility. In exchange for the rental in the Facilities Sublease provided, the Corporation agrees only to provide the Facility to the District as in the Facilities Sublease provided, and upon assignment to the Trustee, will have no further duty with respect thereto.

Changes to the Facility

Subject the Facilities Sublease, the District will, at its own expense, have the right to make additions, modifications and improvements to the Facility. All such additions, modifications and improvements will thereafter comprise part of the Facility and be subject to the provisions of the Facilities Sublease. Such additions, modifications and improvements will not in any way damage the Facility or cause it to be used for purposes other

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than those authorized under the provisions of state and federal law; and the Facility, upon completion of any additions, modifications and improvements made pursuant to the Facilities Sublease, will be of a value which is at least equal to the value of the Facility immediately prior to the making of such additions, modifications and improvements.

Installation of District’s Equipment

The District and any sublessee may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Facility. All such items will remain the sole property of such party, in which neither the Corporation nor the Trustee will have any interest, and may be modified or removed by such party at any time provided that such party will repair and restore any and all damage to the Facility resulting from the installation, modification or removal of any such items. Nothing in the Facilities Sublease will prevent the District from purchasing items to be installed pursuant to the Facilities Sublease under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement as security for the unpaid portion of the purchase price of the Facilities Sublease, provided that no such lien or security interest will attach to any part of the Facility.

Fire and Extended Coverage and Earthquake Insurance

The District will procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facilities Sublease insurance against loss or damage to any structures constituting any part of the Facility by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance, sprinkler system leakage insurance, and earthquake insurance (but as to such earthquake insurance only if such insurance is available at reasonable cost on the open market from reputable insurance companies, and further except that the District need not obtain earthquake insurance on any portion of the Facility the design and construction of which comply with the provisions of the Field Act). Said extended coverage insurance will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance will be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Facility, excluding the cost of excavations, of grading and filling, and of the land (except that such earthquake insurance may be subject to a deductible clause of not to exceed ten per cent of said replacement cost for any one loss and except that such other insurance may be subject to deductible clauses for any one loss of not to exceed $100,000), or, in the alternative, will be in an amount and in a form sufficient (together with moneys in the Certificate Reserve Fund established pursuant to the Trust Agreement), in the event of total or partial loss, to enable all Certificates then Outstanding to be prepaid.

In the event of any damage to or destruction of any part of the Facility, caused by the perils covered by such insurance, if in the judgment of the District the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Facility, the Trustee, except as in the provided in the Facilities Sublease, is required to cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facility, and the Trustee will hold said proceeds separate and apart from all other funds, in a special fund to be designated the “Insurance and Condemnation Fund,” to the end that such proceeds will be applied to the repair, reconstruction or replacement of the Facility to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee will permit withdrawals of said proceeds from time to time upon receiving the Written Requisition of the District, stating that the District has expended moneys or incurred liabilities in an amount equal to the amount in the Facilities Sublease requested to be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the items for which such moneys were expended, or such liabilities were incurred, and containing the additional information, if any, required to be included in a Written Requisition of the District. Any balance of said proceeds not required for such repair, reconstruction or replacement will be treated by the Trustee as Base Rental Payments and applied in the manner provided by the Trust Agreement. Alternatively, the District, at its option, with the written consent of the Trustee, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to prepay the amount of Outstanding Certificates attributable to the portion of the Facility so destroyed or damaged (determined by reference to the proportion which the initial cost of such portion of the Facility bears to the initial cost of the Facility), may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facility and thereupon is required

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to cause said proceeds to be used for the prepayment of Outstanding Certificates pursuant to the provisions of the Trust Agreement.

The District is required to promptly apply for federal disaster aid or State of California disaster aid in the event that any portion of the Facility is damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid will be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facility, or, at the option of the District, to prepay Outstanding Certificates if such use of such disaster aid is permitted.

As an alternative to providing the insurance required by the first paragraph of this section, or any portion of the Facilities Sublease, the District may, with the prior written consent of the Insurer, provide a self-insurance method or plan of protection, if and to the extent such self-insurance method or plan of protection will afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the District. Before such other method or plan may be provided by the District, and annually thereafter so long as such method or plan is being provided to satisfy the requirements of the Facilities Sublease, there will be filed with the Trustee a certificate of an actuary, independent insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facilities Sublease and, when effective, would afford reasonable coverage for the risks required to be insured against. There will also be filed with the Trustee a Certificate of the District setting forth the details of such substitute method or plan. In the event of loss covered by any such self-insurance method, the liability of the District under the Facilities Sublease will be limited to the amounts in the self-insurance reserve fund or funds created under such method. The District agrees that it will not change or modify any self-insurance method in effect on the effective date of the Facilities Sublease to increase the amount of self-insurance being provided or to reduce the coverage of the self-insurance.

Liability Insurance

Except as in the provided in the Facilities Sublease, the District will procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facilities Sublease, standard comprehensive general liability insurance in protection of the Trustee and its members, directors, officers, agents and employees, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the operation of the Facility and the Project, with minimum liability limits of $1,000,000 for personal injury or death of each person, and replacement cost for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $1,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance carried by the District. Insurance must be provided by an insurer rated “A” or better by A.M. Best Company unless waived by the Insurer. All such insurance must name the District, the Corporation and the Trustee as insureds.

As an alternative to providing the insurance required by the first paragraph of this section, or any portion of the Facilities Sublease, the District may provide a self-insurance method or plan of protection, if such self-insurance method or plan of protection is acceptable to the Insurer (following criteria for self-insurance available from the Insurer on request), and if and to the extent such self-insurance method or plan of protection will afford reasonable protection to the Trustee, its members, directors, officers, agents and employees, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the District. Before such other method or plan may be provided by the District, and annually thereafter so long as such method or plan is being provided to satisfy the requirements of the Facilities Sublease, there will be filed with the Trustee a certificate of an actuary, independent insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facilities Sublease and, when effective, would afford reasonable protection to the Trustee, its members, directors, officers, agents and employees, against loss and damage from the hazards and risks covered thereby. There will also be filed with the Trustee a certificate of the District setting forth the details of such substitute method or plan. The District agrees that it will not change or modify any self-insurance method in effect on the effective date of the Facilities Sublease to increase the amount of self-insurance being provided or to reduce the coverage of the self-insurance.

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Rental Interruption or Use and Occupancy Insurance

The District will procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facilities Sublease, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facility as the result of any of the hazards covered by the insurance required by the Facilities Sublease, in an amount sufficient to pay the part of the total rent under the Facilities Sublease attributable to the portion of the Facility rendered unusable (determined by reference to the proportion which the construction cost of such portion bears to the construction cost of the Facility) for a period of at least 24 months, except that such insurance need be maintained as to the peril of earthquake only if such insurance is available at reasonable cost on the open market from reputable insurance companies, and further except that the District need not obtain such insurance as to the peril of earthquake on any portion of the Facility the design and construction of which comply with the provisions of the Field Act. Any proceeds of such insurance will be used by the Trustee to reimburse to the District any rental therefore paid by the District under the Facilities Sublease attributable to such portion of the Facility for a period of time during which the payment of rental under the Facilities Sublease is abated, and any proceeds of such insurance not so used will be applied as provided in Facilities Sublease (to the extent required for the Base Rental Payments and the payment of Additional Payments). The District will use its best efforts to provide sufficient construction funds and to make all required lease payments in excess of the amount of such insurance, if necessary, in order to ensure completion of the reconstruction, repair, or restoration of the Facility.

Title Insurance

Upon the execution and delivery of the Facilities Sublease, the District is required to cause to be procured and delivered to the Trustee an extended California Land Title Association (“CLTA”) Owner’s Policy or American Land Title Association (“ALTA”) Owner’s Policy title policy or policies that names the Corporation and the Trustee as additional insured, in an aggregate amount equal to the aggregate principal component of unpaid Base Rental Payments, subject only to Permitted Encumbrances, insuring the District and the Trustee, as assignee of the Corporation, as to the District’s leasehold estate in the Facility. So long as any of the Certificates will be Outstanding, any award made under the policy or policies of title insurance with respect to the Facility or any portion of the Facilities Sublease will be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in the Facilities Sublease. All encumbrances, endorsements and restrictions to the policy must be acceptable to the Insurer. The policy may not permit the title insurer (i) to purchase any Certificates in lieu of providing payment under the policy unless, upon purchase, such Certificates are canceled, or (ii) to settle claims with any person other than the Trustee, acting with the consent of the Insurer.

Insurance Proceeds; Form of Policies

All policies required under the article of the Facilities Sublease with respect to insurance are required to name the Trustee and the District as insured parties. All insurance required by of the Facilities Sublease will provide that all proceeds under the Facilities Sublease will be payable to the Trustee pursuant to a lender’s loss payable endorsement substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Association. The Trustee will receive all moneys which may become due and payable under any such policies and is required to apply the proceeds of such insurance as provided in the Facilities Sublease. All insurance required under the Facilities Sublease is required to be provided by a commercial insurer rated at least “A” by A.M. Best Company or in the two highest rating categories of Standard & Poor’s. All insurance required by the Facilities Sublease, all insurance policies will provide that the Trustee will be given 30 days’ notice of each expiration of the Facilities Sublease or any intended cancellation of the Facilities Sublease or reduction of the coverage provided thereby. The Trustee will not be responsible for the sufficiency of any insurance in the Facilities Sublease required and will be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the District. The District is required to pay when due the premiums for all insurance policies required by the Facilities Sublease, and is required to promptly furnish evidence of such payments to the Trustee.

The District will deliver to the Trustee in the month of July in each year, and within 30 days of any notice of expiration or cancellation required to be given pursuant to the Facilities Sublease, as to any expiring or canceled policy, a written certificate of an officer of the District stating that such insurance satisfies the requirements of the

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Facilities Sublease, setting forth the insurance policies then in force pursuant to the Trust Agreement, the names of the insurers which have issued the policies, the amounts of the Facilities Sublease and the property and risks covered thereby, and, if any self-insurance program is being provided, the annual report of an actuary, independent insurance consultant or other qualified person containing the information required for such self-insurance program described in the Facilities Sublease. Delivery to the Trustee of the certificate under the provisions of the Facilities Sublease will not confer responsibility upon the Trustee as to the sufficiency of coverage or amounts of such policies and the Trustee may conclusively rely upon the certification of the District with regard to the satisfaction of the requirements of the Facilities Sublease. If so requested in writing by the Trustee, the District will also deliver to the Trustee certificates or duplicate originals or certified copies of each insurance policy described in such request.

Defaults and Remedies.

If the District fails to pay any rental payable under the Facilities Sublease when the same becomes due and payable, time being expressly declared to be of the essence of the Facilities Sublease, or the District fails to keep, observe or perform any other term, covenant or condition contained in the Facilities Sublease, in the Trust Agreement or in the Facilities Lease to be kept or performed by the District for a period of 30 days after notice of the same has been given to the District by the Trustee or for such additional time as is reasonably required, in the sole discretion of the Trustee (with the prior written consent of the Insurer), to correct the same, or upon the happening of the events specified in the Facilities Sublease (any such case above being an “Event of Default”), the District will be deemed to be in default under the Facilities Sublease and it will be lawful for the Trustee, as assignee of the Corporation, to exercise any and all remedies available pursuant to law or granted pursuant to the Facilities Sublease. Upon any such default, the Trustee, in addition to all other rights and remedies it may have at law and subject to its rights and protections under the Trust Agreement, will, acting at the direction of the Insurer upon being indemnified to its satisfaction, have the option to do any of the following:

(1) To terminate the Facilities Sublease in the manner in the provided in the Facilities Sublease on account of default by the District, notwithstanding any re-entry or re-letting of the Facility as provided in the Facilities Sublease, and to re-enter the Facility and remove all persons in possession of the Facilities Sublease and all personal property whatsoever situated upon the Facility and place such personal property in storage in any warehouse or other suitable place located within the County of Solano, California. In the event of such termination, the District agrees to surrender immediately possession of the Facility, without let or hindrance, and to pay the Trustee all damages recoverable at law that the Trustee may incur by reason of default by the District, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Facility and removal and storage of such property by the Trustee or its duly authorized agents in accordance with the provisions in the Facilities Sublease contained. Neither notice to pay rent or to deliver up possession of the Facility given pursuant to law nor any entry or re-entry by the Trustee nor any proceeding in unlawful detainer, or otherwise, brought by the Trustee for the purpose of effecting such re-entry or obtaining possession of the Facility nor the appointment of a receiver upon initiative of the Trustee to protect the Trustee’s interest under the Facilities Sublease, will of itself operate to terminate the Facilities Sublease, and no termination of the Facilities Sublease on account of default by the District will be or become effective by operation of law or acts of the parties to the Facilities Sublease, or otherwise, unless and until the Trustee will have given written notice to the District of the election on the part of the Trustee to terminate the Facilities Sublease. The District covenants and agrees that no surrender of the Facility or of the remainder of the term of the Facilities Sublease or any termination of the Facilities Sublease will be valid in any manner or for any purpose whatsoever unless stated or accepted by the Trustee by such written notice.

(2) Without terminating the Facilities Sublease, (i) to collect each installment of rent as it becomes due and enforce any other terms or provision of the Facilities Sublease to be kept or performed by the District, regardless of whether or not the District has abandoned the Facility, or (ii) to exercise any and all rights of re-entry upon the Facility. In the event the Trustee does not elect to terminate the Facilities Sublease in the manner provided for in subparagraph (1) of the Facilities Sublease, the District will remain liable and agrees to keep or perform all covenants and conditions in the Facilities Sublease contained to be kept or performed by the District and, if the Facility is not re-let, to pay the full amount of the rent to the end of the term of the Facilities Sublease or, in the event that the Facility is re-let, to pay any deficiency in rent that results therefrom; and further agrees to pay said rent and/or rent deficiency punctually at the same time and in the same manner as provided in the Facilities Sublease for the payment of rent under the Facilities Sublease (without acceleration), notwithstanding the fact that the Trustee

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may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental in the Facilities Sublease specified, and notwithstanding any entry or re-entry by the Trustee or suit in unlawful detainer, or otherwise, brought by the Trustee for the purpose of effecting such entry or re-entry or obtaining possession of the Facility. Should the Trustee elect to enter or re-enter as in the Facilities Sublease provided, the District irrevocably appoints the Trustee as the agent and attorney-in-fact of the District to re-let the Facility, or any part of the Facilities Sublease, from time to time, either in the Trustee’s name or otherwise, upon such terms and conditions and for such use and period as the Trustee may deem advisable, and to remove all persons in possession of the Facilities Sublease and all personal property whatsoever situated upon the Facility and to place such personal property in storage in any warehouse or other suitable place located in the County of Solano, California, for the account of and at the expense of the District, and the District exempts and agrees to indemnify and save harmless the Corporation and the Trustee from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re-letting of the Facility and removal and storage of such property by the Trustee or its duly authorized agents in accordance with the provisions in the Facilities Sublease contained. The District agrees that the terms of the Facilities Sublease constitute full and sufficient notice of the right of the Trustee to re-let the Facility and to do all other acts to maintain or preserve the Facility as the Trustee deems necessary or desirable in the event of such re-entry without effecting a surrender of the Facilities Sublease, and further agrees that no acts of the Trustee in effecting such re-letting will constitute a surrender or termination of the Facilities Sublease irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the District, the right to terminate the Facilities Sublease will vest in the Trustee to be effected in the sole and exclusive manner provided for in sub-paragraph (1) of the Facilities Sublease. The District further waives the right to any rental obtained by the Trustee in excess of the rental in the Facilities Sublease specified and conveys and releases such excess to the Trustee for deposit in the Base Rental Payment Fund to be held in trust for the benefit of the Owners. The District further agrees to pay the Trustee the cost of any alterations or additions to the Facility necessary to place the Facility in condition for re-letting immediately upon notice to the District of the completion and installation of such additions or alterations.

The District waives any and all claims for damages caused or which may be caused by the Trustee in re-entering and taking possession of the Facility as provided in the Facilities Sublease and all claims for damages that may result from the destruction of or injury to the Facility and all claims for damages to or loss of any property belonging to the District, or any other person, that may be in or upon the Facility.

(b) If (1) the District’s interest in the Facilities Sublease or any part of the Facilities Sublease be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Insurer, as in the provided in the Facilities Sublease for, or (2) the District or any assignee will file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, win the Facilities Sublease or whereby the District asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the District’s debts or obligations, or offers to the District’s creditors to effect a composition or extension of time to pay the District’s debts, or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the District’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the District, or if a receiver of the business or of the property or assets of the District will be appointed by any court, except a receiver appointed at the instance or request of the Trustee, or if the District will make a general or any assignment for the benefit of the District’s creditors, or if (3) the District will abandon or vacate the Facility, then the District will be deemed to be in default under the Facilities Sublease.

(c) The Corporation will in no event be in default in the performance of any of its obligations under the Facilities Sublease or imposed by any statute or rule of law unless and until the Corporation will have failed to perform such obligations within 30 days or such additional time as is reasonably required to correct any such default after notice by the District to the Corporation properly specifying win the Facilities Sublease the Corporation has failed to perform any such obligation. In the event of default by the Corporation, the District will be entitled to pursue any remedy provided by law.

(d) In addition to the other remedies set forth in the Facilities Sublease, upon the occurrence of an event of default as described in the Facilities Sublease, the Trustee will be entitled to proceed to protect and enforce the rights vested in the Trustee as assignee of the Corporation by the Facilities Sublease or by law. The provisions

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of the Facilities Sublease and the duties of the District and of its trustees, officers or employees will be enforceable by the Trustee by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Trustee will have the right to bring the following actions:

(i) Accounting. By action or suit in equity to require the District and its trustees, officers and employees and its assigns to account as the trustee of an express trust.

(ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Trustee.

(iii) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Trustee rights against the District (and its board, officers and employees) and to compel the District to perform and carry out its duties and obligations under the law and its covenants and agreements with the District as provided in the Facilities Sublease.

Each and all of the remedies given to the Trustee, as assignee of the Corporation, under the Facilities Sublease or by any law now or enacted subsequent to the delivery of the Certificates are cumulative and the single or partial exercise of any right, power or privilege under the Facilities Sublease will not impair the right of the Trustee to other or further exercise of the Facilities Sublease or the exercise of any or all other rights, powers or privileges. The term “re-let” or “re-letting” as used in the Facilities Sublease will include, but not be limited to, re-letting by means of the operation by the Trustee of the Facility. If any statute or rule of law validly limits the remedies given to the Trustee under the Facilities Sublease, the Trustee, acting at the direction of the Insurer and upon being indemnified to its satisfaction, nevertheless will be entitled to whatever remedies are allowable under any statute or rule of law. The Insurer will have the right to control all remedies for default under the Facilities Sublease.

The District agrees to pay for attorney’s fees and expenses incurred by the Trustee in attempting to enforce any of the remedies available to the Trustee under the Facilities Sublease, whether or not a lawsuit has been filed and whether or not any lawsuit culminates in a judgment.

Waiver

Failure of the Trustee to take advantage of any default on the part of the District will not be, or be construed as, a waiver of the Facilities Sublease, nor will any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Trustee to insist upon performance by the District of any term, covenant or condition of the Facilities Sublease, or to exercise any rights given the Trustee on account of such default. A waiver of a particular default will not be deemed to be a waiver of the same or any subsequent default. The acceptance of rent under the Facilities Sublease will not be, or be construed to be, a waiver of any term, covenant or condition of the Facilities Sublease.

Eminent Domain

If the whole of the Facility or so much of the Facilities Sublease as to render the remainder unusable for the purposes for which it was used by the District will be taken under the power of eminent domain, the term of the Facilities Sublease will cease as of the day that possession will be so taken. If less than the whole of the Facility will be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the District at the time of such taking, then the Facilities Sublease will continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there will be a partial abatement of the rental due under the Facilities Sublease in an amount equivalent to the amount by which the annual payments of principal and interest represented by Certificates then Outstanding will be reduced by the application of the award in eminent domain to the prepayment of Outstanding Certificates. So long as any of the Certificates will be Outstanding, any award made in eminent domain proceedings for taking the Facility or any portion of the Facilities Sublease will be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in the Facilities Sublease. Any such award made after all of the Base Rental Payments and Additional Payments have been fully paid, or provision therefor made, will be paid to the District.

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Prepayment

The District will prepay on any date from insurance and eminent domain proceeds not applied for the replacement, repair or restoration of the damaged, destroyed, taken or affected portion of the Facility, to the extent provided in the Facilities Sublease, all of the principal components of Base Rental Payments then unpaid or any part of the Facilities Sublease (in an integral multiple of $5,000), so that the aggregate annual amounts of principal components of Base Rental Payments which will be payable after such prepayment date will be as nearly proportional as practicable to the aggregate annual amounts of principal components of Base Rental Payments unpaid prior to the prepayment date, at a prepayment amount equal to the sum of the principal component prepaid plus accrued interest thereon to the date of prepayment, plus any applicable premium.

(e) The District may prepay, from any source of available funds, all or any portion of Base Rental Payments by depositing with the Trustee moneys or securities as provided in Article X of the Trust Agreement sufficient to make such Base Rental Payments when due; provided that the District furnishes the Trustee with an Opinion of Counsel that such deposit will not cause interest evidenced by and payable with respect to the Certificates to be includable in gross income for federal income tax purposes and has paid all amounts owed to the Insurer. The District agrees that if following such prepayment the Facility is damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and will not be entitled to any reimbursement of such Base Rental Payments.

(f) Before making any prepayment pursuant to the Trust Agreement to the extent provided therein, the District will, within five days following the event creating such right or obligation to prepay, give written notice to the Corporation and the Trustee describing such event and specifying the date on which the prepayment will be made, which date will be not less than 45 days from the date such notice is given.

Option to Purchase; Sale of Personal Property

The District will have the option to purchase the Trustee’s interest, as assignee of the Corporation, in any part of the Facility upon payment of an option price consisting of moneys or securities of the category specified in clause (1) of the definition of the term Permitted Investments contained in the Trust Agreement (not callable by the issuer of the Facilities Sublease prior to maturity) in an amount sufficient (together with the increment, earnings and interest on such securities) to provide funds to pay the aggregate amount for the entire remaining term of the Facilities Sublease of the part of the total rent under the Facilities Sublease attributable to such part of the Facility (determined by reference to the proportion which the initial cost of such part of the Facility bears to the initial cost of all of the Facility) and payment of all amounts owed to the Insurer. Any such payment will be made to the Trustee and will be treated as Base Rental Payments and will be applied by the Trustee to pay the interest and principal components of the Certificates and to prepay Certificates if such Certificates are subject to prepayment pursuant to the terms of the Trust Agreement. Upon the making of such payment to the Trustee: (a) the interest and principal components of each Base Rental Payment installment thereafter payable under the Facilities Sublease will be reduced by the amount of the Facilities Sublease attributable to such part of the Facility and thereofore paid pursuant to the Facilities Sublease; (b) the section of the Facilities Sublease with respect to rental abatement will not thereafter be applicable to such part of the Facility; (c) the fire and extended coverage insurance and rental interruption or use and occupancy insurance required by the Facilities Sublease need not be maintained as to such part of the Facility; and (d) title to such part of the Facility will vest in the District, and the term of the Facilities Sublease and of the Facilities Lease will end as to such part of the Facility.

The District may sell or exchange any personal property which may at any time constitute a part of the Facility, and to release said personal property from the Facilities Sublease, if: (a) in the opinion of the District the property so sold or exchanged is no longer required or useful in connection with the operation of the Facility; (b) as certified by the District, the consideration to be received from the property is of a value substantially equal to the value of the property to be released; and (c) the Trustee will have been furnished a certificate of an independent engineer or other qualified independent professional consultant certifying the value of the Facilities Sublease and further certifying that such property is no longer required or useful in connection with the operation of the Facility. In the event of any such sale, the full amount of the money or consideration received for the personal property so sold and released will be paid to the Trustee. Any money so paid to the Trustee may, so long as the District is not in

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default under any of the provisions of the Facilities Sublease, be used upon the Written Request of the District to purchase personal property, which property will become a part of the Facility leased under the Facilities Sublease.

When there will have been deposited with the Trustee at or prior to the due dates of the Base Rental Payments or date when the District may exercise its option to purchase the Facility or any portion or item of the Facilities Sublease, in trust for the benefit of the Owners of the Certificates and irrevocably appropriated and set aside to the payment of the Base Rental Payments or option price, sufficient moneys and Permitted Investments described in subsection (1) of the definition of the Facilities Sublease in the Trust Agreement, not redeemable prior to maturity, the principal of and interest on which when due will provide money sufficient (in the opinion of an independent certified public accountant) to pay all principal, premium, if any, and interest of the Base Rental Payments represented by the Certificates to the due date of the Base Rental Payments or date when the District may exercise its option to purchase the Facility, as the case may be; and the District has paid the fees and expenses and payment of any amounts owing to the Insurer and the Trustee, then the right, title and interest of the Trustee in the Facilities Sublease and the obligations of the District under the Facilities Sublease will cease, terminate, become void and be completely discharged and satisfied and the Trustee’s interest in and title to the Facility or applicable portion or item of the Facilities Sublease will be transferred and conveyed to the District. In such event, the Trustee is required to cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the Trustee and evidence such discharge and satisfaction, and the Trustee is required to pay over to the District as an overpayment of Base Rental Payments all such moneys or Permitted Investments held by it pursuant to the Facilities Sublease other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Base Rental Payments or the option price and the fees and expenses of the Trustee, which moneys and Permitted Investments will continue to be held by the Trustee in trust for the payment of Base Rental Payments or the option price and the fees and expenses of the Trustee, and will be applied by the Trustee to the payment of the Base Rental Payments or the option price and the fees and expenses of the Trustee.

Right of Entry

The Corporation and its assignees will have the right to enter upon and to examine and inspect the Facility during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the Corporation’s or the District’s rights or obligations under the Facilities Sublease, and (c) for all other lawful purposes.

Liens

In the event the District at any time during the term of the Facilities Sublease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon or attached to the Facility, the District is required to pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the District in, upon or relating to the Facility and will keep the Facility free of any and all mechanics’ or materialmen’s liens or other liens against any portion of the Facility or the Corporation’s interest in the Facilities Sublease. In the event any such lien attaches to or is filed against the Facility or the Corporation’s interest in the Facilities Sublease, the District is required to cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the District desires to contest any such lien it may do so in good faith. If any such lien is reduced to final judgment and such judgment or such process as may be issued for the enforcement of the Facilities Sublease is not promptly stayed, or if so stayed and said stay thereafter expires, the District is required to forthwith pay and discharge said judgment. The District agrees to and is required to, to the maximum extent permitted by law, indemnify and hold the Corporation and the Trustee and their respective members, officers, directors, agents, successors and assigns, harmless from and against, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorney’s fees and expenses) as a result of any such lien or claim of lien against the Facility or the Corporation’s interest in the Facilities Sublease.

Quiet Enjoyment

The parties to the Facilities Sublease mutually covenant that the District, by keeping and performing the covenants and agreements in the Facilities Sublease contained and not in default under the Facilities Sublease, will

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at all times during the term of the Facilities Sublease peaceably and quietly have, hold and enjoy the Facility, without suit, trouble or hindrance from the Corporation.

Corporation Not Liable

The Corporation and its members, directors, officers, agents and employees will not be liable to the District or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facility or the Project. The District, to the extent permitted by law, is required to indemnify and hold the Corporation and the Trustee and their respective members, directors, officers, agents and employees, and successors and assigns, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the construction or operation of the Facility or the Project, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facility or the Project regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity.

Assignment and Subleasing

Except as provided in the Assignment Agreement, neither the Facilities Sublease nor any interest of the District under the Facilities Sublease will be mortgaged, pledged, assigned, sublet or transferred by the District by voluntary act or by operation of law or otherwise, except with the prior written consent of the Corporation and the Insurer, which, in the case of subletting, will not be unreasonably withheld; provided such subletting will not affect the tax-exempt status of the interest components of the Base Rental Payments payable by the District under the Facilities Sublease. No such mortgage, pledge, assignment, sublease or transfer will in any event affect or reduce the obligation of the District to make the Base Rental Payments and Additional Payments required under the Facilities Sublease.

Leasehold Interest in Facility

Except as permitted by the Facilities Sublease, during the term of the Facilities Sublease, the Corporation will pursuant to the Facilities Lease hold a leasehold interest in the Facility and any and all additions which comprise fixtures, repairs, replacements or modifications of the Facilities Sublease, except for those fixtures, repairs, replacements or modifications which are added thereto by the District and which may be removed without damaging the Facility and except for any items added to the Facility by the District pursuant to the Facilities Sublease. This provision will not operate to the benefit of the provider of any policy of rental interruption insurance pursuant to the Facilities Sublease.

Upon the termination or expiration of the Facilities Sublease (other than as provided in the Facilities Sublease), title to the Facility will vest in the District pursuant to the Facilities Lease. Upon any such termination or expiration, the Corporation will execute such conveyances, deeds and other documents as may be necessary to effect such vesting of record.

No Condemnation

The District covenants and agrees, to the extent it may lawfully do so, that so long as any of the Certificates remain outstanding and unpaid, the District will not exercise the power of condemnation with respect to the Facility. The District further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the District should fail or refuse to abide by such covenant and condemns the Facility, the appraised value of the Facility will not be less than the greater of (i) if such Certificates are then subject to prepayment, the principal and interest components of the Certificates outstanding through the date of their prepayment, or (ii) if such Certificates are not then subject to prepayment, the amount necessary to defease such Certificates to the first available prepayment date in accordance with the Trust Agreement.

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Tax Covenants

The District will not take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of the interest payable on the Certificates under Section 103 of the Internal Revenue Code of 1986, and will comply with the requirements of the Tax Certificate of the District with respect to the Certificates (as defined in the Trust Agreement), and further that such representation and covenant will survive payment in full or defeasance of the Certificates.

If at any time the District is of the opinion that for purposes of the Facilities Sublease it is necessary to restrict or limit the yield on or change in any way the investment of any moneys held by the Trustee or the District under the Facilities Sublease or the Trust Agreement, the District will so instruct the Trustee or the appropriate officials of the District in writing, and the Trustee or the appropriate officials of the District, as the case may be, will take such actions as may be necessary in accordance with such instructions.

In furtherance of the covenants of the District set forth above, the District will comply with the Tax Certificate and is required to cause the Trustee to comply with the Tax Certificate. The Trustee may conclusively rely on any such written instructions, and the District agrees to hold harmless the Trustee for any loss, claim, damage, liability or expense incurred by the Trustee for any actions taken thereby in accordance with such instructions.

The District will at all times do and perform all acts and things permitted by law which are necessary or desirable in order to ensure that the interest component of the Base Rental Payments will be excluded from gross income for federal income tax purposes and will take no action that would result in such interest not being excluded from gross income for federal income tax purposes.

Corporation’s Purpose

The Corporation covenants that prior to the discharge of the Facilities Sublease, it will not engage in any activities inconsistent with the purposes for which the Corporation is organized, as set forth in the Corporation’s Articles of Incorporation, as filed in the office of the Secretary of State of the State of California and in effect on the date of the Facilities Sublease.

Purpose of Lease

The District covenants that during the term of the Facilities Sublease, except as in the provided in the Facilities Sublease, (a) it will use, or cause the use of, the Facility for public purposes and for the purposes for which the Facility is customarily used, (b) it will not vacate or abandon the Facility or any part of the Facilities Sublease, and (c) it will not make any use of the Facility which would jeopardize in any way the insurance coverage required to be maintained pursuant to Article V of the Facilities Sublease.

Environmental Matters

The District will comply with Applicable Environmental Laws and will not use, store, generate, treat, transport or dispose of any Hazardous Substance on, or in a manner that would cause it to later flow, migrate, leak, leach or otherwise come to rest on or in the Facility (including, for all purposes of the Facilities Sublease, the Facility after any substitution pursuant to the Facilities Sublease).

The District will transmit copies of all records concerning the contact with any local, state or federal agency concerning any violation of any Applicable Environmental Laws involving the Facility, and all notices, orders or statements received from any governmental entity concerning violations of Applicable Environmental Laws with respect to the Facility and any operations conducted thereon or any conditions existing thereon to the Trustee. The District is required to notify the Corporation and the Trustee in writing immediately of any release, discharge, spill, or deposit of any Hazardous Substance that has occurred or is occurring which in any way affects or threatens to affect the Facility or the people, structures, equipment, or other property thereon. Upon the occurrence of any release, discharge, spill or deposit of any Hazardous Substance, the District is required to promptly

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commence and perform or cause to be commenced and performed, without cost to the Corporation or the Trustee, all investigations, studies, sampling and testing and all remedial, removal and other actions necessary to clean up and remove all Hazardous Substances so released in compliance with Applicable Environmental Laws.

The District will permit the Corporation and the Trustee, and their agents or any experts designated by the Trustee to have full access to the Facility during reasonable business hours for purposes of their independent investigation of compliance with Applicable Environmental Laws.

Irrespective of whether any representation or warranty contained in the Facilities Sublease is not true or correct, the District will defend, indemnify and hold harmless to the fullest extent permitted by law, the Corporation, the Trustee and the Certificate Owners and each of its and their employees, agents, officers, directors, trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys’ fees (including, without limitation, attorneys’ fees incurred to enforce the indemnification contained in this paragraph), consultants’ fees, investigation and laboratory fees, liabilities, settlements (five Business Days’ prior notice of which the Corporation or the Trustee, as appropriate, will have delivered to the District), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence, disposal, release, threat of release, removal, discharge, storage or transportation of any Hazardous Substances on, from or beneath the Facility, (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substances, (iii) any lawsuit brought or threatened, settlement reached (five Business Days’ prior notice of which the Corporation or the Trustee, as appropriate, will have delivered to the District), or governmental order relating to Hazardous Substances on, from or beneath any of the Facility, (iv) any violation of Applicable Environmental Laws or the Facilities Sublease to the extent provided therein by it or any of its agents, tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v) the imposition of any governmental lien for the recovery of environmental cleanup or removal costs. To the extent that the District is strictly liable under any Applicable Environmental Laws, its obligation to the Corporation, the Trustee and the Certificate Owners and the other indemnitees under the foregoing indemnification will likewise be without regard to fault on its part with respect to the violation of any Applicable Environmental Laws which results in liability to any indemnitee. Its obligations and liabilities under the Facilities Sublease to the extent provided therein will survive any foreclosure of the security interest in the Facility or the delivery of any instrument in lieu of foreclosure, and the satisfaction of all Certificates.

Disclaimer of Warranties

THE CORPORATION MAKES NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR FITNESS FOR USE OF THE FACILITY, OR WARRANTY WITH RESPECT THERETO. THE DISTRICT ACKNOWLEDGES THAT THE CORPORATION IS NOT A MANUFACTURER OF THE FACILITY OR A DEALER THEREIN, THAT THE DISTRICT LEASES THE FACILITY AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE DISTRICT. In no event will the Corporation or Trustee be liable for any incidental, indirect, special or consequential damage in connection with or arising out of the Facilities Sublease or the existence, furnishing, functioning or the District’s use of any item or products or services provided for in the Facilities Sublease.

Vendor’s Warranties

The Corporation irrevocably appoints the District its agent and attorney-in-fact during the term of the Facilities Sublease, so long as the District will not be in default under the Facilities Sublease, to assert from time to time whatever claims and rights, including warranties of the Facility, which the Corporation may have against the manufacturers, vendors and contractors of the Facility. The District’s sole remedy for the breach of such warranty, indemnification or representation will be against the manufacturer or vendor or contractor of the Facility, and not against the Corporation, nor will such matter have any effect whatsoever on the rights and obligations of the Corporation with respect to the Facilities Sublease, including the right to receive full and timely payments under the Facilities Sublease. The District expressly acknowledges that the Corporation makes, and has made, no representation or warranties whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor.

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Use of the Facility

The District will not install, use, operate or maintain the Facility improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by the Facilities Sublease. The District will provide all permits and licenses, if any, necessary for the installation and operation of the Facility. In addition, the District agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Facility) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Facility; provided, however, that the District may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Corporation, adversely affect the estate of the Corporation in and to the Facility or its interest or rights under the Facilities Sublease.

