Public Financial Management, Inc. · 2015. 10. 22. · INFORMATION FOR BIDDERS $2,450,000 CLARE...
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NEW ISSUE Ratings ¹†: Standard & Poor’s: AA (Build America Mutual Assurance Company) Book-Entry-Only Standard & Poor’s: A (underlying rating) TAX STATUS: In the opinion of Thrun Law Firm, P.C., Bond Counsel, assuming continued compliance by the School District with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), interest on the Bonds is excluded from gross income for federal income tax purposes, as described in the opinion, and the Bonds and interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The School District has designated the Bonds as “QUALIFIED TAX-EXEMPT OBLIGATIONS” within the meaning of the Code, and has covenanted to comply with those requirements of the Code necessary to continue the exclusion of interest on the Bonds from gross income for federal income tax purposes. $2,450,000 CLARE PUBLIC SCHOOLS Counties of Clare and Isabella State of Michigan 2015 School Building and Site Bonds (General Obligation - Unlimited Tax) PURPOSE AND SECURITY: The Bonds were authorized at an election on August 4, 2015, for the purpose of partially remodeling, furnishing and refurnishing, and equipping and reequipping school district buildings; acquiring, installing and equipping instructional technology for school district buildings, together with related infrastructure improvements; purchasing school buses; developing, equipping and improving a playground; and developing and improving sites. The Bonds will pledge the full faith, credit and resources of the School District for payment of the principal and interest thereon, and will be payable from ad valorem taxes, which may be levied without limitation as to rate or amount as provided by Article IX, Section 6, of the Michigan Constitution of 1963. BOOK-ENTRY-ONLY: Unless otherwise required by the initial purchaser of the Bonds, the Bonds are issuable only as fully registered bonds without coupons, and when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry only form, in the denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interest in Bonds purchased. So long as Cede & Co. is the Bondholder, as nominee of DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds. See BOOK-ENTRY ONLY SYSTEM herein. PAYMENT OF BONDS: Interest on the Bonds will be payable semiannually on May 1 and November 1 of each year commencing on May 1, 2016. The Bonds will be registered Bonds, of the denomination of $5,000 or multiples thereof not exceeding for each maturity the principal amount of such maturity. The principal and interest shall be payable at the corporate trust office of U.S. Bank National Association, Detroit, Michigan (the “Paying Agent”) or such other Paying Agent as the School District may hereafter designate by notice mailed to the registered owner not less than sixty (60) days prior to any interest payment date. So long as DTC or its nominee, Cede & Co., is the Bondholder, such payments will be made directly to such Bondholder. Disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants and Indirect Participants, as more fully described herein. Interest shall be paid when due by check or draft mailed to the registered owner as shown on the registration books as of the fifteenth day of the month preceding the payment date for each interest payment. BOND INSURANCE: The scheduled payment of principal and interest on the Bonds when due will guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by Build America Mutual Assurance Company (“BAM”). See “Appendix F – Municipal Bond Insurance and Specimen Policy”. Dated: November 10, 2015 Principal Due: May 1 of each year as shown below MATURITY SCHEDULE (Base CUSIP§: 180060) Year Amount Interest Rate Yield CUSIP§ Year Amount Interest Rate Yield CUSIP§ 2016 $100,000 2.00% 0.55% CP8 2022 $245,000 2.00% 1.75% CV5 2017 135,000 2.00 0.80 CQ6 2023 270,000 2.00 1.95 CW3 2018 155,000 2.00 1.00 CR4 2024 295,000 2.25 2.10 CX1 2019 175,000 2.00 1.10 CS2 2025 320,000 3.00 2.25 CY9 2020 195,000 2.00 1.30 CT0 2026 340,000 3.00 2.40 CZ6 2021 220,000 2.00 1.50 CU7 City Securities Corporation PRIOR REDEMPTION: Bonds of this issue maturing in the years 2016 through 2025, inclusive, shall not be subject to redemption prior to maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2026 shall be subject to redemption prior to maturity as described herein. See “PRIOR REDEMPTION - Optional Redemption” herein. BOND COUNSEL: The Bonds will be offered when, as and if issued by the School District subject to the approving legal opinion of Thrun Law Firm, P.C., East Lansing, Michigan. THIS COVER PAGE CONTAINS INFORMATION FOR A QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. Additional information relative to this Bond issue may be obtained from: Public Financial Management, Inc. 3989 Research Park Drive Ann Arbor, Michigan 48108 734-668-6688 OFFICIAL STATEMENT DATED: OCTOBER 19, 2015 ¹ For an explanation of ratings, see “CREDIT RATINGS” herein. † As of the date of delivery § Copyright 2015, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. The School District shall not be responsible for the selection of CUSIP numbers, nor any representation made as to their correctness on the Bonds or as indicated above.
Transcript of Public Financial Management, Inc. · 2015. 10. 22. · INFORMATION FOR BIDDERS $2,450,000 CLARE...
NEW ISSUE Ratings ¹†: Standard & Poor’s: AA (Build America Mutual Assurance Company)Book-Entry-Only Standard & Poor’s: A (underlying rating)
TAX STATUS: In the opinion of Thrun Law Firm, P.C., Bond Counsel, assuming continued compliance by the School District with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), interest on the Bonds is excluded from gross income for federal income tax purposes, as described in the opinion, and the Bonds and interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The School District has designated the Bonds as “QUALIFIED TAX-EXEMPT OBLIGATIONS” within the meaning of the Code, and has covenanted to comply with those requirements of the Code necessary to continue the exclusion of interest on the Bonds from gross income for federal income tax purposes.
$2,450,000CLARE PUBLIC SCHOOLSCounties of Clare and Isabella
State of Michigan2015 School Building and Site Bonds(General Obligation - Unlimited Tax)
PURPOSE AND SECURITY: The Bonds were authorized at an election on August 4, 2015, for the purpose of partially remodeling, furnishing and refurnishing, and equipping and reequipping school district buildings; acquiring, installing and equipping instructional technology for school district buildings, together with related infrastructure improvements; purchasing school buses; developing, equipping and improving a playground; and developing and improving sites. The Bonds will pledge the full faith, credit and resources of the School District for payment of the principal and interest thereon, and will be payable from ad valorem taxes, which may be levied without limitation as to rate or amount as provided by Article IX, Section 6, of the Michigan Constitution of 1963.
BOOK-ENTRY-ONLY: Unless otherwise required by the initial purchaser of the Bonds, the Bonds are issuable only as fully registered bonds without coupons, and when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry only form, in the denominations of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their beneficial interest in Bonds purchased. So long as Cede & Co. is the Bondholder, as nominee of DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Bonds. See BOOK-ENTRY ONLY SYSTEM herein.
PAYMENT OF BONDS: Interest on the Bonds will be payable semiannually on May 1 and November 1 of each year commencing on May 1, 2016. The Bonds will be registered Bonds, of the denomination of $5,000 or multiples thereof not exceeding for each maturity the principal amount of such maturity. The principal and interest shall be payable at the corporate trust office of U.S. Bank National Association, Detroit, Michigan (the “Paying Agent”) or such other Paying Agent as the School District may hereafter designate by notice mailed to the registered owner not less than sixty (60) days prior to any interest payment date. So long as DTC or its nominee, Cede & Co., is the Bondholder, such payments will be made directly to such Bondholder. Disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants and Indirect Participants, as more fully described herein. Interest shall be paid when due by check or draft mailed to the registered owner as shown on the registration books as of the fifteenth day of the month preceding the payment date for each interest payment.
BOND INSURANCE: The scheduled payment of principal and interest on the Bonds when due will guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by Build America Mutual Assurance Company (“BAM”). See “Appendix F – Municipal Bond Insurance and Specimen Policy”.
Dated: November 10, 2015 Principal Due: May 1 of each year as shown below
MATURITY SCHEDULE(Base CUSIP§: 180060)
Year AmountInterest
Rate Yield CUSIP§ Year AmountInterest
Rate Yield CUSIP§2016 $100,000 2.00% 0.55% CP8 2022 $245,000 2.00% 1.75% CV52017 135,000 2.00 0.80 CQ6 2023 270,000 2.00 1.95 CW32018 155,000 2.00 1.00 CR4 2024 295,000 2.25 2.10 CX12019 175,000 2.00 1.10 CS2 2025 320,000 3.00 2.25 CY92020 195,000 2.00 1.30 CT0 2026 340,000 3.00 2.40 CZ62021 220,000 2.00 1.50 CU7
City Securities CorporationPRIOR REDEMPTION: Bonds of this issue maturing in the years 2016 through 2025, inclusive, shall not be subject to redemption prior to maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2026 shall be subject to redemption prior to maturity as described herein. See “PRIOR REDEMPTION - Optional Redemption” herein.
BOND COUNSEL: The Bonds will be offered when, as and if issued by the School District subject to the approving legal opinion of Thrun Law Firm, P.C., East Lansing, Michigan.
This cover page conTains informaTion for a quick reference only. iT is noT a summary of This issue. invesTors musT read The enTire official sTaTemenT To obTain informaTion essenTial To The making of an informed invesTmenT decision.
Additional information relative to this Bond issue may be obtained from:
Public Financial Management, Inc.3989 Research Park Drive
Ann Arbor, Michigan 48108734-668-6688
official sTaTemenT daTed: ocTober 19, 2015
¹ For an explanation of ratings, see “CREDIT RATINGS” herein.† As of the date of delivery§ Copyright 2015, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a division of the McGraw-Hill
Companies, Inc. The School District shall not be responsible for the selection of CUSIP numbers, nor any representation made as to their correctness on the Bonds or as indicated above.
Build America Mutual Assurance Company (“BAM”) makes no representation regarding the Bonds or the advisability of investingin the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept anyresponsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, oromitted herefrom, other than with respect to the accuracy of the information regarding BAM supplied by BAM and presented underthe heading “MUNICIPAL BOND INSURANCE & SPECIMEN POLICY” in Appendix F herein.
CLARE PUBLIC SCHOOLS201 E. State StreetClare, MI 48617
Phone: 989-386-9945Fax: 989-386-6055
BOARD OF EDUCATION
PRESIDENTFrank Thomas Weaver
Term Expires December 2016
VICE PRESIDENTSteven L. Stark
Term Expires December 2016
SECRETARYCarol J. Santini
Term Expires December 2016
TREASURERSusan M. Murawski
Term Expires December 2016
TRUSTEESBenjamin A. Browning
Term Expires December 2018
Loren ColeTerm Expires December 2018
John L. MillerTerm Expires December 2018
SUPERINTENDENTDouglas O. Fillmore
BUSINESS MANAGERLynn M. Graham
PROFESSIONAL SERVICES
PAYING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. Bank National Association
BOND COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thrun Law Firm, P.C.
FINANCIAL CONSULTANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public Financial Management, Inc.
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TABLE OF CONTENTS
Page
INFORMATION FOR BIDDERS . . . . . . . . . . . . . . . . . 1PURPOSE AND SECURITY . . . . . . . . . . . . . . . . . 1PRIOR REDEMPTION . . . . . . . . . . . . . . . . . . . . . 1NOTICE OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . 2BOOK-ENTRY ONLY SYSTEM . . . . . . . . . . . . . 2TAX PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . 4TRANSFER OUTSIDE BOOK-ENTRY-ONLY
SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4SOURCES OF SCHOOL OPERATING
REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5MICHIGAN PROPERTY TAX REFORM . . . . . . . 6LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
State of Michigan . . . . . . . . . . . . . . . . . . . . . . . 6Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Original Issue Premium . . . . . . . . . . . . . . . . . . 7Future Developments . . . . . . . . . . . . . . . . . . . . 7
QUALIFIED BY THE MICHIGAN DEPARTMENTOF TREASURY . . . . . . . . . . . . . . . . . . . . . . . 8
CONTINUING DISCLOSURE . . . . . . . . . . . . . . . 8BOND COUNSEL’S RESPONSIBILITY . . . . . . . 8FINANCIAL CONSULTANT’S OBLIGATION . . 9CREDIT RATINGS . . . . . . . . . . . . . . . . . . . . . . . . 9ESTIMATED SOURCES AND
USES OF FUNDS . . . . . . . . . . . . . . . . . . . . . 10
GENERAL FINANCIAL INFORMATION . . . . . . . . 11AREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11POPULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 11PROPERTY VALUATIONS . . . . . . . . . . . . . . . . 11
Historical Valuations . . . . . . . . . . . . . . . . . . . 11Per Capita Valuation . . . . . . . . . . . . . . . . . . . 12Industrial Facilities Tax (IFT) . . . . . . . . . . . . 12
TAX BASE COMPOSITION . . . . . . . . . . . . . . . . 13MAJOR TAXPAYERS . . . . . . . . . . . . . . . . . . . . . 13CONSTITUTIONAL MILLAGE ROLLBACK . . 14TAX RATES - (Per $1,000 of Valuation) . . . . . . . 14
Clare Public Schools . . . . . . . . . . . . . . . . . . . 14Other Major Taxing Units . . . . . . . . . . . . . . . 14
STATE AID PAYMENTS . . . . . . . . . . . . . . . . . . 14TAX LEVIES AND COLLECTIONS . . . . . . . . . 15LABOR FORCE . . . . . . . . . . . . . . . . . . . . . . . . . . 15PENSION FUND . . . . . . . . . . . . . . . . . . . . . . . . . 16OTHER POST-EMPLOYMENT BENEFITS . . . 17
DEBT STATEMENT . . . . . . . . . . . . . . . . . . . . . . 17DIRECT DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . 17OVERLAPPING DEBT . . . . . . . . . . . . . . . . . . . . 17DEBT RATIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17DEBT HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . 17FUTURE FINANCING . . . . . . . . . . . . . . . . . . . . 18OTHER BORROWING . . . . . . . . . . . . . . . . . . . . 18LEGAL DEBT MARGIN . . . . . . . . . . . . . . . . . . . 18SCHOOL BOND QUALIFICATION AND LOAN
PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . 18
GENERAL ECONOMIC INFORMATION . . . . . . . . 19LOCATION AND AREA . . . . . . . . . . . . . . . . . . . 19POPULATION BY AGE . . . . . . . . . . . . . . . . . . . 19INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19EMPLOYMENT CHARACTERISTICS . . . . . . . 20EMPLOYMENT BREAKDOWN . . . . . . . . . . . . 21UNEMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . 21BANKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
GENERAL SCHOOL INFORMATION . . . . . . . . . . . 22DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22BOARD OF EDUCATION . . . . . . . . . . . . . . . . . 22SCHOOL ENROLLMENT . . . . . . . . . . . . . . . . . . 22
Historical Enrollment . . . . . . . . . . . . . . . . . . . 22Enrollment by Grade . . . . . . . . . . . . . . . . . . . 22Projected Enrollment . . . . . . . . . . . . . . . . . . . 22
EXISTING SCHOOL FACILITIES . . . . . . . . . . . 23OTHER SCHOOLS . . . . . . . . . . . . . . . . . . . . . . . 23OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . 24
APPENDIX A - BUDGET . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B - AUDIT . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C - FORM OF CONTINUINGDISCLOSURE AGREEMENT . . . . . . . . . . . . . . C-1
APPENDIX D - DRAFT LEGAL OPINION . . . . . . . D-1
APPENDIX E - DRAFT OFFICIAL NOTICE OF SALE . . . . . . . . . . . . . . . . . . . . . . . E-1
APPENDIX F - MUNICIPAL BOND INSURANCEAND SPECIMEN POLICY . . . . . . . . . . . . . . . . F-1
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INFORMATION FOR BIDDERS
$2,450,000 CLARE PUBLIC SCHOOLSCounties of Clare and Isabella
State of Michigan2015 School Building and Site Bonds(General Obligation - Unlimited Tax)
DATED: November 10, 2015
FIRST INTEREST: May 1, 2016
REGISTRATION: Principal and Interest
PAYING AGENT: U.S. Bank National Association, Detroit, Michigan
TAX DESIGNATION: QUALIFIED TAX - EXEMPT OBLIGATIONS
PRINCIPAL DUE: May 1, annually as shown the front cover
PURPOSE AND SECURITY
The Bonds were authorized at an election on August 4, 2015, for the purpose of partially remodeling, furnishingand refurnishing, and equipping and reequipping school district buildings; acquiring, installing and equippinginstructional technology for school district buildings, together with related infrastructure improvements; purchasingschool buses; developing, equipping and improving a playground; and developing and improving sites. The Bonds willpledge the full faith, credit and resources of the School District for payment of the principal and interest thereon, andwill be payable from ad valorem taxes, which may be levied without limitation as to rate or amount as provided byArticle IX, Section 6, of the Michigan Constitution of 1963.
PRIOR REDEMPTION
A. Optional Redemption.
Bonds of this issue maturing in the years 2016 through 2025, inclusive, shall not be subject to redemption priorto maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2026 shall be subjectto redemption prior to maturity, at the option of the School District, in such order as the School District may determineand by lot within any maturity, on any date occurring on or after May 1, 2025, at par and accrued interest to the datefixed for redemption.
B. Notice of Redemption and Manner of Selection.
Notice of redemption of any Bond shall be given not less than thirty (30) days and not more than sixty (60) daysprior to the date fixed for redemption by mail to the registered owner at the registered address shown on the registrationbooks kept by the Paying Agent. The Bonds shall be called for redemption in multiples of $5,000 and Bonds ofdenominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the faceamount of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemedin part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate face amountequal to the unredeemed portion of the Bond surrendered shall be issued to the registered owner thereof.
If less than all of the Bonds of any maturity shall be called for redemption prior to maturity, unless otherwiseprovided, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the Paying Agent, in theprincipal amounts designated by the School District. Any Bonds selected for redemption will cease to bear interest onthe date fixed for redemption, whether presented for redemption or not, provided funds are on hand to redeem saidBonds. Upon presentation and surrender of such Bonds at the corporate trust office of the Paying Agent, such Bondsshall be paid and redeemed.