Net-Net-Net Lease

The Facilities Sublease will be deemed and construed to be a “triple net” or “net-net-net lease” and the District agrees that the rentals provided for in the Facilities Sublease will be an absolute net return to the Corporation, free and clear of any expenses, charges or set-offs whatsoever.

Taxes

The District is required to pay or cause to be paid all taxes and assessments of any type or nature charged to the Corporation or affecting the Facility or the respective interests or estates in the Facilities Sublease; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the District will be obligated to pay only such installments as are required to be paid during the term of the Facilities Sublease as and when the same become due.

The District will also pay directly such amounts, if any, in each year as will be required by the Corporation for the payment of all license and registration fees and all taxes (including, without limitation, income, excise, license, franchise, capital stock, recording, sales, use, value-added, property, occupational, excess profits and stamp taxes), levies, imposts, duties, charges, withholdings, assessments and governmental charges of any nature whatsoever, together with any additions to tax, penalties, fines or interest thereon, including, without limitation, penalties, fines or interest arising out of any delay or failure by the District to pay any of the foregoing or failure to file or furnish to the Corporation or the Trustee for filing in a timely manner any returns, levied or imposed against the Corporation or the Facility as provided in the Facilities Sublease, the rentals and other payments required under the Facilities Sublease or any parts of the Facilities Sublease or interests of the District or the Corporation or the Trustee in the Facilities Sublease by any governmental authority.

The District may, at the District’s expense and in its name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Corporation or the Trustee is required to notify the District that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Corporation in the Facility will be materially endangered or the Facility, or any part of the Facilities Sublease, will be subject to loss or forfeiture, in which event the District is required to promptly pay such taxes, assessments or charges or provide the Corporation with full security against any loss which may result from nonpayment, in form satisfactory to the Corporation and the Trustee.

Amendment or Termination

The Corporation and the District may, with the prior written consent of the Insurer, at any time agree to the amendment, supplementation, modification or termination of the Facilities Sublease; provided, however, that the Corporation and the District agree and recognize that the Facilities Sublease is entered into in accordance with the terms of the Trust Agreement, and accordingly, that any such amendment or termination will only be made or effected in accordance with and subject to the terms of the Trust Agreement.

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Rights of Insurer

As long as the Insurance Policy is in effect and the Insurer is not in default in respect of its payment obligations thereunder, the Insurer will be deemed to be the sole and exclusive Owner of the Outstanding Certificates for purposes of all approvals, consents, waivers, institution of any action, and the direction of all remedies, including but not limited to approval of or consent to any amendment or supplement to the Facilities Sublease and the Facilities Lease which requires the consent or approval of the Owners of a majority of the principal evidenced by the Certificates then Outstanding; provided, however, that the Insurer will not be deemed to be the sole and exclusive Owner of the Outstanding Certificates with respect to any amendment or supplement to the Facilities Sublease or the Facilities Lease which seeks to amend or supplement the Facilities Sublease or the Facilities Lease for the purposes set forth in the Facilities Sublease, and, provided, further, that the Insurer will not be deemed the sole and exclusive Owner of the Outstanding Certificates for such purposes, and will not have the right to direct or consent to District, Corporation, Trustee or Owner action, during any period if:

(a) the Insurer fails to make any payment under the Insurance Policy when due and such failure will continue for three Business Days;

(b) any material provision of the Insurance Policy is held to be invalid by a final, non-appealable order of a court of competent jurisdiction, or the validity or enforceability thereof will be contested in writing by the Insurer; or

(c) a proceeding will have been instituted in a court having jurisdiction in the premises seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution in respect of the Insurer under Article 16 of the Insurance Law of the State of New York or any successor provision thereto and such proceeding is not terminated for a period of 90 consecutive days or such court enters an order granting the relief sought in such proceeding.

Third-Party Beneficiary

The Insurer is explicitly recognized as a third-party beneficiary under the Facilities Sublease and may enforce any right, remedy or claim conferred upon, given or granted under the Facilities Sublease, except during any period that an event described in the Facilities Sublease has occurred and is continuing.

CERTAIN PROVISIONS OF THE ASSIGNMENT AGREEMENT

Pursuant to the Assignment Agreement between the Corporation and the Trustee, dated as of October 1, 2016, the Corporation for good and valuable consideration, the receipt of which is acknowledged, does unconditionally grant, transfer and assign to the Trustee for the benefit of the owners of the Certificates without recourse (i) all its rights to receive the Base Rental Payments and Additional Payments scheduled to be paid by the District under and pursuant to the Facilities Sublease, (ii) all rents, profits, products and proceeds from the Facility to which the Corporation has any right or claim whatsoever under the Facilities Sublease, (iii) the right to take all actions (except for its rights to give consents and approvals under) and give all consents under the Facilities Sublease, (iv) any right of access more particularly described in the Facilities Sublease, (v) all other right, title, and interest (but none of its obligations) of the Corporation in the Facilities Sublease, (vi) all right, title, and interest (but none of its obligations) of the Corporation in the Facilities Lease, and (vii) all right, title, and interest of the Corporation in the funds and accounts (and the money and other property held therein) established pursuant to the Trust Agreement or the Facilities Sublease.

The Insurer is a third party beneficiary of the Assignment Agreement.

CERTAIN PROVISIONS OF THE TRUST AGREEMENT

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Pledge of Base Rental Payments; Base Rental Payment Fund

The Base Rental Payments are irrevocably pledged by the District to and will be used for the punctual payment of the interest and principal represented by the Certificates, and the Base Rental Payments will not be used for any other purpose while any of the Certificates remain Outstanding. This pledge will constitute a first and exclusive lien on the Base Rental Payments in accordance with the terms of the Trust Agreement.

All Base Rental Payments are required to be paid directly by the District to the Trustee, and if received by the Corporation at any time are required to be deposited by the Corporation with the Trustee within five Business Days after the receipt thereof. All Base Rental Payments will be held in trust by the Trustee in the Base Rental Payment Fund, which fund the Trustee agrees to establish and maintain so long as any Certificates are Outstanding, for the benefit of the District until deposited in the funds provided in the Trust Agreement, whereupon they will be held in trust by the Trustee in such funds for the benefit of the Owners from time to time.

Deposit of Base Rental Payment Fund

The Trustee is required to deposit the Base Rental Payments into the Base Rental Payment Fund when received by the District in the manner hereinafter provided in the following respective funds, each of which the Trustee agrees to establish and maintain so long as any Certificates are Outstanding, and the moneys in each of such funds will be disbursed only for the purposes and uses hereinafter authorized.

(a) Interest Fund. The Trustee, on March 1 and September 1 of each year (commencing on March 1, 2017), is required to deposit in the Interest Fund that amount of moneys representing the portion of the Base Rental Payments designated as interest components coming due on each such March 1 and September 1 date, respectively. Moneys in the Interest Fund will be used and withdrawn by the Trustee solely for the purpose of paying the interest represented by the Certificates when due and payable.

(b) Principal Fund. The Trustee, on September 1 of each year (commencing on September 1, 2017), is required to deposit in the Principal Fund that amount of moneys representing the portion of the Base Rental Payments designated as the principal component coming due on such September 1. Moneys in the Principal Fund will be used and withdrawn by the Trustee solely for the purpose of paying the principal represented by the Certificates when due and payable.

(c) Prepayment Fund. The Trustee, on the prepayment date specified in the Written Request of the District filed with the Trustee at the time that any prepaid Base Rental Payment is paid to the Trustee pursuant to the Facilities Sublease, is required to deposit in the Prepayment Fund that amount of moneys representing the portion of the Base Rental Payments designated as prepaid Base Rental Payments. Moneys in the Prepayment Fund will be used and withdrawn by the Trustee solely for the purpose of paying the interest and principal and any applicable premium represented by the Certificates to be prepaid.

Trust Administration Fund

The Trustee is required to deposit in the Trust Administration Fund (which fund the Trustee agrees to establish and maintain so long as any Certificates are Outstanding) all amounts received from the District to be applied as Additional Payments under the Facilities Sublease, to be held by the Trustee for the benefit of the District until disbursed. The moneys in the Trust Administration Fund will be disbursed by the Trustee upon the Written Request of the District, for the payment of compensation and indemnification of the Trustee payable by the District under the Trust Agreement, fees of the auditors, accountants, attorneys or architects, amounts owed to the Insurer and all other charges required to be paid by the District to comply with the terms of the Certificates or of the Trust Agreement. The Trustee will, from time to time, give notice to the District of such Additional Payments required to be paid pursuant to the Facilities Sublease and amounts owed to the Insurer.

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Establishment and Application of Rebate Fund

The Trustee will establish and maintain a fund separate from any other fund established and maintained under the Trust Agreement designated as the Rebate Fund. Within the Rebate Fund, the Trustee will maintain such accounts as will be specified in a Written Request of the District necessary in order to comply with the terms and requirements of the Tax Certificate. Subject to the transfer provisions provided in paragraph (e) below, all money at any time deposited in the Rebate Fund will be held by the Trustee in trust, to the extent required to satisfy the rebate amount (as calculated in the Tax Certificate) for payment to the federal government of the United States of America. The District and the Owners of any Certificates will have no rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund will be governed by the Facilities Sublease and by the Tax Certificate. The Trustee will be deemed conclusively to have complied with such provisions if it follows a Written Request of the District delivered pursuant to the Trust Agreement and will have no liability or responsibility to enforce compliance by the District with the terms of the Tax Certificate.

(a) Upon the District’s Written Request, an amount will be deposited to the Rebate Fund by the Trustee from deposits by the District if and to the extent required, so that the balance of the amount on deposit in the Rebate Fund after such deposit will equal the rebate amount for the Obligation Year (as defined in the Tax Certificate) calculated as of the most recent date of calculation as provided in the Tax Certificate. Computations of the rebate amount will be furnished to the Trustee by or on behalf of the District in accordance with the Tax Certificate.

(b) The Trustee will have no obligation to rebate any amounts required to be rebated pursuant to the Trust Agreement other than from moneys held in the Rebate Fund or from other moneys provided to it by the District for that purpose.

(c) The Trustee will invest all amounts held in the Rebate Fund in Permitted Investments specified in a Written Request of the District or, if no such Written Request is filed with the Trustee, the Trustee will hold such funds uninvested.

(d) Upon receipt of the District’s Written Request, the Trustee will remit part or all of the balances in the Rebate Fund to the United States, as so directed. In addition, if the District so directs, the Trustee is required to deposit moneys into or transfer moneys out of the Rebate Fund from or into such accounts or funds as directed by the District’s written directions. Any funds remaining in the Rebate Fund after prepayment and payment of all of the Certificates, or provision made therefor satisfactory to the Trustee, and payment and satisfaction of any rebate amount, will be withdrawn and remitted to the District upon its Written Request to the Trustee.

(e) Notwithstanding any other provision of the Trust Agreement, the obligation to remit the rebate amounts to the United States and to comply with all other requirements of the Trust Agreement, the Facilities Sublease and the Tax Certificate, will survive the defeasance or payment in full of the Certificates.

Certificate Reserve Fund

In further consideration for the agreements and covenants of the District in the Trust Agreement, the Corporation further agrees to cause to be paid to the District upon the sale and delivery of the Certificates, as provided in the Trust Agreement, a sum equal to the Certificate Reserve Fund Requirement for deposit with the Trustee in a separate special fund created, to be held by the Trustee for and on behalf of the District, known as the “Certificate Reserve Fund”.

If on March 1 and September 1 of any year the amount in the Certificate Reserve Fund exceeds the Certificate Reserve Fund Requirement, the Trustee, if the District is not then in default under the Trust Agreement, is required to pay the amount of such excess to the District (or credit such amount to rental due or to be due from the District, as the District will direct the Trustee), unless directed by the District to deposit any portion of such excess to the Trust Administration Fund. Except for such withdrawals, the District agrees to apply the moneys on deposit in the Certificate Reserve Fund solely to Base Rental Payments due and payable by the District if and when rental will be abated in accordance with the Facilities Sublease or when other moneys of the District are not otherwise

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available to make such Base Rental Payments. The District pledges and grants a lien on and a security interest in the Certificate Reserve Fund to the Trustee in order to secure the District’s obligation to pay the Base Rental Payments as in the Trust Agreement provided. The District further agrees that if at any time the balance in the Certificate Reserve Fund will be reduced below the Certificate Reserve Fund Requirement, the first Base Rental Payments thereafter payable by the District and not needed to pay the interest and principal components payable to the Certificate Owners on the next Base Rental Payment due date will be used to increase the balance in the Certificate Reserve Fund to the required Certificate Reserve Fund Requirement and to pay amounts owed to the Insurer, if any. At the termination of the Facilities Sublease in accordance with its terms, any balance remaining in the Certificate Reserve Fund will be released from the foregoing pledge, lien and security interest and will be transferred to such other fund or account of the District, or otherwise used by the District to pay any amounts owed to the Insurer, if any, and for any other lawful purposes, as the District may direct.

Investments

Upon the Written Request of the District, any moneys held by the Trustee under the Trust Agreement will be invested as directed by the District in such Written Request by the Trustee in Permitted Investments which will, as nearly as practicable, mature on or before the dates when such moneys are anticipated to be needed for disbursement under the Trust Agreement or under the Facilities Sublease. Such Written Requests of the District will not be inconsistent with the investments permitted under the Trust Agreement. In the absence of such Written Request, the Trustee will hold such funds uninvested.

The Trustee and its affiliates may act as sponsor, depository, advisor, principal or agent in the acquisition or disposition of any such investment. The Trustee will not be liable or responsible for any loss suffered in connection with any such investment made by it in accordance with the Indenture with the District’s written investment direction. The Trustee may sell or present for Prepayment any obligations so purchased whenever it will be necessary in order to provide moneys to meet any payment of the funds so invested, and the Trustee will not be liable or responsible for any losses resulting from any such investment sold or presented for Prepayment. The Trustee will be entitled to assume, absent receipt of written notice to the contrary, that any investment made at the Written Request of the District which at the time of purchase was a Permitted Investment remains a Permitted Investment thereafter. For investment purposes, the Trustee may commingle the funds and accounts established under the Trust Agreement, but will account for each separately. The Trustee may conclusively rely on the District’s investment direction as to the suitability and legality of the directed investments.

Interest earnings or profits on investments of the Base Rental Payment Fund will be transferred to the Certificate Reserve Fund, unless the amount already on deposit therein is greater than or equal to the Certificate Reserve Fund Requirement, in which event such interest earnings or profits will be paid to the District. Interest earnings or profits on investments of moneys in other funds and accounts held by the Trustee under the Trust Agreement or under the Facilities Sublease will remain in the fund or account from which the principal derived.

The District acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory agency grant the District the right to receive brokerage confirmations of security transactions as they occur, at no additional cost, the District waives receipt of such confirmations. The Trustee will furnish to the District monthly statements of account activity and balances.

Compliance with Trust Agreement

The Trustee will not execute or deliver any Certificates in any manner other than in accordance with the provisions of the Trust Agreement, and the Corporation and the District will not suffer or permit any default by them to occur under the Trust Agreement, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms of the Trust Agreement required to be complied with, kept, observed and performed by them.

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Compliance with or Amendment of Facilities Lease or Facilities Sublease

The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in Facilities Lease and the Facilities Sublease required to be complied with, kept, observed and performed by them and will enforce Facilities Lease and the Facilities Sublease against the other party thereto in accordance with its terms.

The Corporation and the District will not alter, amend or modify Facilities Lease or the Facilities Sublease without the prior written consent of the Trustee and the Insurer, which consent of the Trustee will be given only (i) if the Trustee will be furnished an Opinion of Counsel or a Certificate of the District to the effect that such alterations, amendments or modifications are not materially adverse to the interests of the Owners, or (ii) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power therein reserved to the District, or (iii) to cure, correct or supplement any ambiguous or defective provision contained therein, or (iv) to resolve questions arising thereunder, as the parties thereto may deem necessary or desirable and which, based upon an Opinion of Counsel or Certificate of the District, do not materially adversely affect the interests of the Owners of the Certificates, or (v) to modify the legal description of the Facility to conform to the requirements of title insurance or otherwise to add or delete property descriptions to reflect accurately the description of the parcels intended to be included therein, or (vi) to provide for the requirements of any entity providing a policy of municipal bond insurance or letter of credit or similar financial instrument for deposit in the Certificate Reserve Fund, so long as such alterations, amendments or modifications are not materially adverse to the interests of the Owners, or (vii) if the Trustee first obtains the written consents of the Owners of at least a majority in aggregate principal amount of the Certificates then Outstanding to such alterations, amendments or modifications; provided, however, that no such alteration, amendment or modification will extend the date for the making of any Base Rental Payment, extend a Certificate Payment Date or reduce the rate of interest represented by any Certificate or extend the time of payment of such interest or reduce the amount of principal represented thereby without the prior written consent of the Owner of any Certificate so affected, nor will any such alteration, amendment or modification reduce the percentage of Owners whose consent is required for the execution of any alteration, amendment or supplement. Consent of the Trustee to any amendment as provided in the Trust Agreement will be given only upon delivery to the Trustee of an Opinion of Counsel to the effect that the amendment is authorized or permitted by the Trust Agreement and the Facilities Lease or Facilities Sublease, as applicable, and complies with the terms of the Trust Agreement and under the Facilities Lease or Facilities Sublease. The Trustee will furnish copies to Standard & Poor’s of all amendments.

Any amendment, supplement, modification to, or waiver of the Facilities Lease or the Facilities Sublease will be subject to the prior written consent of the Insurer, which consent will not be unreasonably withheld.

Observance of Laws and Regulations

The District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or imposed subsequent to the delivery of the Certificates on them by contract, or prescribed by any law of the United States of America or of the State of California, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or acquired subsequent to the delivery of the Certificates by it, including its right to exist and carry on its business, to the end that such franchises, rights and privileges will be maintained and preserved and will not become abandoned, forfeited or in any manner impaired.

Other Liens

The District will keep the Facility and all parts thereof free from judgments and liens and free from all claims, demands or encumbrances of whatever nature or character, except for Permitted Encumbrances, and free from any claim or liability which might embarrass or hamper the District in conducting its business or utilizing the Facility or any portion thereof, and the Trustee at its option (after first giving the District ten days’ written notice to comply therewith and failure of the District to so comply within such ten-day period) may defend against any and all actions or proceedings in which the validity thereof is or might be questioned, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that, in defending against any such actions or proceedings or in paying or compromising any such claims or demands, the Trustee will not in any event be deemed to have waived or released the District from liability for or on account of any of its agreements and

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covenants contained in the Trust Agreement, or from its liability under the Trust Agreement to defend the validity of the Trust Agreement and to perform such agreements and covenants.

So long as any Certificates are Outstanding, neither the Corporation nor the District will create or suffer to be created any pledge of or lien on the Base Rental Payments other than the pledge and lien of the Trust Agreement.

Prosecution and Defense of Suits

The District is required to promptly, upon request of the Trustee or any Owner, take such action from time to time as may be necessary or proper to remedy or cure any cloud upon or defect in the title to the Facility or any part thereof, whether now existing or developing subsequent to the delivery of the Certificates, will prosecute all actions, suits or other proceedings as may be appropriate for such purpose and is required to indemnify, defend and save the Trustee and every Owner harmless from all cost, damage, expense or loss, including attorneys’ fees, which they or any of them may incur by reason of any such cloud, defect, action, suit or other proceeding.

The District will defend against every action, suit or other proceeding at any time brought against the Trustee or any Owner upon any claim arising out of the receipt, deposit or disbursement of any of the Base Rental Payments or involving the rights of the Trustee or any Owner under the Trust Agreement; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action, suit or other proceeding. The District is required to indemnify and hold harmless the Trustee and the Owners against any and all liability claimed or asserted by any person arising out of any such receipt, deposit or disbursement, and is required to indemnify and hold harmless the Owners and the Trustee against any attorneys’ fees or other expenses which any of them may incur in connection with any litigation or otherwise in connection with the foregoing to which any of them may become a party in order to enforce their rights under the Trust Agreement or under the Certificates, provided that with respect to any such liability or expense suffered by Owners, such litigation will be concluded favorably to such Owners’ contentions therein.

Accounting Records and Statements

The Trustee will keep proper accounting records in which complete and correct entries will be made of all transactions of the Trustee relating to the receipt, deposit and disbursement of the Base Rental Payments, and such accounting records will be available for inspection by the Corporation, the District or any Owner or its agent duly authorized in writing with prior notice at reasonable hours and under reasonable conditions. Not later than September 1 in each year, commencing on September 1, 2017, and continuing so long as any Certificates are Outstanding, the Trustee will furnish to the District and any Owner who may so request, a complete statement covering the receipts, deposits and disbursements of the Base Rental Payments for the twelve-month period ending on the preceding August 31, which may be in the form of its regular account statement.

Recordation and Filing

The District will file, record, register, renew, refile and rerecord all such documents, including financing statements (or continuation statements in connection therewith), as may be required by law in order to maintain the security interest in the Base Rental Payments granted pursuant to, and the assignment of the Facilities Sublease made pursuant to, the Assignment Agreement and the Trust Agreement at all times as a security interest in the Base Rental Payments, all in such manner, at such times and in such places as may be required and to the extent permitted by law in order to fully perfect, preserve and protect the security of the Owners and the rights and security interests of the Trustee, and the District will do whatever else may be necessary or be reasonably required in order to perfect and continue such security interest and assignment of the Facilities Sublease.

Further Assurances

Whenever and so often as requested to do so by the Trustee (which has no duty to make such requests) or any Owner, the Corporation and the District is required to promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in

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the Trustee and the Owners all advantages, benefits, interests, powers, privileges and rights conferred or intended to be conferred upon them or by the Assignment Agreement or the Facilities Sublease.

Action on Default

If an Event of Default (as that term is defined in the Facilities Sublease) occurs or the District or the Corporation fails to comply with the covenants set forth in the Trust Agreement, then such Event of Default will constitute a default under the Trust Agreement, and in each and every such case during the continuance of such Event of Default the Trustee or the Insurer will be entitled, upon notice in writing to the District, to exercise the remedies provided to the Corporation (or the Trustee as Corporation’s assignee) in the Facilities Sublease and to the Trustee in the Assignment Agreement.

Other Remedies of the Trustee

The Trustee will have the right --

(a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any member, director, officer or employee thereof, and to compel the Corporation or the District or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained in the Trust Agreement;

(b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee;

(c) by suit in equity upon the happening of any default under the Trust Agreement to require the Corporation and the District and any members, directors, officers and employees thereof to account as the trustee of an express trust; or

(d) exercise any remedies available under the Facilities Sublease or any related account.

Nothing in the Trust Agreement will be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Owner any plan of reorganization, arrangement, adjustment, or composition affecting the Certificates or the rights of any Owner thereof, or to authorize the Trustee to vote in respect of the claim of any Owner in any such proceeding without the approval of the Owners so affected.

Notwithstanding anything contained in the Trust Agreement or in the Facilities Sublease to the contrary, upon the occurrence and continuance of an Event of Default, before taking any foreclosure action on any action which may subject the Trustee to liability under an Applicable Environmental Law (as defined in the Facilities Sublease), the Trustee may require that a satisfactory indemnity bond, indemnity or environmental impairment insurance be furnished for the payment or reimbursement of all expenses to which it may be put and to protect it against all liability resulting from any claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability) and expenses which may result from such foreclosure or other action. The Trustee will not be required to take any foreclosure action if the approval of a government regulator is a condition precedent to taking such action, and such approval cannot be obtained.

Anything in the Trust Agreement or in the Facilities Sublease to the contrary notwithstanding, the Trustee will not be required to enter, take possession of, or take any other action whatsoever with respect to the failure to initiate foreclosure proceedings with respect to the Facility unless the Trustee is satisfied that the Trustee will not be subject to any kind of liability under any local, state, or federal environmental laws or regulations of any kind whatsoever or from any circumstances present at the Facility relating to the presence, use, management, disposal or contamination by any environmentally hazardous materials or substances of any kind whatsoever.

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Non-Waiver

A waiver of any default or breach of duty or contract by the Trustee will not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee to exercise any right or remedy accruing upon any default or breach of duty or contract will impair any such right or remedy or will be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee by law or by the Trust Agreement to the extent provided therein may be enforced and exercised from time to time and as often as will be deemed expedient by the Trustee.

If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee, the Trustee and the Corporation and the District will be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.

Remedies Not Exclusive

No remedy in the Trust Agreement conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy will be cumulative and will be in addition to every other remedy given under the Trust Agreement or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. A delay or omission by the Trustee or any Owner in exercising any right or remedy accruing upon an Event of Default will not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.

No Liability by the Corporation to the Owners

The Corporation will not have any obligation or liability to the Owners with respect to the payment when due of the Base Rental Payments by the District, or with respect to the performance by the District of the other agreements and covenants required to be performed by it contained in the Facilities Sublease or in the Trust Agreement, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Trust Agreement.

No Liability by the District to the Owners

Except for the payment when due of the Base Rental Payments and the performance of the other agreements and covenants required to be performed by it contained in the Facilities Sublease or in the Trust Agreement, the District will not have any obligation or liability to the Owners with respect to the Trust Agreement or the preparation, execution, delivery or transfer of the Certificates or the disbursement of the Base Rental Payments by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Trust Agreement.

No Liability by the Trustee to the Owners

Except as expressly provided in the Trust Agreement, the Trustee will not have any obligation or liability to the Owners in its individual capacity with respect to the payment when due of the Base Rental Payments by the District, or with respect to the performance by the District of other agreements and covenants required to be performed by it contained in the Facilities Sublease or in the Trust Agreement.

Trustee May Enforce Claims Without Possession of Certificates

All rights of action and claims under the Trust Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee will be brought in its own name as trustee of an express trust, and any recovery of judgment will, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Certificates in respect of which such judgment has been recovered.

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Application of Money Collected

Any money collected by the Trustee pursuant to the Trust Agreement to the extent provided therein, and any other funds then held or thereafter received, will be applied in the following order, at the date or dates fixed by the Trustee:

FIRST, Costs and Expenses: to the payment of reasonable compensation for and the costs and expenses of the Trustee, first, and of the Owners, second, in declaring such Event of Default and exercising their rights and remedies under the Trust Agreement to the extent provided therein, including reasonable compensation to its or their agents, attorneys and counsel, and with regard to the Trustee, including, any outstanding fees and expenses incurred in and about the performance of its powers and duties under the Trust Agreement;

SECOND, Interest: to the payment to the persons entitled thereto of all payments of interest represented by the Certificates then due in the order of the due date of such payments, and, if the amount available will not be sufficient to pay in full any payment or payments coming due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

THIRD, Principal: to the payment to the persons entitled thereto of the unpaid principal represented by any Certificates which will have become due, whether on the Certificate Payment Date or by call for prepayment, in the order of their due dates, with interest on the overdue principal and interest represented by the Certificates at a rate equal to the rate paid with respect to the Certificates and, if the amount available will not be sufficient to pay in full all the amounts due with respect to the Certificates on any date, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference.

FOURTH, Insurer: to the payment of all amounts due to the Insurer.

Right to Direct Proceedings

Notwithstanding anything to the contrary in the Trust Agreement, the Insurer may direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust powers conferred on it, provided that, the Trustee is provided indemnity satisfactory to it by the Insurer prior to taking such actions and provided further that, the Trustee may refuse to follow any direction that conflicts with law or the Trust Agreement.

Limitations on Suits

No Owner of any Certificate will have any right to institute any proceeding, judicial or otherwise, with respect to the Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy under the Trust Agreement, unless

1. such Owner has previously given written notice to the Trustee of a continuing Event of Default;

2. the Owners of not less than a majority in principal amount of the Outstanding Certificates will have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee under the Trust Agreement ;

3. such Owner or Owners have offered to the Trustee satisfactory indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and

4. the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding;

it being understood and intended that no one or more Owners of Certificates will have any right in any manner whatever by virtue of, or by availing of, any provision of the Trust Agreement to affect, disturb or prejudice

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the rights of any other Owners of Certificates, or to obtain or to seek to obtain priority or preference over any other Owners or to enforce any right under the Trust Agreement, except in the manner in the Trust Agreement provided and for the equal and ratable benefit of all Owners of the Certificates.

Corporation Not Liable; Reimbursement

The Corporation and its members, directors, officers, agents and employees, and its successors and assigns, will not be liable to the District or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facility. The District, to the extent permitted by law, is required to indemnify and hold the Corporation and its respective members, directors, officers, agents and employees, and its successors and assigns, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the construction or operation of the Facility, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facility regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. This indemnification will survive the defeasance of the Certificates and the termination of the Facilities Lease and the Facilities Sublease. The District’s indemnification of the Corporation contained in the Facilities Sublease will survive the Corporation’s assignment of the Facilities Sublease to the Trustee.

The District will also pay to the Corporation such amounts as will be required for the payment of all expenses incurred by the Corporation under the Trust Agreement or in connection with the Facilities Sublease or Facilities Lease.

Employment of the Trustee

The District appoints and employs the Trustee to receive, deposit and disburse the Base Rental Payments, to execute, deliver and transfer the Certificates and to perform the other functions contained in the Trust Agreement; all in the manner provided in the Trust Agreement and subject to the conditions and terms of the Trust Agreement. By executing and delivering the Trust Agreement, the Trustee accepts the appointment and employment in the Trust Agreement and accepts the rights and obligations of the Trustee provided in the Trust Agreement, as well as the obligations of Trustee set forth in the Facilities Sublease, subject to the conditions and terms of the Trust Agreement.

Succession, Removal and Resignation of the Trustee

So long as no Event of Default has occurred and is continuing, the District, or the Owners of a majority in aggregate principal amount represented by the Certificates at the time Outstanding, may by an instrument in writing remove the Trustee initially a party to the Trust Agreement, upon thirty (30) days’ prior notice and any successor thereto and may appoint a successor Trustee, but any Trustee under the Trust Agreement will be a national banking association, corporation, bank or trust company doing business and having an office or affiliate office in California, having a combined capital (exclusive of borrowed capital) and surplus (together with its corporate parent) of at least $75,000,000 and subject to supervision or examination by federal or state authorities. If such national banking association, corporation, bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of the Trust Agreement as provided therein the combined capital and surplus of such national banking association or trust company will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it will be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company will be eligible as provided in the Trust Agreement, will be the successor to the Trustee without the execution or filing of any paper or further act, anything in the Trust Agreement to the contrary notwithstanding.

The Trustee may at any time resign by giving a 45-day written notice of such resignation to the Corporation, the District and the Owners, which notice to the Owners will be mailed, first class postage prepaid.

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Upon receiving such notice of resignation, the District is required to promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the District does not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee will become effective only upon acceptance of appointment by the successor Trustee.

For such time as the Insurance Policy is in full force and effect and so long as the Insurer is not in default under its Insurance Policy (i) the Trustee may be removed at any time, at the request of the Insurer, for any breach of the trust set forth herein, (ii) the Insurer will receive prior written notice of any Trustee resignation, (iii) every successor Trustee appointed pursuant to this Section will be (A) a national banking association that is supervised by the Office of the Comptroller of the Currency and has at least $250,000,000 of assets, (B) a state-chartered commercial bank that is a member of the Federal Reserve System and has at least $1,000,000,000 of assets, or (C) otherwise approved by the Insurer in writing, and (iv) no removal, resignation or termination of the Trustee will take effect until a successor, acceptable to the Insurer, will be appointed.

Compensation and Indemnification of the Trustee

The District will from time to time, subject to any agreement then in effect with the Trustee, pay the Trustee compensation for its services and reimburse the Trustee for all its advances and expenditures under the Trust Agreement, including but not limited to: costs of printing definitive Certificates, and advances to and fees and expenses of accountants, agents, appraisers, consultants, counsel or other experts employed by it in the exercise and performance of its rights and obligations under the Trust Agreement ; provided, further, that the Trustee will have a lien for such compensation or reimbursement against any moneys held by it in any of the funds established under the Trust Agreement or under the Facilities Sublease (except that such compensation or reimbursement will be made first from the Trust Administration Fund established pursuant to the Trust Agreement or from interest and income received from the investment of moneys on deposit in the Certificate Reserve Fund created under the Facilities Sublease so long as the moneys on deposit therein are equal to the Certificate Reserve Fund Requirement (as that term is defined in the Facilities Sublease)). The Trustee may take whatever legal actions are lawfully available to it directly against the District.

The District is required to indemnify, defend, protect and hold harmless the Trustee and its officers, directors, agents and employees to the fullest extent and in the amounts permitted by the laws of the State of California from and against all claims, damages, liabilities, costs, suits, expenses, actions, judgements and losses, including legal fees and expenses, arising out of (i) the condition, management, maintenance or use of or from any work or thing done in connection with the Facility by the District, (ii) any act of negligence by the District or of any of its agents, contractors, employees, invitees, licensees, officers or servants in connection with the Facility, (iii) the authorization of the payment of any costs or expenses of acquisition of the Facility, or (iv) the exercise of any rights or obligations of the Trustee under the Trust Agreement or as assignee of the Corporation under the Facilities Sublease and the Facilities Lease or any other documents executed in connection with the Trust Agreement or the Facilities Sublease or the Facilities Lease; provided that no indemnification will be made for negligence or willful misconduct by the Trustee.

The indemnification obligations of the District set forth in the Trust Agreement and the Trustee’s rights to immunities and protection from liability under the Trust Agreement and its rights to payment of its fees and expenses will survive its resignation or removal and the final payment or defeasance of the Certificates. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default, such expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

Protection of the Trustee The Trustee will be protected and will incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, telegram, voucher, waiver or other paper or document which it will in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions of the Trust Agreement, and the Trustee will be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee will not be bound to recognize any person as an Owner of any Certificate

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or to take any action at the request of any such person unless such Certificate will be deposited with the Trustee or satisfactory evidence of the ownership of such Certificate will be furnished to the Trustee. Before taking action or refraining from taking any action, the Trustee may consult with counsel, who may be counsel to the Corporation or the District, with regard to legal questions, and the advice or opinion of such counsel will be full and complete authorization and protection in respect to any action taken, omitted or suffered by it under the Trust Agreement in good faith in accordance therewith. The Trustee will not be liable for an error of judgment made in good faith, unless it has been proven that the Trustee was negligent in ascertaining the pertinent facts. The Trustee will not be responsible for the sufficiency of the Facilities Sublease, or of the Facilities Lease or the assignment made to it by the Assignment Agreement of all rights to receive the Base Rental Payments under the Facilities Sublease, or of the title to or value of the Facility. The Trustee will have no obligation to exercise any remedies under the Trust Agreement that involve its incurring any liability under any environmental laws or regulations. The Trustee will not be responsible for any recital in the Trust Agreement or in the Certificates, or for the validity of the execution by the District of the Trust Agreement, and the Trustee will have no liability with respect to any official statement or any other disclosure or offering material prepared in connection with the sale of the Certificates.

Whenever in the administration of its rights and obligations under the Trust Agreement the Trustee will deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Trust Agreement, such matter (unless other evidence in respect thereof be in the Trust Agreement specifically prescribed) may be deemed to be conclusively proved and established by a Certificate of the District or a Certificate of the Corporation, and such certificate will be full warrant to the Trustee for any action taken or suffered under the provisions of the Trust Agreement upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.

The Trustee may buy, sell, own, hold and deal in any of the Certificates and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party to the Trust Agreement. The Trustee, either as sponsor, advisor, depository, principal or agent, may also engage in or be interested in any financial or other transaction with the Corporation or the District, and may act as agent, depositary or trustee for any committee or body of Owners or of owners of obligations of the Corporation or the District as freely as if it were not the Trustee under the Trust Agreement.

The Trustee will not be answerable for the exercise of any trusts or powers under the Trust Agreement or for anything whatsoever in connection with the funds established under the Trust Agreement, except only for its own negligence or willful misconduct. The Trustee will not be required to take notice or be deemed to have notice of any Event of Default, except failure to cause to be made any of the payments required to be made to the Trustee, unless the Trustee will be specifically notified in writing by the Corporation, District or Owners of at least 25% in aggregate principal amount of the Certificates, and in the absence of such notice the Trustee may conclusively assume no default exists.