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So long as the book-entry-only system remains in effect, in the event of a partial redemption the Paying Agentwill give notice to Cede & Co., as nominee of DTC, only, and only Cede & Co. will be deemed to be a holder of theBonds. DTC is expected to reduce the credit balances of the applicable DTC Participants in respect of the Bonds andin turn the DTC Participants are expected to select those Beneficial Owners whose ownership interests are to beextinguished or reduced by such partial redemption, each by such method as DTC or such DTC Participants, as the casemay be, deems fair and appropriate in its sole discretion.
NOTICE OF SALE
See “APPENDIX E - DRAFT OFFICIAL NOTICE OF SALE,” for further information regarding this issue.
BOOK-ENTRY ONLY SYSTEM
The information in this section has been furnished by The Depository Trust Company, New York, New York("DTC"). No representation is made by U.S. Bank National Association, Detroit, Michigan (the “Paying Agent”) as to thecompleteness or accuracy of such information or as to the absence of material adverse changes in such informationsubsequent to the date hereof. No attempt has been made by the School District or the Paying Agent to determine whetherDTC is or will be financially or otherwise capable of fulfilling its obligations. Neither the School District nor the PayingAgent will have any responsibility or obligation to Direct Participants, Indirect Participants (both as defined below) or thepersons for which they act as nominees with respect to the Bonds, or for any principal, premium, if any, or interest paymentthereof.
The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the"Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC'spartnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registeredSecurity certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, andwill be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificatewill be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respectto any remaining principal amount of such issue.
DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New YorkBanking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the FederalReserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearingagency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds andprovides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues,and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions indeposited 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 holdingcompany for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which areregistered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is alsoavailable to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearingcorporations 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 areon file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receivea credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("BeneficialOwner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive writtenconfirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmationsproviding details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participantthrough which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are tobe 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 Securities, except in the event thatuse of the book-entry system for the Securities is discontinued.
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To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in thename of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representativeof DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nomineedo not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities;DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account oftheir holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to IndirectParticipants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangementsamong them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Ownersof Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respectto the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example,Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreedto obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their namesand addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unlessauthorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails anOmnibus Proxy to School District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'sconsenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date(identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or suchother 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 School District or Paying Agent, onpayable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to BeneficialOwners will be governed by standing instructions and customary practices, as is the case with securities held for theaccounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant andnot of DTC, Paying Agent, or School District, subject to any statutory or regulatory requirements as may be in effect fromtime to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nomineeas may be requested by an authorized representative of DTC) is the responsibility of School District or Paying Agent,disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such paymentsto the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant,to Paying Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant'sinterest in the Securities, on DTC's records, to Paying Agent. The requirement for physical delivery of Securities inconnection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in theSecurities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tenderedSecurities to Paying Agent's DTC account.
DTC may discontinue providing its services as depository with respect to the Securities at any time by givingreasonable notice to the School District or Paying Agent. Under such circumstances, in the event that a successor depositoryis not obtained, Security certificates are required to be printed and delivered.
The School District may decide to discontinue use of the system of book-entry-only transfers through DTC (ora successor securities depository). In that event, Security 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 sourcesthat the School District believes to be reliable, but the School District takes no responsibility for the accuracy thereof.
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TAX PROCEDURES
Article IX, Section 3, of the Michigan Constitution provides that the proportion of true cash value at whichproperty shall be assessed shall not exceed 50% of true cash value. The Michigan Legislature by statute has providedthat property shall be assessed at 50% of its true cash value, except as described below. The Michigan Legislature or theelectorate may at some future time reduce the percentage below 50% of true cash value.
On March 15, 1994, the electors of the State approved an amendment to the Michigan Constitution permittingthe Legislature to authorize ad valorem taxes on a non-uniform basis. The legislation implementing this constitutionalamendment added a new measure of property value known as "Taxable Value." Beginning in 1995, taxable property hastwo valuations -- State equalized valuation ("SEV") and Taxable Value. Property taxes are levied on Taxable Value.Generally, Taxable Value of property is the lesser of (a) the Taxable Value of the property in the immediately precedingyear, adjusted for losses, and increased or reduced by the lesser of the inflation rate or 5%, plus additions, or (b) theproperty's current SEV. Under certain circumstances, therefore, the Taxable Value of property may be different fromthe same property's SEV.
When property is sold or transferred, Taxable Value is adjusted to the SEV, which under existing law is 50%of the current true cash value. The Taxable Value of new construction is equal to current SEV. Taxable Value and SEVof existing property are also adjusted annually for additions and losses.
Responsibility for assessing taxable property rests with the local assessing officer of each township and city.Any property owner may appeal the assessment to the local board of review, to the Michigan Tax Tribunal, andultimately to the Michigan Courts.
The Michigan Constitution also mandates a system of equalization for assessments. Although the assessors foreach local unit of government within a county are responsible for actually assessing at 50% of true cash value, adjustedfor Taxable Value purposes, the final SEV and Taxable Value are arrived at through several steps. Assessments areestablished initially by the municipal assessor. Municipal assessments are then equalized to the 50% levels as determinedby the county's department of equalization. Thereafter, the State equalizes the various counties in relation to each other.SEV is important, aside from its use in determining Taxable Value for the purpose of levying ad valorem property taxes,because of its role in the spreading of taxes between overlapping jurisdictions, the distribution of various State aidprograms, State revenue sharing and in the calculation of debt limits.
Property that is exempt from property taxes, e.g., churches, government property, public schools, is not includedin the SEV and Taxable Value data in the Official Statement. Property granted tax abatements under Act 198, Public Actsof Michigan, 1974, amended, is recorded on a separate tax roll while subject to tax abatement. The valuation oftax-abated property is based upon SEV but is not included in either the SEV or Taxable Value data in the OfficialStatement except as noted. Under limited circumstances, other state laws permit the partial abatement of certain taxesfor other types of property for periods of up to 12 years.
TRANSFER OUTSIDE BOOK-ENTRY-ONLY SYSTEM
In the event that the book-entry-only system is discontinued, the following provisions would apply to the Bonds. The Paying Agent shall keep the registration books for the Bonds (the “Bond Register”) at its corporate trust office. Subject to the further conditions contained in the Resolutions, the Bonds may be transferred or exchanged for one ormore Bonds in different authorized denominations upon surrender thereof at the corporate trust office of the PayingAgent by the registered owners or their duly authorized attorneys; upon surrender of any Bonds to be transferred orexchanged, the Paying Agent shall record the transfer or exchange in the Bond Register and shall authenticatereplacement bonds in authorized denominations; during the fifteen (15) days immediately preceding the date of mailing(the “Record Date”) of any notice of redemption or any time following the mailing of any notice of redemption, thePaying Agent shall not be required to effect or register any transfer or exchange of any Bond which has been selectedfor such redemption, except the Bonds properly surrendered for partial redemption may be exchanged for new Bondsin authorized denominations equal in the aggregate to the unredeemed portion; the School District and Paying Agentshall be entitled to treat the registered owners of the Bonds, as their names appear in the Bond Register as of theappropriate dates, as the owners of such Bonds for all purposes under the Resolutions. No transfer or exchange madeother than as described above and in the Resolutions shall be valid or effective for any purposes under the Resolutions.
4
SOURCES OF SCHOOL OPERATING REVENUE
On March 15, 1994, the electors of the State of Michigan approved a ballot proposition to amend the StateConstitution of 1963, in part, to increase the State sales tax from 4% to 6% as part of a complex plan to restructure thesource of funding of public education (K-12) in order to reduce reliance on local property taxes for school operatingpurposes and to reduce the per pupil finance resource disparities among school districts. The Legislature has appropriatedfunds to establish a base foundation allowance in 2015/16 ranging from $7,391 to $8,169 per pupil, depending upon thedistrict's 1993/94 revenue. In the future, the foundation allowance may be adjusted annually by an index based upon thechange in revenues to the State school aid fund and change in the total number of pupils statewide and the spread betweenthe high and low per pupil allowance is reduced. The foundation allowance is funded by locally raised property taxes plusState aid. The revenues for the State's contribution to the foundation allowance are derived from a mix of taxing sources,including, but not limited to, a statewide property tax of 6 mills on all taxable property¹, a State sales and use tax, a realestate transfer tax and a cigarette tax. See "STATE AID PAYMENTS" in this Official Statement for further information.
School districts are required to levy a local property tax of not more than 18 mills or the number of mills leviedin 1993 for school operating purposes, whichever is less, on non-homestead properties² in order for the school district toreceive its per pupil foundation allowance. An intermediate school district may seek voter approval for three enhancementmills for distribution to local constituent school districts on a per pupil basis. Proceeds of the enhancement mills are notcounted toward the foundation allowance. Furthermore, school districts whose per pupil foundation allowance in 2015/16calculates to an amount in excess of $8,169 are authorized to levy additional millage to obtain the foundation allowance,first by levying such amount of the 18 mills against homestead property³ as is necessary to hold themselves harmless and,if the 18 mills is insufficient, to then levy such additional mills against all property uniformly as is necessary to obtain thefoundation allowance. The School District's per pupil foundation allowance does not exceed $8,169, and the School Districtdoes not levy such additional millage. State aid appropriations and the payment schedule for state aid may be changed bythe Legislature at any time. See “STATE AID PAYMENTS” in this Official Statement for further information.
Public Act 196 of 2014 ("Act 196") amended the State School Aid Act for the 2014/15 fiscal year and increasedthe School District's per pupil foundation allowance to $7,126. Act 196 included a one-time equity per pupil funding of$125 per pupil that the School District is receiving because its foundation allowance would otherwise be below $7,126. Act 196 included an additional payment to the School District to partially offset increases in the retirement plancontribution rate for the period October 1, 2014 to September 30, 2015. Act 196 also included grant funding equal to $50per pupil (a $2 decline in the per pupil amount as compared to 2013/14) for school districts if they satisfy 7 out of 9 "bestpractices" relating to health and other benefits coverage, competitive bidding for certain vendor services, schools of choice,online instruction programs or blended learning opportunities, a dashboard/report card of the School District's financialmanagement efforts, compensation methods for teachers and administrators that significantly factor performance andaccomplishments, use of collective bargaining agreements that omit statutorily prohibited subjects of bargaining,implementation of a comprehensive guidance and counseling program, and opportunities for K to 8 pupils to completecoursework or other learning experiences equivalent to 1 credit in a language other than English. The Board andAdministration satisfied such "best practices" requirements and the School District included such grant funding in its2014/15 General Fund Budget.
Public Act 85 of 2015 ("Act 85") amended the State School Aid Act for the 2015/16 fiscal year and increased theSchool District's per pupil foundation allowance to $7,391. The 2015/16 per pupil foundation allowance is calculated basedupon the 2014/2015 per pupil foundation allowance, plus the 2014/15 per pupil equity payment, plus $140 for a netincrease per pupil of 105 for the School District. The prior fiscal year's per pupil equity payment and "best practices" and"performance based" grants are eliminated. Act 85 also increased funding for at risk students and appropriated new fundsfor early literacy, career and technical education middle college, and college and career preparation programs for eligibleschool districts. The Board and Administration anticipate that the School District will be eligible for said additional fundingand the School District has included such funding in its 2015/16 General Fund Budget.
¹ “Taxable property” does not include industrial personal property.
² “Non-homestead property” includes all taxable property other than principal residence, qualified agricultural property, qualified forestryproperty, supportive housing property, property occupied by a public school academy and industrial personal property. Commercialpersonal property is exempt from the first 12 mills of not more than 18 mills levied by school districts.
³ “Homestead property”, in this context, means principal residence, qualified agricultural property, qualified forestry property, supportivehousing property, property occupied by a public school academy, industrial personal property and commercial personal property.
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THE SOURCES OF THE SCHOOL DISTRICT'S OPERATING REVENUE DO NOT IMPACT THETAXING AUTHORITY OF THE SCHOOL DISTRICT FOR PAYMENT OF GENERAL OBLIGATION UNLIMITEDTAX SCHOOL BONDS AND DO NOT AFFECT THE OBLIGATION OF THE SCHOOL DISTRICT TO LEVYTAXES FOR PAYMENT OF DEBT SERVICE ON GENERAL OBLIGATION UNLIMITED TAX BONDS OF THESCHOOL DISTRICT, INCLUDING THE BONDS OFFERED HEREIN.
MICHIGAN PROPERTY TAX REFORM
On November 5, 2013, March 28, 2014, and April 1, 2014, Governor Snyder signed into law a package of billsamending and replacing legislation enacted in 2012 to phase-out most personal property taxes in Michigan. The bills werecontingent on Michigan voters approving a ballot question authorizing a new municipal entity, the Local CommunityStabilization Authority ("LCSA"), to levy a local component of the statewide use tax and distribute that revenue to localunits of government to offset their revenue losses resulting from the personal property tax reform. On August 5, 2014,voters approved that ballot question.
The bill package, together with the original 2012 legislation, created two new exemptions from the personalproperty tax. Under the "small taxpayer exemption," the commercial and industrial personal property of each owner witha combined true cash value in a local tax collecting unit of less than $80,000 is exempt from ad valorem taxes in thatcollecting unit beginning in 2014. For businesses that do not qualify for the "small taxpayer exemption," all "eligiblemanufacturing personal property" (personal property used more than 50% of the time in industrial processing or directintegrated support) purchased and placed into service before 2006 or during or after 2013 becomes exempt beginning in2016. Taxation on "eligible manufacturing personal property" placed into service after 2006 but before 2013 will bephased-out over time; with the exemption taking effect after the property has been in service for the immediately preceding10 years. The legislation extends certain personal property tax exemptions and tax abatements for technology parks,industrial facilities and enterprise zones that were to expire after 2012, until the voter-approved personal property taxexemptions take effect.
Pursuant to voter approval in August 2014, the legislation also includes a formula to reimburse school districtsfor 100% of their lost operating millage revenue and lost sinking fund millage revenue. To provide the reimbursement, thelegislation reduces the state share of the use tax and authorizes the LCSA to levy a local component of the use tax anddistribute that revenue to qualifying local units. However, the reimbursement for the school district's operating millage willcome from the state use tax component, which is deposited into the school state aid fund.¹ While the legislation providesreimbursement for prospective school operating losses, school districts will only be reimbursed for debt losses attributableto debt obligations that voters approved before January 1, 2013 or were incurred before January 1, 2013. For the 2014-2015and 2015-2016 fiscal years, the State of Michigan will appropriate sufficient funds to the LCSA to reimburse schooldistricts for such debt losses.
Because the Bonds are associated with debt obligations that received voter approval before January 1, 2013,the School District will be reimbursed for debt millage revenue it could have otherwise generated to make payments onthe Bonds.
¹ Because the reimbursement funds are deposited into the state school aid fund, the legislature may, in the future, change the funding formulas in theState School Aid Act of 1979 or appropriate funds therein for other purposes.
LITIGATION
The School District has not been served with any litigation, administrative action or proceeding, nor, to theknowledge of the School District, is there threatened any litigation restraining or enjoining the issuance or delivery ofthe Bonds or in any manner questioning the proceedings and authority under which the Bonds are to be issued oraffecting the validity of the Bonds.
TAX MATTERS
State of Michigan
In the opinion of Thrun Law Firm, P.C., East Lansing, Michigan (“Bond Counsel”), based on its examinationof the documents described in its opinion, under existing State statutes, regulations and court decisions, the Bonds andthe interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxeson gains realized from the sale, payment or other disposition thereof.
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Federal
In the opinion of Bond Counsel based upon its examination of the documents described in its opinion, underexisting statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income forfederal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum taximposed on individuals and corporations. It should be noted, however, that certain corporations must take into accountinterest on the Bonds in determining adjusted net current earnings for the purpose of computing the alternative minimumtax imposed on such corporations. The opinions set forth in the preceding sentences are subject to the condition that theSchool District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”), that mustbe satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded fromgross income for federal income tax purposes. Failure to comply with certain of such requirements may cause theinclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date ofissuance of the Bonds. Bond Counsel will express no opinion regarding other federal tax consequences arising withrespect to the Bonds.
There are additional federal tax consequences relative to the Bonds and the interest thereon. The following isa general description of some of these consequences but is not intended to be complete or exhaustive and investorsshould consult with their tax advisors with respect to these matters. Prospective purchasers of the Bonds should be awarethat (i) interest on the Bonds is included in the effectively connected earnings and profits of certain foreign corporationsfor purposes of calculating the branch profits tax imposed by Section 884 of the Code, (ii) interest on the Bonds maybe subject to a tax on excess net passive income of certain S Corporations imposed by Section 1375 of the Code, (iii)interest on the Bonds is included in the calculation of modified adjusted gross income for purposes of determining thetaxability of social security or railroad retirement benefits, (iv) the receipt of interest on the Bonds by life insurancecompanies may affect the federal tax liability of such companies, (v) in the case of property and casualty insurancecompanies, the amount of certain loss deductions otherwise allowed is reduced by a specific percentage of, among otherthings, interest on the Bonds,(vi) holders of the Bonds may not deduct interest on indebtedness incurred or continuedto purchase or carry the Bonds, and (vii) commercial banks, thrift institutions and other financial institutions may deducttheir costs of carrying certain obligations such as the Bonds.
Original Issue Premium
For federal income tax purposes, the difference between the initial offering prices to the public (excludingbondhouses and brokers) at which certain Bonds, as set forth on the cover of this Official Statement, are sold and theamounts payable at maturity thereof (the “Premium Bonds”), constitutes for the original purchasers of the PremiumBonds an amortizable bond premium. Such amortizable bond premium is not deductible from gross income but is takeninto account by certain corporations in determining adjusted current earnings for the purpose of computing the alternativeminimum tax, which may also affect liability for the branch profits tax imposed by Section 884 of the Code. The amountof amortizable bond premium allocable to each taxable year is generally determined on the basis of a taxpayer’s yieldto maturity determined by using the taxpayer’s basis (for purposes of determining loss on sale or exchange) of suchPremium Bonds and compounding at the close of each six-month accrual period. The amount of amortizable bondpremium allocable to each taxable year is deducted from the taxpayer’s adjusted basis of such Premium Bonds todetermine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Premium Bonds.