The Trustee may execute any of the trusts or powers of the Trust Agreement and perform the duties required of it under the Trust Agreement by or through attorneys, agents or receivers, and the Trustee will not be responsible for any willful misconduct or negligence on the part of any attorney, agent, or receiver not an employee or affiliate of the Trustee who is appointed with due care.

The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Trust Agreement, and no implied covenants or obligations, fiduciary or otherwise, will be read into the Trust Agreement against the Trustee. Upon an Event of Default (which has not been cured or waived), the Trustee will use the same degree of care and skill in the exercise of such rights, duties and powers vested in it by the Trust Agreement and by the Assignment Agreement as a prudent person would exercise or use under the circumstances in the conduct of such person’s affairs.

The Trustee has no obligation or liability to the Owners to make payment of principal, premium, if any, or interest pertaining to the Certificates except from Base Rental Payments. No provision of the Trust Agreement will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties under the Trust Agreement, or in the exercise of any of its rights and powers, if it will have reasonable

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grounds for believing the repayment of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

The Trustee will not be required to take any action on behalf of the Owners or the Insurer until the Trustee has received indemnity satisfactory to it obligating the Owners or the Insurer, as appropriate, to indemnify the Trustee against all reasonable expenses (including reasonable attorneys’ fees), and liabilities resulting from its taking such action, unless such liabilities are the result of the Trustee’s own negligence or willful misconduct. The Trustee will not be liable for any action taken or omitted by it in good faith at the direction of the Owners of not less than a majority in principal amount of the securities or the Insurer as to the time, method, and place of conducting any proceedings for any remedy available to the Trustee or the exercising of any power conferred by the Trust Agreement or Assignment Agreement.

Any action taken, or omitted to be taken, by the Trustee in good faith pursuant to the Trust Agreement or Assignment Agreement upon the request or authority or consent of any person, who, at the time of making such request or giving such authority or consent, is the Owner of any security will be conclusive and binding upon all future Owners of securities and upon securities executed and delivered in exchange therefore or in place thereof.

The Trustee will not be considered in breach of or in default in its obligations under the Trust Agreement or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources or energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee.

The Trustee will have the right to accept and act upon instructions, including funds transfer instruction (“Instructions”) given pursuant to the Trust Agreement and delivered using Electronic Means (“Electronic Means” will mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services under the Trust Agreement); provided, however, that the Corporation and/or District will provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate will be amended by the Corporation and/or the District whenever a person is to be added or deleted from the listing. If the Corporation and/or the District elects to give the Trustee instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s understanding of such Instructions will be deemed controlling. The Corporation and District understand and agree that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee will conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Corporation and District will be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Corporation, District and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Corporation and/or District. The Trustee will not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Corporation and the District agree: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Corporation and District; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.

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The permissive right of the Trustee to do things enumerated in the Trust Agreement will not be construed as a duty and the Trustee will not be answerable for other than its negligence or willful misconduct.

The Trustee will not be accountable for the use or application by the District of any of the Certificates or the proceeds thereof or for the use or application of any money paid over by the Trustee in accordance with the provisions of the Trust Agreement or for the use and application of money received by any paying agent.

Amendment or Supplement

Subject to the prior written consent of the Insurer, the Trust Agreement and the rights and obligations of the Corporation and the District and the Owners and the Trustee under the Trust Agreement may be amended or supplemented at any time by an amendment of the Trust Agreement or supplement to the Trust Agreement which will become binding when the written consents of the Owners of a majority in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in the Trust Agreement, are filed with the Trustee. No such amendment or supplement will (1) change the fixed Certificate Payment Date of any Certificate or reduce the rate of interest represented thereby or extend the time of payment of such interest or reduce the amount of principal represented thereby without the prior written consent of the Owner of the Certificate so affected, or (2) reduce the percentage of Owners whose consent is required for the execution of any amendment of the Trust Agreement or supplement to the Trust Agreement, or (3) modify any of the rights or obligations of the Trustee without its prior written consent thereto, or (4) amend the Trust Agreement as provided therein without the prior written consent of the Owners of all Certificates then Outstanding. The Trustee will furnish copies to Standard & Poor’s of all amendments.

The Trust Agreement and the rights and obligations of the Corporation and the District and the Owners and the Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment of the Trust Agreement or supplement to the Trust Agreement which will become binding upon execution without the written consents of any Owners, but only to the extent permitted by law and after receipt of an approving Opinion of Counsel and only for any one or more of the following purposes --

(d) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed in the Trust Agreement other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved in the Trust Agreement to or conferred in the Trust Agreement on the Corporation or the District, and which in either case will not materially adversely affect the interests of the Owners; or

(e) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising under the Trust Agreement which the Corporation or the District may deem desirable or necessary and not inconsistent herewith, and which will not materially adversely affect the interests of the Owners; or

(f) to modify, amend or supplement the Trust Agreement or any agreement supplemental to the Trust Agreement in such manner as to permit the qualification of the Trust Agreement and thereof under the Trust Indenture Act of 1939 or any similar federal statute hereafter in effect or to permit the qualification of the Certificates for sale under the securities laws of the United States of America or of any of the states of the United States of America, and, if they so determine, to add to the Trust Agreement or any agreement supplemental to the Trust Agreement such other terms, conditions and provisions as may be permitted by said Trust Indenture Act of 1939 or similar federal statute; or

(g) to make any modifications or changes necessary or appropriate in the Opinion of Counsel to preserve or protect the exclusion from gross income of interest represented by the Certificates for federal income tax purposes.

Any amendment, supplement, modification to, or waiver of, the Trust Agreement will be subject to the prior written consent of the Insurer.

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In executing, or accepting the additional trusts created by, any amendment or supplement to the Trust Agreement permitted by this Article or the modification thereby of the trusts created by the Trust Agreement, the Trustee will be entitled to receive, and will be fully protected in relying upon, an opinion of counsel stating that the execution of such amendment or supplement is authorized or permitted by the Trust Agreement and complies with the terms thereof. The Trustee may, but will not be obligated to, enter into any such amendment or supplement which affects the Trustee's own rights, duties or immunities under the Trust Agreement or otherwise.

Disqualified Certificates

Certificates owned or held by or for the account of the District (but excluding Certificates held in any pension or retirement fund of the District) will not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Certificates provided in the Trust Agreement to the extent provided therein, and will not be entitled to consent to or take any other action provided in the Trust Agreement to the extent provided therein, except that in determining whether the Trustee will be protected in relying upon any such consent or other action of an Owner, only Certificates which the Trustee actually knows to be owned or held by or for the account of the District will be disregarded unless all Certificates are so owned or held, in which case such Certificates will be considered Outstanding for the purpose of such determination. The Trustee may adopt appropriate regulations to require each Owner, before its consent provided for in the Trust Agreement will be deemed effective, to reveal if the Certificates as to which such consent is given are disqualified as provided in the Trust Agreement. Upon request of the Trustee, the District will specify in a certificate to the Trustee those Certificates disqualified pursuant to the Trust Agreement and the Trustee may conclusively rely on such certificate.

Endorsement or Replacement of Certificates After Amendment or Supplement.

After the effective date of any action taken as provided in the Trust Agreement, the Trustee may determine that the Certificates may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Owner of any Outstanding Certificate and presentation of such Certificate for such purpose at the Principal Corporate Trust Office of the Trustee a suitable notation as to such action will be made on such Certificate. If the Trustee will so determine, new Certificates so modified as in the opinion of the Trustee will be necessary to conform to such action will be prepared, and in that case upon demand of the Owner of any Outstanding Certificates such new Certificates will be exchanged at the Principal Corporate Trust Office of the Trustee without cost to each Owner for Certificates then Outstanding upon surrender of such Outstanding Certificates.

Amendment by Mutual Consent

The provisions of the Trust Agreement will not prevent any Owner from accepting any amendment as to the particular Certificates owned by it, provided that due notation thereof is made on such Certificate and the Insurer has consented thereto.

Discharge of Certificates and Trust Agreement

(a) If the District pays or causes to be paid or there shall otherwise be paid to the Owners of all Outstanding Certificates the interest and principal represented thereby at the times and in the manner stipulated in the Trust Agreement and therein and amounts owed to the Insurer, then such Owners will cease to be entitled to the pledge of and lien on the Base Rental Payments as provided in the Trust Agreement, and all agreements and covenants of the Corporation, the District and the Trustee to such Owners under the Trust Agreement will thereupon cease, terminate and become void and will be discharged and satisfied except only as provided in subsection (b) below, provided further, however, that the provisions the Trust Agreement will apply in all events.

(b) Any Outstanding Certificates will be deemed to have been paid within the meaning of and with the effect expressed the Trust Agreement as provided therein if there will be irrevocably deposited with the Trustee Defeasance Securities in an amount sufficient (together with the increment, earnings and interest on such securities), in the opinion of an independent certified public accountant delivered to the Trustee and the Insurer, to pay the interest and principal represented by such Certificates payable on their Payment Dates or on any dates of

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prepayment prior thereto, except that the Owners thereof will be entitled to the principal and interest represented by such Certificates, and the District will remain liable for such Base Rental Payments, but only out of such moneys or securities deposited with the Trustee as aforesaid for such payment, and for indemnifying the Trustee under the Trust Agreement.

(c) The Trustee may seek and is entitled to rely upon (i) an Opinion of Counsel reasonably satisfactory to the Trustee to the effect that the conditions precedent to a defeasance pursuant to the Trust Agreement have been satisfied, and (ii) such other opinions, certifications and computations, as the Trustee may reasonably request, of accountants or other financial consultants concerning the matters described in subsection (b) above.

(d) After the payment of all the interest and principal represented by all Outstanding Certificates as provided in Trust Agreement including amounts owed to the Insurer, the Trustee will execute and deliver to the Corporation and the District all such instruments as may be prepared by them or on their behalf and reasonably necessary or desirable to evidence the discharge and satisfaction of the Trust Agreement, and the Trustee is required to pay over or deliver to the District all moneys or securities held by it pursuant to the Trust Agreement which are not required for the payment of the interest and principal and premium, if any, evidenced and represented by such Certificates and any unpaid fees and expenses of the Trustee.

Unclaimed Moneys

Anything contained in the Trust Agreement to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of the interest or principal represented by any of the Certificates which remain unclaimed for two years after the date when the payments represented by such Certificates have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest and principal represented by such Certificates have become payable, will at the Written Request of the District be repaid (without liability for interest) by the Trustee to the District as its absolute property free from trust, and the Trustee will thereupon be released and discharged with respect thereto and the Owners will look only to the District for the payment of the interest and principal represented by such Certificates; provided, however, that before being required to make any such payment to the District, the Trustee may, at the expense and direction of the District, cause to be published once a week for two successive weeks in a Financial Newspaper a notice that such moneys remain unclaimed and that after a date named in such notice, which date will not be less than 30 days after the date of the first publication of such notice, the balance of such moneys then unclaimed will be returned to the District.

Insurance Policy Requirements

So long as the Insurance Policy is in effect, the following provisions will govern with respect to the Certificates, notwithstanding anything to the contrary set forth in the Trust Agreement, the Facilities Sublease, or the Facilities Lease:

Insurer as Sole and Exclusive Owner of Certificates. The Insurer will at all times be deemed the sole and exclusive Owner of the Outstanding Certificates for the purposes of all approvals, consents, waivers, institution of any action, and the direction of all remedies, including but not limited to approval of or consent to any amendment of or supplement to the Trust Agreement which requires the consent or approval of the Owners of a majority of the aggregate principal evidenced by the Certificates then Outstanding pursuant to the Trust Agreement; provided, however, that the Insurer will not be deemed to be the sole and exclusive Owner of the Outstanding Certificates with respect to any amendment or supplement to the Trust Agreement which seeks to amend or supplement the Trust Agreement for the purposes set forth in the Trust Agreement, and provided further that the Insurer will not be deemed the sole and exclusive Owner of the Outstanding Certificates with respect to any amendment or supplement to the Trust Agreement, and will not have the right to direct or consent to District, Corporation, Trustee or Owner action as provided therein, if:

(i) the Insurer will be in payment default under the Insurance Policy and such failure will continue for three Business Days;

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(ii) any material provision of the Insurance Policy will be held to be invalid by a final, non-appealable order of a court of competent jurisdiction, or the validity or enforceability thereof will be contested in writing by the Insurer; or

(iii) a proceeding will have been instituted in a court having jurisdiction in the premises seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution in respect of the Insurer under Article 16 of the Insurance Law of the State of New York or any successor provision thereto and such proceeding is not terminated for a period of 90 consecutive days or such court enters an order granting the relief sought in such proceeding.

To the extent that the Insurer makes payment of any interest or principal evidenced by a Certificate, it will become the Owner of such portion of such Certificate and the right to receive payment of such interest or principal and will be fully subrogated to all of the Owner’s rights thereunder in accordance with the terms of the Insurance Policy to the extent of such payment, including the Owner’s rights to payment thereof. To evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee will note the Insurer’s rights as subrogee on the registration books maintained by the Trustee upon receipt of proof from the Insurer as to payment of such interest to the Owner of the Certificate evidencing such interest, and (ii) in the case of subrogation as to claims for past due principal, the Trustee will note the Insurer’s rights as subrogee on the registration books maintained by the Trustee upon surrender of the Certificate evidencing such principal by the Owner thereof to the Trustee.

In the event that the interest or principal evidenced by a Certificate will be paid by the Insurer pursuant to the terms of the Insurance Policy, (i) such Certificate will continue to be Outstanding under the Trust Agreement, (ii) the pledge of the amounts on deposit in the funds and accounts established hereunder and all covenants, agreements and other obligations of the District hereunder and under the Facilities Sublease will continue to exist, (iii) the Insurer will be fully subrogated to all of the rights of such Owner in accordance with the terms and conditions of the Trust Agreement and the Insurance Policy, and (iv) neither the Trust Agreement nor the Facilities Sublease will be discharged unless and until all amounts due to the Insurer have been paid in full.

Default. If an event of default (within the meaning of the Facilities Sublease) will have occurred and be continuing, the Insurer may, regardless of whether a claim has been made under the Insurance Policy, at any time and at its sole option, pay to the Owners all or any portion of the interest or principal evidenced by the Certificates (at a price equal to 100% of the principal evidenced by the Certificates so purchased) prior to the stated Principal Payment Dates thereof; provided, however, that such payment by the Insurer will not accelerate the District’s obligation to make Rental Payments under the Facilities Sublease. The Trustee will accept such payments on behalf of the Owners and the Insurer’s obligations under the Insurance Policy will be discharged to the extent of such payments.

Insurer Notice of Amendments. The Insurer will be notified (i) by the District at least 30 days (or such lesser time as agreed by the Insurer) in advance of the execution of any amendment of or supplement to the Trust Agreement and of any amendment to the Facilities Sublease or the Facilities Lease in the event consent of the Owners is not required for such amendment or supplement, (ii) by the Trustee within two Insurance Business Days of the Trustee’s having actual knowledge of the occurrence of any event of default (within the meaning of Article VI of the Facilities Sublease), and (iii) by the Trustee of any prepayment of Certificates (including the principal evidenced by, and the CUSIP numbers of, such Certificates to be prepaid) at the same time that the Owners of the Certificates to be prepaid are notified. In addition, all notices, reports, certificates and opinions (i) to be delivered to or by the Trustee or to the Owners or available at the request of the Owners pursuant to the Trust Agreement, or (ii) to be delivered by the District pursuant to the Facilities Sublease or the Assignment Agreement will also be delivered to the Insurer.

Insurer Notice of Reserve Fund Deposits and Trustee Resignation. The Insurer will also be notified immediately (i) by the Trustee upon the withdrawal of amounts on deposit in the Reserve Fund, other than amounts comprising investment earnings thereon which may be withdrawn in accordance with the terms of the Trust Agreement, upon a claim being made under any Reserve Facility or upon the determination that a deficiency in the Reserve Fund exists as a result of fluctuations in the market value of investments held therein, and (ii) by the District upon the resignation or removal of the Trustee or the appointment of a successor Trustee.

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No contract. No contract will be entered into or any action taken by which the rights of the Insurer or security for or sources of payment of the Certificates may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer.

Assignment of Payments to the Insurer. Subject to and conditioned upon payment of any interest or principal evidenced by the Certificates by or on behalf of the Insurer, each Owner, by its purchase of Certificates, hereby assigns to the Insurer, but only to the extent of all payments made by the Insurer, all rights to the payment of interest or principal evidenced by the Certificates, including, without limitation, any amounts due to the Owners in respect of securities law violations arising from the offer and sale of the Certificates, which are then due for payment. The Insurer may exercise any option, vote, right, power or the like with respect to Certificates to the extent it has made a payment of principal evidenced by Certificates pursuant to the Insurance Policy. The foregoing assignment is in addition to, and not in limitation of, rights of subrogation otherwise available to the Insurer in respect of such payments. The Trustee will take such action and deliver such instruments as may be reasonably requested or required by the Insurer to effectuate the purpose or provisions of this paragraph in accordance with the Trust Agreement.

Right to Advance Payment. The Insurer will have the right to advance any payment required to be made by the District in order to prevent an event of default under the Trust Agreement and the Trustee will be required to accept such advance. The District will, upon demand, reimburse the Insurer for any such advance.

Contractual Rights. The rights granted under the Trust Agreement, the Facilities Sublease or the Facilities Lease to the Insurer to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer’s contractual rights and will not be construed or deemed to be taken for the benefit of or on behalf of the Owners, nor does such action evidence any position of the Insurer, positive or negative, as to whether Owner consent is required in addition to consent of the Insurer.

Reimbursement of Amounts Paid by the Insurer. The District hereby agrees, to the extent permitted by law, to pay or reimburse the Insurer any and all charges, fees, costs and expenses which the Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement, (ii) the pursuit of any remedies under the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement, or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement, or the transactions contemplated hereby or thereby, other than costs resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement.

The Insurer will be entitled to pay principal or interest evidenced by the Certificates that will become Due for Payment but will be unpaid by reason of Nonpayment by the District (as such terms are defined in the Insurance Policy) thereof in accordance with the Trust Agreement, whether or not the Insurer has received a Notice (as defined in the Insurance Policy) of Nonpayment or a claim upon the Insurance Policy.

Notice to Insurer of Proceedings. The Trustee is required to promptly notify the Insurer of either of the following as to which it has actual knowledge: (i) the commencement of any proceeding by or against the District or the Corporation commenced under the United States Bankruptcy Code or any successor statute or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an “Insolvency Proceeding”), and (ii) the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer (a “Preference Claim”) of any payment of interest or principal evidenced by the Certificates. Each Owner, by its purchase of Certificates, and the Trustee hereby agrees that the Insurer may at any time during the continuation of an Insolvency Proceeding direct all matters relating to such Insolvency Proceeding, including, without limitation, (i) all matters relating to any Preference Claim, (ii) the direction of any appeal of any order relating to any Preference Claim, and (iii) the posting of any surety, supersedes or performance bond pending any such appeal. In addition, and without limitation of the foregoing, the Insurer will be subrogated to the rights of the

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Trustee and each Owner in any Insolvency Proceeding to the extent it is subrogated pursuant to the Trust Agreement, including, without limitation, any rights of any party to an adversary proceeding action with respect to any court order issued in connection with any such Insolvency Proceedings.

In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Trust Agreement would adversely affect the security for the Certificates or the rights of the Owners, the effect of any such amendment, consent, waiver, action or inaction will be considered as if there were no Insurance Policy.

Reorganization or Liquidation Plans. Any reorganization or liquidation plan with respect to the District must be acceptable to the Insurer. In the event of any such reorganization or liquidation, the Insurer will have the right to vote on behalf of all Owners (so long as the Insurer is not in default in its payment obligations under the Insurance Policy).

Access to Financial Records and Accounts of the District. The District will permit the Insurer to discuss the affairs, finances and accounts of the District or any information the Insurer may reasonably request regarding the security for the Certificates with appropriate officers of the District and will use commercially reasonable efforts to enable the Insurer to have access to the facilities, books and records of the District on any business day upon reasonable prior notice.

Deposits to Policy Payments Account; Payments Under the Insurance Policy. So long as the Insurance Policy is in full force and effect, the District and the Trustee agree to comply with the following paragraphs under the Trust Agreement.

If, on the second Insurance Business Day prior to a Principal Payment Date or Interest Payment Date there is not on deposit with the Trustee, after making all transfers and deposits required under the Trust Agreement, moneys sufficient to pay the interest or principal evidenced by the Certificates due on such Principal Payment Date or Interest Payment Date, the Trustee will give notice to the Insurer and to the Insurer’s Fiscal Agent (if any) by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Insurance Business Day. If, on the second Insurance Business Day prior to such Principal Payment Date or Interest Payment Date, there continues to be a deficiency in the amount available to pay the interest or principal evidenced by the Certificates due on such Principal Payment Date or Interest Payment Date, the Trustee will make a claim under the Insurance Policy and give notice to the Insurer and the Insurer’s Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay the interest evidenced by the Certificates and the amount required to pay principal evidenced by the Certificates, confirmed in writing to the Insurer and the Insurer’s Fiscal Agent (if any) by 12:00 noon, New York City time, on such second Insurance Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy.

The Trustee will designate any portion of principal evidenced by Certificates paid by the Insurer, whether by virtue of Mandatory Sinking Account Payment, the stated Principal Payment Date or the Insurer’s election to pay said amounts prior to the stated Principal Payment Date pursuant to the Trust Agreement, on its books as a reduction in the principal evidenced by Certificates registered to the then current Owners, whether DTC or its nominee or otherwise, and will issue a replacement Certificate to the Insurer, registered in the name of Build America Mutual Assurance Company, evidencing principal in an amount equal to the principal so paid (without regard to Authorized Denominations); provided that the Trustee’s failure to so designate any payment or issue any replacement Certificate will have no effect on the amount of principal or interest evidenced by any Certificate payable by the District or the subrogation rights of the Insurer.

The Trustee will keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of the interest and principal evidenced by any Certificate. The Insurer will have the right to inspect such records at reasonable times upon reasonable notice to the Trustee.

Upon payment of a claim under the Insurance Policy, the Trustee will establish a separate special purpose trust account for the benefit of Owners known as the “Policy Payments Account” and over which the Trustee will have exclusive control and sole right of withdrawal. The Trustee will receive any amount paid under the Insurance

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Policy in trust on behalf of Owners and is required to deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts will be disbursed by the Trustee to Owners in the same manner as payments of interest and principal evidenced by the Certificates are to be made with respect to the Certificates under the provisions hereof. It will not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to make payments of interest and principal with other funds available to make such payments.

If, as a result of the District’s non-payment, when due, of all or a portion of a Base Rental Payment (other than a non-payment caused by an abatement of Base Rental Payments pursuant to the Facilities Sublease), the Insurer has paid interest or principal evidenced by the Certificates pursuant to the Insurance Policy, (i) the first of Base Rental Payments thereafter received from the District under the Facilities Sublease that are not required to be paid to the Reserve Insurer pursuant to the Trust Agreement, and (ii) the interest payable with respect to such delinquent Base Rental Payments, calculated at the Insurer Rate as provided in the Facilities Sublease, will be paid to the Insurer, as the Owner of the Certificates (or portions thereof) evidencing such delinquent Base Rental Payment in repayment of such payment by the Insurer until such payment is paid in full. If, as a result of the District’s non-payment of all or a portion of a Base Rental Payment (which non-payment is caused by an abatement of Rental Payments pursuant to the Facilities Sublease), the Insurer has paid interest or principal evidenced by the Certificates pursuant to the Insurance Policy, the Insurer, as the Owner of the Certificates (or portions thereof) representing such abated Base Rental Payment, will be entitled to receive, during the extension of the term of the Facilities Sublease provided for in the Facilities Sublease, any amounts paid in respect of such abated and unpaid Base Rental Payment pursuant to the Facilities Sublease that are not required to be paid to the Reserve Insurer pursuant to the Trust Agreement. Any such payment by the District pursuant to the Trust Agreement will be applied first to the interest component of such delinquent Base Rental Payment due the Insurer and second to the principal components of such delinquent Base Rental Payment due the Insurer.

Funds held in the Policy Payments Account will not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Principal Payment Date or Interest Payment Date is required to promptly be remitted to the Insurer.

Reporting Requirements. The District will provide to the Insurer (i) within 180 days after the end of each fiscal year of the District, a Written Certificate of the District certifying that the District is not aware of any event of default or of any default hereunder or under the Facilities Sublease, (ii) within 180 days after the end of each fiscal year of the District, audited financial statements for such fiscal year, (iii) within 30 days after the approval thereof, each annual budget of the District, and, (iv) from time to time, such other information, data or reports as the Insurer may reasonably request.

The Trustee will provide the Insurer with notice of any default hereunder or under the Facilities Sublease within five Business Days of obtaining actual knowledge thereof. The District will provide the Insurer with notice of any default hereunder or under the Facilities Sublease within five Business Days of obtaining actual knowledge thereof.

The District will provide the Insurer with prior notice of the advance refunding or prepayment of any of the Certificates, including the principal amount, maturities and CUSIP numbers thereof.

The District will provide the Insurer with notice of the resignation or removal of the Trustee or the Depository, and the appointment of, and acceptance of duties by, any successor thereto.

Each of the District and the Trustee agrees that it will, if it has actual knowledge thereof, promptly notify the Insurer of (i) the commencement of any Insolvency Proceeding by or against the District, and (ii) the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal or interest evidenced by the Certificate.

The Trustee will, at the time any report, notice or correspondence is delivered to Owners of the Certificates pursuant to the provisions hereof, deliver a copy of such report, notice or correspondence to the Insurer.

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The District will provide the Insurer with all information furnished pursuant to the Continuing Disclosure Certificate simultaneously with the furnishing of such information.

The Trustee is required to notify the Insurer of any failure of the District to provide notices, certificates and other information required to be delivered to the Trustee under the Trust Agreement or the Facilities Sublease.

Reserve Policy Requirements

So long as the Reserve Policy is in full force and effect, the Trustee agrees to comply with the following provisions:

If, on the fifth Insurance Business Day prior to a Principal Payment Date or Interest Payment Date moneys on deposit in the Base Rental Payment Fund, the Interest Fund and/or the Principal Fund, as applicable, plus all amounts on deposit in and credited to the Reserve Fund in excess of the amount of the Reserve Policy, are insufficient to pay the amount of principal and interest coming due, the Trustee will give notice to the Reserve Insurer by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day.

The District agrees, to the extent permitted by law, to pay or reimburse the Reserve Insurer any and all charges, fees, costs and expenses which the Reserve Insurer may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with any actions taken to facilitate payments under the Reserve Policy.

Benefits of Trust Agreement Limited to Parties

Nothing contained in the Trust Agreement, expressed or implied, is intended to give to any person other than the Corporation, the District, the Trustee, the Insurer and the Owners any claim, remedy or right under or pursuant to the Trust Agreement, and any agreement, condition, covenant or term required in the Trust Agreement to be observed or performed by or on behalf of the Corporation or the District will be for the sole and exclusive benefit of the Trustee, the Insurer and the Owners.

Successor Deemed Included in all References to Predecessor

Whenever either the Corporation, the District or the Trustee or any officer thereof is named or referred to in the Trust Agreement, such reference will be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation, the District or the Trustee or such officer, and all agreements, conditions, covenants and terms required to be observed or performed by or on behalf of the Corporation, the District or the Trustee or any officer thereof will bind and inure to the benefit of the respective successors thereof whether so expressed or not.

Waiver of Personal Liability

No member of the Governing Board, officer or employee of the District will be individually or personally liable for the payment of the interest or principal represented by the Certificates, but nothing contained in the Trust Agreement will relieve any member of the Governing Board, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or by the Facilities Sublease or by the Trust Agreement.

Acquisition of Certificates by District

All Certificates acquired by the District, whether by purchase or gift or otherwise, will be surrendered to the Trustee for cancellation.

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Funds

Any fund required to be established and maintained in the Trust Agreement by the Trustee except the Rebate Fund may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such funds will at all times be maintained in accordance with current corporate trust industry standards and with due regard for the protection of the security of the Certificates and the rights of the Owners.

Except for moneys held in the Rebate Fund, the Trustee may commingle any of the moneys held by it under the Trust Agreement for investment purposes only; provided, however, that the Trustee will account separately for the moneys in each fund or account established pursuant to the Trust Agreement or the Facilities Sublease.

Continuing Disclosure

The District covenants that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the Trust Agreement, failure of the District to comply with the Continuing Disclosure Certificate will not be considered an Event of Default; however, the Trustee will (at the request of any Participating Underwriter, as defined in the Continuing Disclosure Certificate, who will have indemnified the Trustee to its satisfaction under the Trust Agreement applicable to the Owners, or at the request of the Owners of at least 25% aggregate principal amount of Outstanding Certificates, upon providing the Trustee with indemnity satisfactory to it) or any Owner or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under the Trust Agreement. For purposes of the Trust Agreement as provided therein, “Beneficial Owner” means any person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries). “Continuing Disclosure Certificate” will mean that certain Continuing Disclosure Certificate executed and delivered by the District, dated the date of issuance and delivery of the Certificates, as originally executed and as it may be amended from time to time in accordance with the terms thereof, in order to permit the original purchasers of the Certificates to comply with Rule 15c2-12 promulgated by the Securities and Exchange Commission.

California Law

The Trust Agreement will be construed and governed in accordance with the laws of the State of California.

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APPENDIX B

FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2015

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ANNUAL FINANCIAL REPORT

JUNE 30, 2015

TRAVIS UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTSJUNE 30, 2015

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

Government-Wide Financial StatementsStatement of Net Position 18Statement of Activities 19

Fund Financial StatementsGovernmental Funds - Balance Sheet 20Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 21Governmental Funds - Statement of Revenues, Expenditures, and Changes in FundBalances

22

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, andChanges in Fund Balances to the Statement of Activities 23

Fiduciary Funds - Statement of Net Position and Changes in Net Position 24Notes to Financial Statements 25

REQUIRED SUPPLEMENTARY INFORMATIONGeneral Fund - Budgetary Comparison Schedule 67Schedule of Other Postemployment Benefits (OPEB) Funding Progress 68Schedule of the District's Proportionate Share of the Net Pension Liability 69Schedule of District Contributions 70

SUPPLEMENTARY INFORMATIONSchedule of Expenditures of Federal Awards 72Local Education Agency Organization Structure 73Schedule of Average Daily Attendance 74Schedule of Instructional Time 75Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 76Schedule of Financial Trends and Analysis 77Combining Statements - Non-Major Governmental Funds

Combining Balance Sheet 78Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 79

Note to Supplementary Information 80

INDEPENDENT AUDITOR'S REPORTSReport on Internal Control Over Financial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performed in Accordance With GovernmentAuditing Standards 83

Report on Compliance for Each Major Program and Report on Internal Control Over ComplianceRequired by the OMB Circular A-133 85

Report on State Compliance 87

TRAVIS UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTSJUNE 30, 2015

SCHEDULE OF FINDINGS AND QUESTIONED COSTSSummary of Auditor's Results 91Financial Statement Findings 92Federal Awards Findings and Questioned Costs 95State Awards Findings and Questioned Costs 96Summary Schedule of Prior Audit Findings 97

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FINANCIAL SECTION

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INDEPENDENT AUDITOR'S REPORT

Governing BoardTravis Unified School DistrictFairfield, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and theaggregate remaining fund information of the Travis Unified School District (the District) as of and for the yearended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District'sbasic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted ouraudit in accordance with auditing standards generally accepted in the United States of America and the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the 2014-2015 Guide for Annual Audits of K-12 Local Education Agencies and StateCompliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

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

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

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

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

VALUE THE D IFFERENCE

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, each major fund, and the aggregate remaining fund informationof the Travis Unified School District, as of June 30, 2015, and the respective changes in financial position and,where applicable, cash flows thereof for the year then ended in accordance with accounting principles generallyaccepted in the United States of America.

Emphasis of Matter - Change in Accounting Principles

As discussed in Note 1 and 15 to the financial statements, in 2015, the District adopted new accounting guidance,GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71,Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modifiedwith respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the required supplementaryinformation, such as management's discussion and analysis on pages 5 through 17, and the budgetary comparison,other postemployment benefit information, District's proportionate share of the net pension liability, and theDistrict contributions on pages 67 through 70, respectively, be presented to supplement the basic financialstatements. Such information, although not a part of the basic financial statements, is required by theGovernmental Accounting Standards Board who considers it to be an essential part of financial reporting forplacing the basic financial statements in an appropriate operational, economic, or historical context. We haveapplied certain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries of management aboutthe methods of preparing the information and comparing the information for consistency with management'sresponses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of thebasic financial statements. We do not express an opinion or provide any assurance on the information because thelimited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the Travis Unified School District's basic financial statements. The accompanying supplementaryinformation such as the combining and individual nonmajor fund financial statements and Schedule ofExpenditures of Federal Awards, as required by Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, and the other supplementary information as listed onthe table of contents, are presented for purposes of additional analysis and are not a required part of the basicfinancial statements.

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

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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2015, on our consideration of the Travis Unified School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Travis Unified School District's internal control over financial reporting and compliance.

Rancho Cucamonga, California December 15, 2015

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Kate Wren GavlakSuperintendent

2751 De Ronde DriveFairfield, CA 94533

(707) 437-4604

Cambridge Elementary School

100 Cambridge Drive, Vacaville

(707) 446-9494

Center Elementary School

3101 Markeley Lane, Fairfield

(707) 437-4621

Foxboro Elementary School

600 Morning Glory Drive, Vacaville

(707) 447-7883

Golden West Middle School

2651 De Ronde Drive, Fairfield

(707) 437-8240

Scandia Elementary School

100 Broadway Street, Travis AFB

(707) 437-4691

Travis Community Day School

2785 De Ronde Drive, Fairfield

(707) 437-8265

Travis Elementary School

100 Fairfield Avenue, Travis AFB

(707) 437-2070

Travis Education Center

2775 De Ronde Drive, Fairfield

(707) 437-8265

Vanden High School

2951 Markeley Lane, Fairfield

(707) 437-7333

Governing BoardRiitta DeAnda

John DickersonIvery Hood

Angela WeinzingerJamilah Whiteside

This section of Travis Unified School District's (the District) annual financialreport presents our discussion and analysis of the District's financial performanceduring the fiscal year that ended on June 30, 2015, with comparative informationfrom 2014. Please read it in conjunction with the District's financial statements,which immediately follow this section.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Financial Statements

The financial statements presented herein include all of the activities of theDistrict and its component units using the integrated approach as prescribed byGovernmental Accounting Standards Board (GASB) Statement No. 34.

The Government-Wide Financial Statements present the financial picture of theDistrict from the economic resources measurement focus using the accrual basisof accounting. These statements include all assets of the District, as well as allliabilities (including long-term obligations). Additionally, certain eliminationshave occurred as prescribed by the statement in regards to interfund activity,payables, and receivables.

The Fund Financial Statements include statements for each of the two categoriesof activities: governmental and fiduciary.

The Governmental Activities are prepared using the current financial resourcesmeasurement focus and modified accrual basis of accounting.

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

The Primary unit of the government is the Travis Unified School District.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

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FINANCIAL HIGHLIGHTS OF FISCAL YEAR 2014-2015

Fiscal year 2014-2015 was the second implementation year of the Local Control Funding Formula (LCFF).The difference between what the law calculates as full funding, the LCFF target for each school district andthe amount each school district receives is called the "gap". Gap funding factors for each year of the law mustbe determined annually by the Legislature. Estimated gap funding and annual Cost of Living Adjustment(COLA) estimates were provided by the California Department of Finance (DOF). Compared to last fiscalyear, the current LCFF gap funding percentages and estimates increased dramatically and the annual COLAestimates declined.

Estimate2014-15

Actual2014-15

Estimate2015-16

Estimate2016-17

Estimate2017-18

Estimate2018-19

LCFF Gap Funding Percentage 28.06% 29.97% 51.52% 35.55% 35.11% 19.88%

Annual COLA 0.85% 0.85% 1.02% 1.60% 2.48% 2.87%

As of June 26, 2015 of SSC Volume 35, No. 13.

As presented above, with the increase in the LCFF Gap Funding Percentage and COLA rate, there was anincrease to the overall revenue to school districts throughout the State of California. The impact has broughtthe District above the level of funding it received in fiscal year 2008-2009, its highest level of funding priorto the economic downturn. A history of our revenue beginning 2008-2009 is below.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

7

Looking at the District's revenue stream per Average Daily Attendance (ADA) basis provides a measure ofhow increased funding has dramatically provided relief to the underfunding of Pre K-12 education withinCalifornia. While this relief is well above the Total Revenue Per ADA in 2008-2009, the likelihood of therevenues continuing in future years remains unknown.

When you take into account the impact of inflation the District has experienced roughly a gain of $600,000 inpurchasing power. Below is historical and projected inflation for our area.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

8

Shown on a per pupil basis there is a sufficient amount of funding for the first time since 2008.

The chart below shows our erratic funding levels. It is because of this type of funding it is very difficult todetermine how best to chart the course for the future.

It is extremely important to remember there is no requirement to increase funding each year, producingsignificant uncertainty into multi-year projections and the fiscal stability of all school districts within thestate.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

9

The next series of charts provides information directly related to the District's historic Revenue Limit fundingand for fiscal year 2014-2015 LCFF funding.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

10

As the reader may note LCFF first year funding caused per ADA revenue to increase 18.18 percent.Unfortunately this is not an accurate picture. LCFF rolled into base district funding many categoricalprograms, see other chart below on history of Other State Revenue and Local Revenue. This resulted inartificially increasing the per ADA amount as compared to previous years. Politically expedient butoperationally difficult for the Districts within the State that must still comply with many mandates andrequirements of these programs that once received separate identifiable funding.

While the increase in revenue and per ADA funding is a significant improvement over previous years, thefuture is still very uncertain. Proposition 30, approved by voters in November 2012, temporarily increasedthe State sales tax and income tax rates for high-income earners to address State revenue shortfalls stemmingfrom the Great Recession. The higher rates boosted revenues by over $7 million in 2014-2015. Unlessextended by the voters, these higher taxes will expire. The 0.25 percent sales tax increase expires 2016-2017fiscal year, and the personal income tax increase expires 2018-2019. Unless extended or replaced by otherrevenue sources, on average, districts could see a per ADA reduction of $529, or over $2.7 million.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

11

While Federal revenue is up slightly over the previous year we believe this is a temporary situation related toa specific grant that expired during the 2014-2015 fiscal year so we continue to be cautious about our federalfunding.

$2,443,401

$643,304

$2,495,234

$2,075,236$2,313,584

$2,305,941

$3,274,289

$4,412,786$3,471,707 $3,528,804

$2,945,934$3,765,586

7,852,537

$5,056,090

$5,966,941

$5,604,040$5,259,518

$6,071,527

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

Travis USD History of Federal Revenues Sources

Other Federal Impact Aid Total Federal Sources Percent Change

$2

,44

3,4

01

$6

43

,30

4

$2,495,234

$2

,07

5,2

36

$2

,31

3,5

84

$2

,30

5,9

41

$3

,27

4,2

89

$4

,41

2,7

86

$3

,47

1,7

07

$3

,52

8,8

04 $2,945,934

$3

,76

5,5

86

$5,717,690

$5,056,090

$5,966,941$5,604,040 $5,259,518

$6,071,527

-27.19%

-11.57%

18.01%

-6.08%

-6.15%

15.44%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

Federal Revenue History

Other Federal Impact Aid Total Federal Sources Percent Change

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

12

Average Daily Attendance (ADA) continues to be an area of concern for the District. ADA for the 2014-2015fiscal year did not meet projections and the District is reducing projections for future years until the root causeof this situation can be determined.

The State Teachers Retirement System (STRS) and the Public Employment Retirement System (PERS)substantially increased the District's required contribution and will increase faster than forecasted revenues.Legislation that was enacted in the 2013-2014 year places a significant burden on all California schooldistricts starting this year to fund the unfunded liability related to both teacher and classified employeeretirements.

o The CalPERS Board also recently voted to alter their investment strategy and methodology forforecasting future returns on investments. This may have a major impact on all governmentalagencies that must pay into CalPERS as this could substantially increase the employer cost in futureyears.

CalPERS Rates

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

11.847% 13.05% 16.60% 18.20% 19.90% 20.40%

CalSTRS Rates

2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

10.73% 12.58% 14.43% 16.28% 18.13% 19.10%

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

13

Proposition 39, the California Clean Energy Jobs Act, was approved in 2012 and provides funding to LEAsfor improving energy efficiency and creating clean energy jobs. This increased state corporate tax revenueswhich allocated $304,378.00 to the Travis Unified School District with $205,887.00 in the 2014-2015 year.These funds are distributed among all the school sites and categories of audits, assistance, an EnergyManager, and training.

The District continues to monitor its ending Fund Balance. As shown by the chart below it is again decliningalthough not as rapidly as originally budgeted. While still above the limits that may be imposed by State lawshould certain conditions be met the District continues to believe that it is too low to sustain operations atcurrent levels should another economic downturn occur.

Under-funding of K-12 education within California and specifically Travis Unified continues. Despiteforecasts by the Legislative Analyst Office that California is better prepared to handle an economic downturnthat it has been in decades and increasing revenue forecasts, the State is not appropriately funding K-12education.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

14

Under the provisions of the new State Funding Formula (LCFF) Travis will continue to decline in funding perpupil compared to other Districts. San Diego Unified has invested in a comprehensive study of what fundingshould look like to make us competitive with other states. Here is a brief summary of what they have found:

Using the information above look at comparison data of how California compares with other states:

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

15

Now look at some specific data for Travis Unified:

While the District is being fiscally responsible with its resources unless there is some recognition by the State ofthe significant shortfall of K-12 education funding in relation to the significant needs to address class size,employee compensation, student technology needs, and infrastructure maintenance and upgrades the quality ofeducation for our students will not be at a level that will allow us to compete effectively in a global economy.

This continues to be a significant challenge for our District.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

16

THE DISTRICT'S FUNDS

As the District completed this year, our governmental funds reported a combined fund balance of $20,776,621,which is a decrease of $820,307 from last year (Table 4).

July 01, 2014 Revenues Expenditures June 30, 2015

General Fund 8,784,305$ 48,626,812$ 49,811,000$ 7,600,117$

Capital Facilities Fund 5,152,234 1,424,219 5,582,476 993,977Special Reserve Fund for Capital

Outlay Projects 70,895 3,500,365 - 3,571,260

Mello-Roos Capital Project Fund 3,371,908 3,322,265 2,314,885 4,379,288

COP Debt Service Fund 3,382,737 2,402,609 2,401,822 3,383,524

Non-Major Governmental Funds 834,849 1,600,802 1,587,196 848,455Total 21,596,928$ 60,877,072$ 61,697,379$ 20,776,621$

Balances and Activity

Major changes occurred in the following funds:

Capital Facilities Funds: Construction of a new library at Vanden High School was conducted after years of delaydue to significant cash deferrals. Construction is due for completion in fiscal year 2016.

Special Reserve Fund for Capital Outlay Projects:

Travis Unified School District received a Department of Defense Office of Economic Adjustment grant for$17,241,064 to undertake planning, design, and construction activities at the Scandia Elementary School onTravis Air Force Base, California. The scope of work provides for renovation, modernization, and expansion ofthe Scandia Elementary School to address capacity and facility condition deficiencies, as determined by the July2011 Deputy Secretary of Defense "Public Schools on Military Installations Priority List". This is a matchprogram with the District providing $3.5 million. Construction is slated to begin late FY 2016.

The Cafeteria Fund continues to be an area of concern with low meal participation levels impacting federal andstate reimbursements, as well as, reduced daily sales.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a generaloverview of the District's finances and to show the District's accountability for the money it receives. This reportonce approved by the Board of Trustees will be published to the District website. If you have questions about thisreport or need additional financial information, please contact Jamie Metcalf, Asst. in Training-Director, FiscalServices, Travis Unified School District, 2751 De Ronde Drive, Fairfield, California 94533.

TRAVIS UNIFIED SCHOOL DISTRICT

MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2015

17

Acknowledgements:

Portions of this letter relied on information provided by:

School Services of California, Inc.

California County Superintendents Educational Services Association (CCSESA)Common Message, First Interim 2014-15, November 2014

Legislative Analyst's OfficeThe 2015-2016 Budget California's Fiscal Outlook, November 2014

TRAVIS UNIFIED SCHOOL DISTRICT

STATEMENT OF NET POSITIONJUNE 30, 2015

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

18

Governmental

Activities

ASSETS

Deposits and investments 18,239,010$

Restricted investments 3,383,524

Receivables 2,102,084

Due from warrant pass-thru 15,690

Prepaid expenses 7,011

Stores inventories 63,840

Capital assets:

Land and construction in process 18,617,646

Other capital assets 77,114,069

Less: Accumulated depreciation (30,827,088)

Total Capital Assets 64,904,627

Total Assets 88,715,786

DEFERRED OUTFLOWS OF RESOURCES

Current year pension contribution 4,430,221

LIABILITIES

Accounts payable 2,458,052

Due to warrant pass-thru 251,292

Interest payable 533,429

Unearned revenue 325,194

Long-term obligations

Current portion of long-term obligations other than pensions 929,620

Noncurrent portion of long-term obligations other than pensions 33,034,459

Total Long-term obligation 33,964,079

Aggregate net pension liability 34,062,842Total Liabilities 71,594,888

DEFERRED INFLOWS OF RESOURCESDifference between projected and actual earnings on pension plan investments 9,091,810

NET POSITION

Net investment in capital assets 31,855,627

Restricted for:

Debt service 2,850,095

Capital projects 9,651,788

Educational programs 1,002,734

Other activities 43,515

Unrestricted (Deficit) (32,944,450)Total Net Position 12,459,309$

TRAVIS UNIFIED SCHOOL DISTRICT

STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015

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

19

Net Expensesand

Changes inNet Position

Charges for Operating

Services and Grants and GovernmentalFunctions/Programs Expenses Sales Contributions Activities

Governmental Activities:Instruction 29,729,088$ 11,690$ 4,232,633$ (25,484,765)$Instruction-related activities:

Supervision of instruction 1,353,836 4,897 294,518 (1,054,421)Instructional library, media,and technology 1,385,938 883 96,710 (1,288,345)

School site administration 2,717,533 139 111,545 (2,605,849)Pupil services:

Home-to-school transportation 1,402,312 7 1,762 (1,400,543)Food services 1,663,412 614,669 679,752 (368,991)All other pupil services 2,509,994 3 237,691 (2,272,300)

Administration:Data processing 745,258 - - (745,258)All other administration 2,944,046 26,132 165,011 (2,752,903)

Plant services 4,133,754 4,527 293,572 (3,835,655)Ancillary services 252,350 42 6,576 (245,732)Interest on long-term obligations 1,622,761 - - (1,622,761)Other outgo 897,440 - 85,471 (811,969)

Total Governmental Activities 51,357,722$ 662,989$ 6,205,241$ (44,489,492)

General revenues and subventions:

Property taxes, levied for general purposes 3,814,642

Taxes levied for other specific purposes 3,307,890

38,165,094

Interest and investment earnings 99,408

Miscellaneous 4,030,207

Subtotal, General Revenues 49,417,241

Change in Net Position 4,927,749

Net Position - Beginning 47,719,324

Prior Period Adjustment (40,187,764)

Net Assets - Beginning (as Restated) 7,531,560Net Position - Ending 12,459,309$

Program Revenues

Federal and State aid not restricted to specific

purposes

[THIS PAGE INTENTIONALLY LEFT BLANK]

TRAVIS UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDSBALANCE SHEETJUNE 30, 2015

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

20

Special Reserve

Capital Fund for

General Facilities Capital Outlay

Fund Fund Projects

ASSETS

Deposits and investments 11,017,480$ 2,095,154$ 71,260$Restricted investments - -

Receivables 1,796,773 12,778 -

Due from other funds 171,213 - 3,500,000

Prepaid expenditures 7,011 - -

Stores inventories 32,488 - -Total Assets 13,024,965$ 2,107,932$ 3,571,260$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 1,298,490$ 1,071,772$ -

Due to other funds 3,801,164 42,183 -

Unearned revenue 325,194 - -

Total Liabilities 5,424,848 1,113,955 -

Fund Balances:

Nonspendable 89,499 - -

Restricted 1,002,734 993,977 -

Committed 179,692 - -

Assigned 1,667,053 - 3,571,260

Unassigned 4,661,139 - -

Total Fund Balances 7,600,117 993,977 3,571,260

Total Liabilities andFund Balances 13,024,965$ 2,107,932$ 3,571,260$

20

Mello-Roos COP Non-Major Total

Capital Project Debt Service Governmental Governmental

Fund Fund Funds Funds

4,274,710$ -$ 780,406$ 18,239,010$- 3,383,524 - 3,383,524

161,428 - 131,105 2,102,084

- - 49,872 3,721,085

- - - 7,011

- - 31,352 63,8404,436,138$ 3,383,524$ 992,735$ 27,516,554$

56,850$ -$ 30,940$ 2,458,052$

- - 113,340 3,956,687

- - - 325,194

56,850 - 144,280 6,739,933

- - 31,352 120,851

120 3,383,524 720,046 6,100,401

4,379,168 - 97,057 4,655,917

- - - 5,238,313

- - - 4,661,139

4,379,288 3,383,524 848,455 20,776,621

4,436,138$ 3,383,524$ 992,735$ 27,516,554$

TRAVIS UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET POSITIONJUNE 30, 2015

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

21

Total Fund Balance - Governmental Funds 20,776,621$

Amounts Reported for Governmental Activities in the Statement

of Net Position are Different Because:

Capital assets used in governmental activities are not financial resources

and, therefore, are not reported as assets in governmental funds.

The cost of capital assets is: 95,731,715$

Accumulated depreciation is: (30,827,088)

Net Capital Assets 64,904,627

Expenditures relating to contributions made to pension plans were recognized

on the modified accrual basis, but are not recognized on the accrual basis. 4,430,221

In governmental funds, unmatured interest on long-term obligations is

recognized in the period when it is due. On the government-wide

financial statements, unmatured interest on long-term obligations

is recognized when it is incurred. (533,429)

The difference between projected and actual earnings on pension plan

investments are not recognized on the modified accrual basis, but are

recognized on the accrual basis as an adjustment to pension expense. (9,091,810)

Net pension liability is not due and payable in the current period, and is not

reported as a liability in the funds. (34,062,842)

Long-term obligations, including bonds payable, are not due and payable

in the current period and, therefore, are not reported as obligations

in the funds.

Long-term obligations at year-end consist of:

Certificates of participation 32,960,000

Capital leases payable 89,620

Compensated absences (vacations) 282,047

Net OPEB obligation 632,412

Total Long-Term Obligations (33,964,079)Total Net Position - Governmental Activities 12,459,309$

[THIS PAGE INTENTIONALLY LEFT BLANK]

TRAVIS UNIFIED SCHOOL DISTRICT

GOVERNMENTAL FUNDSSTATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCESFOR THE YEAR ENDED JUNE 30, 2015

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

22

Special ReserveCapital Fund for

General Facilities Capital OutlayFund Fund Projects

REVENUESLocal Control Funding Formula 36,882,935$ -$ -$Federal sources 6,071,527 - -Other State sources 3,547,539 - -Other local sources 2,082,628 1,424,219 365

Total Revenues 48,584,629 1,424,219 365EXPENDITURESCurrent

Instruction 27,781,933 - -Instruction-related activities:

Supervision of instruction 1,300,983 - -Instructional library, media and technology 1,390,642 - -School site administration 2,689,447 - -

Pupil services:Home-to-school transportation 1,263,894 - -Food services 68,666 - -All other pupil services 2,448,789 - -

Administration:Data processing 745,960 - -All other administration 2,813,950 - -

Plant services 4,059,595 66,194 -Facility acquisition and construction 1,691 5,474,099 -Ancillary services 251,665 - -Other outgo 897,440 - -

Debt servicePrincipal 349,691 - -Interest and other 16,962 - -

Total Expenditures 46,081,308 5,540,293 -

Excess (Deficiency) of Revenues

Over Expenditures 2,503,321 (4,116,074) 365Other Financing Sources (Uses)

Transfers in 42,183 - 3,500,000Transfers out (3,729,692) (42,183) -

Net Financing Sources (Uses) (3,687,509) (42,183) 3,500,000NET CHANGE IN FUND BALANCES (1,184,188) (4,158,257) 3,500,365Fund Balances - Beginning 8,784,305 5,152,234 70,895Fund Balances - Ending 7,600,117$ 993,977$ 3,571,260$

22

Mello-RoosCapital COP Non-Major TotalProject Debt Service Governmental GovernmentalFund Fund Funds Funds

-$ -$ -$ 36,882,935$- - 648,351 6,719,878- - 50,175 3,597,714

3,322,265 184,037 672,584 7,686,0983,322,265 184,037 1,371,110 54,886,625

- - - 27,781,933

- - - 1,300,983- - - 1,390,642- - - 2,689,447

- - - 1,263,894- - 1,428,015 1,496,681- - - 2,448,789

- - - 745,960- - 59,927 2,873,877- - 99,254 4,225,043

96,313 - - 5,572,103- - - 251,665- - - 897,440

- 785,000 - 1,134,691- 1,616,822 - 1,633,784

96,313 2,401,822 1,587,196 55,706,932

3,225,952 (2,217,785) (216,086) (820,307)

- 2,218,572 229,692 5,990,447(2,218,572) - - (5,990,447)(2,218,572) 2,218,572 229,692 -1,007,380 787 13,606 (820,307)3,371,908 3,382,737 834,849 21,596,9284,379,288$ 3,383,524$ 848,455$ 20,776,621$

TRAVIS UNIFIED SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2015

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

23

Total Net Change in Fund Balances - Governmental Funds (820,307)$

Amounts Reported for Governmental Activities in the Statement

of Activities are Different Because:

Capital outlays to purchase or build capital assets are reported in

governmental funds as expenditures; however, for governmental

activities, those costs are shown in the Statement of Net Position and

allocated over their estimated useful lives as annual depreciation expenses

in the Statement of Activities.

This is the amount by which capital outlays exceeds depreciation

in the period.

Capital outlays 5,718,820$

Depreciation expense (2,432,194)

Net Expense Adjustment 3,286,626

In the Statement of Activities, certain operating expenses, such as

compensated absences (vacations) are measured by the amounts earned

during the year. In the governmental funds, however, expenditures or

these items are measured by the amount of financial resources used

(essentially, the amounts actually paid). Vacation used was less

amounts earned by $74,372. (74,372)

In the Statement of Activities, Other Postemployment Benefit Obligations

(OPEB) are measured by an actuarially determined Annual Required

Contribution (ARC). In the governmental funds, however, expenditures

for these items are measured by the amount of financial resources used

(essentially, the amounts actually paid). This year, amounts contributed

toward the OPEB obligation were less than the ARC by $73,245. (73,245)

In the governmental funds, pension costs are based on employer contributions

made to pension plans during the year. However, in the Statement of

Activities, pension expense is the net effect of all changes in he deferred

outflows, deferred inflows and net pension liability during the year. 1,463,333

Payment of principal on long-term obligations is an expenditure in the

governmental funds, but it reduces long-term obligations in the Statement

of Net Position and does not affect the Statement of Activities.

Certificates of participation 785,000

Capital lease obligations 349,691

Interest on long-term obligations is recorded as an expenditure in the funds

when it is due; however, in the Statement of Activities, interest expense is

recognized as the interest accrues, regardless of when it is. 11,023Change in Net Position of Governmental Activities 4,927,749$

TRAVIS UNIFIED SCHOOL DISTRICT

FIDUCIARY FUNDSSTATEMENT OF NET POSITION AND CHANGES IN NET POSITIONJUNE 30, 2015

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

24

Associated Total

Student Scholarship Warrant Fiduciary

Bodies Trust Pass-Thru Funds

ASSETS

Deposits and investments 221,310$ 7,169$ 2,384,525$ 2,613,004$

Receivables - - 3,792 3,792

Due from other funds - - 251,292 251,292Total Assets 221,310$ 7,169$ 2,639,609$ 2,868,088$

LIABILITIES

Due to student groups/other agencies 221,310$ -$ 2,623,919$ 2,845,229$

Due to other funds - - 15,690 15,690Total Liabilities 221,310$ - 2,639,609$ 2,860,919

NET POSITIONHeld in trust for scholarships 7,169$ -$ 7,169$

Scholarship

ADDITIONS Trust

Private donations 120$

Interest 38

Total Additions 158

DEDUCTIONS

Other expenditures 1,000

Change in Net Position (842)

Net Position - Beginning 8,011Net Position - Ending 7,169$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

25

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The Travis Unified School District (the District) was unified on January 30, 1962, under the laws of the State ofCalifornia. The District operates under a locally elected five member Board form of government and provideseducational services to grades K - 12 as mandated by the State and/or Federal agencies. The District operates fiveelementary schools, one middle school, one high school, one alternative education high school, and onecommunity day school.

A reporting entity is comprised of the primary government, component units, and other organizations that areincluded to ensure the financial statements are not misleading. The primary government of the District consists ofall funds, departments, boards, and agencies that are not legally separate from the District. For Travis UnifiedSchool District, this includes general operations, food service, and student related activities of the District.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Componentunits may also include organizations that are fiscally dependent on the District, in that the District approves theirbudget, the issuance of their debt or the levying of their taxes. In addition, component units are other legallyseparate organizations for which the District is not financially accountable but the nature and significance of theorganization's relationship with the District is such that exclusion would cause the District's financial statementsto be misleading or incomplete. For financial reporting purposes, the component units have a financial andoperational relationship which meets the reporting entity definition criteria of the Governmental AccountingStandards Board (GASB) Statement No. 14, The Financial Reporting Entity, and thus are included in the financialstatements of the District. The component units, although legally separate entities, are reported in the financialstatements using the blended presentation method as if they were part of the District's operations because thegoverning board of the component units is essentially the same as the governing board of the District and becausetheir purpose is to finance the construction of facilities to be used for the direct benefit of the District.

The California School Boards Association Finance Corporation's financial activity is presented in the financialstatements as the COP Capital Project Fund and the COP Debt Service Fund. Certificates of participation issuedby the Corporation are included as long-term liabilities in the government-wide financial statements.

The Travis Unified School District CFD No. 1 and CFD No. 2 financial activity is presented in the financialstatements as the Mello-Roos Capital Projects Fund and the Debt Service Fund used to pay the certificates ofparticipation issued by the California School Boards Association Finance Corporation included in theGovernmental Funds of the District.

Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accountingentity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activitiesor attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District'sfunds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

26

Governmental Funds Governmental funds are those through which most governmental functions typically arefinanced. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources.Expendable assets are assigned to the various governmental funds according to the purposes for which they mayor must be used. Current liabilities are assigned to the fund from which they will be paid. The differencebetween governmental fund assets and liabilities is reported as fund balance. The following are the District'smajor and non-major governmental funds:

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinaryoperations of the District. All transactions except those accounted for in another fund are accounted for in thisfund.

One fund is currently defined, as a special revenue fund in the California State Accounting Manual (CSAM) doesnot meet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 20, Special ReserveFund for Postemployment Benefits, is not substantially composed of restricted or committed revenue sources.While this fund is authorized by statute and will remain open for internal reporting purposes, this fund functionseffectively as an extension of the General Fund, and accordingly has been combined with the General Fund forpresentation in these audited financial statements.

As a result, the General Fund reflects an increase in assets, fund balance, and revenues of $29,044, $29,044, and$148, respectively.

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies receivedfrom fees levied on developers or other agencies as a condition of approving a development (Education CodeSections 17620-17626). Expenditures are restricted to the purposes specified in Government Code Sections65970-65981 or to the items specified in agreements with the developer (Government Code Section 66006).

Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects existsprimarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education CodeSection 42840).

Mello-Roos Capital Project Fund The Mello-Roos Capital Project Fund is used to account for capital projectsfinanced by the Community Facilities Districts that are considered component units of the District under generallyaccepted accounting principles.

COP Debt Service Fund The COP Debt Service Fund is used to account for the interest and redemption ofprincipal of Certificates of Participation.

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Non-Major Governmental Funds

Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specificrevenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to thefinancing of particular activities and that compose a substantial portion of the inflows of the fund. Additionalresources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund.

Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources tooperate the food service program (Education Code Sections 38090-38093) and is used only for thoseexpenditures authorized by the governing board as necessary for the operation of the District's food serviceprogram (Education Code Sections 38091 and 38100).

Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for Stateapportionments and the District's contributions for deferred maintenance purposes (Education Code Sections17582-17587) and for items of maintenance approved by the State Allocation Board.

Capital Project Funds The Capital Project funds are used to account for and report financial resources that arerestricted, committed, or assigned to the acquisition or construction of major capital facilities and other capitalassets (other than those financed by proprietary funds and trust funds).

Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds(Education Code Section 15146) and may not be used for any purposes other than those for which the bondswere issued. In addition, it accounts for proceeds received from the issuance of certificates of participationfor the purpose of funding land acquisition and school facility construction projects.

County School Facilities Fund The County School Facilities Fund is established pursuant to EducationCode Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund (PropositionlA), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund(Proposition 55) authorized by the State Allocation Board for new school facility construction, modernizationprojects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998(Education Code Section 17070 et seq.)

Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others thatcannot be used to support the District's own programs. The fiduciary fund category is split into fourclassifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. Thekey distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects thedegree of management involvement and the length of time that the resources are held.

Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide financial statements are prepared using theeconomic resources measurement focus and the accrual basis of accounting. This is the same approach used inthe preparation of the proprietary fund financial statements, but differs from the manner in which governmentalfund financial statements are prepared.

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The government-wide Statement of Activities presents a comparison between expenses, both direct and indirect,for each governmental function. Direct expenses are those that are specifically associated with a service,program, or department and are therefore, clearly identifiable to a particular function. The District does notallocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid bythe recipients of the goods or services offered by the programs and grants and contributions that are restricted tomeeting the operational or capital requirements of a particular program. Revenues that are not classified asprogram revenues are presented as general revenues. The comparison of program revenues and expensesidentifies the extent to which each program or business segment is self-financing or draws from the generalrevenues of the District.

Net position should be reported as restricted when constraints placed on net position are either externally imposedby creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governmentsor imposed by law through constitutional provisions or enabling legislation. The net position restricted for otheractivities result from special revenue funds and the restrictions on their use.

Fund Financial Statements Fund financial statements report detailed information about the District. The focusof governmental fund financial statements is on major funds rather than reporting funds by type. Each major fundis presented in a separate column. Non-major funds are aggregated and presented in a single column.

Governmental Funds All governmental funds are accounted for using the flow of current financialresources measurement focus and the modified accrual basis of accounting. With this measurement focus,only current assets and current liabilities generally are included on the balance sheet. The Statement ofRevenues, Expenditures, and Changes in Fund Balances reports on the sources (revenues and other financingsources) and uses (expenditures and other financing uses) of current financial resources. This approachdiffers from the manner in which the governmental activities of the government-wide financial statements areprepared. Governmental fund financial statements, therefore, include reconciliations with brief explanationsto better identify the relationship between the government-wide financial statements, prepared using theeconomic resources measurement focus and the accrual basis of accounting, and the governmental fundfinancial statements, prepared using the flow of current financial resources measurement focus and themodified accrual basis of accounting.

Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurementfocus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financialstatements because they do not represent resources of the District.

Revenues – Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, inwhich each party gives and receives essentially equal value, is recorded on the accrual basis when the exchangetakes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources aremeasurable and become available. Available means that the resources will be collected within the current fiscalyear or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year.Generally, available is defined as collectible within 60 days. However, to achieve comparability of reportingamong California districts and so as not to distort normal revenue patterns, with specific respect to reimbursementgrants and corrections to State-aid apportionments, the California Department of Education has defined availablefor districts as collectible within one year. The following revenue sources are considered to be both measurableand available at fiscal year-end: State apportionments, interest, certain grants, and other local sources.

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Non-exchange transactions, in which the District receives value without directly giving equal value in return,include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized inthe fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations isrecognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirementsinclude time and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions mustalso be available before it can be recognized.

Under the modified accrual basis, the following revenue sources are considered to be both measurable andavailable at fiscal year-end: State apportionments, interest, certain grants, and other local sources.

Unearned Revenue Unearned revenue arises when potential revenue does not meet both the "measurable" and"available" criteria for recognition in the current period or when resources are received by the District prior to theincurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, orwhen the District has a legal claim to the resources, the liability for unearned revenue is removed from the balancesheet and revenue is recognized.

Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On thegovernmental fund financial statements, receivables that will not be collected within the available period are alsorecorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they areincurred. The measurement focus of governmental fund accounting is on decreases in net financial resources(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which therelated fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on long-term obligations, which has not matured, are recognized when paid in the governmental funds as expenditures.Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but arerecognized in the government-wide financial statements.

Investments

Investments held at June 30, 2015, with original maturities greater than one year are stated at fair value. Fairvalue is estimated based on quoted market prices at year-end. All investments not required to be reported at fairvalue are stated at cost or amortized cost. Fair values of investments in the county and investment pool aredetermined by the program sponsor.

Restricted Assets

Restricted assets arise when restrictions on their use change the normal understanding of the availability of theasset. Such constraints are either imposed by creditors, contributors, grantors, or laws of other governments orimposed by enabling legislation. Certain resources set aside for the repayment of the District's Certificates ofParticipation are classified on the Statement of Net Position and Governmental Funds Balance Sheet. Theseassets are maintained in separate investment accounts and their use is limited by applicable debt covenantrequirements.

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Prepaid Expenditures

Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The Districthas the option of reporting an expenditure in governmental funds for prepaid items either when purchased orduring the benefiting period. The District has chosen to report the expenditures when paid.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on theweighted average basis. The costs of inventory items are recorded as expenditures in the governmental typefunds.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by itsmeasurement focus. Capital assets are long-lived assets of the District. The District maintains a capitalizationthreshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs ofnormal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are notcapitalized, but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in thegovernment-wide Statement of Net Position. The valuation basis for capital assets is historical cost, or wherehistorical cost is not available, estimated historical cost based on replacement cost. Donated capital assets arecapitalized at estimated fair market value on the date donated.

Depreciation is computed using the straight-line method. Estimated useful lives of the various classes ofdepreciable capital assets are as follows: buildings, 20 to 50 years; improvements, 5 to 50 years; equipment, 2 to15 years.

Interfund Balances

On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as"interfund receivables/payables". These amounts are eliminated in the governmental activities column of theStatement of Net Position.

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absenceliability is reported on the government-wide Statement of Net Position. For governmental funds, the currentportion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employeeresignations and retirements that occur prior to year-end that have not yet been paid with expendable availablefinancial resources. These amounts are reported in the fund from which the employees who have accumulatedleave are paid.

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Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leavewith pay is provided when employees are absent for health reasons; however, the employees do not gain a vestedright to accumulated sick leave. Employees are never paid for any sick leave balance at termination ofemployment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability inthe District's financial statements. However, credit for unused sick leave is applicable to all classified schoolmembers who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit foreach day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and isdetermined by dividing the number of unused sick days by the number of base service days required to completethe last school year, if employed full-time.

Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities, and long-term obligations are reported in the government-wide financialstatements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timelymanner and in full from current financial resources are reported as obligations of the governmental funds.However, claims and judgments, compensated absences, special termination benefits, and contractually requiredpension contributions that will be paid from governmental funds are reported as a liability in the governmentalfund financial statements only to the extent that they are due for payment during the current year. Bonds, capitalleases, and other long-term obligations are recognized as liabilities in the governmental fund financial statementswhen due.

Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net position also reports deferred outflows of resources. This separatefinancial statement element represents a consumption of net position that applies to a future period and so will notbe recognized as an expense or expenditure until then. The District reports deferred outflows of resources for thecurrent year pension contributions.

In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources.This separate financial statement element represents an acquisition of net position that applies to a future periodand so will not be recognized as revenue until then. The District reports deferred inflows of resources for thedifference between projected and actual earnings on pension plan investments specific to the net pension liability.

Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions,and pension expense, information about the fiduciary net position of the California State Teachers RetirementSystem (CalSTRS) and the California Public Employees' Retirement System (CalPERS) plan for schools (Plans)and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as theyare reported by CalSTRS and CalPERS. For this purpose, benefit payments (including refunds of employeecontributions) are recognized when due and payable in accordance with the benefit terms. Member contributionsare recognized in the period in which they are earned. Investments are reported at fair value.

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Fund Balances - Governmental Funds

As of June 30, 2015, fund balances of the governmental funds are classified as follows:

Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they arelegally or contractually required to be maintained intact.

Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enablinglegislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws orregulations of other governments.

Committed - amounts that can be used only for specific purposes determined by a formal action of the governingboard. The governing board is the highest level of decision-making authority for the District. Commitments maybe established, modified, or rescinded only through resolutions or other action as approved by the governingboard.

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended tobe used for specific purposes. Under the District's adopted policy, only the governing board or chief businessofficer/assistant superintendent of business services may assign amounts for specific purposes.

Unassigned - all other spendable amounts.

Spending Order Policy

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available,the District considers restricted funds to have been spent first. When an expenditure is incurred for whichcommitted, assigned, or unassigned fund balances are available, the District considers amounts to have been spentfirst out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governingboard has provided otherwise in its commitment or assignment actions.

Minimum Fund Balance Policy

The governing board adopted a minimum fund balance policy for the General Fund in order to protect the Districtagainst revenue shortfalls or unpredicted on-time expenditures. The policy requires a Reserve for EconomicUncertainties consisting of unassigned amounts equal to no less than three percent of General Fund expendituresand other financing uses.

Net Position

Net position represents the difference between assets and liabilities. Net position net investment in capital assets,consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowingsused for the acquisition, construction or improvement of those assets. Net position is reported as restricted whenthere are limitations imposed on their use either through the enabling legislation adopted by the District orthrough external restrictions imposed by creditors, grantors, or laws or regulations of other governments. TheDistrict first applies restricted resources when an expense is incurred for purposes for which both restricted andunrestricted net position is available. The government-wide financial statements report $13,548,132 of restrictednet position.

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Interfund Activity

Transfers between governmental activities in the government-wide financial statements are reported in the samemanner as general revenues.

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses inthe purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment arereported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmentalfunds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid forthem are not presented in the financial statements. Interfund transfers are eliminated in the governmentalactivities column of the Statement of Activities.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Budgetary Data

The budgetary process is prescribed by provisions of the California Education Code and requires the governingboard to hold a public hearing and adopt an operating budget no later than July 1st of each year. The Districtgoverning board satisfied these requirements. The adopted budget is subject to amendment throughout the year togive consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the timeof budget adoption with the legal restriction that expenditures cannot exceed appropriations by major objectaccount.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when theoriginal appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetarystatements reflect the amounts after all budget amendments have been accounted for. For budget purposes, onbehalf payments have not been included as revenue and expenditures as required under generally acceptedaccounting principles.

Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in twoinstallments on November 1 and February 1 and become delinquent on December 13 and April 10, respectively.Unsecured property taxes are payable in one installment on or before August 31. The County of Solano bills andcollects the taxes on behalf of the District. Local property tax revenues are recorded when received.

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Change in Accounting Principles

In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions—anamendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting andfinancial reporting by state and local governments for pensions. It also improves information provided by stateand local governmental employers about financial support for pensions that is provided by other entities. ThisStatement results from a comprehensive review of the effectiveness of existing standards of accounting andfinancial reporting for pensions with regard to providing decision-useful information, supporting assessments ofaccountability and inter-period equity, and creating additional transparency.

This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and LocalGovernmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate topensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafterjointly referred to as trusts) that meet certain criteria. The requirements of Statements No. 27 and No. 50 remainapplicable for pensions that are not covered by the scope of this Statement.