Future Developments
No assurance can be given that any future legislation or clarifications or amendments to the Code, if enactedinto law, will not contain proposals which could cause the interest on the Bonds to be subject directly or indirectly tofederal or state income taxation, adversely affect the market price or marketability of the Bonds, or otherwise preventbondholders from realizing the full current benefit of the status of the interest thereon.
It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subjectto bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore orhereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exerciseof judicial discretion in appropriate cases.
INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCESOF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS, INCLUDING THE TREATMENT OFORIGINAL ISSUE PREMIUM.
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QUALIFIED BY THE MICHIGAN DEPARTMENT OF TREASURY
The School District has received a letter from the Department of Treasury of the State of Michigan stating thatthe School District is in material compliance with the criteria of the Revised Municipal Finance Act, Act No. 34, PublicActs of Michigan, 2001 (“Act 34”) for a municipality to be granted “qualified status” to issue municipal securitieswithout further approval by the Michigan Department of Treasury.
CONTINUING DISCLOSURE
Prior to delivery of the Bonds the School District will execute a Continuing Disclosure Agreement (the“Agreement”) for the benefit of the holders of the Bonds and Beneficial Owners to send certain information annuallyand to provide notice of certain events to certain information repositories pursuant to the requirements of Rule 15c2-12(b)(5) (the “Rule”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The information to be provided on an annual basis, the events which will be noticed on an occurrence basis, and the otherterms of the Agreement are set forth in “APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT.” Additionally, the School District shall provide certain annual financial information and operating data, generallyconsistent with the information in the tables under the headings “PROPERTY VALUATIONS - Historical Valuations”“MAJOR TAXPAYERS”, “TAX RATES - Clare Public Schools”, “STATE AID PAYMENTS”, “TAX LEVIES ANDCOLLECTIONS”, “LABOR FORCE”, “PENSION FUND”, “DEBT STATEMENT - DIRECT DEBT”, “SCHOOLBOND QUALIFICATION AND LOAN PROGRAM”, “SCHOOL ENROLLMENT” and “GENERAL FUND BUDGETSUMMARY” herein.
A failure by the School District to comply with the Agreement will not constitute an event of default under theResolutions authorizing issuance of the Bonds and holders of the Bonds or Beneficial Owners are limited to the remediesdescribed in the Agreement. A failure by the School District to comply with the Agreement must be reported inaccordance with the Rule and must be considered by any broker, dealer or municipal securities dealer beforerecommending the purchase or sale of the Bonds in the secondary market. Consequently, such failure may adverselyaffect the transferability and liquidity of the Bonds and their market price.
Except as disclosed below, the School District has not in the previous five years, failed to comply, in all materialrespects, with any previous continuing disclosure agreements executed by the School District pursuant to the Rule. Whilethe School District filed its audited financial statements and annual disclosure information timely over the past five yearsin compliance, in all material respects, with the previous continuing disclosure agreements executed by the SchoolDistrict, the School District filed late material event notices of, the rating on its bonds qualified for the State School BondLoan Program and ratings affecting the bond insurer for certain prior bond issues of the School District. To the best ofthe School District’s knowledge, the School District did not receive notification from bond insurer or the rating agenciesof the rating changes for the bond insurer or the State School Bond Loan Program.
BOND COUNSEL’S RESPONSIBILITY
The fees of Thrun Law Firm, P.C., East Lansing, Michigan (“Bond Counsel”) for services rendered inconnection with its approving opinion are expected to be paid from Bond proceeds. Except to the extent necessary toissue its approving opinion as to the validity of the Bonds and tax matters relating to the Bonds and the interest thereon,and except as stated below, Bond Counsel has not been retained to examine or review, and has not examined or reviewedany financial documents, statements or materials that have been or may be furnished in connection with the authorization,issuance or marketing of the Bonds and accordingly will not express any opinion with respect to the accuracy orcompleteness of any such financial documents, statements or materials.
Bond Counsel has reviewed the statements made in this Official Statement on the cover page and under theheading "Information for Bidders", insofar as such statements summarize the language and effect of the Resolutions, theBonds, the Continuing Disclosure Agreement, the Constitution of the State of Michigan, the laws of the State ofMichigan and federal income tax laws and, further, the statements under such headings are fair and accurate summariesthereof in all material respects. Except as otherwise disclosed on pages herein, Bond Counsel has not been retained toreview and has not reviewed any other portion of this Official Statement for accuracy or completeness, and has not madeinquiry of any official or employee of the School District or any other person and has made no independent verificationof such other portions hereof, and further has not expressed and will not express an opinion as to any portions hereof.
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FINANCIAL CONSULTANT’S OBLIGATION
Public Financial Management, Inc., Ann Arbor, Michigan (the "Financial Advisor"), has been retained by theSchool District to provide certain financial advisory services. The Financial Advisor assisted in the preparation of theOfficial Statement and in other matters relating to the planning, structuring and issuance of the Bonds.
The information contained in the Official Statement was prepared in part by the Financial Advisor and is basedon information supplied by various officials from records, statements and reports required by various local, county orstate agencies of the State of Michigan. To the best of the Financial Advisor's knowledge, all of the informationcontained in the Official Statement, which it assisted in preparing, while it may be summarized is complete and accurate. However, the Financial Advisor has not and will not independently verify the completeness and accuracy of theinformation contained in the Official Statement.
The Financial Advisor is a registered municipal advisor and is not engaged in the business of underwriting,marketing or trading of municipal securities or any other negotiable instrument. The Financial Advisor's duties,responsibilities and fees arise solely as financial advisor to the School District. The Financial Advisor's fees are expectedto be paid from Bond proceeds.
Further information concerning the Bonds may be secured from Public Financial Management, Inc., 3989Research Park Drive, Ann Arbor, Michigan 48108. Telephone: 734-668-6688.
CREDIT RATINGS
Standard & Poor's Ratings Services (“S&P”) has assigned, as the of the date of delivery of the Bonds, itsunderlying municipal bond rating of “A” to the Bonds.
S&P has also assigned its municipal bond rating of “AA” to the Bonds with the understanding that upon deliveryof the Bonds, a municipal bond insurance policy will be issued by Build America Mutual Assurance Company (“BAM”)to insure the Bonds.
The aforementioned ratings will reflect the sole view of the rating agency and there is no assurance that suchratings will be continued for any period of time, or that it will not be revised upwards or downwards or be withdrawn;a revision, suspension, or withdrawal of the rating may have an effect on the market price of these securities and shouldbe noted.
A brief description of the Standard & Poor’s rating definitions reads as follows:
Standard & Poor’s Ratings Services
Bonds rated “AAA” have the highest rating assigned. Capacity to pay interest and repayprincipal is extremely strong.
Bonds rated “AA” qualify as high quality debt obligations. Capacity to pay principal andinterest is very strong, and in the majority of instances they differ from “AAA” issues only in a smalldegree.
Bonds rated “A” have a strong capacity to pay principal and interest, although they aresomewhat more susceptible to the adverse effects of change in circumstances and economic conditions.
Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repayprincipal. Whereas it normally exhibits adequate protection parameters, adverse economic conditionsor changing circumstances are more likely to lead to a weakened capacity to pay interest and repayprincipal for debt in this category than in higher rated categories.
Plus (+) or Minus (-): To provide more detailed indications of credit quality, the ratings from“AA” to “BBB” may be modified by the addition of a plus or minus sign to show relative standingwithin the major rating categories.
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ESTIMATED SOURCES AND USES OF FUNDS
Sources of FundsPar Amount of Bonds $2,450,000.00 Production 69,511.60 Total Sources $2,519,511.60
Uses of FundsCapital Projects Account $2,411,612.38Deposit to Debt Fund 37,021.60Underwriter's Discount 23,990.00Bond Insurance 8,500.00Costs of Issuance 38,387.62Total Uses $2,519,511.60
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CLARE PUBLIC SCHOOLSGENERAL FINANCIAL INFORMATION¹
AREA
The School District encompasses an area of 124.3 square miles.
POPULATION
The estimated population totals for the School District and the U.S. Census reported for the City of Clareare as follows:
School City ofYear District* Clare2010 8,546 3,0712000 8,396 3,1731990 6,000 3,013
* Estimated based on an extrapolation of the U.S. Census figures of the local units within the School District.
PROPERTY VALUATIONS
In accordance with Act 539, Public Acts of Michigan, 1982, as amended, and Article IX, Section 3 of theMichigan Constitution, the ad valorem State Equalized Valuation (SEV) represents 50% of true cash value. SEV doesnot include any value of tax exempt property (e.g. churches, governmental property) or property granted tax abatementsunder Act 198, Public Acts of Michigan, 1974, as amended. As a result of Proposal A, ad valorem property taxesare assessed on the basis of taxable value, which is subject to assessment caps. SEV is used in the calculation ofdebt margin and true cash value. See “TAX PROCEDURES” herein for more information.
Taxable property in the School District is assessed by the local municipal assessor and is subject to review bythe County Equalization Department.
Historical Valuations*
Principal Non-Principal Total State EqualizedYear Residence Residence Taxable Value Valuation2015 $152,728,028 $91,205,318 $243,933,346 $301,726,277 2014 148,130,709 91,369,780 239,500,489 293,205,501 2013 147,226,583 92,149,599 239,376,182 288,989,153 2012 145,809,082 84,960,304 230,769,386 282,185,950 2011 143,447,313 86,068,934 229,516,247 288,553,795
* See "MICHIGAN PROPERTY TAX REFORM" herein for information regarding tax changes effective in the 2014 and 2016 tax years.
¹ Information included in this Official Statement under the headings “General Financial Information, “General Economic Information,” and “GeneralSchool Information” was obtained from the School District, unless otherwise noted.
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0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
3 0 0
3 5 0
2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5
M ill io n s
Y e a r
H is to ric a l Va lua tio ns
T a xa b le V a l ua t i o n S t a te E q u a li z ed V a lu a ti o n
2015 Taxable Value $243,933,346Plus: 2015 IFT Taxable Valuation* 3,931,940
Total Equivalent Valuation $247,865,286
* Millage is levied at half rate against the amount listed. See “PROPERTY VALUATIONS - Industrial Facilities Tax (IFT)” herein.
Per Capita Valuation
2015 Per Capita Taxable Value $28,543.572015 Per Capita State Equalized Valuation $35,306.142015 Per Capita Estimated True Cash Valuation $70,612.28
Industrial Facilities Tax (IFT)
Under the provisions of Act 198 of the Public Acts of Michigan, 1974 (“Act 198"), plant rehabilitation districtsand/or industrial development districts may be established. Businesses in these districts are offered certain property taxincentives to encourage restoration or replacement of obsolete facilities and to attract new facilities to the area. Anindustrial facilities tax (“IFT”) is paid, at a lesser effective rate and in lieu of ad valorem property taxes, on suchfacilities for a period of up to 12 years. Qualifying facilities are issued abatement certificates for specific periods.
After expiration of the abatement certificate, the then-current SEV of the facility is returned to the ad valoremtax roll. The owner of such facility may obtain a new certificate, provided it has complied with the provisions of Act198.
The 2015 Taxable Value for the properties which have been granted IFT abatements within the SchoolDistrict’s boundaries is $3,931,940 which is subsequently taxed at half rate. For further information see "PROPERTYVALUATIONS - Historical Valuations" herein.
As part of the phase-out of Michigan's property tax on personal property, if a facility and personal propertywithin that facility were subject to an industrial facilities exemption on December 31, 2011, that exemption will remainintact and continue to be subject to the industrial facilities tax until the expiration of the exemption at which time theeligible personal property associated with the industrial facilities exemption becomes exempt under the new law. See"MICHIGAN PROPERTY TAX REFORM" above.
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Agricultural16.55%
Commercial15.73%
Industrial3.38%
Residential53.37%
Personal Commercial
2.30%
Personal Industrial
2.05%
Personal Utility6.62%
Taxable Valuation by Use
TAX BASE COMPOSITION†
A breakdown of the School District’s 2015 Taxable Value by municipality, class and use are as follows:
Principal¹ Non-Principal¹ Total Taxable Percent ofMunicipality Residence Residence Value TotalClare County
Arthur Township $5,018,352 $892,870 $5,911,222 2.42%Grant Township 35,086,138 12,358,712 47,444,850 19.45Hatton Township 5,351,872 1,301,528 6,653,400 2.73Sheridan Township 34,029,570 10,769,604 44,799,174 18.37City of Clare 30,001,229 43,474,895 73,476,124 30.12
Isabella County Vernon Township 26,474,361 8,570,642 35,045,003 14.37Wise Township 13,246,666 4,921,936 18,168,602 7.44City of Clare 3,519,840 8,915,131 12,434,971 5.10
TOTAL $152,728,028 $91,205,318 $243,933,346 100.00%
¹ See “SOURCES OF SCHOOL OPERATING REVENUE” in this Official Statement for further details.
Taxable Percent ofClass Value TotalReal Property $217,173,851 89.03% Personal Property 26,759,495 10.97TOTAL $243,933,346 100.00%
UseAgricultural $40,374,846 16.55%Commercial 38,372,248 15.73Industrial 8,242,737 3.38Residential 130,184,020 53.37Personal Commercial 5,599,500 2.30Personal Industrial 4,999,400 2.05Personal Utility 16,160,595 6.62TOTAL $243,933,346 100.00%
† See "MICHIGAN PROPERTY TAX REFORM" herein for information regarding tax changes effective in the 2014 and 2016 tax years
Source: Clare and Isabella Counties
MAJOR TAXPAYERS
The ten largest taxpayers in the School District and their 2015 Taxable Value totals and Industrial FacilitiesTax Valuation totals are as follows:
Taxable IFT TotalTaxpayer Product/Service Value + Valuation = Valuation
Consumers Energy Co Utility $15,415,241 $0 $15,415,241Alro Steel Corporation Steel 3,442,600 1,341,700 4,784,300R & R Real Estate Real estate 2,123,802 0 2,123,802Doherty Hotel, Inc. Hotel 2,011,300 0 2,011,300Stageright Corporation Sheet metal 1,364,200 632,300 1,996,500Tendercare Holdings LLC Nursing home 1,389,388 0 1,389,388Poet Brothers /Jay's Sporting Goods Retail 1,350,891 0 1,350,891Red Hook Properties/Jim's Body Shop Auto exterior repair 1,307,543 0 1,307,543Chodaka LLC Restaurant, groceries 1,294,000 0 1,294,000Packard Farms Agriculture 1,111,802 0 1,111,802TOTAL $30,810,767 $1,974,000 $32,784,767
The Taxable Valuations of the major taxpayers represent 12.63% of the School District's 2015 TaxableValuation of $243,933,346 and their Total Valuations represent 13.20% of the School District's Total EquivalentValuation of $247,865,286.
Source: Clare and Isabella Counties
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CONSTITUTIONAL MILLAGE ROLLBACK
Article IX, Section 31 of the Michigan Constitution (also referred to herein as the “Headlee Rollback”) requiresthat if the total value of existing taxable property (State Equalized Valuation) in a local taxing unit, exclusive of newconstruction and improvements, increases faster than the U.S. Consumer Price Index from one year to the next, themaximum authorized tax rate for that local taxing unit must be reduced through a Millage Reduction Fraction unless newmillage is authorized by a vote of the electorate of the local taxing unit.
TAX RATES - (Per $1,000 of Valuation)†
Each school district, county, township, special authority and city has a geographical definition which constitutesa tax district. Since local school districts and the county overlap either a township or a city, and intermediate schooldistricts overlap local school districts and county boundaries, the result is many different tax rate districts.
Clare Public Schools 2015 2014 2013 2012 2011Operating Non-Principal Residence 18.0000 18.0000 17.5464 17.5464 18.0000Debt 3.2800 3.2800 3.2800 3.4400 3.5000
TOTAL PRINCIPAL RESIDENCE 3.2800 3.2800 3.2800 3.4400 3.5000TOTAL NON-PRINCIPAL RESIDENCE 21.2800 21.2800 20.8264 20.9864 21.5000
The School District levies 18 mills for operating purposes on non-principal residence property and authorizeddebt millage on all principal residence and non-principal residence property located within the School District. TheSchool District’s operating millage expires with the December 2016 levy. See “SOURCES OF SCHOOL OPERATINGREVENUE” in this Official Statement.
† See "MICHIGAN PROPERTY TAX REFORM" herein for information regarding tax changes effective in the 2014 and 2016 tax years
Other Major Taxing Units 2014 2013State Education Tax¹ 6.0000 6.0000Clare County 6.1072 5.8372City of Clare 19.0000 19.0000Isabella County 9.3996 9.1720Clare-Gladwin RESD 2.0385 2.0385Mid-Michigan Community College 1.2232 1.2232
¹ The State of Michigan levies 6.00 mills for school operating purposes on all principal residence and non-principal residence property located
within the School District. Source: Clare and Isabella Counties
STATE AID PAYMENTS
The School District's primary source of funding for operating costs is the State School Aid per pupil foundationallowance. The base foundation allowance has been set from $7,391 to $8,169 per pupil for fiscal year 2015/2016. Infuture years, this allowance may be adjusted by an index based upon the change in revenues to the state school aid fundand the change in the total number of pupils statewide. The State may reduce State School Aid appropriations at any timeif the State's revenues do not meet budget expectations. See "SOURCES OF SCHOOL OPERATING REVENUE" hereinfor additional information.
The following table shows a history and current estimates of the School District's total State School Aidrevenues, including categoricals and other amounts, the State Amount Received per Pupil and the Foundation Allowanceper Pupil.
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State Amount FoundationReceived Allowance
Year Total per Pupil per Pupil2015/16 (Estimate) $10,717,923 $6,342 $7,3912014/15* 10,260,481 5,910 7,1262013/14 10,071,431 5,932 6,9662012/13 9,558,799 5,813 6,8462011/12 9,964,861 6,334 7,316
* The School District has received a $125 per pupil one-time equity payment for the 2014/15 fiscal year.Source: Michigan Department of Education
TAX LEVIES AND COLLECTIONS
The School District's fiscal year begins July 1 and ends June 30. School District property taxes are dueDecember 1 of each fiscal year and are payable without penalty or interest on or before the following February 14. Allreal property taxes remaining unpaid on March 1st of the fiscal year following the levy are turned over to the CountyTreasurers for collection. Clare and Isabella Counties (the “Counties”) annually pay from their Tax Payment Fundsdelinquent taxes on real property to all taxing units in the Counties, including the School District, shortly after the datedelinquent taxes are returned to the County Treasurers for collection.
A history of operating tax levies and collections for the School District are as follows:
Levy Operating Collections to Collections Plus FundingYear Tax Levy March 1 of Following Year To June 30 of Following Year2015 $1,639,277 N/A N/A2014 1,601,277 $1,505,916 94.04% $1,601,277 100.00%2013 1,623,305 1,533,381 94.46 1,623,305 100.002012 1,551,087 1,419,540 91.52 1,551,087 100.002011 1,536,213 1,385,852 90.21 1,536,213 100.00
The Tax Payment Fund is financed through the issuance of General Obligation Limited Tax Notes (GOLTNs) bythe Counties. Although the School District anticipates the continuance of this program by the Counties, the ability of theCounties to issue such GOLTNs is subject to market conditions at the time of offering. In addition, Act 206, Public Actsof Michigan, 1893, as amended, provides in part that: “The primary obligation to pay to the county the amount of taxesand interest on the taxes shall rest with the local taxing units and the state for the state education tax under the stateeducation tax act... If the delinquent taxes that are due and payable to the county are not received by the county for anyreason, the county has full right of recourse against the taxing unit or to the state for the state education tax... to recoverthe amount of the delinquent taxes and interest...” On the third Tuesday in July in each year, a tax sale is held by theCounties at which lands delinquent for taxes assessed in the third year preceding the sale, or in a prior year, are sold forthe total of the unpaid taxes of those years. Pursuant to Act 123, Public Acts of Michigan, 1999, as amended, property owners with taxes that are two years delinquent will be foreclosed and the property will be sold at public auction. Forexample, property owners who fail to pay their 2015 delinquent property taxes will lose their property in March 2018.
LABOR FORCE
A breakdown of the number of salaried employees of the School District and their affiliations with organizedgroups are as follows:
ContractEmployees Number Bargaining Unit ExpirationAdministrators 7 Non-Affiliated N/ATeachers 84 MEA 06/30/2016Secretaries 8 MEA 06/30/2016Aides 24 MEA 06/30/2016Maintenance/Custodians 14 Non-Affiliated N/ATransportation 10 Non-Affiliated N/ANon-Affiliated 9 N/A N/ATOTAL STAFF 156
The School District has not experienced a strike by any of its bargaining units within the past ten years.
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PENSION FUND
For the period October 1 through September 30, the School District pays an amount equal to a percentage of itsemployees' wages to the Michigan Public School Employees Retirement System ("MPSERS"), which is administered bythe State of Michigan. These contributions are required by law and are calculated by using the contribution rates andperiods provided in the table below of the employees' wages. The employer contribution rate for employees who firstworked July 1, 2010 or later (Pension Plus members) for the time period July 1, 2010 to September 30, 2010 was 15.44%.For other employees, the rate was 16.94% through September 30, 2010. Effective October 1, 2010, the employercontribution rate for all employees except Pension Plus members increased to 19.41%. For Pension Plus members, theemployer contribution rate was 17.91%.
On June 28, 2010, the Michigan Court of Claims issued an injunction in response to a challenge to the authorityof the State to require employees who began working before July 1, 2010, to contribute 3% of reportable wages to theretiree health care trust at MPSERS. As a result, the State has adjusted the contribution rate due on employees wages paidbetween November 1, 2010 and September 30, 2011 to 20.66% for members who first worked prior to July 1, 2010 and19.16% for Pension Plus members. In March 2011, the Court of Claims granted the plaintiffs' motions for summarydisposition finding that the mandatory 3% contribution violated both the U.S. and Michigan Constitutions. The Stateappealed the ruling to the Michigan Court of Appeals. In August of 2012, the Court of Appeals affirmed the decision ofthe Court of Claims. The State of Michigan has filed an Application for Leave to Appeal with the Michigan Supreme Court.
On September 4, 2012, the governor signed Public Act 300 of 2012 ("Act 300") to reform MPSERS. Act 300made changes to employee contributions to their pensions and retiree health benefits, shifting the 3% pension contributionto retiree health benefits. Act 300 increased the amount retirees contribute to their health insurance, and employees arerequired to choose to increase contributions to their pension plan, maintain current contribution rates and freeze existingbenefits, or freeze existing pension benefits and move into a defined contribution plan. In addition, the legislation endedretiree health benefits for new hires. On November 29, 2012, the Ingham County Circuit Court, sitting as the Court ofClaims, ruled that the substantive provisions of the Act 300 were constitutional except for one particular provision relatingto an "election window" for healthcare benefits. The Legislature promptly adopted legislation which was signed into lawby the Governor addressing the constitutional concerns of the election window raised by the Court of Claims. Two publicschool employee unions appealed the Court of Claims decision to the Michigan Court of Appeals, which affirmed the Courtof Claims' ruling on January 14, 2014. The unions appealed the matter to the Michigan Supreme Court. On April 8, 2015,the Michigan Supreme Court upheld Act 300 by ruling that the required employee elections to participate and contributeto retiree healthcare and defined benefit pension plans are constitutional under both the Michigan and United StatesConstitutions. It is unknown at this time if plaintiffs will appeal this decision to the federal court. The Michigan SupremeCourt has not yet ruled on the mandatory 3% retiree health contributions made by members from July 2010 to September2012 before Act 300 took effect.
The School District's estimated contribution to MPSERS for 2015/16 the contributions for the previous four yearsare shown below.
Contribution Period Contribution Rate Pension PlusOct. 1, 2015-Sept. 30, 2016 25.78 - 27.78% 25.56 - 27.13%Oct. 1, 2014-Sept. 30, 2015 25.78 - 27.27 25.70 - 27.19 Oct. 1, 2013-Sept. 30, 2014 24.79 - 26.96 25.56 - 26.63Feb. 1, 2013-Sept. 30, 2013 24.32 - 26.96 25.13 - 26.20Oct. 1, 2012-Jan. 31, 2013 25.36 24.13Oct. 1, 2011-Sept. 30, 2012 24.46 23.23
Fiscal Year Ending Contributions toJune 30 MPSERS
2016 (estimate) $2,563,6382015 2,329,5442014 2,021,3642013 1,826,3592012 1,647,904
Source: Audited financial statements.Note: Effective for fiscal years beginning after June 15, 2014, GASB Statement 68 requires all reporting units in a multi-employer cost sharing pensionplan to record a balance sheet liability for their proportionate share of the net pension liability of the plan. The School District will be required toimplement GASB 68 in their year ended June 30, 2015 financial statements. Preliminary unaudited estimates from the State for fiscal year 2013indicate a potential pension liability of approximately $18,335,013. (Net pension liability 8% discount rate per ORS)
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OTHER POST-EMPLOYMENT BENEFITS
MPSERS is a cost-sharing, multi-employer, statewide plan. Pension benefits and retiree health benefits areestablished by law and funded through employer contributions. The cost of retiree health benefits is funded annuallyon a pay-as-you-go basis, with retirees paying some of the costs. Current year liability for retiree health benefits isreflected in the figures provided above. Further information regarding MPSERS, including retiree health benefits, canbe found at: www.michigan.gov/orsschools.
DEBT STATEMENT (As of October 20, 2015 and including the Bonds described herein)
DIRECT DEBT
Dated Interest AmountDate Purpose Type Spread Maturities Outstanding
11/02/2006 Refunding UTQ 4.00% 05/01/16-26 $4,985,00011/10/2015 Building & Site UTNQ 2.00 - 3.00 05/01/16-26 2,450,000
TOTAL DIRECT DEBT $7,435,000
OVERLAPPING DEBTAmount District
Percent Municipality Outstanding Share100.00% City of Clare $1,176,000 $1,176,000
17.79 Clare County 533,718 94,9483.72 Isabella County 12,975,868 482,702
12.87 Clare-Gladwin I/S/D 620,000 79,79412.87 Mid Michigan Comm. College 1,600,000 205,920
NET OVERLAPPING DEBT $2,039,364NET DIRECT AND OVERLAPPING DEBT $9,474,364
Source: Municipal Advisory Council of Michigan.
DEBT RATIOS
Per Capita (8,546)Net Direct Debt $870.00
Net Direct and Overlapping Debt $1,108.63
Ratio to 2015 Taxable Valuation ($243,933,346)Net Direct Debt 3.05%Net Direct and Overlapping Debt 3.88%
Ratio to 2015 State Equalized Valuation ($301,726,277 )Net Direct Debt 2.46%Net Direct and Overlapping Debt 3.14%
Ratio to 2015 Estimated True Cash Valuation ($603,452,554)Net Direct Debt 1.23%Net Direct and Overlapping Debt 1.57%
DEBT HISTORY
The School District has no record of default.
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FUTURE FINANCING
The School District anticipates issuing Refunding Bonds in the approximate principal amount of $4,450,000in early 2016.
OTHER BORROWING
The School District has the following borrowing outstanding:
Interest MaturityDate Description Rate Date Balance
08/20/2015 State Aid Notes 1.09%* 08/22/2016 $2,400,000
*Blended rate
LEGAL DEBT MARGIN
2015 State Equalized Valuation $301,726,277 Debt Limit (15% of 2015 State Equalized Valuation) $45,258,942 Debt Outstanding, including Bonds described herein $7,435,000
Less Bonds not subject to Debt Limit** (4,985,000)
Total Subject to Debt Limit 2,450,000
Additional Debt Which Could Be Legally Incurred $42,808,942
* Section 1351(3) of Act 451, Public Acts of Michigan, 1976, as amended, provides that the bonded indebtedness of a school district shall not exceed15% of the total assessed valuation of the district. Bonds not included in the computation of the legal debt margin are (1) any bond qualified underArticle IX, Section 16 of the Michigan Constitution of 1963, and (2) deficit budget bonds as authorized under Section 1356. In addition, Section605 of Act 34, Public Acts of Michigan, 2001, as amended, provides, in relevant part, that debt evidenced by a refunding security shall not bedeemed to be within any statutory or charter limitation of outstanding debt limit.
SCHOOL BOND QUALIFICATION AND LOAN PROGRAM
The School District does not currently have a School Loan Revolving Fund balance under the School BondQualification and Loan Program.
Source: State of Michigan Department of Treasury
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GENERAL ECONOMIC INFORMATION
LOCATION AND AREA
Clare Public Schools, with an area of approximately 124.3 square miles, lies predominantly in Clare County,with the remainder to the south in Isabella County. The School District encompasses all of the City of Clare andSheridan Township, and portions of Arthur, Grant, Hatton, Vernon and Wise Townships. The City of Clare is the countyseat and the main trading center for the School District.
The School District is located the following distances from these commercial and industrial areas:
15 miles north of Mt. Pleasant30 miles northwest of Midland50 miles northwest of Saginaw70 miles northwest of Flint80 miles north of Lansing
150 miles south of Mackinac Bridge175 miles northwest of Detroit
POPULATION BY AGE
The 2010 U.S. Census estimate of population by age for Clare County are as follows:
Number PercentTotal Population 30,926 100.00%0 through 19 years 7,242 23.4220 through 64 years 17,517 56.6465 years and over 6,167 19.94
Median Age 45.3 years
INCOME
The 2010 U.S. Census estimate of household income for Clare County are as follows:
Number PercentHOUSEHOLDS BY INCOME 13,145 100.00%Less than $10,000 1,275 9.70$10,000 to $14,999 1,301 9.90$15,000 to $24,999 2,287 17.40$25,000 to $34,999 1,814 13.80$35,000 to $49,999 2,511 19.10$50,000 to $74,999 2,222 16.90$75,000 to $99,999 999 7.60$100,000 to $149,999 539 4.10$150,000 to $199,999 118 0.90$200,000 or more 79 0.60
Median Income $34,399 Mean Income $43,170
Source: www.census.gov
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EMPLOYMENT CHARACTERISTICS*
The following employers located within the School District’s boundaries and surrounding communities offeremployment opportunities.
Approx. No.Employer Product/Service EmployedWithin the School District (60 or more employees)Mid Michigan Med Center-Clare General medical & surgical hospital 306StageRight Corporation Portable stage construction 200Tendercare Nursing care (full & part time) 190Clare Public Schools Education 156Mid-Michigan Industries, Inc. Contract packaging 125Letherer Truss Roof & floor trusses 100Jays Sporting Goods Sporting goods 100Doherty Hotel lodging/restaurant 90County of Clare Government 90Valuland Grocery store 80Northern Logistics, LLC Plastic recycling 75J D Metal Works, Inc. Steel Fabrication 60
Clare County (100 or more employees)Jay's Sporting Goods, Inc. Sporting goods stores 245Mid Michigan Med Center-Clare General medical & surgical hospital 230Rogers Athletic Company Football practice equipment 200Mid Michigan Community College Community college 164Tendercare Inc. Skilled nursing care facility 130Federal Broach and Machine Company Broaching machines 115Pelican Metal Products Metal fabrication 100Cannon Freight Systems Truck hauling/ freight 100
Isabella County (300 or more employees)Soaring Eagle Hotel & Casino Hotel & casino 2,510 Central Michigan University Education 2,403 Bellehoff Corporation (HQ) Restaurant/Ponderosa 2,200 Saginaw Chippewa Indian Tribe Corporate 1,000 Morbark Inc. Heavy equipment, grinders, chippers 600 STT Inc. Security guard & patrol services 600 The Delfield Company (HQ) Refrigeration equipment 550 Central Michigan Community Hospital Health care 500 McBride Quality Care Services Adult foster care placement & services 500 Meijer Inc. Retail 475 Mount Pleasant Center Mental health care 450 Wal-Mart Super Center Retail 400 Mt. Pleasant Public Schools Education 393 Bandit Industries Wood chippers 346 Isabella Bank Financial 335 Sam’s Club Retail 300 Unified Brands Randell Restaurant equipment 300
*The approximate number of employees listed above are as reported in the sources indicated below. Because of reporting time lags and other factorsinherent in collecting and reporting such information, the numbers may not reflect recent changes in employment levels, if any.
Source: 2015 Michigan Manufacturers Directory, 2015 Crain’s Book of Lists, Manta Company Intelligence website, the Michigan EconomicDevelopment Council (“MEDC”), and individual employers.
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EMPLOYMENT BREAKDOWN
The 2010 U. S. Census reports the occupational breakdown of persons 16 years and over for Clare County areas follows:
Number PercentPERSONS BY OCCUPATION 10,796 100.00%Professional Specialty Occupations 2,631 24.37Service Occupations 2,161 20.02Sales & Office Occupations 2,568 23.79Natural Resources, Construction, and Maintenance Occupations 1,689 15.64Transportation & Material Moving Occupations 1,747 16.18
The breakdown by industry for persons 16 years and over in Clare County are as follows:
Number PercentPERSONS BY INDUSTRY 10,796 100.00%Agriculture, Forestry, Fishing, Hunting & Mining 372 3.45Construction 1,141 10.57Manufacturing 1,268 11.75Wholesale Trade 224 2.07Retail Trade 1,524 14.12Transportation 544 5.04Information 158 1.46Finance, Insurance, & Real Estate 524 4.85Professional & Management Services 423 3.92Educational, Health & Social Services 2,262 20.95Arts, Entertainment, Recreation and Food Services 1,268 11.75Other Professional and Related Services 656 6.08Public Administration 432 4.00
Source: www.census.gov
UNEMPLOYMENT*
The Michigan Department of Technology, Management & Budget Information, reports unemployment averagesfor Clare County as compared to the State of Michigan are as follows:
County of State ofClare Michigan
2015 Year to Date (August) 5.2% 6.1%2014 Annual Average 9.9 7.22013 Annual Average 11.5 8.82012 Annual Average 12.8 9.12011 Annual Average 15.5 10.4
*not seasonally adjusted
BANKING
The following banks have branches located within the School District’s boundaries. Deposits are as reportedin the Accuity American Financial Directory, July - December 2015.
Total State-WideBank Main Office Deposits Chemical Bank Midland, MI $6,124,791,000Isabella Bank Mount Pleasant, MI 1,075,803,000Mercantile Bank of Michigan Grand Rapids, MI 2,278,356,000
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GENERAL SCHOOL INFORMATION
DESCRIPTION
The School District currently operates one elementary school, one middle school and two high schools. TheSchool District’s 2014/15 student enrollment was 1,516. A staff of 84 teachers, 7 administrators and 65 supportpersonnel are employed by the School District.
BOARD OF EDUCATION
The Board of Education consists of seven members who are elected at large for four-year overlapping terms. The Board annually elects a President, Vice President, Treasurer and Secretary. The Board is responsible for theselection and appointment of the Superintendent of Schools. The Board meets as a single body to set or amend policy,develop long range educational goals and act upon recommendations of the Superintendent of Schools. The Board isalso responsible for adopting and periodically amending the operating budget and evaluating school programs inaccordance with governing laws.