The scope of this Statement addresses accounting and financial reporting for pensions that are provided to theemployees of state and local governmental employers through pension plans that are administered through truststhat have the following characteristics:

Contributions from employers and non-employer contributing entities to the pension plan and earnings onthose contributions are irrevocable.

Pension plan assets are dedicated to providing pensions to plan members in accordance with the benefitterms.

Pension plan assets are legally protected from the creditors of employers, non-employer contributingentities, and the pension plan administrator. If the plan is a defined benefit pension plan, plan assets alsoare legally protected from creditors of the plan members.

This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, anddeferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifiesthe methods and assumptions that should be used to project benefit payments, discount projected benefitpayments to their actuarial present value, and attribute that present value to periods of employee service.

Note disclosure and required supplementary information requirements about pensions also are addressed.Distinctions are made regarding the particular requirements for employers based on the number of employerswhose employees are provided with pensions through the pension plan and whether pension obligations andpension plan assets are shared. Employers are classified in one of the following categories for purposes of thisStatement:

Single employers are those whose employees are provided with defined benefit pensions through single-employer pension plans—pension plans in which pensions are provided to the employees of only oneemployer (as defined in this Statement).

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Agent employers are those whose employees are provided with defined benefit pensions through agentmultiple-employer pension plans—pension plans in which plan assets are pooled for investment purposesbut separate accounts are maintained for each individual employer so that each employer's share of thepooled assets is legally available to pay the benefits of only its employees.

Cost-sharing employers are those whose employees are provided with defined benefit pensions throughcost-sharing multiple-employer pension plans—pension plans in which the pension obligations to theemployees of more than one employer are pooled and plan assets can be used to pay the benefits of theemployees of any employer that provides pensions through the pension plan.

In addition, this Statement details the recognition and disclosure requirements for employers with liabilities(payables) to a defined benefit pension plan and for employers whose employees are provided with definedcontribution pensions. This Statement also addresses circumstances in which a non-employer entity has a legalrequirement to make contributions directly to a pension plan.

The District has implemented the Provisions of this Statement for the year ended June 30, 2015.

In November 2013, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequentto the Measurement Date — An Amendment of GASB Statement No. 68. The objective of this Statement is toaddress an issue regarding application of the transition provisions of Statement No. 68, Accounting and FinancialReporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state orlocal government employer or nonemployer contributing entity to a defined benefit pension plan after themeasurement date of the government's beginning net pension liability.

Statement No. 68 requires a state or local government employer (or nonemployer contributing entity in a specialfunding situation) to recognize a net pension liability measured as of a date (the measurement date) no earlierthan the end of its prior fiscal year. If a state or local government employer or nonemployer contributing entitymakes a contribution to a defined benefit pension plan between the measurement date of the reported net pensionliability and the end of the government's reporting period, Statement No. 68 requires that the governmentrecognize its contribution as a deferred outflow of resources. In addition, Statement No. 68 requires recognitionof deferred outflows of resources and deferred inflows of resources for changes in the net pension liability of astate or local government employer or nonemployer contributing entity that arise from other types of events. Attransition to Statement No. 68, if it is not practical for an employer or nonemployer contributing entity todetermine the amounts of all deferred outflows of resources and deferred inflows of resources related topensions, paragraph 137 of Statement No. 68 required that beginning balances for deferred outflows of resourcesand deferred inflows of resources not be reported.

Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferredinflows of resources related to pensions, contributions made after the measurement date of the beginning netpension liability could not have been reported as deferred outflows of resources at transition. This could haveresulted in a significant understatement of an employer or nonemployer contributing entity's beginning netposition and expense in the initial period of implementation.

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This Statement amends paragraph 137 of Statement No. 68 to require that, at transition, a governmentrecognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent tothe measurement date of the beginning net pension liability. Statement No. 68, as amended, continues torequire that beginning balances for other deferred outflows of resources and deferred inflows of resourcesrelated to pensions be reported at transition only if it is practical to determine all such amounts.

The District has implemented the Provisions of this Statement for the year ended June 30, 2015.

As the result of implementing GASB Statement No. 68, the District has restated the beginning net position in thegovernment wide Statement of Net Position, effectively decreasing net position as of July 1, 2014 by$40,187,764. The decrease results from recognizing the net pension liability, net of related deferred outflows ofresources. The restatement does not include deferred inflows of resources, as this information was not available.

New Accounting Pronouncements

In February 2015, the GASB issued Statement No. 72, Fair Value Measurement and Application. This Statementaddresses accounting and financial reporting issues related to fair value measurements. The definition of fairvalue is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. This Statement provides guidance for determining a fairvalue measurement for financial reporting purposes. This Statement also provides guidance for applying fairvalue to certain investments and disclosures related to all fair value measurements.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2015. Early implementation is encouraged.

In June 2015, the GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and RelatedAssets That are not Within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASBStatements No. 67 and No. 68. The objective of this Statement is to improve the usefulness of information aboutpensions included in the general purpose external financial reports of state and local governments for makingdecisions and assessing accountability. This Statement results from a comprehensive review of the effectivenessof existing standards of accounting and financial reporting for all postemployment benefits with regard toproviding decision-useful information, supporting assessments of accountability and inter-period equity, andcreating additional transparency.

This Statement establishes requirements for defined benefit pensions that are not within the scope of StatementNo. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes ofproviding those pensions. In addition, it establishes requirements for defined contribution pensions that are notwithin the scope of Statement No. 68. It also amends certain provisions of Statement No. 67, Financial Reportingfor Pension Plans, and Statement No. 68 for pension plans and pensions that are within their respective scopes.

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The requirements of this Statement extend the approach to accounting and financial reporting established inStatement No. 68 to all pensions, with modifications as necessary to reflect that for accounting and financialreporting purposes, any assets accumulated for pensions that are provided through pension plans that are notadministered through trusts that meet the criteria specified in Statement No. 68 should not be considered pensionplan assets. It also requires that information similar to that required by Statement No. 68 be included in notes tofinancial statements and required supplementary information by all similarly situated employers and nonemployercontributing entities.

This Statement also clarifies the application of certain provisions of Statements No. 67 and No. 68 with regard tothe following issues:

Information that is required to be presented as notes to the ten-year schedules of required supplementaryinformation about investment-related factors that significantly affect trends in the amounts reported.

Accounting and financial reporting for separately financed specific liabilities of individual employers andnonemployer contributing entities for defined benefit pensions.

Timing of employer recognition of revenue for the support of nonemployer contributing entities not in aspecial funding situation.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2016. Early implementation is encouraged.

In June 2015, the GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans OtherThan Pension Plans. The objective of this Statement is to improve the usefulness of information aboutpostemployment benefits other than pensions (other postemployment benefits or OPEB) included in the generalpurpose external financial reports of state and local governmental OPEB plans for making decisions and assessingaccountability. This Statement results from a comprehensive review of the effectiveness of existing standards ofaccounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providingdecision-useful information, supporting assessments of accountability and interperiod equity, and creatingadditional transparency.

This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other ThanPension Plans, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-EmployerPlans. It also includes requirements for defined contribution OPEB plans that replace the requirements for thoseOPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosuresfor Defined Contribution Plans, as amended, Statement No. 43, and Statement No. 50, Pension Disclosures.

Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions,establishes new accounting and financial reporting requirements for governments whose employees are providedwith OPEB, as well as for certain nonemployer governments that have a legal obligation to provide financialsupport for OPEB provided to the employees of other entities.

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The scope of this Statement includes OPEB plans—defined benefit and defined contribution—administeredthrough trusts that meet the following criteria:

Contributions from employers and nonemployer contributing entities to the OPEB plan and earnings onthose contributions are irrevocable.

OPEB plan assets are dedicated to providing OPEB to plan members in accordance with the benefitterms.

OPEB plan assets are legally protected from the creditors of employers, nonemployer contributingentities, and the OPEB plan administrator. If the plan is a defined benefit OPEB plan, plan assets also arelegally protected from creditors of the plan members.

This Statement also includes requirements to address financial reporting for assets accumulated for purposes ofproviding defined benefit OPEB through OPEB plans that are not administered through trusts that meet thespecified criteria.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2016. Early implementation is encouraged.

In June 2015, the GASB issued Statement No., 75, Accounting and Financial Reporting for PostemploymentBenefits Other Than Pension. The primary objective of this Statement is to improve accounting and financialreporting by state and local governments for postemployment benefits other than pensions (other postemploymentbenefits or OPEB). It also improves information provided by state and local governmental employers aboutfinancial support for OPEB that is provided by other entities. This Statement results from a comprehensivereview of the effectiveness of existing standards of accounting and financial reporting for all postemploymentbenefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments ofaccountability and inter-period equity, and creating additional transparency.

This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting byEmployers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements byAgent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting forPostemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reportingrequirements for OPEB plans.

The scope of this Statement addresses accounting and financial reporting for OPEB that is provided to theemployees of state and local governmental employers. This Statement establishes standards for recognizing andmeasuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures.For defined benefit OPEB, this Statement identifies the methods and assumptions that are required to be used toproject benefit payments, discount projected benefit payments to their actuarial present value, and attribute thatpresent value to periods of employee service. Note disclosure and required supplementary informationrequirements about defined benefit OPEB also are addressed.

In addition, this Statement details the recognition and disclosure requirements for employers with payables todefined benefit OPEB plans that are administered through trusts that meet the specified criteria and for employerswhose employees are provided with defined contribution OPEB. This Statement also addresses certaincircumstances in which a nonemployer entity provides financial support for OPEB of employees of another entity.

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In this Statement, distinctions are made regarding the particular requirements depending upon whether the OPEBplans through which the benefits are provided are administered through trusts that meet the following criteria:

Contributions from employers and nonemployer contributing entities to the OPEB plan and earnings onthose contributions are irrevocable.

OPEB plan assets are dedicated to providing OPEB to plan members in accordance with the benefitterms.

OPEB plan assets are legally protected from the creditors of employers, nonemployer contributingentities, the OPEB plan administrator, and the plan members.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2017. Early implementation is encouraged.

In June 2015, the GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principlesfor State and Local Governments. The objective of this Statement is to identify—in the context of the currentgovernmental financial reporting environment—the hierarchy of generally accepted accounting principles(GAAP). The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financialstatements of state and local governmental entities in conformity with GAAP and the framework for selectingthose principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP andaddresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for atransaction or other event is not specified within a source of authoritative GAAP.

This Statement supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles forState and Local Governments.

The requirements of this Statement are effective for financial statements for periods beginning afterJune 15, 2015, and should be applied retroactively. Earlier implementation is permitted.

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

40

NOTE 2 - DEPOSITS AND INVESTMENTS

Summary of Deposits and Investments

Deposits and investments as of June 30, 2015, are classified in the accompanying financial statements as follows:

Governmental activities 21,622,534$

Fiduciary funds 2,613,004

Total Deposits and Investments 24,235,538$

Deposits and investments as of June 30, 2015, consist of the following:

Cash on hand and in banks 221,310$

Cash in revolving 50,000

Investments 23,964,228

Total Deposits and Investments 24,235,538$

Policies and Practices

The District is authorized under California Government Code to make direct investments in local agency bonds,notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes;securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of depositplaced with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements;medium term corporate notes; shares of beneficial interest issued by diversified management companies,certificates of participation, obligations with first priority security; and collateralized mortgage obligations.

Investment in County Treasury - The District is considered to be an involuntary participant in an externalinvestment pool as the District is required to deposit all receipts and collections of monies with their CountyTreasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported inthe accounting financial statements at amounts based upon the District's pro-rata share of the fair value providedby the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balanceavailable for withdrawal is based on the accounting records maintained by the County Treasurer, which isrecorded on the amortized cost basis.

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

41

General Authorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in theschedules below:

Maximum Maximum Maximum

Authorized Remaining Percentage Investment

Investment Type Maturity of Portfolio in One Issuer

Local Agency Bonds, Notes, Warrants 5 years None None

Registered State Bonds, Notes, Warrants 5 years None None

U.S. Treasury Obligations 5 years None None

U.S. Agency Securities 5 years None None

Banker's Acceptance 180 days 40% 30%

Commercial Paper 270 days 25% 10%

Negotiable Certificates of Deposit 5 years 30% None

Repurchase Agreements 1 year None None

Reverse Repurchase Agreements 92 days 20% of base None

Medium-Term Corporate Notes 5 years 30% None

Mutual Funds N/A 20% 10%

Money Market Mutual Funds N/A 20% 10%

Mortgage Pass-Through Securities 5 years 20% None

County Pooled Investment Funds N/A None None

Local Agency Investment Fund (LAIF) N/A None None

Joint Powers Authority Pools N/A None None

Authorized Under Debt Agreements

Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather thanthe general provisions of the California Government Code. These provisions allow for the acquisition ofinvestment agreements with maturities through the last schedule payment of the certificates of participation debt.

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of aninvestment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value tochanges in market interest rates. The District does not have a formal investment policy that limits investmentmaturities as a means of managing its exposure to fair value losses arising from increasing interest rates. TheDistrict manages its exposure to interest rate risk by having the Pool purchase a combination of shorter term andlonger term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing orcoming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed foroperations.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

42

Specific Identification

Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuationis provided by the following schedule that shows the distribution of the District's investment by maturity:

Fair Maturity

Investment Type Value Date

U.S. Agencies 1,299,500$ 8/27/2027

Repurchase Agreement 2,083,218 9/1/2036

Money Market Mutual Funds:

Wells Fargo Advantage 806 7/1/2015

Solano County Investment Pool 20,580,998 487*

Total 23,964,522$

*Weighted average maturity in days.

Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.This is measured by the assignment of a rating by a nationally recognized statistical rating organization.Presented below is the minimum rating required by the California Government Code, the District's investmentpolicy, or debt agreements, and the actual rating as of the year-end for each investment type.

Minimum Fitch

Legal Rating Fair

Investment Type Rating June 30, 2015 Value

U.S. Agencies AA AA 1,299,500$

Repurchase Agreement AA AA 2,083,218

Money Market Mutual Funds:

Wells Fargo Advantage Not Required Not Required 806

Solano County Investment Pool Not Required Not Required 20,580,998

Total Investments 23,964,522$

Custodial Credit Risk - Deposits

This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The Districtdoes not have a policy for custodial credit risk for deposits. However, the California Government Code requiresthat a financial institution secure deposits made by State or local governmental units by pledging securities in anundivided collateral pool held by a depository regulated under state law (unless so waived by the governmentalunit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the totalamount deposited by the public agency. California law also allows financial institutions to secure public depositsby pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and lettersof credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secureddeposits. As of June 30, 2015, the District's bank balance was not exposed to custodial credit risk.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

43

NOTE 3 - RECEIVABLES

Receivables at June 30, 2015, consisted of intergovernmental grants, entitlements, interest, and other localsources. All receivables are considered collectible in full.

Mello-Roos

Capital Capital Non-Major Total

General Facilities Project Governmental Governmental Fiduciary

Fund Fund Fund Funds Activities Funds

Federal Government

Categorical aid 604,348$ -$ -$ 93,329$ 697,677$ -$

State Government

Categorical aid 539,763 - - 7,303 547,066 -

Lottery 461,717 - - - 461,717 -

Local Government

Other Local Sources 190,945 12,778 161,428 30,473 395,624 3,792

Total 1,796,773$ 12,778$ 161,428$ 131,105$ 2,102,084$ 3,792$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

44

NOTE 4 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2015, was as follows:

Balance Balance

July 1, 2014 Additions Deductions June 30, 2015

Governmental Activities

Capital Assets Not Being Depreciated:

Land 12,548,300$ -$ -$ 12,548,300$

Construction in Progress 532,337 5,537,009 - 6,069,346

Total Capital Assets

Not Being Depreciated 13,080,637 5,537,009 - 18,617,646

Capital Assets Being Depreciated:

Land Improvements 13,204,832 - - 13,204,832

Buildings and Improvements 57,087,211 5,100 - 57,092,311

Furniture and Equipment 6,640,215 176,711 - 6,816,926

Total Capital Assets

Being Depreciated 76,932,258 181,811 - 77,114,069

Total Capital Assets 90,012,895 5,718,820 - 95,731,715

Less Accumulated Depreciation:

Land Improvements 2,675,337 630,286 - 3,305,623

Buildings and Improvements 22,358,697 1,325,926 - 23,684,623

Furniture and Equipment 3,360,860 475,982 - 3,836,842

Total Accumulated Depreciation 28,394,894 2,432,194 - 30,827,088

Governmental Activities

Capital Assets, Net 61,618,001$ 3,286,626$ -$ 64,904,627$

Depreciation expense was charged as a direct expense to governmental functions as follows:

Governmental Activities

Instruction 1,823,939$

Supervision of instruction 45,635

School site administration 11,889

Home-to-school transportation 152,265

Food services 174,105

All other pupil services 75,529

All other administration 79,076

Plant services 69,756

Total Depreciation Expenses Governmental Activities 2,432,194$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

45

NOTE 5 - INTERFUND TRANSACTIONS

Interfund Receivables/Payables (Due To/Due From)

Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affectedin the period in which transactions are executed. Interfund receivable and payable balances at June 30, 2015,between major and non-major governmental funds are as follows:

Capital Non-Major

General Facilities Governmental Fiduciary

Due To Fund Fund Funds Funds Total

General Fund -$ 42,183$ 113,340$ 15,690$ 171,213$

Special Reserve Fund for Capital

Outlay Projects 3,500,000 - - 3,500,000

Non-Major Governmental Funds 49,872 - - - 49,872

Fiduciary Funds 251,292 - - - 251,292

Total 3,801,164$ 42,183$ 113,340$ 15,690$ 3,972,377$

A balance of $109,900 is due to the General Fund from the Cafeteria Fund for indirect costs, payroll costs, and

temporary loan.

Due From

The balance of $42,183 is due to the General Fund from the Capital Facilities Fund for 3% administrative fees.

The balance of $3,500,000 is due to the Special Reserve Fund for Capital Outlay Projects from the General Fund for

Scandia project match.

All remaining balance resulted from the time lag between the date that (1) interfund goods and services areprovided or reimbursable expenditures occur, (2) transaction are recorded in the accounting system, and(3) payments between funds are made.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

46

Operating Transfers

Interfund transfers for the year ended June 30, 2015, consisted of the following:

Capital Mello-Roos

General Facilities Capital Project

Transfer To Fund Fund Fund Total

General Fund -$ 42,183$ -$ 42,183$

Special Reserve Fund for Capital

Outlay Projects 3,500,000 - - 3,500,000

COP Debt Service Fund - - 2,218,572 2,218,572

Non-Major Governmental Funds 229,692 - - 229,692

Total 3,729,692$ 42,183$ 2,218,572$ 5,990,447$

50,000$

179,692

3,500,000

42,183

2,218,572

Total 5,990,447$

Transfer From

The Mello-Roos Capital Project Fund transferred to the COP Debt Service Fund for

debt service payments.

The General Fund transferred to the Cafeteria (Non-Major) Governmental Fund to cover

deficit and cash balance.

The General Fund transferred to the Deferred Maintenance (Non-Major) Governmental

Fund for deferred maintenance projects.

The General Fund transferred to the Special Reserve Fund for Capital Outlay Projects for

Scandia project match.

The Capital Facilities Fund transferred to the General Fund for 3% administrative fees.

Interfund transfers are used to (1) move revenues from the fund that statute or budget requires to collect them tothe fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the fundscollecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestrictedrevenues collected in the General Fund to finance various programs accounted for in other funds in accordancewith budgetary authorizations.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

47

NOTE 6 - ACCOUNTS PAYABLE

Accounts payable at June 30, 2015, consisted of the following:

Capital Mello-Roos Non-Major Total

General Facilities Capital Project Governmental Governmental

Fund Fund Fund Funds Activities

Vendor payables 757,557$ 8,820$ -$ 28,480$ 794,857$

Salaries and benefits 175,241 - - - 175,241

Other significant payables 365,692 - - - 365,692

Construction - 1,062,952 56,850 2,460 1,122,262

Total 1,298,490$ 1,071,772$ 56,850$ 30,940$ 2,458,052$

NOTE 7 - UNEARNED REVENUE

Unearned revenue at June 30, 2015, consisted of the following:

General

Fund

Federal financial assistance 31,369$

State categorical aid 16,737

Other local 277,088

Total 325,194$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

48

NOTE 8 - LONG-TERM OBLIGATIONS

Summary

The changes in the District's long-term obligations during the year consisted of the following:

Balance Balance Due in

July 1, 2014 Additions Deductions June 30, 2015 One Year

Certificates of participation 33,745,000$ -$ 785,000$ 32,960,000$ 840,000$

Capitalized lease obligations 439,311 - 349,691 89,620 89,620

Compensated absences 207,675 74,372 - 282,047 -

Net OPEB Obligation 559,167 214,239 140,994 632,412 -

34,951,153$ 288,611$ 1,275,685$ 33,964,079$ 929,620$

Payments on Certificates of Participation are made in the Certificates of Participation Debt Service Fund withMello-Roos Fund proceeds.

Payments for Capital Lease Obligations are made in the General Fund.

The Compensated Absences are paid by the fund for which the employee worked.

Net OPEB obligations are paid by the General Fund.

Certificates of Participation

The outstanding certificates of participation are as follows:

Bonds Bonds

Issue Maturity Interest Original Outstanding Outstanding

Date Date Rate Issue July 1, 2014 Issued Redeemed June 30, 2015

4/12/2006 9/01/2036 3.80-4.60% 24,520,000$ 23,485,000$ -$ 340,000$ 23,145,000$

7/11/2007 9/01/2027 3.74-4.77% 12,995,000 10,260,000 - 445,000 9,815,000

33,745,000$ -$ 785,000$ 32,960,000$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

49

2006 Certificates of Participation

On April 12, 2006 the California School Boards Association Finance Corporation issued certificates ofparticipation in the amount of $24,520,000 with interest rates ranging from 3.8 to 4.6 percent. At June 30, 2015,the principal balance outstanding was $23,145,000.

The Certificates mature through September 1, 2036, as follows:

Year Ending

June 30, Principal Interest Total

2016 375,000$ 1,117,213$ 1,492,213$

2017 425,000 1,100,150 1,525,150

2018 475,000 1,079,663 1,554,663

2019 525,000 1,057,713 1,582,713

2020 575,000 1,034,469 1,609,469

2021-2025 3,815,000 4,715,500 8,530,500

2026-2030 5,735,000 3,566,625 9,301,625

2031-2035 7,545,000 1,852,875 9,397,875

2036-2037 3,675,000 225,625 3,900,625

Total 23,145,000$ 15,749,833$ 38,894,833$

2007 Certificates of Participation

On July 11, 2007, the Travis Unified School District Financing Corporation issued $12,995,000 of RefundingCertificates of Participation with interest rates ranging from 3.74 to 4.77 percent. The proceeds were used torefund the 1997 Certificates of Participation. At June 30, 2015, the principal balance outstanding was $9,815,000.

The certificates mature through September 1, 2027, as follows:

Year Ending

June 30, Principal Interest Total

2016 465,000$ 464,778$ 929,778$

2017 475,000 442,106 917,106

2018 505,000 417,606 922,606

2019 535,000 393,278 928,278

2020 560,000 369,675 929,675

2021-2025 3,205,000 1,427,088 4,632,088

2026-2028 4,070,000 395,250 4,465,250

Total 9,815,000$ 3,909,781$ 13,724,781$

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

50

Capital Leases

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

Balance, July 1, 2014 452,578$

Payments 362,062

Balance, June 30, 2015 90,516$

The capital leases have minimum lease payments as follows:

Year Ending Lease

June 30, Payment

2016 90,516$

Less: Amount Representing Interest 896

Present Value of Minimum Lease Payments 89,620$

Accumulated Unpaid Employee Vacation

The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2015, amounted to$282,047.

Other Postemployment Benefits (OPEB) Obligation

The District's annual required contribution for the year ended June 30, 2015, was $191,872, and contributionsmade by the District during the year were $108,657. Interest on the net OPEB obligation and adjustments to theannual required contribution were $22,367 and ($32,337), respectively, which resulted in an increase to the netOPEB obligation of $73,245. As of June 30, 2015, the net OPEB obligation was $632,412. See Note 11 foradditional information regarding the OPEB obligation and the postemployment benefits plan.

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

51

NOTE 9 - FUND BALANCES

Fund balances are composed of the following elements:

Special Reserve

Capital Fund for

General Facilities Capital Outlay

Fund Fund Projects

Nonspendable:

Revolving cash 50,000$ -$ -$

Stores inventories 32,488 - -

Prepaid expenditures 7,011 - -

Total Nonspendable 89,499 - -

Restricted

Legally restricted programs 1,002,734 - -

Capital projects - 993,977 -

Debt services - - -

Total Restricted 1,002,734 993,977 -

Committed

Deferred maintenance program 179,692 - -

Other commitments - - -

Total Committed 179,692 - -

Assigned

Reserve for compensated absences 284,668 - -

Reserve for TUTA - catastrophic sick leave bank 20,000 - -

Reserve for CSEA - professional growth 2,413 - -

Reserve for Scandia match program 500,000 - -

Reserve for textbook adoption 595,952 - -

Reserve for School Violence Prevention 20,959 - -

Reserve for MS and HS Counseling 12,233 - -

Reserve for LCAP supplemental 230,828 - -

Other assignments - - 3,571,260

Total Assigned 1,667,053 - 3,571,260

Unassigned

Economic uncertainties 1,494,296 - -

Remaining unassigned 3,166,843 - -

Total Unassigned 4,661,139 - -

Total 7,600,117$ 993,977$ 3,571,260$

51

Mello-Roos COP Non-Major

Capital Project Debt Service Governmental

Fund Fund Funds Total

-$ -$ -$ 50,000$

- - 31,352 63,840

- - - 7,011

- - 31,352 120,851

- - 12,163 1,014,897

120 - 707,883 1,701,980

- 3,383,524 - 3,383,524

120 3,383,524 720,046 6,100,401

- - 97,057 276,749

4,379,168 - - 4,379,168

4,379,168 - 97,057 4,655,917

- - - 284,668

- - - 20,000

- - - 2,413

- - - 500,000

- - - 595,952

- - - 20,959

- - - 12,233

- - - 230,828

- - - 3,571,260

- - - 5,238,313

- - - 1,494,296

- - - 3,166,843

- - - 4,661,139

4,379,288$ 3,383,524$ 848,455$ 20,776,621$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

52

NOTE 10 - RISK MANAGEMENT

Description

The District's risk management activities are recorded in the General Fund. Employee health programs areadministered by the General Fund through the purchase of commercial insurance. The District participates in theNorth Bay Schools Insurance Authority (NBSIA) joint powers agency for the workers' compensation, propertyand liability, and dental and vision programs. Refer to Note 14 for additional information regarding the JPA.

For insured programs, there have been no significant reductions in insurance coverage. Settlement amounts havenot exceeded insurance coverage for the current year for the three prior years.

NOTE 11 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENTBENEFITS (OPEB) OBLIGATION

Plan Description

The Travis Unified School District Health and Welfare Benefit Plan (the Plan) is a single-employer definedbenefit healthcare plan administered by the Travis Unified School District. The Plan provides medical, dental,and vision insurance benefits to eligible retirees and their dependents. Membership of the Plan consists ofseven retirees and beneficiaries currently receiving benefits, and 428 active Plan members.

Contribution Information

The contribution requirements of plan members and the District are established and may be amended by theDistrict and the Travis Unified Teachers Association (TUTA), the local California School Employees Association(CSEA), and unrepresented groups. The required contribution is based on projected pay-as-you-go financingrequirements. For fiscal year 2014-2015, the District contributed $108,657 to the Plan, all of which was related toimplicit subsidy.

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

53

Annual OPEB Cost and Net OPEB Obligation

The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer(ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. TheARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each yearand amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceedthirty years. The following table shows the components of the District's annual OPEB cost for the year, theamount actually contributed to the plan, and changes in the District's net OPEB obligation to the Plan:

Annual required contribution (ARC) 191,872$

Interest on net OPEB obligation 22,367

Adjustment to annual required contribution (32,337)

Annual OPEB cost (expense) 181,902

Contributions made (108,657)

Increase in net OPEB obligation 73,245

Net OPEB obligation, beginning of year 559,167

Net OPEB obligation, end of year 632,412$

Trend Information

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the netOPEB obligation is as follows:

Annual Actual

Year Ended OPEB Employer Percentage Net OPEB

June 30, Cost Contribution Contributed Obligation

2013 189,326$ 46,939$ 24.79% 325,126$

2014 188,212 96,558 51.30% 559,167

2015 181,902 108,657 59.73% 632,412

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NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

54

Funded Status and Funding Progress

The schedule of funding progress presented as required supplementary information following the notes to thefinancial statements, presents multiyear trend information that shows whether the actuarial value of plan assets isincreasing or decreasing over time relative to the actuarial accrued liabilities for benefits. As of July 1, 2012, themost recent actuarial valuation date, the Plan was not funded. The actuarial accrued liability for benefits was$1,414,036, and the actuarial value of assets was zero, resulting in an UAAL of $1,414,036. The covered payroll(annual payroll of active employees covered by the plan) was $29,389,535, and the ratio of the UAAL to thecovered payroll was five percent.

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial Actuarial (AAL) - AAL Funded Percentage of

Valuation Value of Unprojected (UAAL) Ratio Covered Covered Payroll

Date Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2012 -$ 1,414,036$ 1,414,036$ 0% 29,389,535$ 5%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions aboutthe probability of occurrence of events far into the future. Examples include assumptions about futureemployment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of theplan and the annual required contributions of the employer are subject to continual revision as actual results arecompared with past expectations and new estimates are made about the future. The schedule of funding progress,presented as required supplementary information following the notes to the financial statements, presentsmultiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over timerelative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understoodby the employer and the plan members) and include the types of benefits provided at the time of each valuationand the historical pattern of sharing of benefit costs between the employer and plan members to that point. Theactuarial methods and assumptions used include techniques that are designed to reduce the effects of short-termvolatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspectiveof the calculations.

In the July 1, 2012, actuarial valuation a standard set of assumptions were used with modifications made asappropriate for the District. Under this method, the Actuarial Accrued Liability is the present value of projectedbenefits multiplied by the ratio of benefit service as of the valuation date to the projected benefit service atretirement, termination, disability, or death. The Normal Cost for a plan year is the expected increase in theAccrued Liability during the plan year. All employees eligible as of the measurement date in accordance with theprovisions of the plan listed in the data provided by the employer were included in the valuation.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

55

NOTE 12 - EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agenciesof the State of California. Academic employees are members of the California State Teachers' Retirement System(CalSTRS) and classified employees are members of the California Public Employees' Retirement System(CalPERS).

The District implemented GASB Statements No. 68 and No. 71 for the fiscal year ended June 30, 2015. As aresult, the District reported its proportionate share of the net pension liabilities, pension expense, and deferredinflow of resources for each of the above plans and a deferred outflow of resources for each of the above plans asfollows:

Proportionate Deferred Proportionate Proportionate

Share of Net Outflow of Share of Deferred Share of

Pension Plan Pension Liability Resources Inflow of Resources Pension Expense

CalSTRS 26,833,207$ 3,578,038$ 6,607,626$ 2,325,560$

CalPERS 7,229,635 852,183 2,484,184 641,327

Total 34,062,842$ 4,430,221$ 9,091,810$ 2,966,887$

The details of each plan are as follows:

California State Teachers' Retirement System (CalSTRS)

Plan Description

The District contributes to the State Teachers Retirement Plan (STRP) administered by the California StateTeachers' Retirement System (CalSTRS). STRP is a cost-sharing multiple-employer public employee retirementsystem defined benefit pension plan. Benefit provisions are established by State statutes, as legislativelyamended, within the State Teachers' Retirement Law.

A full description of the pension plan regarding benefit provisions, assumptions (for funding, but not accountingpurposes), and membership information is listed in the June 30, 2013, annual actuarial valuation report, DefinedBenefit Program Actuarial Valuation. This report and CalSTRS audited financial information are publicallyavailable reports that can be found on the CalSTRS website under Publications at:http://www.calstrs.com/member-publications.

Benefits Provided

The STRP provides retirement, disability and survivor benefits to beneficiaries. Benefits are based on members'final compensation, age, and years of service credit. Members hired on or before December 31, 2012, with fiveyears of credited service are eligible for the normal retirement benefit at age 60. Members hired on or afterJanuary 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. Thenormal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

56

The STRP is comprised of four programs: Defined Benefit Program, Defined Benefit Supplement Program, CashBalance Benefit Program, and Replacement Benefits Program. The STRP holds assets for the exclusive purposeof providing benefits to members and beneficiaries of these programs. CalSTRS also uses plan assets to defrayreasonable expenses of administering the STRP. Although CalSTRS is the administrator of the STRP, the state isthe sponsor of the STRP and obligor of the trust. In addition, the state is both an employer and nonemployercontributing entity to the STRP.

The District contributes exclusively to the STRP Defined Benefit Program, thus disclosures are not included forthe other plans.

The STRP provisions and benefits in effect at June 30, 2015, are summarized as follows:

Hire date

On or before

December 31, 2012

On or after

January 1, 2013

Benefit formula 2% at 60 2% at 62

Benefit vesting schedule 5 Years of Service 5 Years of Service

Benefit payments Monthly for Life Monthly for Life

Retirement age 60 62

Monthly benefits as a percentage of eligible compensation 2.0% - 2.4% 2.0% - 2.4%

Required employee contribution rate 8.15% 8.15%

Required employer contribution rate 8.88% 8.88%

Required State contribution rate 5.95% 5.95%

STRP Defined Benefit Program

Contributions

Required member District and State of California contributions rates are set by the California Legislature andGovernor and detailed in Teachers' Retirement Law. The contributions rates are expressed as a level percentageof payroll using the entry age normal actuarial method. In accordance with AB 1469, employer contributions intothe CalSTRS will be increasing to a total of 19.1 percent of applicable member earnings phased over a seven yearperiod. The contribution rates for each plan for the year ended June 30, 2015, are presented above and theDistrict's total contributions were $3,578,038.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

57

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

At June 30, 2015, the District reported a liability for its proportionate share of the net pension liability thatreflected a reduction for State pension support provided to the District. The amount recognized by the District asits proportionate share of the net pension liability, the related state support and the total portion of the net pensionliability that was associated with the District were as follows:

Total Net Pension Liability, Including State Share:

District's proportionate share of net pension liability 26,833,207$

State's proportionate share of the net pension liability associated with the District 16,203,049

Total 43,036,256$

The net pension liability was measured as of June 30, 2014. The District's proportion of the net pension liabilitywas based on a projection of the District's long-term share of contributions to the pension plan relative to theprojected contributions of all participating school districts and the State, actuarially determined. AtJune 30, 2015, the District's proportion was 0.0459 percent.