SCHOOL ENROLLMENT
Historical Enrollment
The School District’s historical enrollment totals (Fall Pupil Count Day) are as follows:
School Year Enrollment School Year Enrollment2014/15 1,516 2009/10 1,4822013/14 1,535 2008/09 1,4842012/13 1,531 2007/08 1,5082011/12 1,525 2006/07 1,4762010/11 1,536 2005/06 1,559
Enrollment by Grade
The enrollment by grade for the school year 2014/15 (Fall Pupil Count Day) are as follows:
Kindergarten 133 Ninth 106First 117 Tenth 118Second 129 Eleventh 89Third 97 Twelfth 113Fourth 103 Sub Total 1,465Fifth 124 Special Ed. 26Sixth 102 Alternative Ed. 25Seventh 123Eighth 111 TOTAL 1,516
Projected Enrollment
The projected enrollment totals for 2019/20 are as follows:
K-6 8007-8 2209-12 455Special Ed. 25
TOTAL 1,500
Note: Projected enrollment totals provided by the Clare Public Schools.
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EXISTING SCHOOL FACILITIES
Year Remodeling/ Type ofSchool Grades Completed Additions ConstructionElementary
Clare K-4 1972 2002 MasonryMiddle School
Clare 5-8 1922 1951/62/02 MasonryHigh School
Clare 9-12 1959 1963 -1982/02 MasonryPioneer/ Adult Ed. -- 2010 -- Modular
OTHER SCHOOLS
There is one school that is located within the School District’s boundaries.
Grades ApproximateSchool Served EnrollmentShady Lawn Amish Parochial School 1-8 14
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OTHER MATTERS
All information contained in this Official Statement is subject, in all respects, to the complete body ofinformation contained in the original source thereof and no guaranty, warranty or other representation is made concerningthe accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as towhether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or notexpressly identified as such, should not be considered statements of fact.
The School District certifies that to its best knowledge and belief, this Official Statement, insofar as it pertainsto the School District and its economic and financial condition, is true and correct as of the date of this OfficialStatement, and does not contain, nor omit, any material facts or information which would make the statements containedherein misleading.
CLARE PUBLIC SCHOOLS
/s/ Douglas O. FillmoreSUPERINTENDENT
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2014/15 2015/16Amended Adopted
REVENUE Budget Budget Local Sources 1,872,263$ 1,812,849$ State Sources 10,637,955 10,823,335 Federal Sources 1,045,010 1,138,459 Interdistrict Sources 41,078 41,078
TOTAL REVENUE 13,596,306$ 13,815,721$ EXPENDITURESINSTRUCTION: Basic Programs 7,022,548$ 6,801,716$ Added Needs 1,915,100 1,961,903 Adult/ Continuing Education 68,097 71,236
TOTAL INSTRUCTION 9,005,745$ 8,834,855$
SUPPORTING SERVICES: Pupil 798,708$ 737,444$ Instructional 177,745 212,217 General Administration 284,798 308,389 School Administration 720,812 723,973 Business Services 302,079 414,002 Operations/Maintenance 1,122,364 1,131,394 Pupil Transportation 512,478 407,913 Support Services Central 535,023 456,475 Support Services Other 476,386 492,480 Community Services 32,826 37,517TOTAL SERVICES 4,963,219 4,921,804
TOTAL EXPENDITURES 13,968,964$ 13,756,659$ Interest and fiscal charges 23,867 30,000
TOTAL EXPENDITURES 13,992,831 13,786,659
REVENUE OVER (UNDER) EXPENDITURES (396,525)$ 29,062$ BEGINNING FUND BALANCE, JULY 1 1,158,487$ 761,962$ ESTIMATED ENDING FUND BALANCE, JUNE 30 761,962$ 791,024$
CLARE PUBLIC SCHOOLSGeneral Fund Budget Summaries
For Fiscal Years Ending June 30, 2015 and June 30, 2016
APPENDIX A - BUDGET
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INDEPENDENT AUDITOR’S REPORT
To the Board of Education Clare Public Schools Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Clare Public Schools (the District), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District, as of June 30, 2014, and the respective changes in financial position, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The other supplemental information, as listed in the table of contents, is presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplemental information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplemental information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 26, 2014 on our consideration of the 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 the District’s internal control over financial reporting and compliance. Sincerely,
Roslund, Prestage & Company, P.C. August 26, 2014
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MANAGEMENT’S DISCUSSION AND ANALYSIS
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Our discussion and analysis of the Clare School District’s (School District) financial performance provides an overview of the School District’s financial activities for the fiscal year ended June 30, 2014. Financial Highlights The School District’s net position increased $151,771 or 2.1%. Program revenues accounted for $2.83 million or 19% of total revenues and general revenues accounted for $12.0 million or 81%. The General Fund reported a positive fund balance in excess of $1.15 million. Using this Annual Financial Report This annual financial report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Clare Public Schools financially as a whole. The District-wide Financial Statements provide information about the activities of the whole School District, presenting both an aggregate view of the School District’s finances and a longer-term view of those finances. The Fund Financial Statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements look at the School District’s operations in more detail than the district-wide financial statements by providing information about the School District’s funds - the General Fund, Food Service Fund, Capital Projects Funds, with all Debt funds presented in one column. The remaining statement, the statement of fiduciary net position, presents financial information about activities for which the School District acts solely as an agent for the benefit of students activities. The following summarizes the presentation included in this annual financial report.
Management’s Discussion and Analysis (MD&A) (Required Supplemental Information)
Basic Financial Statements � District-wide Financial Statements � Fund Financial Statements � Notes to the Financial Statements Budgetary Information for the General Fund (Required Supplemental Information) Other Supplemental Information
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CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Reporting the District as a Whole
The Statement of Net Position and Statement of Activities One of the most important questions asked about the School District’s finances is, “Is the School District better or worse off as a result of the year’s activities?” The Statement of Net Positionand the Statement of Activities report information about the School District as a whole and about its activities in a manner that helps to answer this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by privatesector companies. All of the current year’s revenues and expenses are taken into consideration regardless of when cash is received or paid.
These two statements report the School District’s net position as a way to measure the SchoolDistrict’s financial status. The change in net position provides the reader a tool to assist indetermining whether the School District’s financial health is improving or deteriorating. Thereader will need to consider other non-financial factors such as property tax base, student enrollment growth, and facility conditions in arriving at their conclusion regarding the overall health of School District.
Reporting the District’s Most Significant Funds
Fund Financial Statements The School District’s fund financial statements provide detailed information about the mostsignificant funds – not the School District as a whole. Some funds are required to be established by State law and by bond covenants. Other funds are established to help it control and managemoney for particular purposes or to meet legal responsibilities for using certain taxes, grants, and other sources of revenue. The School District’s two types of funds, governmental and fiduciary, use different accounting approaches as further described in the notes to the financial statements.
Governmental FundsMost of the School District’s activities are reported in governmental funds, which focus on howmoney flows into and out of those funds and the balances remaining at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and other financial assets that can readily beconverted to cash. The governmental fund statements provide a detailed short-term view of the School District’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources available to spend in the near future to finance the School District’s programs. Therelationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the basicfinancial statements.
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Fiduciary FundsThe School District is the trustee, or fiduciary, for its student activity funds and library funds. All of the School District’s fiduciary activities are reported in separate Statements of Fiduciary Net Position and Changes in Fiduciary Net Position. We exclude these activities from theSchool District’s other financial statements because the assets cannot be utilized by the School District to finance its operations.
District-wide Financial Analysis
The statement of net assets provides the perspective of the School District as a whole. Exhibit Aprovides a summary of the School District’s net assets as of June 30, 2014 and 2013:
Exhibit A 2014 2013Assets
Current and other assets $5,400,0005, 6,300,000$ 6Capital assets - net of accumulated depreciation 12,000,000 11,700,0001
Total assets 17,400,000 18,000,0001
LiabilitiesCurrent liabilities 2,900,000 2 2,500,0002,Long-term liabilities 7,000,000 8,200,000
Total liabilities 9,900,000 10,700,0001
Net AssetsInvested in property and equipment - net of related debt 5,200,000 5 3,700,000 3Restricted 1,300,000 2,600,000 2Unrestricted 1,000,000 1,000,000 1
Total net position 7,500,000$ 7 7,300,000$ 7
Governmental Activities
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CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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The preceding table focuses on net position (see Exhibit A). The School District’s net position was $7,500,000 at June 30, 2014. Capital assets, net of related debt totaling $5,200,000,compares the original costs, less depreciation of the School District’s capital assets to long-term debt used to finance the acquisition of those assets. Most of the debt will be repaid from voter-approved property taxes collected as the debt service comes due. Restricted net assets are reported separately to show legal constraints from debt requirements and legislation that limit theSchool District’s ability to use those net assets for day-to-day operations.
The $1,000,000 in unrestricted net assets of governmental activities represents the accumulatedresults of all past years’ operations. The operating results of the General Fund will have a significant impact on the change in unrestricted net assets from year to year.
The results of this year’s operations for the School District as a whole are reported in thestatement of activities. Exhibit B provides a summary of the changes in net position for the years ended June 30, 2014 and 2013.
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Exhibit B 2014 2013Revenue
Program revenue:Charges for services 350,000$ 3 350,000$ 3Grants and categoricals 2,480,000 2 2,480,000 2
General revenue:Property taxes 2,460,000 2 2,370,000 2State foundation allowance 9,170,000 9 9,060,000 9Other 400,000 4 880,000 8
Total revenue 14,860,0001 15,140,0001Function/Program Expenses
Instruction 7,880,000 7 8,680,000 8Support services 4,300,000 4 4,560,000 4Food services 580,000 5 560,000 5Other Expenditures 1,080,000 , 70,000 Interest on long-term debt 240,000 2 270,000 2Depreciation - unallocated
,630,000 6
,560,000
Total expenses 14,710,0001 14,700,0001
Change in net position 150,000$
440,000$
Governmental Activities
Prior Period Adjustment
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CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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As reported in the statement of activities, the cost of all of our governmental activities this year was $14.7 million. Certain activities were partially funded from those who benefited from the programs ($350,000) or by the other governments and organizations that subsidized certain programs with grants and categorical ($2.5 million). We paid for the remaining “public benefit”portion of our governmental activities with $2.5 million in taxes, $9.2 million in StateFoundation Allowance and with our other revenues, such as interest and general entitlements.
The School District experienced an increase in net position of $150,000. The increase was dueto the excess of revenues over expenditures. The increase in net position differs from the changein fund balance and a reconciliation appears in the financial statements.
The School District’s Funds
The School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the School District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the School District’s overall financial health.
The School District’s governmental funds reported a combined fund balance of $2.5 million,which is below last year’s total of $3.9 million. The schedule below indicates the fund balanceand the total change in fund balance as of June 30, 2014 and 2013.
The School District completed this year with a combined fund balance decrease of $1,395,498from the previous year.
� The General Fund balance decreased by $91,094 due to the planned use of fund balance. Overall, the General Fund activity was within 99 percent of budgeted revenues and expenditures.
Fund Balance Fund BalanceJune 30, 2014 June 30, 2013 Change
General 1,158,487$ 1 1,249,581$ 1 (91,094)$ (9(9Special Revenue 177,012 166,529 10,483Debt Service 915,630 1,625,159 (709,529)Capital Projects 209,314 814,672
( , )(605,358)
Total 2,460,443$ 2 3,855,941$ 3 (1,395,498)$ ,3
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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� Our Special Revenue Fund balance increased by $10,483. Through normal operations,the Food Service Fund brought in $10,483 more than it spent.
� Our Debt Service Funds’ balances decreased by $709,529, The decrease was mainly dueto the second of three principal payments of $930,000 made for the QZAB bonds.
� Our Capital Projects Funds’ balances decreased by $605,358. This decrease was the result of Brookwood 2.0 development (mainly the synthetic turf football field) paid for with fundraising done in the 2012-13 year.
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CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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As the graph below illustrates, the largest portions of General Fund expenditures (excludingfund transfers) are for salaries and fringe benefits. The School District by nature is a labor intensive organization.
alaries & Sawages52%
Fringee benefits229%
Purchhased serviices
6%%
Supplies11.5%
Capital outlay1%
Miscellaneous.5%
Expenditures
2014 2013Expenditures by object
Salaries and wages 6,979,384$ 6 7,156,213$ 7Fringe benefits 3,909,222 3,937,065Purchased services 859,070 1,062,079Supplies 1,546,450 972,898Capital outlay 113,636 313,520Miscellaneous 46,370 50,987
Total 13,454,132$1$ 13,492,762$$
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Expenditures (not including transfers) are down $38,630 or .3%. Salaries and wages havedecreased by $176,829 or 2.5%. This change is due to a year of no salary increases and thedifference in salaries of several new staff verses retired staff the year before. Purchased services are down $203,009. In 2013-14, there were few projects and no long term teacher or administrator sub expense. Supplies are up $573,552. In 2013-14 there were $168,000 inlanguage arts curriculum purchases, two new buses were purchased for $165,392, and the firein the High School cost $107,000 to repair (reimbursed by insurance). Capital Outlay is down $199,884. A new phone system costing that amount was purchased in 2012-13.
General Fund Budgetary Highlights
Over the course of the year, the School District revises its budget to reflect changes in revenues and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. A schedule showing the School District’s original and final budget amounts compared with amounts actually paid and received is provided in required supplemental information of these financial statements. Changes to theGeneral Fund original budget were as follows:
� Final budgeted revenues were $202,990 more than the original budget, mainly due tothe insurance reimbursement for the high school fire in the spring.
� The actual revenues were $9,696 more than the final budgeted revenues. This wasdue to a combination of small variances within all three major funding sources.
� Final budgeted expenditures were $295,441 above the original budget. This wasmainly due to the adding to the operations budget for the High School fire repair and the additional budgeting to purchase two buses.
� The actual expenditures were $167,109 lower than the final budgeted expenditures. This was mainly due to slightly less spending in many areas including instruction, administration, and utilities.
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CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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Capital Assets
At June 30, 2014, the School District had $12 million invested in a broad range of capital assets,including land, buildings, furniture, and equipment. This amount represents a net increase (including additions and disposals) of $282,897, or 2.4%, from last year.
2014 2013Land 298,976$ 298,976$ Buildings and improvements 16,365,502 15,779,296 Buses and other vehicles 900,907 722,545 Furniture and equipment 7,162,403 7,009,762
Total capital assets 24,727,788 23,810,579
Less accumulated depreciation 12,766,365 12,132,053
Net capital assets 11,961,423$ 11,678,526$
This year’s additions included $717,862 for the new artificial turf football field and other Brookwood 2.0 improvements. Other additions were two new school buses costing $165,362. We present more detailed information about our capital assets in the notes to the financial statements.
Debt
At the end of this year, the School District had $6,425,392 in bonds and loans outstanding versus$7,685,000 in the previous year – a decrease of 16.4%. The decrease reflects principal payments made on the 2006 refunding bond and the 2001 QZAB bonds. The 2013 bus loan will be paid in two equal installments due August 31, 2014 and August 31, 2015.
2014 20132006 Refunding Bonds 5,415,000$ 5 5,825,000$ 52001 Revenue Bonds 0 02001 QZAB Bonds 930,000 1,860,0002013 Bus Loan 80,392 0
06,425,392$ 7,685,000$
CLARE PUBLIC SCHOOLS Management’s Discussion and Analysis
For the Year Ended June 30, 2014
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The School District’s General Obligation Bond rating continues to be equivalent to the State’scredit rating. The State limits the amount of general obligation debt that schools can issue to 15percent of the assessed value of all taxable property within the School District’s boundaries. If the School District issues “qualified debt,” i.e., debt backed by the State of Michigan, suchobligations are not subject to this debt limit. The School District’s outstanding unqualified general obligation debt is significantly below the statutorily imposed limit.
Factors Expected to have an Effect on Future Operations
Our elected Board and administration consider many factors when setting the School District’s2014-15 fiscal year budget. One of the most important factors affecting the budget is our student count. The State foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The 2014-15 fiscal year budget was adopted in June 2014,based on an estimate of students that will be enrolled in October 2014. Under State law, theSchool District cannot access additional property tax revenue for general operations. As a result,district funding is heavily dependent on the State’s ability to fund local school operations. Based on early enrollment data at the start of the 2014-15 school year, we anticipate that the fall student count will meet the estimates used in creating the 2014-15 fiscal year budget. Once the finalstudent count and related per pupil funding is validated, State law requires the School District toamend the budget if actual district resources are not sufficient to fund original appropriations..
Requests For Information
This financial report is designed to provide a general overview of the School District’s financesfor all those with an interest in the School District. Questions concerning any of the informationprovided in this report or requests for additional financial information should be addressed to:
Office of the Superintendent Clare Public School District 201 East State Street Clare, Michigan 48617
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DISTRICT-WIDE FINANCIAL STATEMENTS
June 30, 2014
AssetsCurrent assets
Cash and cash equivalents 2,891,359$ Accounts receivable 11,866 Due from other governmental units 2,418,450 Inventory 3,184 Prepaid expenses 66,730 Total current assets 5,391,589
Noncurrent assetsLand 298,976 Capital assets less accumulated depreciation 11,662,447 Total noncurrent assets 11,961,423
Total assets 17,353,012
LiabilitiesCurrent liabilities
Accounts payable 149,580 Due to other governmental units 411,915 Accrued interest on short-term note payable 14,240 Salaries payable 850,554 Unearned revenues 19,143 Short-term note payable 1,485,714 Accrued interest on long-term debt 13,806 Long-term obligations due within one year 1,399,889 Total current liabilities 4,344,841
Noncurrent liabilitiesLong-term obligations due after one year 5,025,503 Compensated absences 219,221 Post-employment benefits 295,369 Total noncurrent liabilities 5,540,093
Total liabilities 9,884,934
Net positionInvested in capital assets, net of related debt 5,237,055 Restricted for:
Debt service 915,630 Capital projects 209,314 Food service 177,012
Unrestricted 929,067
Total net position 7,468,078$
Clare Public SchoolsStatement of Net Position
The notes are an integral part of these financial statements. 1
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Net (Expense)Operating Revenue and
Charges Grants and ChangesFunctions / Programs Expenses for Services Contributions Net Position
Governmental activities:Instruction 7,882,064$ 10,058$ 2,069,342$ (5,802,664)$ Support services 4,301,158 56,548 - (4,244,610) Food service 576,219 174,165 411,114 9,060 Community services 21,720 106,428 - 84,708 Athletics 284,983 - - (284,983) Interest and fees on long-term debt 240,484 - - (240,484) Other expenditures 766,521 - - (766,521) Depreciation - unallocated 634,312 - - (634,312) Total governmental activities 14,707,461$ 347,199$ 2,480,456$ (11,879,806)
General revenues:Property taxes 2,458,600 State sources 9,173,628 Unrestricted interest and investment earnings 1,324 Restricted interest and investment earnings 39,457 Miscellaneous 358,568 Total general revenues 12,031,577
Change in net position 151,771
Net position - beginning 7,316,307
Net position - ending 7,468,078$
Program Revenues
Clare Public SchoolsStatement of Activities
For the Year Ended June 30, 2014
The notes are an integral part of these financial statements. 2
FUND FINANCIAL STATEMENTS
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Food Capital Debt
General Service Projects Service TotalsAssets
Cash and cash equivalents 1,633,054$ 121,461$ 221,214$ 915,630$ 2,891,359$ Accounts receivable 11,866 - - - 11,866 Due from other governmental units 2,414,560 3,890 - - 2,418,450 Inventory - 3,184 - - 3,184 Prepaid expenses 16,730 50,000 - - 66,730 Total assets 4,076,210$ 178,535$ 221,214$ 915,630$ 5,391,589$
LiabilitiesAccounts payable 137,584$ 96$ 11,900$ -$ 149,580$ Due to other governmental units 411,915 - - - 411,915 Accrued interest 14,240 - - - 14,240 Salaries payable 850,554 - - - 850,554 Unearned revenues 17,716 1,427 - - 19,143 Short term note payable 1,485,714 - - - 1,485,714 Total liabilities 2,917,723 1,523 11,900 - 2,931,146
Fund balance Non-spendable
Inventory - 3,184 - - 3,184 Prepaid expenses 16,730 50,000 - - 66,730
Restricted - 123,828 209,314 898,747 1,231,889 Commited - - - 16,883 16,883 Unassigned 1,141,757 - - - 1,141,757 Total fund balance 1,158,487 177,012 209,314 915,630 2,460,443
Total liabilities and fund balance 4,076,210$ 178,535$ 221,214$ 915,630$ 5,391,589$
Major Funds
Clare Public SchoolsBalance Sheet - Governmental Funds
June 30, 2014
The notes are an integral part of these financial statements. 3
Total fund balance - governmental funds 2,460,443$
Add: Cost of capital assets 24,727,788$ Deduct: Accumulated depreciation (12,766,365)
11,961,423
Long-term debt obligationsDeduct: 2006 Refunding Bonds (5,415,000) Deduct: 2001 School Building & Site Bonds, Series B (930,000) Deduct: Woodlawn Special Assessment Debt - Deduct: 2013 School Bus Loan (80,392)
(6,425,392) Other long-term obligations
Deduct: Compensated absences payable (219,221) Deduct: Post-employment benefits (295,369) Deduct: Accrued interest on long-term liabilities (13,806)
Total net position - governmental activities 7,468,078$
Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of:
Clare Public SchoolsReconciliation of Fund Balances on the Balance Sheet for Governmental Funds
For the Year Ended June 30, 2014to Net Position of Governmental Activities on the Statement of Net Position
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 in the funds:
The notes are an integral part of these financial statements. 4
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Food Capital Debt General Service Project Service Totals
RevenuesLocal sources 2,024,368$ 175,587$ 131,075$ 874,118$ 3,205,148$ State sources 10,259,596 23,112 - - 10,282,708 Federal sources 983,374 388,002 - - 1,371,376 Total revenues 13,267,338 586,701 131,075 874,118 14,859,232
Expenditures Instruction
Basic programs 6,894,517 - - - 6,894,517 Added needs 1,836,221 - - - 1,836,221 Adult / continuing education 69,163 - - - 69,163 Total instruction 8,799,901 - - - 8,799,901
Support services
Pupil 531,283 - - - 531,283 Instructional staff 274,124 - - - 274,124 General administration 257,444 - - - 257,444 School administration 654,188 - - - 654,188 Business services 314,618 - - - 314,618 Operation and maintenance 1,162,188 - - - 1,162,188 Pupil transportation 549,903 - - - 549,903 Central 557,410 - - - 557,410 Total support services 4,301,158 - - - 4,301,158
Food service - 576,219 - - 576,219 Community services 21,720 - - - 21,720 Athletics 284,983 - - - 284,983 Debt service
Principal payments 2,865 - - 1,340,000 1,342,865 Interest, fees and other 366 - - 241,400 241,766
Other 43,139 - 721,133 2,249 766,521 Total expenditures 13,454,132 576,219 721,133 1,583,649 16,335,133
Excess (deficiency) of revenues
over expenditures (186,794) 10,482 (590,058) (709,531) (1,475,901)
Other financing sources (uses) Transfers in 85,000 - 69,700 - 154,700 Transfers (out) (69,700) - (85,000) - (154,700) Proceeds from bus loan 80,392 - - - 80,392
Excess (deficiency) of revenuesand other sources over expenditures (91,102) 10,482 (605,358) (709,531) (1,395,509)
Fund balances - beginning 1,249,589 166,530 814,672 1,625,161 3,855,952
Fund balances - ending 1,158,487$ 177,012$ 209,314$ 915,630$ 2,460,443$
Clare Public SchoolsStatement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds
Major Funds
For the Year Ended June 30, 2014
The notes are an integral part of these financial statements. 5
(1,395,509)$
Add: Capital outlay 917,209 Deduct: Depreciation expense (634,312)
Long-term obligationsAdd: 2006 Refunding Bonds 410,000 Add: 2001 School Building & Site Bonds, Series B 930,000 Add: Woodlawn Special Assessment Debt 2,865 Less: Proceeds from bus loan (80,392)
Deduct: Increase in accrual for compensated absences (14,688) Add: Decrease in accrual for other post-employment benefits 15,316 Add: Decrease in accrued interest on long term debt 1,282
151,771$
Clare Public SchoolsReconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities
Net change in fund balances - total governmental funds
Change in net position - governmental activities
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense.
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the funds.
Payment of principal on long-term debt is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt).
For the Year Ended June 30, 2014
The notes are an integral part of these financial statements. 6
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Private Purpose Trust Agency Fund
AssetsCash and cash equivalents 25,000$ 172,718$
LiabilitiesDue to student and other groups - 172,718
Net positionRestricted net position 25,000$ -$
For the Year Ended June 30, 2014Fiduciary Funds - Statement of Net Position
Clare Public Schools
The notes are an integral part of these financial statements. 7
NOTES TO THE FINANCIAL STATEMENTS
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Clare Public School District Notes to the Financial Statements
June 30, 2014
8
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Clare Public School District (the District) conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the significant accounting policies used by the District. Reporting Entity The District is governed by a Board of Education which has responsibility and control over all activities related to public school education within the District. Board members are elected by the public and have decision-making authority, the power to designate management, the ability to significantly influence operations, and the primary accountability for fiscal matters. The District receives funding from local, state and federal government sources and must comply with all of the requirements of these funding source entities. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational financial relationships that determine which of the governmental organizations are a part of the District’s reporting entity, and which organizations are legally separate, component units of the District. Based on the application of the criteria, the District does not contain any component units. District-Wide and Fund Financial Statements The District-wide financial statements (i.e. the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All of the District-wide activities are considered governmental activities. The statement of activities demonstrates the degree to which the direct expenses of a function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include charges to consumers who purchase, use or directly benefit from services provided by a given function. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Other items, including taxes and intergovernmental payments, not properly included among program revenues are reported instead as general revenues. Net position are restricted when constraints placed on them are either externally imposed or are imposed by constitutional provisions or enabling legislation. Internally imposed designations of resources are not presented as restricted net position. When both restricted and unrestricted resources are available for use, generally it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the District-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.
Measurement Focus, Basis of Accounting and Financial Statement Presentation District-wide Financial Statements – The District-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Clare Public School District Notes to the Financial Statements
June 30, 2014
9
Fund Financial Statements - The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal year end. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and severance pay, are recorded only when payment is due. The fiduciary fund statement is also reported using the economic resources measurement focus and the accrual basis of accounting. The District reports the following major governmental funds: � The general fund is the District’s primary operating fund. It accounts for all financial resources of the District,
except those required to be accounted for in another fund. � The debt service fund is used to record tax, interest, other revenue for payment, principal and other
expenditures on bond issues. � The special revenue funds are used to account for the proceeds of specific revenue sources that are
restricted to expenditures for specified purposes. The school service funds are special revenue funds that segregate, for administrative purposes, the transactions of a particular activity from regular revenue and expenditure accounts. The District maintains full control of these funds. The school service funds maintained by the District are the capital projects and food service fund.
Additionally, the District reports the following fund types: � The District presently maintains a student activity fund to record the transactions of student groups for school
and school-related purposes. The funds are segregated and held in trust for the students. � The District also maintains a non-expendable trust fund to account for assets of which the principal may not
be spent. These funds have been accumulated to pay scholarships and awards to students. Fiduciary funds are used to account for assets held by the District in a trustee capacity or as an agent. Fiduciary fund net position and results of operations are not included in the District-wide statements. Agency funds are custodial in nature (i.e. assets equal liabilities) and do not involve measurement of results of operations. Budgetary Data Budgets are adopted by the District for the general and food service funds. The budgets are adopted and prepared on the modified accrual basis of accounting. The budget is adopted at the function level and control is exercised at the activity level. The budgeted revenues and expenditures for governmental fund types, as presented in this report, include any authorized amendments to the original budget as adopted. Cash and Cash Equivalents The District’s cash and cash equivalents are considered to be cash on hand, money market funds, demand deposits and certificates of deposit. State statute authorizes the District to deposit and invest in the accounts of Federally insured banks, credit unions, and savings and loan associations; bonds, securities and other direct obligations of the United States, or any agency or instrumentality of the United States; United States government or Federal agency obligation repurchase agreements; bankers’ acceptance of United States banks; commercial paper rated by two standard rating agencies within the two highest classifications, which mature not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions which are rated investment grade; and mutual funds composed of investment vehicles which are legal for direct investment by local units of government in Michigan. Financial institutions eligible for deposit of public funds must maintain an office in Michigan. The District’s deposits are in accordance with statutory authority.
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Clare Public School District Notes to the Financial Statements
June 30, 2014
10
Receivables Accounts receivable in all funds report amounts that have arisen in the ordinary course of business and are stated net of allowances for uncollectible amounts. Due from other governmental entities consist primarily of amounts due from the State of Michigan. Property Tax Revenue Property taxes levied by the District are collected by various municipalities and periodically remitted to the District. For Clare Public Schools taxpayers, properties are assessed as of December 31 and the related property taxes are levied and become a lien on July 1. The final collection date is February 28, after which uncollected taxes are added to the County delinquent tax rolls. The District levied 18.00 mills for school general operations on the non-homestead taxable value. The District also levied an additional 3.50 mills on all property in the District for the purpose of debt service. State Aid Revenue The State of Michigan utilizes a foundation allowance approach, which provides for a specific annual amount of revenue per student based on a state-wide formula. The foundation allowance is funded from a combination of state and local sources. Revenues from state sources are primarily governed by the School Aid Act and the School Code of Michigan. The state portion of the foundation is provided from the state’s School Aid Fund and is recognized as revenue in accordance with state law and accounting principles generally accepted in the United States of America. The District also receives revenue from the state to administer certain categorical education programs. State rules require that revenue earmarked for these programs be used for its specific purpose. Certain categorical funds require an accounting to the state of the expenditures incurred. For categorical funds meeting this requirement, funds received which are not expended by the close of the fiscal year are recorded as unearned revenue. Other categorical funding is recognized when the appropriation is received. Inventory Inventories are valued at cost, on a first in, first out (FIFO) basis. Fund balance is reserved for the amount of inventories on hand as of June 30th. USDA donated commodities are recorded as a unearned revenue and inventory when received based on their fair market value as determined by the U.S. Department of Agriculture. Revenues and expenditures are then recognized when the commodities are used. Ending inventory for USDA donated commodities was immaterial and, therefore, was not recorded. Capital Assets Capital assets, which include property, plant and equipment, are reported in the governmental column in the District-wide financial statements. Capital assets are defined by the District as individual assets with an initial cost equal to or more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. The District does not have infrastructure type assets.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction of capital assets is not capitalized. Capital assets utilized in the governmental funds are recorded as expenditures in the governmental fund financial statements. Depreciation expense is recorded in the District-wide financial statements.
Clare Public School District Notes to the Financial Statements
June 30, 2014
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Capital assets of the District are depreciated using the straight-line method over the following estimated useful lives:
Assets Years
Land Not Depreciated Buildings & Additions 10 - 50 Machinery & Equipment 5 - 20 Vehicles 7
Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Compensated Absences Compensated Absences (unused sick pay is calculated using the termination payoff rate of $40 for eligible employees times the number of unused days (maximum 155 days). At June 30, 2014, the amount of $219,221 has been reflected in the District-wide financial statements. Unearned Revenue Unearned revenues arise when resources are received by the District before it has a legal claim to them. In subsequent periods, when the revenue recognition criterion is met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the fund financial statements and District-wide financial statements, and revenue is recognized. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District has no items that qualify for reporting in this category. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has no items that qualify for reporting in this category. Long-Term Obligations In the District-wide financial statements, long-term debt and other long-term liabilities are reported as liabilities in the statement of net position. Net Position and Fund Balances Restricted net position shown in the District-wide financial statements will generally be different from amounts reported in fund balances in the governmental fund financial statements. This occurs because of differences in the measurement focus and basis of accounting used in the government-wide and fund financial statements and because of the use of funds to imply that restrictions exist. Fund Balances The District has implemented GASB Statement No. 54, “Fund Balance Reporting and Governmental Fund Type Definitions.” This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: � Nonspendable fund balance—amounts that are in nonspendable form (such as inventory or prepaid
expenditures) or are either legally or contractually required to be maintained intact.
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Clare Public School District Notes to the Financial Statements
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� Restricted fund balance—amounts constrained to specific purposes by their providers (such as taxpayers, grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. The District’s Capital Projects and Debt Service fund balances are considered restricted. The District would typically use restricted fund balance first, followed by committed resources, and then assigned resources as appropriate opportunities arise, but reserves the right to selectively spend unassigned resources first to defer the use of these classified funds.
� Committed fund balance—amounts constrained to specific purposes by the District itself, using its highest level of decision-making authority (Board of Education). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint.
� Assigned fund balance—amounts the District intends to use for a specific purpose. Intent can be expressed by the Board of Education or by an official or body to which the Board of Education delegates the authority.
� Unassigned fund balance—amounts that are available for any purpose. Positive amounts are reported only in the general fund.
Net Position – Restrictions Net position in the government-wide financial statements are reported as restricted when constraints placed on net position use is either: � Externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or � Imposed by law through constitutional provisions or enabling legislation. Unemployment Compensation The District is subject to the Michigan Employment Security Act and has elected to pay unemployment claims on a direct self-insured basis. Under this method the District must reimburse the Employment Commission for all benefits charged against the District for the year. No provision has been made for possible future claims. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Excess Of Expenditures Over Appropriations Budgets are adopted at the functional level and on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted for the general and special revenue funds. Encumbrance accounting is not employed in governmental funds. The District follows these procedures in establishing the budgetary data reflected in the financial statements:
� The Superintendent submits to the School Board a proposed operating budget for the fiscal year commencing on July 1. The operating budget includes proposed expenditures and the means of financing them. The level of control for the budgets is at the functional level as set forth and presented as required supplementary information.
� Public hearings are conducted to obtain taxpayer comments. � Prior to July 1, the budget is legally adopted by School Board resolution pursuant to the Uniform
Budgeting and Accounting Act (1968 PA 2). The Act requires that the budget be amended prior to the end of the fiscal year when necessary to adjust appropriations if it appears that revenues and other financing sources will be less than anticipated or so that expenditures will not be in excess of original estimates. Expenditures shall not be made or incurred, unless authorized in the budget, in excess of the amount appropriated. Violations, if any, in the general fund are noted in the required supplementary information section.
� Management is authorized to transfer budgeted amounts between major expenditure functions within any fund; however, these transfers and any revisions that alter the total expenditures of any fund must be approved by the School Board.
� Formal budgetary integration is employed as a management control device during the year for the general and special revenue funds.
� The budget was amended during the year with supplemental appropriations, the last one approved prior to June 30, 2014.
A detailed comparison of budget to actual revenues and expenses are shown at the back of the report.