For the year ended June 30, 2015, the District recognized pension expense of $2,325,560 and revenue of$1,398,846 for support provided by the State. At June 30, 2015, the District reported deferred outflows ofresources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred

Outflows of Inflows of

Resources Resources

Pension contributions subsequent to measurement date 3,578,038$ -$

Differences between projected and actual earnings

on pension plan investments - 6,607,626

Total 3,578,038$ 6,607,626$

The deferred outflow of resources related to pensions resulting from District contributions subsequent to themeasurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

58

The deferred inflow of resources will be amortized over a closed five-year period and will be recognized inpension expense as follows:

Year Ended

June 30, Amortization

2016 1,651,907$

2017 1,651,907

2018 1,651,907

2019 1,651,907

Total 6,607,628$

Actuarial Methods and Assumptions

Total pension liability for STRP was determined by applying update procedures to a financial reporting actuarialvaluation as of June 30, 2013, and rolling forward the total pension liability to June 30, 2014. The financialreporting actuarial valuation as of June 30, 2013, used the following methods and assumptions, applied to all priorperiods included in the measurement:

Valuation date June 30, 2013

Measurement date June 30, 2014

Experience study July 1, 2006 through June 30, 2010

Actuarial cost method Entry age normal

Discount rate 7.60%

Investment rate of return 7.60%

Consumer price inflation 3.00%

Wage growth 3.75%

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These customtables are based on RP2000 series tables adjusted to fit CalSTRS experience.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

59

The long-term expected rate of return on pension plan investments was determined using a building-block methodin which best estimate ranges of expected future real rates of return (expected returns, net of pension planinvestment expense and inflation) are developed for each major asset class. The best estimate ranges weredeveloped using capital market assumptions from CalSTRS general investment consultant. Based on the modelfor CalSTRS consulting actuary' investment practice, a best estimate range was determined be assuming theportfolio is re-balanced annually and that the annual returns are log normally distributed and independently fromyear to year to develop expected percentile for the long-term distribution of annualized returns. The assumedasset allocation is based on board policy for target asset allocation in effect on February 2, 2012, the date thecurrent experience study was approved by the board. Best estimates of 10-year geometric real rates of return andthe assumed asset allocation for each major asset class used as input to develop the actuarial investment rate ofreturn are summarized in the following table:

Long-Term

Assumed Asset Expected Real

Asset Class Allocation Rate of Return

Global equity 47% 4.50%

Private equity 12% 6.20%

Real estate 15% 4.35%

Inflation sensitive 5% 3.20%

Fixed income 20% 0.20%

Cash/liquidity 1% 0.00%

Discount Rate

The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows usedto determine the discount rate assumed the contributions from plan members and employers will be made atstatutory contribution rates. Projected inflows from investment earnings were calculated using the long-termassumed investment rate of return (7.60 percent) and assuming that contributions, benefit payments andadministrative expense occurred midyear. Based on these assumptions, the STRP's fiduciary net position wasprojected to be available to make all projected future benefit payments to current plan members. Therefore, thelong-term assumed investment rate of return was applied to all periods of projected benefit payments to determinetotal pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the currentdiscount rate as well as what the net pension liability would be if it were calculated using a discount rate that isone percent lower or higher than the current rate:

Net Pension

Discount Rate Liability

1% decrease (6.60%) 41,825,951$

Current discount rate (7.60%) 26,833,207$

1% increase (8.60%) 14,331,982$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

60

California Public Employees Retirement System (CalPERS)

Plan Description

Qualified employees are eligible to participate in the School Employer Pool (SEP) [and the Safety Risk Pool]under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer publicemployee retirement system defined benefit pension plan administered by CalPERS. Benefit provisions areestablished by State statutes, as legislatively amended, within the Public Employees' Retirement Law.

A full description of the pension plan(s) regarding benefit provisions, assumptions (for funding, but notaccounting purposes), and membership information is listed in the June 30, 2013 annual actuarial valuationreport(s), Schools Pool Actuarial Valuation, [and the Risk Pool Actuarial Valuation Report, Safety,] 2013. This(These) report(s) and CalPERS audited financial information are publically available reports that can be found onthe CalPERS website under Forms and Publications at: https://www.calpers.ca.gov/page/forms-publications.

Benefits Provided

CalPERS provide service retirement and disability benefits, annual cost of living adjustments and death benefitsto plan members, who must be public employees and beneficiaries. Benefits are based on years of service credit,a benefit factor, and the member's final compensation. Members hired on or before December 31, 2012, with fiveyears of total service are eligible to retire at age 50 with statutorily reduced benefits. Members hired on or afterJanuary 1, 2013, with five years of total service are eligible to retire at age 52 with statutorily reduced benefits.All members are eligible for non-duty disability benefits after five years of service. The Basic Death Benefit ispaid to any member's beneficiary if the member dies while actively employed. An employee's eligible survivormay receive the 1957 Survivor Benefit if the member dies while actively employed, is at least age 50 (or 52 formembers hired on or after January 1, 2013), and has at least five years of credited service. The cost of livingadjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The CalPERS provisions and benefits in effect at June 30, 2015, are summarized as follows:

Hire date

On or before

December 31, 2012

On or after

January 1, 2013

Benefit formula 2% at 55 2% at 62

Benefit vesting schedule 5 Years of Service 5 Years of Service

Benefit payments Monthly for Life Monthly for Life

Retirement age 55 62

Monthly benefits as a percentage of eligible compensation 1.1% - 2.5% 1.0% - 2.5%

Required employee contribution rate 7.000% 6.000%

Required employer contribution rate 11.771% 11.771%

School Employer Pool (CalPERS)

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

61

Contributions

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contributionrates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1following notice of a change in the rate. Total plan contributions are calculated through the CalPERS annualactuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costsof benefits earned by employees during the year, with an additional amount to finance any unfunded accruedliability. The District is required to contribute the difference between the actuarially determined rate and thecontribution rate of employees. The contributions rates are expressed as percentage of annual payroll. Thecontribution rates for each plan for the year ended June 30, 2015, are presented above and the total Districtcontributions were $852,183.

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

As of June 30, 2015, the District reported net pension liabilities for its proportionate share of the CalPERS netpension liability totaling $7,229,635. The net pension liability was measured as of June 30, 2014. The District'sproportion of the net pension liability was based on a projection of the District's long-term share of contributionsto the pension plan relative to the projected contributions of all participating school districts, actuariallydetermined. At June 30, 2015, the District's proportion was 0.0637 percent.

For the year ended June 30, 2015, the District recognized pension expense of $641,327. At June 30, 2015, theDistrict reported deferred outflows of resources and deferred inflows of resources related to pensions from thefollowing sources:

Deferred Deferred

Outflows of Inflows of

Resources Resources

852,183$ -$

Differences between projected and actual earnings

on pension plan investments - 2,484,184

Total 852,183$ 2,484,184$

Pension contributions subsequent to measurement date

The deferred outflow of resources related to pensions resulting from District contributions subsequent to themeasurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

62

The deferred inflow of resources will be amortized over a closed five-year period and will be recognized inpension expense as follows:

Year Ended

June 30, Amortization

2016 621,046$

2017 621,046

2018 621,046

2019 621,046

Total 2,484,184$

Actuarial Methods and Assumptions

Total pension liability for the SEP was determined by applying update procedures to a financial reportingactuarial valuation as of June 30, 2013, and rolling forward the total pension liability to June 30, 2014. Thefinancial reporting actuarial valuation as of June 30, 2013, used the following methods and assumptions, appliedto all prior periods included in the measurement:

Valuation date June 30, 2013

Measurement date June 30, 2014

Experience study July 1, 1997 through June 30, 2011

Actuarial cost method Entry age normal

Discount rate 7.50%

Investment rate of return 7.50%

Consumer price inflation 2.75%

Wage growth 3.00%

Mortality assumptions are based on mortality rates resulting from the most recent CalPERS experience studyadopted by the CalPERS Board. For purposes of the post-retirement mortality rates, those revised rates includefive years of projected ongoing mortality improvement using Scale AA published by the Society of Actuaries.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

63

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-termmarket return expectations as well as the expected pension fund cash flows. Using historical returns of all thefunds' asset classes, expected compound returns were calculated over the short-term (first ten years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term andlong-term, the present value of benefits was calculated for each fund. The expected rate of return was set bycalculating the single equivalent expected return that arrived at the same present value of benefits for cash flowsas the one calculated using both short-term and long-term returns. The expected rate of return was then setequivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of onepercent. The target asset allocation and best estimates of arithmetic real rates of return for each major asset classare summarized in the following table:

Long-Term

Assumed Asset Expected Real

Asset Class Allocation Rate of Return

Global equity 47% 5.25%

Global fixed income 19% 0.99%

Private equity 12% 6.83%

Real estate 11% 4.50%

Inflation sensitive 6% 0.45%

Infrastructure and Forestland 3% 4.50%

Liquidity 2% -0.55%

Discount Rate

The discount rate used to measure the total pension liability was 7.50 percent. The projection of cash flows usedto determine the discount rate assumed the contributions from plan members and employers will be made atstatutory contribution rates. Based on these assumptions, the School Employer Pool fiduciary net position wasprojected to be available to make all projected future benefit payments to current plan members. Therefore, thelong-term assumed investment rate of return was applied to all periods of projected benefit payments to determinetotal pension liability.

The following presents the District's proportionate share of the net pension liability calculated using the currentdiscount rate as well as what the net pension liability would be if it were calculated using a discount rate that isone percent lower or higher than the current rate:

Net Pension

Discount rate Liability

1% decrease (6.50%) 12,682,430$

Current discount rate (7.50%) 7,229,635$

1% increase (8.50%) 2,673,275$

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

64

On Behalf Payments

The State of California makes contributions to CalSTRS on behalf of the District. These payments consist ofState General Fund contributions to CalSTRS in the amount of $1,687,297 (5.679 percent of annual payroll).Contributions are no longer appropriated in the annual Budget Act for the legislatively mandated benefits toCalPERS. Therefore, there is no on behalf contribution rate for CalPERS). Under accounting principlesgenerally accepted in the United States of America, these amounts are to be reported as revenues andexpenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf paymentshave been excluded from the calculation of available reserves, and have not been included in the budget amountsreported in the General Fund - Budgetary Comparison Schedule.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from Federal and State agencies in the form of grants. Thedisbursement of funds received under these programs generally requires compliance with terms and conditionsspecified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claimsresulting from such audits could become a liability of the General Fund or other applicable funds. However, inthe opinion of management, any such disallowed claims will not have a material adverse effect on the overallfinancial position of the District at June 30, 2015.

Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion ofmanagement and legal counsel, the disposition of all litigation pending is not expected to have a material adverseeffect on the overall financial position of the District at June 30, 2015.

NOTE 14 - PARTICIPATION IN JOINT POWER AUTHORITY

The District is a member of the North Bay Schools Insurance Authority (NBSIA) joint powers authority (JPA).The District pays an annual premium to the applicable entity for its workers' compensation and property liabilitycoverage. The relationship between the District and the JPA is such that it is not a component unit of the Districtfor financial reporting purposes.

These entities have budgeting and financial reporting requirements independent of member units and theirfinancial statements are not presented in these financial statements; however, fund transactions between theentities and the District are included in these statements. Audited financial statements are generally availablefrom the respective entities.

During the year ended June 30, 2015, the District made a payment of $1,179,057 to NBSIA for its dental,workers' compensation, and property liability coverage.

TRAVIS UNIFIED SCHOOL DISTRICT

NOTES TO FINANCIAL STATEMENTSJUNE 30, 2015

65

NOTE 15 - RESTATEMENT OF PRIOR YEAR NET POSITION

The District adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions, in the currentyear. As a result, the effect on the current fiscal year is as follows:

Statement of Net Position

Net Position - Beginning 47,719,324$

Inclusion of net pension liability from the adoption of GASB Statement No. 68 (42,639,980)

Inclusion of deferred outflow of resources from the adoption

of GASB Statement No. 68 2,452,216

Net Position - Beginning as Restated 7,531,560$

66

REQUIRED SUPPLEMENTARY INFORMATION

TRAVIS UNIFIED SCHOOL DISTRICT

GENERAL FUNDBUDGETARY COMPARISON SCHEDULEFOR THE YEAR ENDED JUNE 30, 2015

67

Variances -

Positive

(Negative)

Actual Final

Original Final (GAAP Basis) to Actual

REVENUES

Local Control Funding Formula 36,523,992$ 36,717,180$ 36,882,935$ 165,755$

Federal sources 5,314,521 6,387,807 6,071,527 (316,280)

Other State sources 1,102,976 1,508,055 3,547,539 2,039,484

Other local sources 1,401,989 2,227,642 2,082,628 (145,014)

Total Revenues1

44,343,478 46,840,684 48,584,629 1,743,945

EXPENDITURES

Current

Certificated salaries 22,361,854 22,034,919 21,706,221 328,698

Classified salaries 7,109,182 7,101,196 7,207,118 (105,922)

Employee benefits 6,808,306 6,444,008 8,039,237 (1,595,229)

Books and supplies 2,272,229 4,294,856 3,297,520 997,336

Services and operating expenditures 4,063,881 4,738,454 4,276,758 461,696

Capital outlay 20,141 871,281 350,288 520,993

Other outgo 1,155,319 1,152,051 837,513 314,538

Debt service - principal 349,692 18,878 349,691 (330,813)

Debt service - interest 12,371 400,105 16,962 383,143

Total Expenditures 144,152,975 47,055,748 46,081,308 974,440

190,503 (215,064) 2,503,321 2,718,385

OTHER FINANCING SOURCES (USES)

Transfers in - - 42,183 42,183

Transfers out (2,983,255) - (3,729,692) (3,729,692)

Net Financing Sources (Uses) (2,983,255) - (3,687,509) (3,687,509)

NET CHANGE IN FUND BALANCE (2,792,752) (215,064) (1,184,188) (969,124)

Fund Balance - Beginning 8,784,305 8,784,305 8,784,305 -Fund Balance - Ending 5,991,553$ 8,569,241$ 7,600,117$ (969,124)$

Budgeted Amounts

Excess (Deficiency) of Revenues

Over Expenditures

1On behalf payments of $1,687,297 are included in the actual revenues and expenditures, but have not been included in the budgetedamounts. In addition, due to the consolidation of Fund 20, Special Reserve Fund for Postemployment Benefits for reporting purposesinto the General Fund, additional revenues and expenditures pertaining to these other funds are included in the Actual (GAAP Basis)revenues and expenditures, however are not included in the original and final General Fund budgets.

TRAVIS UNIFIED SCHOOL DISTRICT

SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDINGPROGRESS

FOR THE YEAR ENDED JUNE 30, 2015

68

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial Actuarial (AAL) - AAL Funded Percentage of

Valuation Value of Unprojected (UAAL) Ratio Covered Covered Payroll

Date Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2009 -$ 1,186,326$ 1,186,326$ 0% 25,581,444$ 5%

July 1, 2010 - 1,104,915 1,104,915 0% 25,961,608 4%

July 1, 2012 - 1,414,036 1,414,036 0% 29,389,535 5%

TRAVIS UNIFIED SCHOOL DISTRICT

SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NETPENSION LIABILITYFOR THE YEAR ENDED JUNE 30, 2015

69

2015

CalSTRS

District's proportion of the net pension liability (asset) 0.0459%

District's proportionate share of the net pension liability (asset) 26,833,207$

State's proportionate share of the net pension liability (asset) associated with the District 16,203,049Total 43,036,256$

District's covered - employee payroll 36,847,599$

District's proportionate share of the net pension liability (asset) as a percentage of its

covered - employee payroll 72.82%

Plan fiduciary net position as a percentage of the total pension liability 77%

CalPERS

District's proportion of the net pension liability (asset) 0.0637%

District's proportionate share of the net pension liability (asset) 7,229,635$

District's covered - employee payroll 6,675,380$

District's proportionate share of the net pension liability (asset) as a percentage of its

covered - employee payroll 108.30%

Plan fiduciary net position as a percentage of the total pension liability 83%

Note: In the future, as data become available, ten years of information will be presented.

TRAVIS UNIFIED SCHOOL DISTRICT

SCHEDULE OF DISTRICT CONTRIBUTIONSFOR THE YEAR ENDED JUNE 30, 2015

70

2015

CalSTRS

Contractually required contribution 3,578,038$

Contributions in relation to the contractually required contribution 3,578,038Contribution deficiency (excess) -$

District's covered - employee payroll 40,293,221$

Contributions as a percentage of covered - employee payroll 8.88%

CalPERS

Contractually required contribution 852,183$

Contributions in relation to the contractually required contribution 852,183Contribution deficiency (excess) -$

District's covered - employee payroll 7,240,297$

Contributions as a percentage of covered - employee payroll 11.77%

Note: In the future, as data become available, ten years of information will be presented.

71

SUPPLEMENTARY INFORMATION

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

72

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2015

Pass-Through

Federal Entity

Federal Grantor/Pass-Through Catalog Identifying Federal

Grantor/Program Number Number Expenditures

U.S. DEPARTMENT OF EDUCATION

Impact Aid - Maintenance and Operations 84.041 10015 3,743,947$

Passed through California Department of Education (CDE):

No Child Left Behind Act (NCLB)

Title I, Part A - Basic Grants Low Income and Neglected 84.010 14329 345,595

Title I, Part G: Advanced Placement (AP) Test Fee

Reimbursement Program 84.330 14831 2,738

Title II, Part A - Improving Teacher Quality Local Grants 84.367 14341 67,746

Title III - Immigrant Education Program 84.365 14346 16,436

Passed through Solano County Special Education Local Plan Area:

Individuals with Disabilities Act (IDEA)

Special Education Cluster (IDEA):

Basic Local Assistance Entitlement, Part B, Section 611 84.027 13379 787,278

Preschool Grants, Part B, Section 619 (Age 3-4-5) 84.173 13430 28,709

Preschool Local Entitlement, Part B, Section 611

(Age 3-4-5) 84.027A 13682 51,499

Total Special Education Cluster (IDEA) 867,486

Total U.S. Department of Education 5,043,948

U.S. DEPARTMENT OF AGRICULTURE

Passed through (CDE):

Child Nutrition Cluster:

Basic School Breakfast Program 10.553 13390 17,834

Especially Needy Breakfast 10.553 13526 84,473

National School Lunch Program 10.555 13524 508,382

Meal Supplement 10.555 13396 20,635

Food Distribution 10.555 13524 17,027

Total U.S. Department of Agriculture 648,351

U.S. DEPARTMENT OF DEFENSE

Department of Defense Education Activity Cluster

DODEA Algebraic Thinking to Achieve Heights for

Grades 4-12th 12.556 [1] 489,505

DODEA Virtual Learning Program (K-12) 12.556 [1] 479,277

Total U.S. Department of Defense 968,782

Total Federal Programs 6,661,081$

[1] Pass-Through Entity Identifying Number Not Available.

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

73

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTUREJUNE 30, 2015

ORGANIZATION

The Travis Unified School District (the District) was established January 30, 1962, and consists of an areacomprising approximately 46 square miles. The District operates five elementary schools, one middle school, onehigh school, one alternative education high school, and one community day school. There were no boundarychanges during the year.

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES

Ivery Hood President November 2016

John Dickerson Vice President November 2018

Angela Weinzinger Clerk November 2016

Ritta Deanda Member November 2018

Jamilah Whiteside Member November 2018

ADMINISTRATION

Kate Wren Gavlak Superintendent, Human Resources and Secretary to the Board

Ken A. Forrest Chief Business Officer

Jim Bryan Assistant Superintendent, Educational Services

Anna Pimentel Director, Fiscal Services

Marissa Huitt Director, Special Education

Jon Cornelison Director, Technology Services

David Florez Supervisor, Maintenance, Grounds, and Custodial

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

74

SCHEDULE OF AVERAGE DAILY ATTENDANCEFOR THE YEAR ENDED JUNE 30, 2015

Second Period Annual

Report Report

Regular ADA

Transitional kindergarten through third 1,568.08 1,565.00

Fourth through sixth 1,186.32 1,186.71

Seventh and eighth 806.96 805.26

Ninth through twelfth 1,631.43 1,621.31

Total Regular ADA 5,192.79 5,178.28

Extended Year Special Education

Transitional kindergarten through third 1.21 1.21

Fourth through sixth 0.77 0.77

Ninth through twelfth 0.48 0.48

Total Extended Year Special Education 2.46 2.46

Special Education, Nonpublic, Nonsectarian Schools

Transitional kindergarten through third 2.67 2.81

Fourth through sixth 1.97 2.01

Seventh and eighth 0.95 0.93

Ninth through twelfth 4.29 4.19

Total Special Education, Nonpublic,

Nonsectarian Schools 9.88 9.94

Extended Year Special Education, Nonpublic, Nonsectarian Schools

Transitional kindergarten through third 0.15 0.18

Fourth through sixth 0.12 0.27

Seventh and eighth 0.13 0.20

Ninth through twelfth 0.26 0.38

Total Extended Year Special Education,

Nonpublic, Nonsectarian Schools 0.66 1.03

Community Day School

Seventh and eighth 0.27 0.59

Ninth through twelfth 8.22 8.16

Total Community Day School 8.49 8.75Total ADA 5,214.28 5,200.46

Final Report

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

75

SCHEDULE OF INSTRUCTIONAL TIMEFOR THE YEAR ENDED JUNE 30, 2015

Reduced

1986-87 1986-87 2014-15 Number of Days

Minutes Minutes Actual Traditional Multitrack

Grade Level Requirement Requirement Minutes Calendar Calendar Status

Kindergarten 36,000 35,000 36,000 180 N/A Complied

Grades 1 - 3 50,400 49,000

Grade 1 52,096 180 N/A Complied

Grade 2 52,096 180 N/A Complied

Grade 3 52,360 180 N/A Complied

Grades 4 - 6 54,000 52,500

Grade 4 56,090 180 N/A Complied

Grade 5 56,090 180 N/A Complied

Grade 6 56,090 180 N/A Complied

Grades 7 - 8 54,000 52,500

Grade 7 57,624 180 N/A Complied

Grade 8 57,624 180 N/A Complied

Grades 9 - 12 64,800 63,000

Grade 9 69,559 180 N/A Complied

Grade 10 69,559 180 N/A Complied

Grade 11 69,559 180 N/A Complied

Grade 12 69,559 180 N/A Complied

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

76

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITHAUDITED FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2015

There were no adjustments to the Unaudited Actual Financial Report, which required reconciliation to the auditedfinancial statements at June 30, 2015.

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

77

SCHEDULE OF FINANCIAL TRENDS AND ANALYSISFOR THE YEAR ENDED JUNE 30, 2015

(Budget)

2016 12015 2014 2013

GENERAL FUND 4

Revenues 51,830,553$ 48,584,481$ 43,658,364$ 40,858,389$

Other sources - 42,183 - 5,007

Total Revenues

and Other Sources 51,830,553 48,626,664 43,658,364 40,863,396

Expenditures 51,204,062 46,081,308 43,244,864 39,247,464

Other uses and transfers out 2,699,555 3,729,692 535,488 -

Total Expenditures

and Other Uses 53,903,617 49,811,000 43,780,352 39,247,464

INCREASE (DECREASE)

IN FUND BALANCE (2,073,064)$ (1,184,336)$ (121,988)$ 1,615,932$

ENDING FUND BALANCE 5,498,009$ 7,571,073$ 8,755,409$ 8,877,397$

AVAILABLE RESERVES 23,238,722$ 4,632,095$ 2,953,091$ 5,540,808$

AVAILABLE RESERVES AS A

PERCENTAGE OF TOTAL OUTGO 36.01% 9.63% 6.91% 14.49%

LONG-TERM OBLIGATIONS N/A 33,964,079$ 34,951,153$ 35,970,337$

K-12 AVERAGE DAILY

ATTENDANCE AT P-2 5,278 5,214 5,327 5,184

The General Fund balance has decreased by $1,306,324 over the past two years. The fiscal year 2015-2016budget projects a further decrease of $2,073,064 (27.38 percent). For a district this size, the State recommendsavailable reserves of at least three percent of total General Fund expenditures, transfers out, and other uses (totaloutgo).

The District has incurred operating deficits in two of the past three years and anticipates incurring an operatingdeficit during the 2015-2016 fiscal year. Total long-term obligations have decreased by $2,006,258 over the pasttwo years.

Average daily attendance has increased by 30 over the past two years. Additional growth of 64 ADA isanticipated during fiscal year 2015-2016.

1 Budget 2016 is included for analytical purposes only and has not been subjected to audit.2 Available reserves consist of all unassigned fund balances and all funds reserved for economic uncertainty contained within the

General Fund.3 On behalf payments of $1,687,297, $1,049,101, and $1,009,078, has been excluded from the calculation of available reserves for

the fiscal years ending June 30, 2015, 2014, and 2013, respectively.4 General Fund amounts do not include activity related to the consolidation of the Fund 20, Special Reserve Fund for Postemployment

Benefits as required by GASB Statement No. 54.

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

78

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING BALANCE SHEETJUNE 30, 2015

County

Deferred School Non-Major

Cafeteria Maintenance Building Facilities Governmental

Fund Fund Fund Fund Funds

ASSETS

Deposits and investments (26,994)$ 97,057$ 620$ 709,723$ 780,406$

Receivables 131,105 - - - 131,105

Due from other funds 49,872 - - - 49,872

Stores inventories 31,352 - - - 31,352Total Assets 185,335$ 97,057$ 620$ 709,723$ 992,735$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 28,480$ - -$ 2,460$ 30,940$

Due to other funds 113,340 - - - 113,340

Total Liabilities 141,820 - - 2,460 144,280

Fund Balances:

Nonspendable 31,352 - - - 31,352

Restricted 12,163 - 620 707,263 720,046

Committed - 97,057 - - 97,057

Total Fund Balances 43,515 97,057 620 707,263 848,455

Total Liabilities andFund Balances 185,335$ 97,057$ 620$ 709,723$ 992,735$

TRAVIS UNIFIED SCHOOL DISTRICT

See accompanying note to supplementary information.

79

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCESFOR THE YEAR ENDED JUNE 30, 2015

County

Deferred School Non-Major

Cafeteria Maintenance Building Facilities Governmental

Fund Fund Fund Fund Funds

REVENUES

Federal sources 648,351$ -$ -$ -$ 648,351

Other State sources 50,175 - - - 50,175

Other local sources 667,897 996 3 3,688 672,584

Total Revenues 1,366,423 996 3 3,688 1,371,110

EXPENDITURES

Current

Pupil services:

Food services 1,428,015 - - - 1,428,015

Administration:

All other administration 59,927 - - - 59,927

Plant services - 83,631 - 15,623 99,254

Total Expenditures 1,487,942 83,631 - 15,623 1,587,196

Excess (Deficiency) of Revenues

Over Expenditures (121,519) (82,635) 3 (11,935) (216,086)

OTHER FINANCING SOURCES (USES)

Transfers in 50,000 179,692 - - 229,692

NET CHANGE IN FUND BALANCES (71,519) 97,057 3 (11,935) 13,606

Fund Balance - Beginning 115,034 - 617 719,198 834,849Fund Balance - Ending 43,515$ 97,057$ 620$ 707,263$ 848,455$

TRAVIS UNIFIED SCHOOL DISTRICT

80

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2015

NOTE 1 - PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the Districtand is presented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of the United States Office of Management and Budget Circular A-133, Auditsof States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in thisschedule may differ from amounts presented in, or used in the preparation of, the financial statements.

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries and schools operated, members of thegoverning board, and members of the administration.

Schedule of Average Daily Attendance (ADA)

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. Thepurpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments ofState funds are made to school districts. This schedule provides information regarding the attendance of studentsat various grade levels and in different programs.

Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives forLonger Instructional Day. The District neither met nor exceeded its target funding. This schedule presentsinformation on the amount of instructional time offered by the District and whether the District complied with theprovisions of Education Code Sections 46200 through 46206.

Districts must maintain their instructional minutes at the 1986-87 requirements, as required by Education CodeSection 46201.

Reconciliation of Annual Financial and Budget Report With Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balance of all funds reported on theUnaudited Actual Financial Report to the audited financial statements.

Schedule of Financial Trends and Analysis

This schedule discloses the District's financial trends by displaying past years' data along with current year budgetinformation. These financial trend disclosures are used to evaluate the District's ability to continue as a goingconcern for a reasonable period of time.

TRAVIS UNIFIED SCHOOL DISTRICT

81

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2015

Non-Major Governmental Funds - Balance Sheet and Statement of Revenues, Expenditures, and Changesin Fund Balances

The Non-Major Governmental Funds Combining Balance Sheet and Combining Statement of Revenues,Expenditures, and Changes in Fund Balances are included to provide information regarding the individual fundsthat have been included in the Non-Major Governmental Funds column on the Governmental Funds BalanceSheet and Statement of Revenues, Expenditures, and Changes in Fund Balances.

82

INDEPENDENT AUDITOR'S REPORTS

83

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED INACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Governing BoardTravis Unified School DistrictFairfield, California

We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards issued by theComptroller General of the United States, the financial statements of the governmental activities, each majorfund, and the aggregate remaining fund information of Travis Unified School District (the District) as of and forthe year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise TravisUnified School District's basic financial statements, and have issued our report thereon dated December 15, 2015.

Emphasis of Matter - Change in Accounting Principles

As discussed in Notes 1 and 15 to the financial statements, the District adopted new accounting guidance, GASBStatement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, PensionTransition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modified withrespect to this matter.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Travis Unified School District'sinternal control over financial reporting (internal control) to determine the audit procedures that are appropriate inthe circumstances for the purpose of expressing our opinions on the financial statements, but not for the purposeof expressing an opinion on the effectiveness of Travis Unified School District's internal control. Accordingly,we do not express an opinion on the effectiveness of Travis Unified School District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correct,misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internalcontrol such that there is a reasonable possibility that a material misstatement of the District's financial statementswill not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a material weakness, yet important enoughto merit attention by those charged with governance.

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

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

VALUE THE D IFFERENCE

84

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2015-001 and 2015-002 that we consider to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether Travis Unified School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Travis Unified School District's Response to Findings Travis Unified School District's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Travis Unified School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Rancho Cucamonga, California December 15, 2015

85

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOREACH MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL

OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133

Governing BoardTravis Unified School DistrictFairfield, California

Report on Compliance for Each Major Federal Program

We have audited Travis Unified School District's compliance with the types of compliance requirements describedin the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of TravisUnified School District's (the District) major Federal programs for the year ended June 30, 2015. Travis UnifiedSchool District's major Federal programs are identified in the summary of auditor's results section of theaccompanying schedule of findings and questioned costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grantsapplicable to its Federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of Travis Unified School District's majorFederal programs based on our audit of the types of compliance requirements referred to above. We conductedour audit of compliance in accordance with auditing standards generally accepted in the United States of America;the standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, andNon-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the auditto obtain reasonable assurance about whether noncompliance with the types of compliance requirements referredto above that could have a direct and material effect on a major Federal program occurred. An audit includesexamining, on a test basis, evidence about Travis Unified School District's compliance with those requirementsand performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major Federalprogram. However, our audit does not provide a legal determination of Travis Unified School District'scompliance.

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

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

VALUE THE D IFFERENCE

86

Opinion on Each Major Federal Program In our opinion, Travis Unified School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2015. Report on Internal Control Over Compliance Management of Travis Unified School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Travis Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Travis Unified School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

Rancho Cucamonga, California December 15, 2015

87

INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE

Governing BoardTravis Unified School DistrictFairfield, California

Report on State Compliance

We have audited Travis Unified School District's compliance with the types of compliance requirements asidentified in the 2014-2015 Guide for Annual Audits of K-12 Local Education Agencies and State ComplianceReporting, that could have a direct and material effect on each of the Travis Unified School District's Stategovernment programs as noted below for the year ended June 30, 2015.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grantsapplicable to its State's programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance of each of the Travis Unified School District's Stateprograms based on our audit of the types of compliance requirements referred to above. We conducted our auditin accordance with auditing standards generally accepted in the United States of America; the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the 2014-2015 Guide for Annual Audits of K-12 Local Education Agencies and StateCompliance Reporting. These standards require that we plan and perform the audit to obtain reasonable assuranceabout whether noncompliance with the compliance requirements referred to above that could have a materialeffect on the applicable government programs noted below. An audit includes examining, on a test basis,evidence about Travis Unified School District's compliance with those requirements and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonablebasis for our opinions. Our audit does not provide a legal determination of Travis Unified School District'scompliance with those requirements.

Unmodified Opinion

In our opinion, Travis Unified School District complied, in all material respects, with the compliancerequirements referred to above that are applicable to the government programs noted below that were audited forthe year ended June 30, 2015.

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

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

VALUE THE D IFFERENCE

88

In connection with the audit referred to above, we selected and tested transactions and records to determine theTravis Unified School District's compliance with the State laws and regulations applicable to the following items:

ProceduresPerformed

Attendance Accounting:Attendance Reporting YesTeacher Certification and Misassignments YesKindergarten Continuance YesIndependent Study No, see belowContinuation Education Yes, see below

Instructional Time YesInstructional Materials YesRatios of Administrative Employees to Teachers YesClassroom Teacher Salaries YesEarly Retirement Incentive No, see belowGann Limit Calculation YesSchool Accountability Report Card YesJuvenile Court Schools No, see belowMiddle or Early College High Schools No, see belowK-3 Grade Span Adjustment YesTransportation Maintenance of Effort YesRegional Occupational Centers or Programs Maintenance of Effort No, see belowAdult Education Maintenance of Effort No, see belowCalifornia Clean Energy Jobs Act YesAfter School Education and Safety Program:

General Requirements No, see belowAfter School No, see belowBefore School No, see below

Proper Expenditure of Education Protection Account Funds YesCommon Core Implementation Funds YesUnduplicated Local Control Funding Formula Pupil Counts YesLocal Control Accountability Plan YesCharter Schools:

Attendance No, see belowMode of Instruction No, see belowNon Classroom-Based Instruction/Independent Study No, see belowDetermination of Funding for Non Classroom-Based Instruction No, see belowAnnual Instruction Minutes Classroom-Based No, see belowCharter School Facility Grant Program No, see below

We did not perform testing for Independent Study because the ADA was below the level required for testing.

The District does not offer a Work Experience Program; therefore, we did not perform procedures related to theWork Experience Program within the Continuation Education Attendance Program.

The District does not offer an Early Retirement Incentive Program; therefore, we did not perform proceduresrelated to the Early Retirement Incentive Program.

89

The District does not have any Juvenile Court Schools; therefore, we did not perform any procedures related to Juvenile Court Schools. The District does not have a Middle or Early College High School Program; therefore, we did not perform procedures related to the Middle or Early College High School Program. The District does not have a Regional Occupational Center or Program; therefore, we did not perform procedures related to the Regional Occupational Centers or Programs Maintenance of Effort. The District does not have an Adult Education Program; therefore, we did not perform procedures related to the Adult Education Maintenance of Effort. The District does not have an After School Education and Safety Program; therefore, we did not perform any procedures related to the After School Education and Safety Program. The District does not have any Charter Schools; therefore, we did not perform any procedures for Charter School Programs.

Rancho Cucamonga, California December 14, 2015

90

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

TRAVIS UNIFIED SCHOOL DISTRICT

SUMMARY OF AUDITOR'S RESULTSFOR THE YEAR ENDED JUNE 30, 2015

91

FINANCIAL STATEMENTS

Unmodified

No

Yes

No

FEDERAL AWARDS

No

None reported

Unmodified

No

CFDA Number Name of Federal Program or Cluster

84.010

Title I, Part A - Basic Grants Low Income

and Neglected

10.553, 10.555 Child Nutrition Cluster

12.556 DODEA Cluster

300,000$

Auditee qualified as low-risk auditee? Yes

STATE AWARDS

Unmodified

Noncompliance material to financial statements noted?

Internal control over major Federal programs:

Material weaknesses identified?

Dollar threshold used to distinguish between Type A and Type B programs:

Significant deficiencies identified?

Type of auditor's report issued on compliance for major Federal programs:

Type of auditor's report issued on compliance for programs:

Any audit findings disclosed that are required to be reported in accordance with

Section .510(a) of OMB Circular A-133?

Identification of major Federal programs:

Significant deficiencies identified?

Type of auditor's report issued:

Internal control over financial reporting:

Material weaknesses identified?

TRAVIS UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2015

92

The following findings represent significant deficiencies, and/or instances of noncompliance related to thefinancial statements that are required to be reported in accordance with Government Auditing Standards. Thefindings have been coded as follows:

Five Digit Code AB 3627 Finding Type30000 Internal Control

2015-001 30000

Budget Monitoring/Deficit Spending (Cafeteria Fund)

Criteria or Specific Requirements

Industry standards and best business practices related to accounting and internal control requirethat an entity adopt, implement, and monitor procedures that will allow for timely and accuratereporting of financial information to management and those charged with governance.

Condition

The Cafeteria Fund has incurred operating deficits in each of the past two years in the amountsof $71,519 and $28,701, for the fiscal years ending June 30, 2015 and 2014, respectively. TheCafeteria Fund balance has decreased during that time to a current fund balance of $43,515 ofwhich $31,352 is stores inventory. The practice of deficit spending has lowered the CafeteriaFund balance to levels that have attributed to the Cafeteria Fund encroaching on the GeneralFund to maintain daily operations.