Clare Public School District Notes to the Financial Statements
June 30, 2014
13
NOTE 3. DEPOSITS AND INVESTMENTS
At June 30th, the carrying amount of the District's cash, deposits and investments was as follows:
Cash, Deposits, And Investments Amount
Petty Cash $ 900 Checking, Savings, & Money Market Accounts 1,734,813 State Investment Pool – MILAF 1,155,646
Total $ 2,891,359 Deposits with Financial Institutions At year-end, the carrying amount of the District's deposits was $2,891,357 and the bank balance was $3,060,818. Of the bank balance, $500,000 was covered by federal depository insurance and the remainder was uninsured and uncollateralized. Deposits that exceed FDIC insurance coverage limits are held at local banks. The District believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all bank deposits. As a result, the District evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution. Only those institutions with an acceptable estimated risk level are used as depositories. The District voluntarily invests certain excess funds in external pooled investment funds which includes money market funds. One of the pooled investment funds utilized by the District is the Michigan Investment Liquid Asset Fund (MILAF). MILAF is an external pooled investment fund of “qualified” investments for Michigan school Districts. MILAF is not regulated nor is it registered with the SEC. As of June 30, 2014, MILAF reports the fair value of the District’s investments is the same as the value of the pool shares. Investments As of June 30th, the District had the following investments:
Investment Type
Fair Value
Weighted Average Maturity (years)
Rating
%
MILAF External Investment pool-MICMC $ 952,641 0.0027 AAAm 82.4
MILAF External Investment pool-MIMAX 203,005 0.0027 AAAm 17.6
Total fair value $ 1,155,646 100.00
Portfolio weighted average maturity: 1 day maturity equals 0.0027, one year equals 1.00 MILAF investments are rated by Standard and Poor’s. Interest rate risk. In accordance with its investment policy, the District will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by; structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market; and, investing operating funds primarily in shorter-term securities, liquid asset funds, money market mutual funds, or similar investment pools and limiting the average maturity in accordance with the District’s cash requirements. Credit risk. State law limits investments in commercial paper and corporate bonds to a prime or better rating issued by nationally recognized statistical rating organizations (NRSROs). Concentration of credit risk. The District will minimize concentration of credit risk, which is the risk of loss attributed to the magnitude of the District’s investment in a single issuer, by diversifying the investment portfolio
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Clare Public School District Notes to the Financial Statements
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so that the impact of potential losses from any one type of security or issuer will be minimized. Custodial credit risk – deposits. In the case of deposits, this is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. See above for amount of deposits held by the District that are exposed to custodial credit risk because it is uninsured and uncollateralized. Custodial credit risk – investments. For an investment, it is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The District will minimize custodial credit risk, which is the risk of loss due to the failure of the security issuer or backer, by; limiting investments to the types of securities allowed by law; and prequalifying the financial institutions, broker/dealers, intermediaries and advisors with which the District will do business. Foreign currency risk. The District is not authorized to invest in investments which have this type of risk. NOTE 4. INTERFUND RECEIVABLES AND PAYABLES There were no interfund receivable or payable amounts shown on the fund financial statements as of June 30th. NOTE 5. DUE FROM OTHER GOVERNMENTAL UNITS As of June 30th, due from other governmental units is comprised of the following amounts:
Description Amount
General Fund:
Federal Grants $ 47,715 Clare-Gladwin RESD 167,802 State of Michigan – State Aid 1,850,518 State of Michigan – UAAL Stabilization 348,525
Hot Lunch Fund: State of Michigan – State Aid 3,890
Totals $ 2,418,450 NOTE 6. PREPAIDS Prepaid expenses represent payments for the following expenses that will benefit future periods:
Description Amount
General Fund:
Prepaid Expenses $ 16,730
Hot Lunch Fund:
Chartwells 50,000
Totals $ 66,730
Clare Public School District Notes to the Financial Statements
June 30, 2014
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NOTE 7. CAPITAL ASSETS A summary of changes in the District’s capital assets follows:
Capital Assets Beginning Balance
Additions
Disposals
Ending Balance
Land $ 298,977 $ - $ - $ 298,977 Buildings & improvements 15,779,296 586,206 - 16,365,502 Furniture and equipment 7,035,482 152,641 - 7,188,123 Vehicles 696,824 178,362 - 875,186 Total Capital Assets 23,810,579 917,209 - 24,727,788 Accumulated Depreciation Buildings & improvements (5,577,869) (286,890) - (5,864,760) Furniture and equipment (5,883,094) (314,680) - (6,197,774) Vehicles (671,089) (32,742) - (703,831) Total Accumulated Depreciation (12,132,053) (634,312) - (12,766,365)
Net Capital Assets $ 11,678,526 $ 282,897 $ - $ 11,961,423 Depreciation for the year ended June 30, 2014 totaled $ 634,312. The District determined that it was impractical to allocate depreciation to the various governmental activities as the assets serve multiple functions. NOTE 8. ACCRUED INTEREST Accrued interest represents interest accrued on outstanding debt from the date of the last payment to the end of the fiscal year as follows:
Description Amount
2006 Bonds $ 13,806 NOTE 9. SALARIES PAYABLE Salaries payable represent the remaining balance on teacher contracts to be paid during the summer and other salaries and wages earned as of June 30th. NOTE 10. UNEARNED REVENUE Unearned revenue represents revenues received in advance of the amount expended as follows:
Description Amount
General Fund $ 17,716
Food Service Fund 1,427
Total $ 19,143 NOTE 11. SHORT-TERM NOTE PAYABLE On August 20, 2013, the District borrowed $1,700,000 in three notes ($500,000, $660,000 and $540,000) from the Michigan Finance Authority in the form of State Aid Anticipation Notes for the purpose of providing funds for
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Clare Public School District Notes to the Financial Statements
June 30, 2014
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school operations. The interest rates are stated at 0.4%. These notes are payable at maturity on August 20, 2014. The balances of these loans are shown as a current liability (less set asides) in the General Fund. On August 20, 2014 (after the end of the current fiscal year), the District borrowed $1,700,000 in three notes ($800,000, $630,000 and $770,000) from the Michigan Finance Authority in the form of State Aid Anticipation Notes for the purpose of providing funds for school operations. The interest rates are stated at 0.42%, 1.235%, and 1.05% respectively. These notes are payable at maturity on July 20, 2015, August 20, 2015 and August 20, 2015 respectively. These loans were acquired after the end of the fiscal year and, therefore, are not shown as current liabilities in the General Fund. NOTE 12. LONG-TERM DEBT 2001 School Building & Site Bonds, Series B During 2001, the District issued $2,760,000 of QZAB bonds due in annual installments of $900,000 to $930,000 through May 1, 2015. The interest rate is 0%. 2006 Refunding Bonds During 2006, the District refunded $6,680,000 of serial bonds due in annual installments of $20,000 to $455,000 through May 1, 2026. The interest rate varies from 4.0% to 5.0%. Woodlawn Special Assessment Debt The Woodlawn Special Assessment Debt was assessed for the sewer services to property owned by the School District. Principal is due each August 28th through 2014 in the amount of $2,865 plus interest at 6.3864%. 2013 School Bus Loan During 2013, the District obtained a loan from Firstbank to cover $80,392 of the cost for two new buses. Annual payments of $41,077 are due on August 31, 2014 and August 31, 2015. This payment amount includes interest at 1.40%. For the terms of the bonds, see the bond payment schedule included in this report. Summary of Long-term Debt Transactions The changes in long-term debt during the current fiscal year are as follows:
Beginning Balance Additions (Deletions)
Ending Balance
Due within one year
Due after one year
Compensated abs $ 204,533 $ 14,688 $ - $ 219,221 $ - $ 219,221 2001 Bond - Series B 1,860,000 - (930,000) 930,000 930,000 - 2006 Refunding Bond 5,825,000 - (410,000) 5,415,000 430,000 4,985,000 2013 Bus Loan - 80,392 - 80,392 39,889 40,503 Woodlawn 2,865 - (2,865) - - -
Total $ 7,892,398 $ 95,080 $(1,342,865) $ 6,644,613 $ 1,399,889 $ 5,244,724
The annual requirements to pay principal and interest on the obligations outstanding at June 30, 2014, are shown in the Schedule of Long-term Debt. NOTE 13. FUND BALANCE Fund balance for the General Fund and Food Service Fund are deemed non-spendable for inventory and prepaid expenses. Fund balance in the Debt Service Fund is restricted for debt service. Fund balance in the Capital Projects Fund is restricted for capital outlay. Fund balance in the Food Service Fund is restricted for food service.
Clare Public School District Notes to the Financial Statements
June 30, 2014
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NOTE 14. EMPLOYEE RETIREMENT SYSTEM Plan Description - The District participates in the statewide Michigan Public School Employees’ Retirement System (System) which is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (State) originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board’s authority to promulgate or amend the provisions of the System. The System’s pension plan was established by the State to provide retirement, survivor, and disability benefits to public school employees. In addition, the System’s health plan provides all retirees with the option of receiving health, dental and vision coverage under the Michigan Public School Employees’ Retirement Act. The System’s financial statements are included as a pension and other employee benefit trust fund in the State of Michigan Comprehensive Annual Financial Report. The MPSERS issues a publicly available financial report that includes financial statements and required supplementary information for MPSERS. That report may be obtained by writing to Michigan Public School Employees Retirement System, P.O. Box 30171, Lansing, Michigan 48909-7671 or by calling (800) 381-5111. It is also available at http://www.michigan.gov/orsschools. The System is administered by the Office of Retirement Services within the Michigan Department of Technology, Management & Budget. Introduction Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit (DB) pension plan. Retirement benefits for DB plan members are determined by final average compensation and years of service. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members. A DB member or Pension Plus hybrid plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account. A refund cancels a former member’s rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements. Pension Reform On May 19, 2010, the Governor signed Public Act 75 of 2010 into law. As a result, any member of the Michigan Public School Employees’ Retirement System (MPSERS) who became a member of MPSERS after June 30, 2010 is a Pension Plus member. Pension Plus is a hybrid plan that contains a pension component with an employee contribution (graded, up to 6.4% of salary) and a flexible and transferable defined contribution (DC) tax-deferred investment account that earns an employer match of 50% (up to 1% of salary) on employee contributions. Retirement benefits for Pension Plus members are determined by final average compensation and years of service. Disability and survivor benefits are available to Pension Plus members. On September 4, 2012, the Governor signed Public Act 300 of 2012 into law. The legislation grants all active members a voluntary election regarding their pension if they first became a member before July 1, 2010 and earned service credit in the 12 months ending September 3, 2012. Any changes to a member’s pension are effective as of the member’s transition date, which is defined as the first day of the pay period that begins on or after December 1, 2012, subsequently amended to February 1, 2013. Under the reform, members voluntarily chose to increase, maintain, or stop their contributions to the pension fund. Option 1 Members voluntarily elected to increase their contributions to the pension fund and retain the 1.5% pension factor in their pension formula. Basic Plan members were to contribute 4% and MIP (Fixed, Graded and Plus) members were to contribute 7%. The increased contribution would begin as of their transition date and continue until they terminate public school employment. Option 2 Members voluntarily elected to increase their contribution to the pension fund as stated in Option 1 and retain the 1.5% pension factor in their pension formula. The increased contribution would begin as of their transition date and continue until they reach 30 years of service. If they reach 30 years of service, their contribution rates will
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Clare Public School District Notes to the Financial Statements
June 30, 2014
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return to the previous level in place as of the day before their transition date (0% for Basic Plan members, 3.9% for MIP-Fixed, up to 4.3% for MIP-Graded, or up to 6.4% for MIP-Plus). The pension formula for any service thereafter would include a 1.25% pension factor. Option 3 Members voluntarily elected maintain their current level of contribution to the pension fund and therefore not increase their contribution to the pension fund. The pension formula for their years of service as of the day before their transition date will include a 1.5% pension factor. The pension formula for any service thereafter will include a 1.25% pension factor. Option 4 Members voluntarily elected to no longer contribute to the pension fund and therefore are switched to the Defined Contribution (DC) plan for future service as of their transition date. As a DC participant they receive a 4% employer contribution to a tax-deferred 401(k) account and can choose to contribute up to the maximum amounts permitted by the IRS to a 457 account. They vest in employer contributions and related earnings in their 401(k) account based on the following schedule: 50% at 2 years, 75% at 3 years, and 100% at 4 years of service. They are 100% vested in any personal contributions and related earnings in their 457 account. Upon retirement, if they meet age and service requirements (including their total years of service), they would also receive a pension (calculated based on years of service and Final Average Compensation as of the day before their transition date and a 1.5% pension factor). Non-electing Members Members who did not make an election before the deadline defaulted to Option 3 as described above. Deferred or nonvested public school employees on September 3, 2012, who return to public school employment on or after September 4, 2012, will be considered as if they had elected Option 3 above. Returning members who made the retirement plan election will retain whichever option they chose. New Members Employees who first work on or after September 4, 2012, choose between two retirement plans: the Pension Plus hybrid plan described above and a Defined Contribution (DC) plan that provides a 50% employer match (up to 3% of salary) on employee contributions. New employees are automatically enrolled as members in the Pension Plus plan as of their date of hire. They have 75 days from the last day of their first pay period to elect to opt out of the Pension Plus hybrid plan and become a qualified participant in the DC plan; if no election is made they will remain in the Pension Plus hybrid plan. If they elect to opt out of the Pension Plus hybrid plan, their participation in the DC plan will be retroactive to their date of hire. Member Contributions Mandatory member contributions were phased out between 1974 and 1977, with the plan remaining noncontributory until January 1, 1987, when the Member Investment Plan (MIP) was enacted. MIP members enrolled prior to January 1, 1990, contribute at a permanently fixed rate of 3.9% of gross wages. The MIP contribution rate was 4.0% from January 1, 1987, the effective date of the MIP, until January 1, 1990, when it was reduced to 3.9%. Members first hired between January 1, 1990 and June 30, 2008, and returning members who did not work between January 1, 1987 through December 31, 1989, contribute at the following graduated permanently fixed contribution rates: 3% of the first $5,000; 3.6% of $5,001 through $15,000; 4.3% of all wages over $15,000. Members first hired July 1, 2008, or later including Pension Plus Plan members, contribute at the following graduated permanently fixed contribution rates: 3% of the first $5,000; 3.6% of $5,001 through $15,000; 6.4% of all wages over $15,000. Basic Plan members make no contributions. Actuarial rate of interest is posted to member accounts on July 1st on all MIP monies on deposit for 12 months. If a member leaves public school service and no pension is payable, the member’s accumulated contributions plus interest, if any, are refundable. Under Public Act 300 of 2012, eligible members voluntarily chose between increasing, maintaining, or stopping their contributions to the pension fund as of the transition date. Members who elected to increase their level of contribution contribute 4% (Basic Plan) or 7% (MIP); by doing so they maintain a 1.5% pension factor in their pension formula. Members who elected to maintain their level of contribution will receive a 1.25% pension factor in their pension formula for their years of service as of their transition date. Their contribution rates are described
Clare Public School District Notes to the Financial Statements
June 30, 2014
19
above. Members who elected to stop their contributions became participants in the Defined Contribution plan as of their transition date. Employer Contributions Each school district or reporting entity is required to contribute the full actuarial funding contribution amount to fund pension benefits, plus an additional amount to fund retiree health care benefit amounts on a cash disbursement basis. For the period October 1 through September 30, the District pays an amount equal to a percentage of its employees’ wages to the Michigan Public School Employees Retirement System (“MPSERS”), which is administered by the State of Michigan. These contributions are required by law and are calculated by using the contribution rates and periods provided in the table below of the employees’ wages. In addition, the District is required to match 50% up to 1% of the employee’s contribution in the Pension Plus plan. The contribution requirements of plan members and the District are established and may be amended by the MPSERS Board of Trustees. The District contributions to MPSERS were equal to the required contribution for those years. The District’s contributions to MPSERS were $2,021,364 for the year ending June 30, 2014, $1,826,359 for the year ending June 30, 2013 and $1,647,904 for the year ending June 30, 2012. Included in the amounts paid above, the District received $348,525 of section 147(c) State Aid for the sole purpose of making supplemental payments to MPSERS. The District has recorded this amount as state revenue and additional pension expenditures/expenses for the year ended June 30, 2014. Other Postemployment Benefits Benefit provisions of the postemployment healthcare plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions. Retirees have the option of health coverage, which, through 2012, is currently funded on a cash disbursement basis. Beginning fiscal year 2013, it will be funded on a prefunded basis. The System has contracted to provide the comprehensive group medical, hearing, dental and vision coverage for retirees and beneficiaries. A subsidized portion of the premium is paid by the System with the balance deducted from the monthly pension of each retiree health care recipient. For members who first worked before July 1, 2008, (Basic, MIP-Fixed, and MIP-Graded plan members), the subsidy is the maximum allowed by statute. To limit future liabilities of Other Postemployment Benefits, members who first worked on or after July 1, 2008, (MIP-Plus plan members), have a graded premium subsidy based on career length where they accrue credit towards their insurance premiums in retirement, not to exceed the maximum allowable by statute. Public Act 300 of 2012 sets the maximum subsidy at 80% beginning January 1, 2013; 90% for those Medicare eligible and enrolled in the insurances as of that date. Public Act 75 of 2010 requires each actively employed member of MPSERS after June 30, 2010 to annually contribute 3% of their compensation to offset employer contributions for health care benefits of current retirees. Dependents are eligible for health care coverage if they meet the dependency requirements set forth in Public Act 300 of 1980, as amended. The District is not responsible for the payment of retirement or post-retirement benefits which is the responsibility of the State of Michigan. NOTE 15. POST-EMPLOYMENT BENEFITS Plan Description The School District provides another post-employment benefit (OPEB), in accordance with contractual language, to all teaching, support, and qualifying administrative personnel who retire with 10 years of service to the School District. The School District will pay $10,000 per retiring teacher up to a maximum of five (5) in any one fiscal year. The School District will pay $10,000 per retiring administrator with 10 years of service. The School District also pays retiring support personnel, excluding maintenance, custodial and transportation personnel, $100 to $200 per year of service for personnel with 10 years of service. Retiring maintenance and custodial personnel receive $100 to $175 per year of service for personnel with 10 years of service. Retiring transportation personnel receive $50 to $175 per year of service for personnel with 10 years of service.