Questioned costs

There were no questioned costs associated with the condition found.

Context

The condition identified was determined through review and testing related to the District'sCafeteria Fund.

Effect

The financial statement impact of this situation is that the Cafeteria Fund is currently operatingat a deficit and in the current year the Cafeteria Fund has encroached on the General Fund inthe amount of $50,000 needed for cash flow purposes. If the Cafeteria Fund continues thecurrent trend of deficit spending through operations, the 2015-2016 fiscal year encroachment isestimated in excess of $50,000.

TRAVIS UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2015

93

Cause

The District Cafeteria Fund operating costs have exceeded their Federal and Statereimbursements received over the past few years.

Recommendation

The District must continue to evaluate its Cafeteria operations to decrease the deficit in futureyears so that the fund will no longer continue to encroach on the General Fund of the District.

Corrective Action Plan

The District is working in conjunction with food consultant to improve meal participation ratesacross the District. In addition, the Assistant Superintendent of Business Services and FoodService Supervisor has established, and are monitoring a site-by-site profit/loss analysis.

2015-002 30000

Cafeteria Fund Deficit Cash Balance

Criteria or Specific Requirements

The governing board of any school district that reported a negative unrestricted fund balance ora negative cash balance in the annual report required by Education Code Section 42127 or inthe audited annual financial statements required by Section 41020 shall include with the budgetsubmitted in accordance with Education Code Section 42127 and the certifications required byEducation Code Section 35015 a statement that identifies the reasons for the negativeunrestricted fund balance or negative cash balance and the steps that have been taken to ensurethat the negative balance will not occur at the end of the current fiscal year.

Condition

At June 30, 2015, the District Cafeteria Fund had a negative cash balance of $26,994.

Questioned Costs

There were no questioned costs associated with the condition found.

Context

The condition identified was determined through review and testing related to the District'sGeneral Fund deposits and investments.

TRAVIS UNIFIED SCHOOL DISTRICT

FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2015

94

Effect

The financial statement impact of this situation is that the Cafeteria Fund could be at risk of notbeing able to meet its financial obligations and maintain current service levels withoutadditional encroachment on the General Fund.

Cause

The cause is related to timing differences at year-end and not enough funds coming from theGeneral Fund to bring the cash balance positive as of year-end.

Recommendation

As this appears to be related to timing differences with the temporary loan given to theCafeteria Fund by the General Fund this should be monitored more closely to avoid theoccurrence of a negative cash balance at year-end.

Corrective Action Plan

Staff will ensure all cash balances are monitored on a daily basis prior to the fiscal year endand ensure sufficient cash is available for all warrant and payroll processing. Month end closeprocesses will be implemented to prevent this from occurring in the future.

TRAVIS UNIFIED SCHOOL DISTRICT

FEDERAL AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2015

95

None reported.

TRAVIS UNIFIED SCHOOL DISTRICT

STATE AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2015

96

None reported.

TRAVIS UNIFIED SCHOOL DISTRICT

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGSFOR THE YEAR ENDED JUNE 30, 2015

97

There were no audit findings reported in the prior year's schedule of financial statement findings.

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX C

FORM OF OPINION OF SPECIAL COUNSEL

Upon the execution and delivery of the Certificates, Orrick, Herrington & Sutcliffe LLP, Special Counsel to the District, proposes to render its final approving opinion in substantially the following form:

[Delivery Date]

Travis Unified School District Fairfield, California

Travis Unified School District Certificates of Participation (Series 2016B)

(Final Opinion)

Ladies and Gentlemen:

We have acted as special counsel to the Travis Unified School District (the “District”) in connection with the execution and delivery of the Travis Unified School District Certificates of Participation (Series 2016) (the “Certificates”), evidencing principal in the aggregate amount of $6,170,000, executed and delivered pursuant to a trust agreement, dated as of October 1, 2016 (the “Trust Agreement”), by and among The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), the Public Property Financing Corporation of California (the “Corporation”) and the District. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Trust Agreement.

In such connection, we have reviewed the Trust Agreement, the Facilities Sublease, dated as of October 1, 2016 (the “Facilities Sublease”), by and between the District and the Corporation, the Facilities Lease, dated as of October 1, 2016 (the “Facilities Lease”), by and between the District and the Corporation, the Assignment Agreement, dated as of October 1, 2016 (the “Assignment Agreement”), by and between the Corporation and the Trustee, the Tax Certificate of the District, dated the date hereof (the “Tax Certificate”), opinions of counsel to the District, the Corporation, and the Trustee, certificates of the District, the Corporation, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Certificates has concluded with their execution and delivery, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the District and the Corporation. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the first paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Trust Agreement, the Facilities Sublease, the Facilities Lease,

C-1

C-2

the Assignment Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause the portion of Base Rental Payments designated as and constituting interest evidenced by the Certificates to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Certificates, the Trust Agreement, the Facilities Sublease, the Facilities Lease, the Assignment Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against school districts and nonprofit public benefit corporations in the State of California. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in the Trust Agreement, the Facilities Sublease, the Facilities Lease or the Assignment Agreement or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such property. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Certificates and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Trust Agreement, the Facilities Sublease and the Facilities Lease have been duly executed and delivered by, and constitute valid and binding obligations of, the District.

2. Assuming due authorization, execution and delivery of the Trust Agreement and the Certificates by the Trustee, the Certificates are entitled to the benefits of the Trust Agreement.

3. The portion of each Base Rental Payment designated as and constituting interest paid by the District under the Facilities Sublease and received by the registered owners of the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Such interest evidenced by the Certificates is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of the Certificates, or the amount, accrual or receipt of the portion of each Base Rental Payment constituting interest.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

per

D-1

APPENDIX D

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) is executed and delivered by the TRAVIS UNIFIED SCHOOL DISTRICT (the “District”) in connection with the execution and delivery of $6,170,000 Travis Unified School District Certificates of Participation (Series 2016B) (the “Certificates”). The Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of October 1, 2016 (the “Trust Agreement”), by and among The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”), the Public Property Financing Corporation of California and the District. The District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries).

“Dissemination Agent” shall mean the District, or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Holder” shall mean the person in whose name any Certificate shall be registered.

“Listed Events” shall mean any of the events listed in Section 5(a) or (b) of this Disclosure Certificate.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.

“Participating Underwriter” shall mean Hilltop Securities Inc., the original underwriter of the Certificates required to comply with the Rule in connection with offering of the Certificates.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) The District shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the District’s fiscal year (currently ending June 30), commencing with the report for the

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2015-16 fiscal year (which is due no later than March 31, 2017), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may cross-reference other information as provided in Section 4 of this Disclosure Certificate. If the District’s fiscal year changes, the District shall give notice of such change in a filing with the MSRB. The Annual Report shall be submitted on a standard form in use by industry participants or other appropriate form and shall identify the Certificates by name and CUSIP number.

(b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If the District is unable to provide to the MSRB an Annual Report by the date required in subsection (a) above, the District shall, in a timely manner, send or cause to be sent to the MSRB a notice in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall (if the Dissemination Agent is other than the District) file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to the MSRB.

Written request shall be made to: Travis Unified School District 2751 De Ronde Drive Fairfield, California 94533 Attn: Superintendent Tele: (707) 437-4604

SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:

(a) Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements are not available by the time the Annual Report is required pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Unless otherwise provided in the audited financial statements filed on or prior to the annual filing deadline for Annual Reports provided in Section 3(a) above, financial information and operating data with respect to the District for the preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the official statement for the Certificates:

(1) adopted general fund budget;

(2) average daily attendance;

(3) outstanding debt;

(4) information regarding total assessed valuation of taxable properties within the District; and

(5) if the District is not participating in the Teeter Plan, information regarding secured tax charges and delinquencies on taxable properties within the District.

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Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each such other document so included by reference.

(c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the District shall provide such further material information, if any, as may be necessary to make the specifically required statements, in light of the circumstances under which they are made, not misleading.

The District is solely responsible for the content and format of the Annual Report.

SECTION 5. Reporting of Significant Events.

(a) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates in a timely manner not later than ten (10) Business Days after the occurrence of the event:

(1) Principal and interest payment delinquencies;

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

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

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

(5) Adverse tax opinions or issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

(6) Tender offers;

(7) Defeasances;

(8) Rating changes; or

(9) Bankruptcy, insolvency, receivership or similar event of the obligated person. Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

(b) The District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material, in a timely manner not later than ten (10) Business Days after the occurrence of the event:

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(1) Unless described in Section 5(a)(5), other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Certificates or other material events affecting the tax status of the Certificates;

(2) Modifications to rights of Holders;

(3) Optional, unscheduled or contingent Certificate calls;

(4) Release, substitution, or sale of property securing repayment of the Certificates;

(5) Non-payment related defaults;

(6) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or

(7) Appointment of a successor or additional trustee or the change of name of a trustee.

(c) Whenever the District obtains knowledge of the occurrence of a Listed Event described in Section 5(b) above, the District shall determine if such event would be material under applicable federal securities laws.

(d) If the District learns of the occurrence of a Listed Event described in Section 5(a) above, or determines that knowledge of a Listed Event described in Section 5(b) above would be material under applicable federal securities laws, the District shall within ten (10) Business Days of occurrence file a notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in subsections (a)(7) or (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Certificates pursuant to the Trust Agreement.

SECTION 6. Format for Filings with MSRB. Any report or filing with the MSRB pursuant to this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in a filing with the MSRB.

SECTION 8. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be SCI Consulting Group.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

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(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a) or (b), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Certificates, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Holders of the Certificates in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Certificates.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 11. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate; provided, that any such action may be instituted only in Superior Court of the State of California in and for the County of Solano or in U.S. District Court in or nearest to the County. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

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SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity.

Date: October 12, 2016

TRAVIS UNIFIED SCHOOL DISTRICT

By: Authorized District Representative

APPENDIX E

SOLANO COUNTY INVESTMENT POOL

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SOLANO COUNTY TREASURER

INVESTMENT POLICY

Table of Contents

Purpose ................................................................................................................................ 3

Scope ................................................................................................................................... 3

Implementation ................................................................................................................... 3

Participants .......................................................................................................................... 3

General Policy Statement .................................................................................................... 4

Objectives ........................................................................................................................... 4

Standard of Care ................................................................................................................. 5

Safekeeping and Custody .................................................................................................... 6

Reporting............................................................................................................................. 6

Compensation ..................................................................................................................... 7

Financial Dealers and Institutions ....................................................................................... 7

Borrowing of Pool Funds .................................................................................................... 8

Calculating and Apportioning Pool Earnings ..................................................................... 8

Deposit and Withdrawal Requests ...................................................................................... 9

Authorized Investments and Restrictions ........................................................................... 9

Other Policy Considerations ............................................................................................. 11

Investment of Bond Proceeds ........................................................................................... 12

California Government Code Sections Referenced: ......................................................... 13

Purpose This policy provides guidance, control, and direction for the management of surplus funds entrusted to the care of the Solano County Treasurer. These funds are invested collectively and referred to as the Treasury Pool. In addition, the Treasurer is entrusted with segregated investments related to debt issuance and other sources. These funds are invested within the scope of all applicable bond issuance documents, government codes, trust agreements, or other restrictions in affect at the time of the deposit and during the holding period. Any funds entrusted and invested outside the Treasury Pool are accounted for separately.

Scope This policy applies to all funds over which the Treasurer has been granted fiduciary responsibility and direct control for their management.

Implementation The guidelines and restrictions found herein shall be applied to all actions taken after its adoption by the Board of Supervisors and shall remain in effect until replaced.

Participants This investment policy generally restricts deposits to those funds mandated by law or contractual agreement to be held in care of the County Treasurer. On the consent of the Treasurer, exemptions may be granted pursuant to Government Code §53684 for non-mandatory depositing agencies or non-mandated funds, if it is determined that the additional deposit provides a benefit to the Treasury Pool as a whole while not creating an unmanageable liquidity risk. Non-mandated depositors or funds may be subject to specific transactional limitations that mitigate the non-mandated deposit liquidity risk. These restrictions may include but are not limited to restrictions on the number of transactions per month, on the size of individual transactions, and on the amount of notification time required before processing a transaction. Non-mandated depositors must agree to the terms and conditions of deposit prior to the Treasurer’s acceptance of any non-mandated funds. As a default, these restrictions shall be not more than five transactions per month, not more than the lesser of five million dollars or one percent of the portfolio in aggregate transaction totals per month, and a minimum of thirty days prior notification for any transaction.

General Policy Statement It shall be the policy of the Solano County Treasurer to manage the Treasury Pool in accordance with applicable State codes and for the benefit of the pool participants. The Treasurer will make every reasonable effort to maintain the composition of the Treasury Pool within an acceptable risk – return profile. To achieve and maintain this profile, the Treasurer may direct investment purchases or sales to adjust the credit risk, interest rate risk, liquidity risk, or other risks inherent in investment pools.

Objectives It is the objective of the Solano County Treasurer to invest public funds in a manner that provides security of principal, sufficient liquidity to ensure that the specific portfolio is able to meet its cash flow needs, and generates returns consummate with the inherent risks being managed. This practice is generally referred to as the “SLY” principal; which is Safety, Liquidity, and Yield. Safety: Safety of principal seeks to insure the preservation of capital. The objective will be to manage credit risk and liquidity risk Credit risk, also known as default risk, is the risk that the issuer of a fixed income security may be unable to make timely principal and interest payments. This risk is mitigated through diversification, a process whereby funds are invested in multiple issuers as opposed to a single name.

Liquidity risk, is the risk that an investment will be difficult or impossible to sell at a reasonable price relative to its potential return. Marketability risk increases or decreases based on a number of factors including the notoriety of the debt issuer and the frequency at which they issue debt. The size, structure, and complexity of the particular deal, and the size of the market it is issued in are also factors that impact marketability of the security. Market risk is mitigated in the portfolio through the purchase and holding of securities issued by larger, more well-known, and higher rated issuers, such as the United States Treasury and Federal Agencies. Liquidity: The investment pool shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by purchasing securities from large, well known, and highly rated issuers. As well as maintaining a ladder of investment whose maturities are timed to match the historical needs of depositors. This includes structuring the ladder to provide additional maturities in summer months when cash demands exceed deposits. The Treasury Pool also maintains cash balances in several Money Market and Money Market-like instruments including the Local Agency Investment Fund.

Yield: The Treasury Pool shall be managed with the objective of maintaining a rate of return commensurate with the risk through various budgetary and economic cycles. Taking into account prevailing interest rates, liquidity needs as described above, and the limits on the types of securities the Treasury Pool is authorized to purchase. A prudent balancing of liquidity needs results in an investment return for Treasury Pool participants that is higher, under most conditions, than that which would be available to them in an overnight investment. However, as a consequence of purchasing longer maturity investments with higher yields, the yield on the Treasury Pool can be expected to lag changes in market interest rates. The result is a buffered Treasury Pool yield that moves slowly and steadily in the direction of market rates, while providing higher long term rates of return, and an increased ability to forecast depositor yields for budgetary purposes.

Standard of Care The following policies are designed in accordance with Government Code §53600 et al and the recommended best practices of the Government Finance Officers Association (GFOA) to provide transparency to Treasury operations while enhancing portfolio controls.

a) Mark to Market: The portfolio will be marked to market on a monthly or more frequent basis.

b) Wires, ACH’s, and other electronic transfers: Electronic transfers will

require either dual control in the establishment of a repetitive transaction or dual control in the release of a non-repetitive transaction.

c) Prudent Investor: Treasury staff will at all times be held to the “Prudent

Investor Standard” when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds. The County Treasurer and his/her deputies shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the County and other depositors that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of investing funds of a like character and with like aims to safeguard the principal and maintain the liquidity needs of the County and other depositors.

d) Indemnification: The Treasurer and his or her staff, when acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes. Investments shall be made with judgment and care under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs. Investments will not be made for speculation but for investment consistent with the stated objectives.

e) Ethics and Conflicts of Interest: County officers, employees, agents and any

others who may be directly involved in the investment decision making process shall adhere to all applicable laws regarding conflicts of interest and refrain from personal business activity that could conflict with the proper execution and management of the investment program or that could impair their ability to make impartial decisions. Individuals making or advising on investment decisions shall refrain from conducting personal investment transactions with the same individual firm with whom business is conducted on behalf of the County. The receipt of gifts is subject to the disclosure requirements and limitations set forth in sections §87200 and §89503 of the Government Code. In addition, the receipt of honoraria is prohibited.

f) Delegation of Authority – Government Code §53607: California

Government Code §53607 authorizes the County Board of Supervisors the authority to delegate the investment function to the County Treasurer for a one-year period. The Treasurer shall thereafter assume full responsibility for those transactions until the authority is revoked or expires.

g) Transactions Records: All Treasury records will be maintained in

accordance with the County’s adopted records retention policy.

Safekeeping and Custody Delivery vs. Payment: Purchased, or otherwise acquired, investment securities will be delivered by Fed Book Entry, DTC, or physical deliver, and to the extent feasible, held in third party safekeeping with a designated custodian. To the greatest extent possible, all transactions will be conducted on a Delivery Versus Payment (DVP) methodology where funds for payment are released simultaneously with the arrival of the investment. Third-party Safekeeping: The trust department of a bank or other qualified provider will be designated as custodian for safekeeping specific securities. The custodian shall provide reporting and as needed real time access to financial records that show the specific instrument, selling broker/dealer, issuer, coupon, maturity, CUSIP number, purchase or sale price, transaction date, and other pertinent information.

Reporting In accordance with the recommendations of Government Code §53646 the Treasurer will publish on the County public website, or make available through other electronic means, a detailed report of the investment transactions on a monthly basis. The report will also disclose the amount of liquidity available to meet cash flow demands for the subsequent six month period.

In addition, it is the practice of the Treasurer to provide additional and more frequent information to provide transparency in Treasury operations. These reports include:

a) A monthly summary report showing the ending assets, monthly average assets, summary income, and net asset value of the Treasury Pool portfolio.

b) Detailed supporting documentation for asset balances, income, and net asset values.

Transaction records, bank statements, account reconciliations, and associated accounting materials are filed and maintained in accordance with Government Code §27000 - §27013 inclusive; and the County’s adopted records retention policy.

Compensation In accordance with Government Code §§ 27013 and 53684, the Treasurer will charge all pool participants for administrative and overhead costs. Costs include, but are not limited to, employee salaries and benefits, portfolio management, bank and custodial fees, software maintenance fees, and other direct and indirect costs incurred from handling or managing funds Costs will be deducted from interest earnings on the pool prior to apportioning and payment of interest. The Treasurer shall annually prepare a proposed budget providing a detailed itemization of all estimated costs which comprises the administrative fee charged in accordance with California Government Code § 27013. The administrative fee will be subject to change annually. At the end of each fiscal year the amount of the administrative fee is adjusted to reflect the actual Treasury costs for the year.

Financial Dealers and Institutions As a trustee of public funds held on behalf of other governing bodies it is the Treasurer’s policy to use those financial institutions and financial service providers who provide the greatest investment benefit to the pool participants.

a) Issues of public social concern and benefit will be evaluated on a case by case basis using the minimum criteria that to be eligible to receive County funds, all banks, savings associations or federally insured industrial loan companies must have received an overall rating of not less than “satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record meeting the credit needs of California’s communities, including low, moderate income neighborhoods pursuant to Section 2906 of Title 12 of the United States Code.

b) Any decision to conduct financial transactions with an entity shall be made

exercising the care, skill, prudence and diligence under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs.

c) Authorization of Broker/Dealers to conduct business with the County is in the

sole discretion of the Treasurer. In order to assist in the determination process, Broker/Dealers must provide reasonable proof of qualifications. The criteria for authorization of Broker/Dealers are as follows:

i. Any individual Broker/Dealer or Broker/Dealer firm that has made any

political contribution to any agency, individual, or campaign within the potential scope of this policy, at any time during the prior 48 months that exceeds the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board shall be barred from consideration.

ii. Individual Broker/Dealers and Broker/Dealer firms must be in good standing with the NASD.

iii. Individual Broker/Dealer and Broker/Dealer firms must be licensed to conduct business in the State of California.

Constitutionally Mandated Temporary Transfers Pursuant to Article XVI, section 6 of the California Constitution, the County Treasurer, upon resolution of the Board of Supervisors, has the power and the duty to make temporary transfers of Treasury Pool funds to districts whose funds are in the custody of and paid out solely through the Treasurer’s Office. In accordance with statute, these temporary transfers will be limited to 85% of all anticipated revenues accruing to the district that are mandated for deposit with the Treasury.

Calculating and Apportioning Pool Earnings The Solano County Investment Pool is comprised of monies from multiple units of the county, schools, agencies and districts. Each entity has unique cash flow demands, which dictate the type of investments the Treasurer must purchase. To ensure parity among the pool members when apportioning interest, the following procedures have been developed.

a) Interest is apportioned on an at least quarterly basis in accordance with the California Government Code.

b) Interest is apportioned to pool participants based on the participants’ average daily fund balance as determined by the Auditor-Controller.

c) Interest is calculated on an accrual basis for all investments in the Treasurer’s Pool by the Treasurer and reported to the Auditor-Controller for distribution into the funds of the participants.

d) The Auditor-Controller deducts accounting fees and makes any adjustments from the interest earning and apportions the remaining earnings to all participants based on the positive average daily balance.

e) Negative average daily fund balance will be charged interest at the rate of

interest that is being apportioned.

Deposit and Withdrawal Requests Solano County operates a Pooled Investment Portfolio that allows optimal liquidity and diversification for depositing agencies. Unless otherwise specified, monies from all units of government, schools, agencies and districts deposited into the Treasury are combined into the Treasury Pool. The purpose of the combined portfolio is to increase participant’s liquidity and not limit them to specific investments. This portfolio is managed as a unit based on a calculated combined cash flow of all the participants. See “Participants” section for additional information and restrictions on deposits. Per Government Code §27136, the Treasurer will approve all material withdrawals from the investment pool that are made for the purpose of investing or depositing those funds outside the County Treasury Pool. Transactions by non-mandatory depositors will be at a minimum subject to the limitations as described in Treasurer’s Pool Participants section of this policy. Exceptions to the combined pool are allowed for bond proceeds and other funds that must be segregated by applicable bond documents, trust agreements, statutes, or other restrictions in place at or during the time the funds are entrusted to the Solano County Treasurer. Investment and reporting of these funds will be segregated from the Treasury Pool. For additional information see “Bond Proceeds Portfolios.”

Authorized Investments and Restrictions The Solano County Treasurer’s Pool shall be governed by the tenets of Government Code § 53600 et seq. In addition to these tenets the portfolio is further restricted to the following percentages based on book value at the time of purchase.

a) Bonds issued by Solano County as the local agency i. Not more than 20% of the portfolio ii. Maximum maturity of 30 years in accordance with Resolution 2008-96

b) Treasury Bills, Notes, Bonds, and other Certificates of Indebtedness backed by the full faith and credit of the United States Government i. No restrictions above those mandated by §53601

c) Registered state warrants or treasury notes or bonds of the State of California i. Not more than 20% of the portfolio ii. Maximum maturity of 30 years in accordance with Resolution 2008-96

d) Registered treasury notes or bonds issued by any of the other 49 states in accordance with §53601 (d) i. Not more than 20% of the portfolio. ii. Maximum maturity of 30 years in accordance with Resolution 2008-96

e) Bonds, notes, warrants, or other evidences of indebtedness of any local agency within the State of California not including Solano County i. Not more than 20% of the portfolio ii. Maximum maturity of 30 years in accordance with Resolution 2008-96

f) Federal Agency or United States government-sponsored enterprise obligations, participations, or other instruments i. Not more than 80% of the portfolio ii. Not more than 50% of the portfolio in any single agency

g) Bankers Acceptances i. No restrictions above those mandated by §53601

h) Commercial Paper

i. Must be credit rated the equivalent of “A-1” or higher by at least two nationally recognized statistical rating organizations.

i) Negotiable Certificates of Deposit

i. Not more than 20% of the portfolio

j) Repurchase Agreement or Reverse Repurchase Agreements Collateral i. No restrictions above those mandated by §53601

k) Corporate Bonds, Notes, or other Certificates of Indebtedness i. No restrictions above those mandated by §53601

l) Shares of Beneficial Interest i. No restrictions above those mandated by §53601

m) Bond Proceeds i. No restrictions above those mandated by §53601

n) Security Interests i. No restrictions above those mandated by §53601

o) Any mortgage or other asset backed pass-through security or collateralization i. No restrictions above those mandated be §53601

p) JPA Participations i. No restrictions above those mandated by §53601

q) International Bank for Reconstruction and Development, International Finance Corporation, Inter-American Development Bank i. Dollar denominated senior unsecured unsubordinated rated AA or better.

r) Other Restrictions i. Currently callable securities restricted to not more than 60% of the

portfolio. Restriction does not apply to make whole calls. ii. Securities downgraded to below investment grade shall be reviewed and

sold at market prices if the determination is made that they present a material risk to the portfolio liquidity.

s) Commercial Bank, Savings Bank, Savings and Loan Association, or Credit Union Certificate distribution mechanisms. i. No Restrictions above those mandated by §53601

Any investment currently held in the portfolio that does not meet the guidelines established in this policy is exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. In accordance with California Government Code Section §53601 the Treasurer retains the right to petition the Solano County Board of Supervisors for approval to invest in securities with a final maturity in excess of five years. The Solano County Board of Supervisors adoption of any resolution allowing maturities beyond five years shall be considered an allowed modification to this policy and any investments made in accordance with the modification shall be allowable under this policy. The Board’s previously granted exception in the form of Resolution 2009-65 on April 07, 2009 shall remain in effect regarding the purchase of extended maturity securities, pursuant to Government Code §53601.

Other Policy Considerations Disaster Recovery: The County Treasury maintains disaster recovery policies, procedures, and practices that are tested and updated on a regular basis as technologies and conditions change. These items are intended first and foremost to provide the maximum protection to Treasury assets in the event of a natural or manmade disaster. The Treasury also maintains contingency operating procedures to provide business continuity in the event that key County facilities or equipment are unavailable for extended periods of time.

Auditing: Pursuant to Government Code § 26920 the Treasury undergoes a quarterly review of the Treasurer’s statement of assets conducted by the Internal Audit division of the Auditor-Controller’s office. The Auditor’s review shall be accomplished in accordance with the appropriate professional standards, as determined by the County Auditor. The Treasurer shall prepare a statement showing the amount and type of assets in the County Treasury as of the date of the review. The review shall include:

a) Counting cash in the Treasury.

b) Verifying that the records of the Treasurer and Auditor are reconciled

pursuant to California Government Code § 26905.

c) Issuing a report to the Board of Supervisors in accordance with the Statements on Standards of Accounting and Review Services issued by the American Institute of Certified Public Accountants.

d) On an annual basis, the Internal Audit Division of the Auditor-Controller’s Office shall perform or cause to be performed an audit of the assets in the County Treasury and express an opinion whether the Treasurer’s statement of assets is presented fairly and in accordance with generally accepted accounting principles.

e) The report shall be addressed to the Board of Supervisors. The quarterly review referenced above need not be performed for the period when an audit is conducted.

Investment of Segregated Funds As needed, the Treasurer may be entrusted to manage the proceeds of specific bond issuances or other deposited funds as separate investments from the Treasury Pool. These include, but are not limited to General Obligations of the County, County TRANs, Pension Trust Fund, School General Obligations, School TRANs, and State or other entity provided loans or deposits to local agencies including School Districts. Participation: Participation in a “segregated funds” portfolio is restricted to the terms of the specific issues trust agreement or as directed by the appropriate legal counsel. Establishment of a segregated investment will be by mutual agreement of the requesting agency and the Treasurer Portfolio Restrictions: Funds in any segregated portfolio will be governed by the tenets of the trust agreement, and any other agreed upon governance. Segregated investment will be held to the prudent investor standard.

a) Investments in this portfolio are not subject to the limitations of §53601 - §53609 inclusive.

b) For tax purposes portfolio investments may be restricted to tax exempt or other specific tax treatment securities.

c) As a result of spending restrictions, portfolio funds may be invested in securities with durations of up to forty years or as otherwise proscribed in the trust agreement

Withdrawing funds from the Portfolio: Withdrawals are subject to the limitations and restrictions as described in the trust agreement. Any gains or losses realized as a result of changes in the anticipated withdrawal schedule will be apportioned to the depositor’s fund. Special Investments: Special investments are subject to the restrictions of the individual bond issuance as described in the trust agreement or as directed by the appropriate legal counsel. Roles and Responsibilities: The Treasurer manages these funds on behalf of the depositor and relies on the depositor to provide accurate information with regard to liquidity and other specific investment needs. It shall be the responsibility of the depositor to notify the Treasurer of any changes in the investment requirements. Balances are validated against records maintained by the Auditor – Controller’s office.

California Government Code Sections Referenced: §26900-26922

§27000-27137 §53600-53610 §53630-53692

675 Texas StreetFairfield, California 94533www.solanocounty.com

Solano County

Agenda Submittal

Agenda #: 11 Status: Received and Filed

Type: Report Department: Treasurer-Tax Collector-County Clerk

File #: 16-336 Contact: Charles Lomeli, 784-3419

Agenda date: Final action:4/26/2016 4/26/2016

Title: Accept the Solano County Treasurer’s Quarterly Report for the period of January 1, 2016through March 31, 2016

Governing body: Board of Supervisors

District: All

Attachments: 1. A - Executive Summary, 2. B - Executive Summary PARS, 3. C - PARS 115 Chart, 4. D -Statement of Compliance, 5. E - Maturities List, 6. Minute Order

Action ByDate Action ResultVer.

Board of Supervisors4/26/2016 2

Published Notice Required? Yes ___ No _X _Public Hearing Required? Yes ___ No _X _

DEPARTMENTAL RECOMMENDATION:

It is recommended that the Board accept the County Treasurer’s Quarterly Report for the period of January 1,2016 through March 31, 2016.

SUMMARY:

Submitted herein is the Treasurer’s FY2015/16 Third Quarter Report, which contains the Treasurer’sStatement of Compliance.

This report is provided for informational purposes only. All information contained in this report pertains to allcounty, district, agency and school district funds. This report is also available on the Treasurer’s web site atwww.solanocounty.com.

FINANCIAL IMPACT:

There is no financial impact in accepting this report; all costs associated with producing the report are realizedin the Treasurer’s budget.

ALTERNATIVES:

The Board could elect not to accept this report at this time or request a change in content or format.

OTHER AGENCY INVOLVEMENT:

This report will be promulgated to the distribution list on the Statement of Compliance and published on theTreasurer’s website.

Solano County Printed on 5/5/2016Page 1 of 2

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File #: 16-336, Version: 2

CAO RECOMMENDATION:

APPROVE DEPARTMENTAL RECOMMENDATION

Solano County Printed on 5/5/2016Page 2 of 2

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1 Attachment A

CHARLES LOMELI Treasurer-Tax Collector-County Clerk calomeli@solanocounty.com

MICHAEL COOPER Assistant Treasurer-Tax Collector-County Clerk mrcooper@solanocounty.com ttccc@solanocounty.com

www.solanocounty.com

TREASURER-TAX COLLECTOR-COUNTY CLERK LORI BUTLER-SLAPPY Tax Collections Manager

leslappy@solanocounty.com

DENISE TOLSON County Clerk Manager

dmtolson@solanocounty.com

675 Texas Street, Suite 1900 Fairfield, CA 94533-6342

(707) 784-7485 Treasurer (707) 784-6295

Fax (707) 784-6311

April 12, 2016

The Honorable Members of the Board of Supervisors County of Solano County 675 Texas Street, Suite 6500 Fairfield CA 94533 Honorable Members of the Board: It is my pleasure to present the quarterly report for the third quarter of FY2015/16. State of the Treasury The $940 million Treasury Pool is invested in a manner consistent with the balancing of credit, liquidity, and interest rate risks,

Standard and Poor’s continues to rate the investment pool AA+. Credit and liquidity risk are managed through diversification

and a preference for more widely traded issuers. Liquidity risk is managed through the maintenance of cash and cash

equivalents in the form of Money Market instruments, LAIF, securities maturing in six months or less, and other similarly

liquid holdings. The current liquidity balance of the Treasury Pool is $463 million which provides additional liquidity

protection for the Treasury Pool in anticipation that the Federal Reserve will increase interest rates.

Current Market Conditions Impacting the Treasury Pool

The Federal Reserve Open Market Committee (FOMC) held interest rates at a range of 0.25 – 0.50% at the most recent

meeting on March 16, 2016. The next meeting of the FOMC is June 15, 2016.

The impact of recent FOMC actions on interest rates has been to flatten the yield curve, or cause short term interest rates to

rise and longer term interest rates to fall. Since September 30, 2015, the yield on three month Treasury securities increased

from 0.0% to 0.2% and the yield on 5 year Treasuries decreased from 1.35% to 1.19%. The majority of the investment pool is

invested in this one to five year portion of the yield curve.

In the longer term it is less clear what actions the FOMC may take with regard to interest rates, as they remain data dependent

on indications of strength in labor markets and inflation. Since the economic recovery began, labor growth has shown a steady

demand and significant declines in the unemployment rate, but these declines have yet to translate into real wage growth.

Inflation on the other hand shows a more mixed picture. Stripping out volatile food and energy components, core CPI year

over year is running at 2.3% as of the most recent measurement in February. When the more volatile components are factored

in, the collapse in energy and commodity prices presents a much more muted inflation picture. It remains to be seen if the

abundance in oil supplies, coupled with weakness in China is only a temporary condition or if it will translate to weakness in

the core inflation numbers.

2 Attachment A

Expectations going forward

The Treasury Pool primarily purchases securities at the short end of the yield curve, defined as investments with maturities of

five years or less, and as a result maintains a 0.8 to 1.2 duration. Should the FOMC increasing overnight rates further, the

Treasury will have the opportunity to purchase securities with slightly higher yields and available liquidity will be invested to

take full advantage of higher yielding securities.

Ms. Yellen indicated in December that the FOMC intended to raise overnight rates in three equal amounts of 0.25% each

during the course of this calendar year. Continued uncertainty and economic weakness may cause the FOMC to reconsider

this plan. The Treasury will continue to monitor the FOMC for indications as to their future actions and deploy capital

accordingly.

Respectfully Submitted, CHARLES LOMELI Treasurer – Tax Collector – County Clerk

1 Attachment B

CHARLES LOMELI Treasurer-Tax Collector-County Clerk calomeli@solanocounty.com

MICHAEL COOPER Assistant Treasurer-Tax Collector-County Clerk mrcooper@solanocounty.com ttccc@solanocounty.com

www.solanocounty.com

TREASURER-TAX COLLECTOR-COUNTY CLERK LORI BUTLER-SLAPPY Tax Collections Manager

leslappy@solanocounty.com

DENISE TOLSON County Clerk Manager

dmtolson@solanocounty.com

675 Texas Street, Suite 1900 Fairfield, CA 94533-6342

(707) 784-7485 Treasurer (707) 784-6295

Fax (707) 784-6311

April 12, 2016

The Honorable Members of the Board of Supervisors County of Solano County 675 Texas Street, Suite 6500 Fairfield CA 94533 Honorable Members of the Board: The 115 Pension Trust is invested to achieve the objectives established in the formation of the trust, which is to optimize total

return while meeting the scheduled withdrawals for payment of pension obligations as approved by the Board. To that end,

81% of the portfolio is invested in individual securities with maturities that are laddered to meet projected withdrawal dates.

As a pension fund, the risk of unanticipated withdrawals is minimized, and in general the portfolio will be structured with a

minimum of liquidity. However, current market disruptions have raised concerns that investment assets could see significant

price swings. To mitigate this risk, 19% of the portfolio has been maintained in cash. As opportunities arise, the majority of

these funds will be invested at higher rates.

The fund is currently earning 1.2%, with an estimated annual income of $241,664 dollars. Portfolio duration is calculated to

be 1.27, which indicates that for every 1% change in market rates, the market value of the fund will increase or decrease by a

corresponding 1.27%.

To provide enhanced yield and diversification, the fund is invested in corporate and agency securities.

Respectfully Submitted, CHARLES LOMELI Treasurer – Tax Collector – County Clerk

Holdings by Security Type

3,804,451.93 3,225,000.00

10,999,280.00 2,012,600.00

Cash and Cash Equivalents Mutual FundsUS AgenciesCorporate Securities Total Security Holdings

20,041,331.93

Accrued Income 33,720.85

Grand Total 20,075,052.78

Estimated Annual Income 249,901.49

Yield on Total Assets 1.24%

Description Cusip Security Classification Security Type Market ValueCASH Cash & Cash Equivalents Cash & Cash Equivalents 3,952.51

FIRST AMER PRIME OBLIG FD CL Z 31846V625 Cash & Cash Equivalents Cash & Cash Equivalents 3,800,499.42

FORD MOTOR CREDIT CO 3.984% 6/15/16 345397WA7 Fixed Income CORPORATE BONDS AND NOTES 1,006,340.00

WELLS FARGO CO 3.676% 6/15/16 949746QU8 Fixed Income CORPORATE BONDS AND NOTES 1,006,260.00

F H L B DEB 0.400% 6/06/16 3130A11P0 Fixed Income US AGENCIES 2,000,400.00

F H L B DEB 0.420% 6/30/16 3130A3HQ0 Fixed Income US AGENCIES 2,000,580.00

F F C B DEB 0.680% 7/03/17 3133EFBS5 Fixed Income US AGENCIES 2,999,100.00

F N M A DEB 0.920% 06/26/18 3136G15Q8 Fixed Income US AGENCIES 3,999,200.00

DOUBLELINE TOTAL RET BD I 258620103 Mutual/Collective Funds MUTUAL FUNDS-FIXED TAXABLE 1,087,000.00

VANGUARD SHORT TERM INVT GRADE #539 922031836 Mutual/Collective Funds MUTUAL FUNDS-FIXED TAXABLE 2,138,000.00

20,041,331.93

All values at Market Value unless otherwise noted

Portfolio Holdings

Solano CountyPARS 115 Trust

Account Summary Report March 31, 2016

Holdings by Security Type

Cash and Cash Equivalents Mutual Funds US Agencies Corporate Securities

1 Attachment C

1 Attachment D

CHARLES LOMELI Treasurer-Tax Collector-County Clerk calomeli@solanocounty.com

MICHAEL COOPER Assistant Treasurer-Tax Collector-County Clerk mrcooper@solanocounty.com ttccc@solanocounty.com

www.solanocounty.com

TREASURER-TAX COLLECTOR-COUNTY CLERK LORI BUTLER-SLAPPY Tax Collections Manager

leslappy@solanocounty.com

DENISE TOLSON County Clerk Manager

dmtolson@solanocounty.com

675 Texas Street, Suite 1900 Fairfield, CA 94533-6342

(707) 784-7485 Treasurer (707) 784-6295

Fax (707) 784-6311

STATEMENT OF COMPLIANCE March 31, 2016

Liquidity:

The Treasury has a cash and cash equivalent position (securities maturing within 6 months) of

$462 million dollars as of March 31, 2016. Based on historical trend analysis and projections by

the various school districts, it is estimated that this cash position is adequate to meet projected

liquidity requirements of the pool participants for the next six months.

Should the treasury experience unusual demands on cash, the liquidity position will be adjusted

accordingly.

Investments:

The investment portfolio has been reviewed by the Treasurer-Tax Collector-County Clerk on

March 31, 2016 and found to be in compliance with the Investment Policy.

Reporting and Distribution:

In accordance with Government code section 53607, a monthly report is submitted to the Clerk

of the Board electronically.

In accordance with the Government Code section 53646 this non-mandated quarterly report is

submitted to provide full disclosure to the Board and public.

This report is also made available to the Superintendent of Schools, the business managers of

each district, many pool participants and the public at large via the Internet.

Respectfully Submitted,

CHARLES LOMELI

Treasurer-Tax Collector-County Clerk

ValuesRow Labels Sum of Par Sum of Book Sum of Market

2016Apr 279,488,039 279,510,954 279,543,114

CASH 9,957,045 9,957,045 9,957,045Bank of America 824,119 824,119 824,119

CASH 824,119 824,119 824,119Cash on Hand 3,507,940 3,507,940 3,507,940

CASH 3,507,940 3,507,940 3,507,940Wells Fargo 5,325,331 5,325,331 5,325,331

CASH 5,325,331 5,325,331 5,325,331Bank of Rio Vista 12,325 12,325 12,325

CASH 12,325 12,325 12,325First Northern Bank 287,331 287,331 287,331

CASH 287,331 287,331 287,331FEDCOUP 37,294,000 37,322,333 37,321,619

FHLB 15,000,000 15,000,260 14,999,4903130A4YL0 15,000,000 15,000,260 14,999,490

FHLMC 22,294,000 22,322,073 22,322,1293137EAAD1 12,294,000 12,322,073 12,322,1293134G2CV2 10,000,000 10,000,000 10,000,000

FEDDISC 21,900,000 21,897,323 21,897,772FHDN 11,900,000 11,898,623 11,898,822

313384VT3 11,900,000 11,898,623 11,898,822TVA 10,000,000 9,998,700 9,998,950

880592VU1 10,000,000 9,998,700 9,998,950JPA 37,078,162 37,078,162 37,108,956

Caltrust Medium 15,059,355 15,059,355 15,083,530CALTMED 15,059,355 15,059,355 15,083,530

Caltrust Short 22,018,808 22,018,808 22,025,426CALTSHORT 22,018,808 22,018,808 22,025,426

LAIF 46,155,395 46,155,395 46,155,395Local Agency Investment Fund 46,155,395 46,155,395 46,155,395

LAIF 46,155,395 46,155,395 46,155,395MEDTERM 3,500,000 3,500,000 3,500,000

E.I. DU PONT DE NEMOURS 3,500,000 3,500,000 3,500,000263534CF4 3,500,000 3,500,000 3,500,000

TREASURY 30,000,000 29,997,259 29,998,890U S TREASURY 30,000,000 29,997,259 29,998,890

912796HL6 30,000,000 29,997,259 29,998,890CALSTATE 1,090,000 1,090,000 1,090,000

CA STATE GENERAL PURPOSE 1,090,000 1,090,000 1,090,00013063A5D2 1,090,000 1,090,000 1,090,000

MMY 90,513,437 90,513,437 90,513,437Bank of America Money Market 0 0 0

BANK AMERICA MMY 0 0 0Union Bank Money Market 136,382 136,382 136,382

UNION BANK MMY 136,382 136,382 136,382Wells Fargo Bank Money Market 0 0 0

WELLS MMY 0 0 0Camp Money Market 28,023,931 28,023,931 28,023,931

CAMP MMY 28,023,931 28,023,931 28,023,931Cal Trust Money Market 38,350,954 38,350,954 38,350,954

CAL TRUST MMY 38,350,954 38,350,954 38,350,954Cal Trust Govt MMKT 24,002,170 24,002,170 24,002,170

1 Attachment E

CAL TRUST GOVT MMY 24,002,170 24,002,170 24,002,170NATMUNI 2,000,000 2,000,000 2,000,000

TEXAS ST TRANSPORTATION COMM 2,000,000 2,000,000 2,000,0008827226Y2 2,000,000 2,000,000 2,000,000

May 31,353,000 31,418,290 31,420,654MEDTERM 10,853,000 10,874,119 10,873,219

JOHNSON & JOHNSON 10,853,000 10,874,119 10,873,219478160AY0 10,853,000 10,874,119 10,873,219

TREASURY 20,000,000 20,044,170 20,047,440U S TREASURY 20,000,000 20,044,170 20,047,440

912828QP8 20,000,000 20,044,170 20,047,440CALSTATE 500,000 500,000 499,995

REGENTS OF UNIV OF CA GOB 2015 SER AP 500,000 500,000 499,99591412GWS0 500,000 500,000 499,995

Jun 45,585,000 45,646,418 45,671,188FEDCOUP 30,000,000 30,043,750 30,049,810

FFCB 5,000,000 5,000,000 5,001,9553133EEC40 5,000,000 5,000,000 5,001,955

FHLB 25,000,000 25,043,750 25,047,855313373ZN5 5,000,000 5,013,258 5,015,865313373SZ6 10,000,000 10,030,213 10,032,1403130A6JW8 10,000,000 10,000,280 9,999,850

MEDTERM 5,000,000 5,017,538 5,031,280WELLS FARGO & COMPANY 5,000,000 5,017,538 5,031,280

949746QU8 5,000,000 5,017,538 5,031,280TREASURY 10,000,000 10,000,129 10,004,490

U S TREASURY 10,000,000 10,000,129 10,004,490912828VG2 10,000,000 10,000,129 10,004,490

CALSTATE 585,000 585,000 585,608CARMEL BY SEA 585,000 585,000 585,608

143170AD0 585,000 585,000 585,608Jul 42,380,000 42,495,470 42,518,421

FEDCOUP 12,950,000 12,952,126 12,960,750FHLB 12,950,000 12,952,126 12,960,750

313383QU8 2,950,000 2,952,205 2,954,1603130A3W83 5,000,000 5,000,000 5,003,5503130A3WC4 5,000,000 4,999,921 5,003,040

MEDTERM 5,175,000 5,203,040 5,207,561J P MORGAN CHASE & CO 5,175,000 5,203,040 5,207,561

46625HJA9 5,175,000 5,203,040 5,207,561TREASURY 20,000,000 20,033,080 20,041,200

U S TREASURY 20,000,000 20,033,080 20,041,200912828QX1 10,000,000 10,032,241 10,037,490912828WX4 10,000,000 10,000,839 10,003,710

NATMUNI 4,255,000 4,307,225 4,308,911OKLAHOMA STATE 4,255,000 4,307,225 4,308,911

679077RQ2 4,255,000 4,307,225 4,308,911Aug 33,340,000 33,385,995 33,413,797

TREASURY 30,000,000 30,045,995 30,073,830U S TREASURY 30,000,000 30,045,995 30,073,830

912828RF9 30,000,000 30,045,995 30,073,830CALSTATE 3,340,000 3,340,000 3,339,967

SOLANO CTY CA CMNTY COLLEGE DISTR 3,340,000 3,340,000 3,339,96783412PDU3 3,340,000 3,340,000 3,339,967

Sep 70,000,000 70,167,407 70,211,710

2 Attachment E

FEDCOUP 40,000,000 40,112,745 40,135,940FHLB 40,000,000 40,112,745 40,135,940

313370TW8 20,000,000 20,123,410 20,137,0203130A2T97 20,000,000 19,989,334 19,998,920

TREASURY 30,000,000 30,054,662 30,075,770U S TREASURY 30,000,000 30,054,662 30,075,770

912828VW7 10,000,000 10,009,789 10,019,530912828RJ1 20,000,000 20,044,873 20,056,240

Oct 26,745,000 26,763,210 26,764,470FEDCOUP 26,500,000 26,518,210 26,518,391

FHLB 26,500,000 26,518,210 26,518,3913130A3CE2 26,500,000 26,518,210 26,518,391

CD 245,000 245,000 246,079AMERICAN EXPRESS CENTURION 245,000 245,000 246,079

02587DLC0 245,000 245,000 246,079Nov 7,320,000 7,340,065 7,362,337

FEDCOUP 2,000,000 2,000,000 2,000,032FFCB 2,000,000 2,000,000 2,000,032

3133EEAP5 2,000,000 2,000,000 2,000,032MEDTERM 5,000,000 5,020,065 5,042,305

US BANCORP 5,000,000 5,020,065 5,042,30591159HHB9 5,000,000 5,020,065 5,042,305

SOL 320,000 320,000 320,000SOLANO CTY 2013 COPS 320,000 320,000 320,000

834SCFCP7D 320,000 320,000 320,000Dec 25,000,000 25,000,000 25,045,900

FEDCOUP 25,000,000 25,000,000 25,045,900FHLB 25,000,000 25,000,000 25,045,900

3130A6X85 25,000,000 25,000,000 25,045,9002017

Feb 5,000,000 5,000,267 5,006,200MEDTERM 5,000,000 5,000,267 5,006,200

BANK OF AMERICA NA 5,000,000 5,000,267 5,006,20006050TLT7 5,000,000 5,000,267 5,006,200

Mar 5,000,000 5,005,584 5,002,910FEDCOUP 5,000,000 5,005,584 5,002,910

FHLB 5,000,000 5,005,584 5,002,9103130A4KD3 5,000,000 5,005,584 5,002,910

Apr 36,000,000 36,043,620 36,037,486FEDCOUP 36,000,000 36,043,620 36,037,486

FFCB 5,000,000 5,000,000 5,000,2503133EEB66 5,000,000 5,000,000 5,000,250

FHLB 11,000,000 11,013,537 11,029,8763130A4M41 11,000,000 11,013,537 11,029,876

FNMA 20,000,000 20,030,083 20,007,3603135G0ZB2 20,000,000 20,030,083 20,007,360

May 52,120,000 52,635,218 52,690,343FEDCOUP 18,500,000 18,967,439 18,976,965

FNMA 18,500,000 18,967,439 18,976,9653136G1E96 8,500,000 8,500,000 8,500,14531359M7X5 10,000,000 10,467,439 10,476,820

MEDTERM 20,000,000 20,042,825 20,084,705WALT DISNEY CO 5,000,000 4,989,305 5,004,915

25468PCZ7 5,000,000 4,989,305 5,004,915APPLE INC 10,000,000 10,004,538 10,037,920

3 Attachment E

037833AM2 10,000,000 10,004,538 10,037,920BERKSHIRE HATHAWAY 5,000,000 5,048,983 5,041,870

084664BS9 5,000,000 5,048,983 5,041,870TREASURY 3,000,000 2,998,524 2,998,242

U S TREASURY 3,000,000 2,998,524 2,998,242912828SY7 3,000,000 2,998,524 2,998,242

CALSTATE 620,000 620,000 621,581REGENTS OF UNIV OF CA GOB 2015 SER AP 620,000 620,000 621,581

91412GWT8 620,000 620,000 621,581NATMUNI 5,000,000 5,006,429 5,017,550

MASSACHUSETTS ST TXBL SER B 5,000,000 5,006,429 5,017,55057582P2Q2 5,000,000 5,006,429 5,017,550

SUPRA 5,000,000 5,000,000 4,991,300IBRD 5,000,000 5,000,000 4,991,300

45905URX4 5,000,000 5,000,000 4,991,300Jun 45,000,000 45,014,367 45,102,485

FEDCOUP 30,000,000 30,016,462 30,082,145FHLB 5,000,000 4,996,273 5,007,770

3130A5HF9 5,000,000 4,996,273 5,007,770FHLMC 25,000,000 25,020,189 25,074,375

3137EADH9 25,000,000 25,020,189 25,074,375MEDTERM 5,000,000 5,001,196 5,010,960

3M COMPANY 5,000,000 5,001,196 5,010,96088579YAE1 5,000,000 5,001,196 5,010,960

TREASURY 10,000,000 9,996,709 10,009,380U S TREASURY 10,000,000 9,996,709 10,009,380

912828TB6 10,000,000 9,996,709 10,009,380Jul 49,700,000 50,045,871 50,078,363

FEDCOUP 49,700,000 50,045,871 50,078,363FHLB 4,200,000 4,208,802 4,203,604

3130A5ZU6 4,200,000 4,208,802 4,203,604FHLMC 40,500,000 40,535,585 40,572,474

3137EADJ5 15,000,000 15,056,352 15,054,1953137EADV8 20,500,000 20,471,379 20,507,3393134G6AC7 5,000,000 5,007,853 5,010,940

TENNESEE VALLEY AUTHORITY 5,000,000 5,301,484 5,302,285880591EA6 5,000,000 5,301,484 5,302,285

Aug 35,000,000 34,939,443 35,030,500FEDCOUP 20,000,000 19,985,343 20,015,860

FHLB 20,000,000 19,985,343 20,015,8603130A53Y3 10,000,000 9,995,802 10,011,5103130A62S5 10,000,000 9,989,541 10,004,350

MEDTERM 5,000,000 5,009,425 5,026,750PEPSICO INC 5,000,000 5,009,425 5,026,750

713448CB2 5,000,000 5,009,425 5,026,750TREASURY 10,000,000 9,944,674 9,987,890

U S TREASURY 10,000,000 9,944,674 9,987,890912828TM2 10,000,000 9,944,674 9,987,890

Sep 50,000,000 50,226,688 50,349,290FEDCOUP 50,000,000 50,226,688 50,349,290

FFCB 10,000,000 10,032,240 10,033,5503133EEQX1 10,000,000 10,032,240 10,033,550

FHLB 10,000,000 10,197,688 10,211,970313370SZ2 10,000,000 10,197,688 10,211,970

FHLMC 20,000,000 19,991,620 20,072,700

4 Attachment E

3137EADL0 20,000,000 19,991,620 20,072,700FNMA 10,000,000 10,005,140 10,031,070

3135G0PP2 10,000,000 10,005,140 10,031,070Oct 10,000,000 10,000,000 10,000,110

FEDCOUP 10,000,000 10,000,000 10,000,110FHLB 10,000,000 10,000,000 10,000,110

3130A6JJ7 10,000,000 10,000,000 10,000,110Nov 15,330,000 15,367,359 15,489,800

SOL 330,000 330,000 330,000SOLANO CTY 2013 COPS 330,000 330,000 330,000

834SCFCP7E 330,000 330,000 330,000CALSTATE 15,000,000 15,037,359 15,159,800

CA STATE GENERAL PURPOSE 5,000,000 5,042,923 5,077,70013063CFC9 5,000,000 5,042,923 5,077,700

CA STATE TXBL 10,000,000 9,994,436 10,082,10013063CPN4 10,000,000 9,994,436 10,082,100

2018Jan 1,445,000 1,523,544 1,528,911

SOL 1,445,000 1,523,544 1,528,911SOLANO COUNTY CA 1,445,000 1,523,544 1,528,911

83413QAL3 1,445,000 1,523,544 1,528,911Feb 5,000,000 5,000,000 5,001,460

FEDCOUP 5,000,000 5,000,000 5,001,460FHLMC 5,000,000 5,000,000 5,001,460

3134G84W6 5,000,000 5,000,000 5,001,460May 7,500,000 7,474,394 7,507,565

FEDCOUP 2,500,000 2,490,332 2,497,260FHLMC 2,500,000 2,490,332 2,497,260

3134G74Z1 2,500,000 2,490,332 2,497,260MEDTERM 5,000,000 4,984,062 5,010,305

APPLE INC 5,000,000 4,984,062 5,010,305037833AJ9 5,000,000 4,984,062 5,010,305

Jun 6,305,000 6,323,575 6,364,671MEDTERM 6,305,000 6,323,575 6,364,671

CHEVRON CORPORATION 6,305,000 6,323,575 6,364,671166764AE0 6,305,000 6,323,575 6,364,671

Sep 8,630,000 8,832,199 8,851,411FEDCOUP 8,630,000 8,832,199 8,851,411

FFCB 8,630,000 8,832,199 8,851,4113133ED2C5 8,630,000 8,832,199 8,851,411

Nov 345,000 345,000 345,000SOL 345,000 345,000 345,000

SOLANO CTY 2013 COPS 345,000 345,000 345,000834SCFCP7F 345,000 345,000 345,000

2019Apr 10,000,000 10,016,285 10,039,260

FEDCOUP 10,000,000 10,016,285 10,039,260FHLMC 10,000,000 10,016,285 10,039,260

3137EADZ9 10,000,000 10,016,285 10,039,260Jul 15,000,000 15,024,941 15,236,100

CALSTATE 15,000,000 15,024,941 15,236,100UNIV OF CA -AH 15,000,000 15,024,941 15,236,100

91412GSB2 15,000,000 15,024,941 15,236,100Aug 7,000,000 7,000,000 7,134,470

CALSTATE 7,000,000 7,000,000 7,134,470

5 Attachment E

FRESNO CTY CA PENSN OBLG 7,000,000 7,000,000 7,134,470358266CQ5 7,000,000 7,000,000 7,134,470

Sep 1,750,000 1,783,133 2,045,855CALSTATE 1,750,000 1,783,133 2,045,855

SAN LUIS OBISPO COUNTY 1,750,000 1,783,133 2,045,855798703BD5 1,750,000 1,783,133 2,045,855

Nov 355,000 355,000 355,000SOL 355,000 355,000 355,000

SOLANO CTY 2013 COPS 355,000 355,000 355,000834SCFCP7G 355,000 355,000 355,000

2020Aug 5,460,000 5,638,911 5,775,260

CALSTATE 5,460,000 5,638,911 5,775,260SOLANO CNTY CA CMNTY CLG DIST 5,460,000 5,638,911 5,775,260

83412PDY5 5,460,000 5,638,911 5,775,260Nov 365,000 365,000 365,000

SOL 365,000 365,000 365,000SOLANO CTY 2013 COPS 365,000 365,000 365,000

834SCFCP7H 365,000 365,000 365,0002021

Nov 380,000 380,000 380,000SOL 380,000 380,000 380,000

SOLANO CTY 2013 COPS 380,000 380,000 380,000834SCFCP7I 380,000 380,000 380,000

2022Nov 390,000 390,000 390,000

SOL 390,000 390,000 390,000SOLANO CTY 2013 COPS 390,000 390,000 390,000

834SCFCP7J 390,000 390,000 390,0002023

Nov 405,000 405,000 405,000SOL 405,000 405,000 405,000

SOLANO CTY 2013 COPS 405,000 405,000 405,000834SCFCP7K 405,000 405,000 405,000

2024Nov 415,000 415,000 415,000

SOL 415,000 415,000 415,000SOLANO CTY 2013 COPS 415,000 415,000 415,000

834SCFCP7L 415,000 415,000 415,0002025

Nov 430,000 430,000 430,000SOL 430,000 430,000 430,000

SOLANO CTY 2013 COPS 430,000 430,000 430,000834SCFCP7M 430,000 430,000 430,000

2026Nov 445,000 445,000 445,000

SOL 445,000 445,000 445,000SOLANO CTY 2013 COPS 445,000 445,000 445,000

834SCFCP7N 445,000 445,000 445,0002027

Nov 460,000 460,000 460,000SOL 460,000 460,000 460,000

SOLANO CTY 2013 COPS 460,000 460,000 460,000834SCFCP7O 460,000 460,000 460,000

Grand Total 936,441,039 938,613,208 940,214,041

6 Attachment E

675 Texas Street

Fairfield, California 94533

www.solanocounty.com

Solano County

Meeting Minutes - Action Only

Board of SupervisorsErin Hannigan (Dist. 1), Chairwoman

(707) 553-5363

Linda J. Seifert (Dist. 2), Vice-Chair

(707) 784-3031

James P. Spering (Dist. 3)

(707) 784-6136

John M. Vasquez (Dist. 4)

(707) 784-6129

Skip Thomson (Dist. 5)

(707) 784-6130

8:30 AM Board of Supervisors ChambersTuesday, April 26, 2016

11 16-336 Accept the Solano County Treasurer’s Quarterly Report for the period of

January 1, 2016 through March 31, 2016

Accepted

Page 1Solano County

[THIS PAGE INTENTIONALLY LEFT BLANK]

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APPENDIX F

BOOK–ENTRY ONLY SYSTEM

The information in this Appendix F has been provided by DTC for use in securities offering documents, and the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the Certificates or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Certificates, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC. As used in this appendix, “Securities” means the Certificates, “Issuer” means the District, and “Agent” means the Trustee.

DTC will act as securities depository for the Certificates. The Certificates will be executed and delivered 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 Certificate will be issued for each stated Principal Payment Date of the Certificates, each in the aggregate amount of the principal evidenced by Certificates with such stated Principal Payment Date, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market investments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC’s records. The ownership interest of each actual purchaser of each Certificate (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners, however, are 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

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Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book-entry system for the Certificates is discontinued.

To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Prepayment notices will be sent to DTC. If less than all of the Certificates with a particular stated Principal Payment Date are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such Certificates to be prepaid.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates 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 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal, premium, if any, interest and other payments evidenced by the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, premium, if any, interest and other payments evidenced by the Certificates 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 Trustee, and 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.

F-3

DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Certificates will be printed and delivered to DTC.

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

THE DISTRICT, THE CORPORATION AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE TO PARTICIPANTS, OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS OF PRINCIPAL, INTEREST OR ANY PREMIUM EVIDENCED BY THE CERTIFICATES PAID TO DTC OR ITS NOMINEE AS THE REGISTERED OWNER, OR ANY PREPAYMENT OR OTHER NOTICES, TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE DISTRICT, THE CORPORATION AND THE TRUSTEE ARE NOT RESPONSIBLE OR LIABLE FOR THE FAILURE OF DTC OR ANY PARTICIPANTS TO MAKE ANY PAYMENT OR GIVE ANY NOTICE TO A BENEFICIAL OWNER WITH RESPECT TO THE CERTIFICATES OR ANY ERROR OR DELAY RELATING THERETO.

THE FOREGOING DESCRIPTION OF THE PROCEDURES AND RECORD KEEPING WITH RESPECT TO BENEFICIAL OWNERSHIP INTERESTS IN THE CERTIFICATES, PAYMENT OF PRINCIPAL, INTEREST AND OTHER PAYMENTS EVIDENCED BY THE CERTIFICATES TO PARTICIPANTS OR BENEFICIAL OWNERS, CONFIRMATION AND TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN SUCH CERTIFICATES AND OTHER RELATED TRANSACTIONS BY AND BETWEEN DTC, THE PARTICIPANTS AND THE BENEFICIAL OWNERS IS BASED ON INFORMATION PROVIDED BY DTC. ACCORDINGLY, THE DISTRICT TAKES NO RESPONSIBILITY FOR THE ACCURACY THEREOF.

Discontinuance of DTC Service. In the event that (a) DTC determines not to continue to act as securities depository for the Certificates or (b) the District determines to remove DTC from its functions as a depository, DTC’s role as securities depository for the Certificates and use of the book-entry system will be discontinued. If the District fails to select a qualified securities depository to replace DTC, the District will cause the Trustee to execute and deliver new Certificates in fully registered form in such denominations numbered in the manner determined by the Trustee and registered in the names of such persons as are requested by the Beneficial Owners thereof. Upon such registration, such persons in whose names the Certificates are registered will become the registered Owners of the Certificates for all purposes.

The following provisions regarding the exchange and transfer of the Certificates apply only during any period in which the Certificates are not subject to DTC’s book-entry system. While the Certificates are subject to DTC’s book-entry system, their exchange and transfer will be effected through DTC and the Participants and will be subject to the procedures, rules and requirements established by DTC.

All Certificates are transferable by the Owner thereof, in person or by his or her attorney duly authorized in writing, at the principal corporate trust office of the Trustee on the registration books maintained by the Trustee pursuant to the provisions of the Trust Agreement, upon surrender of such

F-4

Certificates for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee. The Trustee may treat the Owner of any Certificate as the absolute owner of such Certificate for all purposes, whether or not the principal or interest evidenced by such Certificate is overdue, and the Trustee will not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Certificate will be made only to such Owner, which payments will be valid and effectual to satisfy and discharge the liability evidenced by such Certificate to the extent of the sum or sums so paid.

Whenever any Certificate or Certificates shall be surrendered for transfer, the Trustee will execute and deliver a new Certificate or Certificates evidencing principal in the same aggregate amount and having the same stated Principal Payment Date. The Trustee will require the payment by any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer.

Certificates may be exchanged at the principal corporate trust office of the Trustee for Certificates evidencing principal in a like aggregate amount having the same stated Principal Payment Date in such Authorized Denominations as the Owner may request. The Trustee will require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.

The Trustee will not be required to transfer or exchange any Certificate during the period commencing five days before the date of selection of the Certificates for prepayment and ending on the date of mailing notice of such prepayment, nor will the Trustee be required to transfer or exchange any Certificate or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof.

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APPENDIX G

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

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MUNICIPAL BOND INSURANCE POLICY

ISSUER: [NAME OF ISSUER] Policy No: _____ MEMBER: [NAME OF MEMBER] BONDS: $__________ in aggregate principal Effective Date: _________ amount of [NAME OF TRANSACTION] [and maturing on]

Risk Premium: $__________ Member Surplus Contribution: $ _________

Total Insurance Payment: $_________ BUILD AMERICA MUTUAL ASSURANCE COMPANY (“BAM”), for consideration received, hereby UNCONDITIONALLY AND

IRREVOCABLY agrees to pay to the trustee (the “Trustee”) or paying agent (the “Paying Agent”) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner’s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner’s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner’s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer’s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. “Due for Payment” means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. “Nonpayment” means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. “Nonpayment” shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. “Notice” means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. “Owner” means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that “Owner” shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

BAM may appoint a fiscal agent (the “Insurer’s Fiscal Agent”) for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer’s Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer’s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer’s Fiscal Agent on behalf of BAM. The Insurer’s Fiscal Agent is the agent of BAM only, and the Insurer’s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer’s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.

This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.

In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer.

BUILD AMERICA MUTUAL ASSURANCE COMPANY By: _______________________________________ Authorized Officer

Notices (Unless Otherwise Specified by BAM) Email: claims@buildamerica.com Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)

CALIFORNIA ENDORSEMENT TO MUNICIPAL BOND INSURANCE POLICY NO.

This Policy is not covered by the California Insurance Guaranty Association established pursuant to Article 15.2 of Chapter 1 of Part 2 of Division 1 of the California Law.

Nothing herein shall be construed to waive, alter, reduce or amend coverage in any other section of the Policy. If found contrary to the Policy language, the terms of this Endorsement supersede the Policy language

IN WITNESS WHEREOF, BUILDAMERICA MUTUAL ASSURANCE COMPANY has caused this policy to be executed on its behalf by its Authorized Officer.

BUILD AMERICA MUTUAL ASSURANCE COMPANY By _______________________________________________ Authorized Officer

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APPENDIX H

SPECIMEN CERTIFICATE RESERVE INSURANCE POLICY

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MUNICIPAL BOND DEBT SERVICE RESERVE INSURANCE POLICY

ISSUER: ISSUER_NAME, STATE_NAME

MEMBER: MEMBER_COMPANY, STATE_NAME

BONDS: $_______________ in aggregate principal amount of ISSUE_NAME, SERIES Maximum Policy Limit: $486,900.00

Policy No: @@POLICY_NO@@

Effective Date: September 29, 2016

Risk Premium: $________ Member Surplus Contribution: $________

Total Insurance Payment: $________

BUILD AMERICA MUTUAL ASSURANCE COMPANY (“BAM”), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the “Trustee”) or paying agent (the “Paying Agent”) for the Bonds named above under the Security Documents, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

BAM will make payment as provided in this Policy to the Trustee or Paying Agent on the later of (i) the Business Day on which such principal and interest becomes Due for Payment and (ii) the first Business Day following the Business Day on which BAM shall have received a completed Notice of Nonpayment in a form reasonably satisfactory to it. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of this paragraph, and BAM shall promptly so advise the Trustee or Paying Agent who may submit an amended Notice of Nonpayment.

Payment by BAM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of BAM under this Policy. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, (a) BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner’s right to receive payments under such Bond and (b) BAM shall become entitled to reimbursement of the amount so paid (together with interest and expenses) pursuant to the Security Documents and Debt Service Reserve Agreement.

The amount available under this Policy for payment shall not exceed the Policy Limit. The amount available at any particular time to be paid to the Trustee or Paying Agent under the terms of this Policy shall automatically be reduced by and to the extent of any payment under this Policy. However, after such payment, the amount available under this Policy shall be reinstated in full or in part, but only up to the Policy Limit, to the extent of the reimbursement of such payment (after taking into account the payment of interest and expenses) to BAM by or on behalf of the Issuer. Within three (3) Business Days of such reimbursement, BAM shall provide the Trustee or the Paying Agent with Notice of Reinstatement, in the form of Exhibit A attached hereto, and such reinstatement shall be effective as of the date BAM gives such notice.

Payment under this Policy shall not be available with respect to (a) any Nonpayment that occurs prior to the Effective Date or after the end of the Term of this Policy or (b) Bonds that are not outstanding under the Security Documents. If the amount payable under this Policy is also payable under another BAM issued policy insuring the Bonds, payment first shall be made under this Policy to the extent of the amount available under this Policy up to the Policy Limit. In no event shall BAM incur duplicate liability for the same amounts owing with respect to the Bonds that are covered under this Policy and any other BAM issued insurance policy.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer’s Fiscal Agent (as hereinafter defined) are authorized or required by law or executive order to remain closed. [“Debt Service Reserve Agreement” means the Debt Service Reserve Agreement, if any, dated as of the effective date hereof, in respect of this Policy, as the same may be amended or supplemented from time to time.] “Due for Payment” means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. “Nonpayment” means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. “Nonpayment” shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. “Notice” means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. “Owner” means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that “Owner” shall not include the Issuer, the Member or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. “Policy Limit” means the dollar

amount of the debt service reserve fund required to be maintained for the Bonds by the Security Documents from time to time (the “Reserve Account Requirement”), or the portion of the Reserve Account Requirement for the Bonds provided by this Policy as specified in the Security Documents or Debt Service Reserve Agreement, if any, but in no event shall the Policy Limit exceed the Maximum Policy Limit set forth above. The Policy Limit shall automatically and irrevocably be reduced from time to time by the amount of or, if this Policy is only providing a portion of the Reserve Account Requirement, in the same proportion as, each reduction in the Reserve Account Requirement, as provided in the Security Documents or Debt Service Reserve Agreement. “Security Documents” means any resolution, ordinance, trust agreement, trust indenture, loan agreement and/or lease agreement and any additional or supplemental document executed in connection with the Bonds. “Term” means the period from and including the Effective Date until the earlier of (i) the maturity date for the Bonds and (ii) the date on which the Bonds are no longer outstanding under the Security Documents.

BAM may appoint a fiscal agent (the “Insurer’s Fiscal Agent”) for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer’s Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer’s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer’s Fiscal Agent on behalf of BAM. The Insurer’s Fiscal Agent is the agent of BAM only, and the Insurer’s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer’s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.

This Policy is being issued under and pursuant to and shall be construed under and governed by the laws of the State of New York, without regard to conflict of law provisions.

This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.

In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer.

BUILD AMERICA MUTUAL ASSURANCE COMPANY

By: ______________________________________ Authorized Officer

Schedule Notices (Unless Otherwise Specified by BAM) Email: claims@buildamerica.com Address: 200 Liberty Street, 27th floor New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)

EXHIBIT A

NOTICE OF REINSTATEMENT

[DATE]

[TRUSTEE][PAYING AGENT] [INSERT ADDRESS]

Reference is made to the Municipal Bond Debt Service Reserve Insurance Policy, Policy No. ________ (the “Policy”), issued by Build America Mutual Assurance Company (“BAM”). The terms which are capitalized herein and not otherwise defined shall have the meanings specified in the Policy.

BAM hereby delivers notice that it is in receipt of payment from the [Issuer], or on its behalf, pursuant to the Security Documents or Debt Service Reserve Agreement, if any, and, as of the date hereof, the Policy Limit is $_________, subject to reduction as the Reserve Account Requirement for the Bonds is reduced in accordance with the terms set forth in the Security Documents.

BUILD AMERICA MUTUAL ASSURANCE COMPANY

By: ____________________________________ Name: Title:

CALIFORNIA ENDORSEMENT TO MUNICIPAL BOND DEBT

SERVICE RESERVE INSURANCE POLICY

NO.

This Policy is not covered by the California Insurance Guaranty Association established pursuant to Article 15.2 of Chapter 1 of Part 2 of Division 1 of the California Law.

Nothing herein shall be construed to waive, alter, reduce or amend coverage in any other section of the Policy. If found contrary to the Policy language, the terms of this Endorsement supersede the Policy language

IN WITNESS WHEREOF, BUILDAMERICA MUTUAL ASSURANCE COMPANY has caused this policy to be executed on its behalf by its Authorized Officer. BUILD AMERICA MUTUAL ASSURANCE COMPANY By _______________________________________________ Authorized Officer