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Clare Public School District Notes to the Financial Statements
June 30, 2014
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Funding Policy The required contribution is funded on a cash basis. 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 determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District’s annual OPEB cost for the year, the amount actually contributed to the plan and changes in the District’s net OPEB obligation:
Description Amount
OPEB obligation – beginning of year $ 310,685
Increase (decrease) in net OPEB obligation (15,316)
OPEB obligation – end of year $ 295,369 Funded Status and Funding Progress As of June 30, 2014, unfunded actuarial accrued liability (UAAL) for benefits was $295,369, all of which was unfunded. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include years until retirement, turnover rate and discount percentage. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Methods and Assumptions Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the District and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plans members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The following simplifying assumptions were made: Turnover – Historical average retirement age for the covered groups and probability that active members would remain employed until the assumed retirement criteria were met were both used to develop an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. Benefit growth rate – Based on the historical and expected returns of the District’s short-term investment portfolio, a discount rate of 5.5% was used. NOTE 16. RISK MANAGEMENT The District is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries (workers’ compensation) as well as medical benefits provided to employees. The District participates in the SET/SEG risk pool for claims relating to property loss, torts, errors and omissions, and employee injuries (workers’ compensation). The District has purchased commercial insurance for medical claims. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. There was no reduction in coverage obtained through commercial insurance during the past year.
Clare Public School District Notes to the Financial Statements
June 30, 2014
21
NOTE 17. TRANSFERS The general fund transferred $69,700 to the capital projects fund for future projects, including tennis court repairs and future football field replacement. The capital projects fund transferred $85,000 to the general fund for the purchase of a new bus. NOTE 18. UPCOMING ACCOUNTING PRONOUNCEMENT GASB Statement No. 68, Accounting and Financial Reporting for Pensions, was issued by the GASB in June 2012 and will be effective for the District’s 2015 fiscal year. The Statement requires governments that participate in defined benefit pension plans to report in their statement of net position a net pension liability. The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair value) set aside in a trust and restricted to paying benefits to current employees, retirees, and their beneficiaries. Statement 68 requires cost-sharing employers to record a liability and expense equal to their proportionate share of the collective net pension liability and expense for the cost-sharing plan. The Statement also will improve the comparability and consistency of how governments calculate the pension liabilities and expense.
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REQUIRED SUPPLEMENTAL INFORMATION
BUDGETARY COMPARISON SCHEDULES
Variance withOriginal Final Actual Final Budget
RevenuesLocal sources 1,804,033$ 2,006,617$ 2,024,368$ 17,751$ State sources 10,274,582 10,258,451 10,259,596 1,145 Federal sources 976,037 992,574 983,374 (9,200) Total revenues 13,054,652 13,257,642 13,267,338 9,696
ExpendituresInstruction
Basic programs 6,885,081 6,904,564 6,894,517 10,047 Added needs 1,803,741 1,865,104 1,836,221 28,883 Adult / continuing education 86,767 79,744 69,163 10,581 Total instruction 8,775,589 8,849,412 8,799,901 49,511
Support servicesPupil 515,010 532,176 531,283 893 Instructional staff 280,823 292,364 274,124 18,240 General administration 312,769 297,501 257,444 40,057 School administration 667,097 655,268 654,188 1,080 Business services 363,242 336,939 314,618 22,321 Operation and maintenance 1,153,123 1,187,712 1,162,188 25,524 Pupil transportation 445,602 553,299 549,903 3,396 Central 462,270 565,425 557,410 8,015 Athletics 290,674 283,396 284,983 (1,587) Total support services 4,490,610 4,704,080 4,586,141 117,939
Community services 21,401 23,518 21,720 1,798 Debt service 3,048 3,231 3,231 - Other 35,152 41,000 43,139 (2,139) Total expenditures 13,325,800 13,621,241 13,454,132 167,109
Excess (deficiency) of revenues over expenditures (271,148) (363,599) (186,794) 176,805
Other financing sources (uses)Transfers in 56,406 85,000 85,000 - Transfers (out) (74,500) (81,700) (69,700) 12,000 Proceeds from bus loan - 80,392 80,392 -
Excess (deficiency) of revenuesand other sources over expenditures (289,242) (279,907) (91,102) 188,805
Fund balances - beginning 1,249,589 1,249,589 1,249,589 -
Fund balances - ending 960,347$ 969,682$ 1,158,487$ 188,805$
Clare Public SchoolsBudgetary Comparison Schedule for the General Fund
Budgeted Amounts
For the Year Ended June 30, 2014
The notes are an integral part of these financial statements. 22
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Variance withOriginal Final Actual Final Budget
RevenuesLocal sources 168,000$ 174,035$ 175,587$ 1,552$ State sources 27,000 23,112 23,112 - Federal sources 364,688 375,138 388,002 12,864 Total revenues 559,688 572,285 586,701 14,416
ExpendituresFood service 571,688 562,315 576,219 (13,904)
Excess (deficiency) of revenues over expenditures (12,000) 9,970 10,482 512
Fund balances - beginning 166,530 166,530 166,530 -
Fund balances - ending 154,530$ 176,500$ 177,012$ 512$
Clare Public SchoolsBudgetary Comparison Schedule for the Food Service Fund
Budgeted Amounts
For the Year Ended June 30, 2014
The notes are an integral part of these financial statements. 23
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FORM OF CONTINUING DISCLOSURE AGREEMENT
$2,450,000 CLARE PUBLIC SCHOOLS
COUNTIES OF CLARE AND ISABELLA STATE OF MICHIGAN
2015 SCHOOL BUILDING AND SITE BONDS (GENERAL OBLIGATION - UNLIMITED TAX)
This Continuing Disclosure Agreement (the "Agreement") is executed and delivered by Clare Public Schools, Counties of Clare and Isabella, State of Michigan (the "Issuer"), in connection with the issuance of $2,450,000 2015 School Building and Site Bonds (General Obligation - Unlimited Tax) (the "Bonds"). The Bonds are being issued pursuant to resolutions adopted by the Board of Education of the Issuer on August 18, 2015 and October 19, 2015 (together, the "Resolution"). The Issuer covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Agreement is being executed and delivered by the Issuer for the benefit of the Bondholders and in order to assist the Participating Underwriters in complying with the Rule. The Issuer acknowledges that this Agreement does not address the scope of any application of Rule 10b-5 promulgated by the SEC pursuant to the 1934 Act to the Annual Reports or notices of the Listed Events provided or required to be provided by the Issuer pursuant to this Agreement.
SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Agreement.
"Bondholder" means the registered owner of a Bond or any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including any person holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes.
"Dissemination Agent" means any agent designated as such in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation, and such agent's successors and assigns.
"EMMA" shall mean the MSRB's Electronic Municipal Market Access which provides continuing disclosure services for the receipt and public availability of continuing disclosure documents and related information required by Rule 15c2-12 promulgated by the SEC.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Agreement.
"MSRB" shall mean the Municipal Securities Rulemaking Board.
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APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Official Statement" shall mean the final Official Statement for the Bonds dated October 19, 2015.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds.
"Resolution" shall mean the resolutions duly adopted by the Issuer authorizing the issuance, sale and delivery of the Bonds.
"Rule" shall mean Rule 15c2-12 promulgated by the SEC pursuant to the 1934 Act, as the same may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"State" shall mean the State of Michigan.
"State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the SEC. Currently, the following is the State Repository:
Municipal Advisory Council of Michigan Buhl Building 535 Griswold, Suite 1850 Detroit, Michigan 48226 Tel: (313) 963-0420 Fax: (313) 963-0943 E-Mail: [email protected]
SECTION 3. Provision of Annual Reports.
(a) Each year, the Issuer shall provide, or shall cause the Dissemination Agent to provide, on or prior to the 180th day after the end of the fiscal year of the Issuer commencing with the fiscal year ending June 30, 2015, to EMMA and the State Repository an Annual Report for the preceding fiscal year which is consistent with the requirements of Section 4 of this Agreement. Currently, the Issuer's fiscal year ends on June 30. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by specific reference other information as provided in Section 4 of this Agreement; provided, however, that if the audited financial statements of the Issuer are not available by the deadline for filing the Annual Report, they shall be provided when and if available, and unaudited financial statements in a format similar to the financial statements contained in the Official Statement shall be included in the Annual Report.
(b) The Annual Report shall be submitted to EMMA either through a web-based electronic submission interface or through electronic computer-to-computer data connections with EMMA in accordance with the submission process, document format and configuration requirements established by the MSRB. The Annual Report shall also include all related information required by MSRB to accurately identify: (i) the category of information being
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provided; (ii) the period covered by the Annual Report; (iii) the issues or specific securities to which the Annual Report is related (including CUSIP number, Issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate); (iv) the name of any obligated person other than the Issuer; (v) the name and date of the document; and (vi) contact information for the Dissemination Agent or the Issuer's submitter.
(c) If the Issuer is unable to provide to EMMA an Annual Report by the date required in subsection (a), the Issuer shall send a notice in a timely manner to the MSRB and to the State Repository in substantially the form attached as Appendix A.
(d) If the Issuer's fiscal year changes, the Issuer shall send a notice of such change to the MSRB and to the State Repository in substantially the form attached as Appendix B. If such change will result in the Issuer's fiscal year ending on a date later than the ending date prior to such change, the Issuer shall provide notice of such change to the MSRB and to the State Repository on or prior to the deadline for filing the Annual Report in effect when the Issuer operated under its prior fiscal year. Such notice may be provided to the MSRB and to the State Repository along with the Annual Report, provided that it is filed at or prior to the deadline described above.
SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference the following:
(a) audited financial statements of the Issuer prepared pursuant to State laws, administrative rules and guidelines and pursuant to accounting and reporting policies conforming in all material respects to generally accepted accounting principles as applicable to governmental units as such principles are prescribed, in part, by the Financial Accounting Standards Board and modified by the Government Accounting Standards Board and in effect from time to time; and
(b) additional annual financial information and operating data as set forth in the Official Statement under "CONTINUING DISCLOSURE".
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 Issuer or related public entities, which previously have been provided to each of the Repositories or filed with the SEC. If the document included by specific reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The Issuer covenants to provide, or cause to be provided, notice in a timely manner not in excess of ten business days of the occurrence of any of the following events with respect to the Bonds in accordance with the Rule:
(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial
difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties;
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(5) substitution of credit or liquidity providers, or their failure to perform;
(6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security;
(7) modifications to rights of security holders, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the
securities, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the
obligated person; (13) the consummation of a merger, consolidation, or acquisition
involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
(14) appointment of a successor or additional trustee or the change of name of a trustee, if material.
(b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would constitute material information for the Bondholders, provided, that any event other than those listed under Section 5(a)(1), (3), (4), (5), (9), (11) (only with respect to any change in any rating on the Bonds) or (12) above will always be deemed to be material. Events listed under Section 5(a)(6) and (8) above will always be deemed to be material except with respect to that portion of those events which must be determined to be material.
(c) The Issuer shall promptly cause a notice of the occurrence of a Listed Event, determined to be material in accordance with the Rule, to be electronically filed with EMMA and with the State Repository together with a significant event notice cover sheet substantially in the form attached as Appendix C. In connection with providing a notice of the occurrence of a Listed Event described in Section 5(a)(9) above, the Issuer shall include in the notice explicit disclosure as to whether the Bonds have been escrowed to maturity or escrowed to call, as well as appropriate disclosure of the timing of maturity or call.
(d) The Issuer acknowledges that the "rating changes" referred to above in Section 5(a)(11) of this Agreement may include, without limitation, any change in any rating on the Bonds or other indebtedness for which the Issuer is liable.
(e) The Issuer acknowledges that it is not required to provide a notice of a Listed Event with respect to credit enhancement when the credit enhancement is added after the primary
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offering of the Bonds, the Issuer does not apply for or participate in obtaining such credit enhancement, and such credit enhancement is not described in the Official Statement.
SECTION 6. Termination of Reporting Obligation.
(a) The Issuer's obligations under this Agreement shall terminate upon the legal defeasance of the Resolution or the prior redemption or payment in full of all of the Bonds.
(b) This Agreement, or any provision hereof, shall be null and void in the event that the Issuer (i) receives an opinion of nationally recognized bond counsel, addressed to the Issuer, to the effect that those portions of the Rule, which require such provisions of this Agreement, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, amended or modified, or are otherwise deemed to be inapplicable to the Bonds, as shall be specified in such opinion, and (ii) delivers notice to such effect to the MSRB, and to the State Repository, if any.
SECTION 7. Dissemination Agent. The Issuer, from time to time, may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
SECTION 8. Amendment. Notwithstanding any other provision of this Agreement, this Agreement may be amended, and any provision of this Agreement may be waived to the effect that:
(a) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, a change in law or a change in the identity, nature or status of the Issuer, or the types of business in which the Issuer is engaged;
(b) this Agreement as so amended or taking into account such waiver, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, in the opinion of independent legal counsel; and
(c) such amendment or waiver does not materially impair the interests of the Bondholders, in the opinion of independent legal counsel.
If the amendment or waiver results in a change to the annual financial information required to be included in the Annual Report pursuant to Section 4 of this Agreement, the first Annual Report that contains the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of such change in the type of operating data or financial information being provided. If the amendment or waiver involves a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared based on the new accounting principles and those prepared based on the former accounting principles. The comparison should include a qualitative discussion of such differences and the impact of the changes on the presentation of the financial information. To the extent reasonably feasible, the comparison should also be quantitative. A notice of the change in the accounting principles should be sent by the Issuer to the MSRB and to
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the State Repository. Further, if the annual financial information required to be provided in the Annual Report can no longer be generated because the operations to which it related have been materially changed or discontinued, a statement to that effect shall be included in the first Annual Report that does not include such information.
SECTION 9. Additional Information. Nothing in this Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Agreement. If the Issuer 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 Agreement, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Agreement, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Issuer to comply with its obligations under this Agreement. A default under this Agreement shall not be deemed an Event of Default under the Resolution or the Bonds, and the sole remedy under this Agreement in the event of any failure of the Issuer to comply with the Agreement shall be an action to compel performance.
SECTION 11. Duties of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Agreement.
SECTION 12. Beneficiaries. This Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriters, and the Bondholders and shall create no rights in any other person or entity.
SECTION 13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State. Notwithstanding the foregoing, to the extent this Agreement addresses matters of federal securities laws, including the Rule, this Agreement shall be construed and interpreted in accordance with such federal securities laws and official interpretations thereof.
CLARE PUBLIC SCHOOLS COUNTIES OF CLARE AND ISABELLA STATE OF MICHIGAN
By: _________________________________ Its: Superintendent
Dated: November 10, 2015
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APPENDIX A
NOTICE TO THE MSRB AND TO THE STATE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Clare Public Schools, Clare and Isabella Counties, Michigan
Name of Bond Issue: 2015 School Building and Site Bonds (General Obligation - Unlimited Tax)
Date of Bonds: November 10, 2015
NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of its Continuing Disclosure Agreement with respect to the Bonds. The Issuer anticipates that the Annual Report will be filed by _____________.
CLARE PUBLIC SCHOOLS COUNTIES OF CLARE AND ISABELLA STATE OF MICHIGAN
By: _________________________________ Its: Superintendent
Dated: _______________________
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APPENDIX B
NOTICE TO THE MSRB AND THE STATE REPOSITORY OF CHANGE IN ISSUER'S FISCAL YEAR
Name of Issuer: Clare Public Schools, Clare and Isabella Counties, Michigan
Name of Bond Issue: 2015 School Building and Site Bonds (General Obligation - Unlimited Tax)
Date of Bonds: November 10, 2015
NOTICE IS HEREBY GIVEN that the Issuer's fiscal year has changed. Previously, the Issuer's fiscal year ended on ______________. It now ends on _________________.
CLARE PUBLIC SCHOOLS COUNTIES OF CLARE AND ISABELLA STATE OF MICHIGAN
By: _________________________________ Its: Superintendent
Dated:
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2
APPENDIX C
SIGNIFICANT EVENT NOTICE COVER SHEET
This cover sheet and significant event notice should be provided in an electronic format to the Municipal Securities Rulemaking Board and the State Repository pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D).
Issuer's and/or other Obligated Person's Name:
Issuer's Six-Digit CUSIP Number(s):
or Nine-Digit CUSIP Number(s) to which this significant event notice relates:
Number of pages of attached significant event notice:
Description of Significant Events Notice (Check One):
1. Principal and interest payment delinquencies 2. Non-payment related defaults 3. Unscheduled draws on debt service reserves reflecting financial difficulties 4. Unscheduled draws on credit enhancements reflecting financial difficulties 5. Substitution of credit or liquidity providers, or their failure to perform 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final
determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security
7. Modifications to rights of security holders 8. Bond calls 9. Tender offers 10. Defeasances 11. Release, substitution, or sale of property securing repayment of the securities 12. Rating changes 13. Bankruptcy, insolvency, receivership or similar event of the obligated person 14. 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
15. Appointment of a successor or additional trustee or the change of name of a trustee 16. Other significant event notice (specify)
I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly:
Signature:
Name: Title:
Employer:
Address:
City, State, Zip Code:
Voice Telephone Number: ( )
The MSRB Gateway is www.msrb.org or through the EMMA portal at emma.msrb.org/submission/ Submission_Portal.aspx. Contact the MSRB at (703) 797-6600 with questions regarding this form or the dissemination of this notice. The cover sheet and notice may also be faxed to the MAC at (313) 963-0943.
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East Lansing • Novi • West Michigan
U.S. Mail Address:P.O. BOX 2575
EAST LANSING, MI 48826-2575PHONE: (517) 484-8000
FAX: (517) 484-0041FAX: (517) 484-0081
ALL OTHER SHIPPING:2900 WEST ROAD, SUITE 400
EAST LANSING, MI 48823-6386
MICHAEL B. FARRELL ROY H. HENLEY KIRK C. HERALD DAVID M. REVORE KATHERINE WOLF BROADDUS
GORDON W. VAN WIEREN, JR. ROBERT G. HUBER MARGARET M. HACKETT JENNIFER K. JOHNSTON TIMOTHY T. GARDNER, JR.
BEVERLY J. BONNING MICHAEL D. GRESENS MATTHEW F. HISER RYAN J. NICHOLSON
MARTHA J. MARCERO CHRISTOPHER J. IAMARINO KARI S. COSTANZA BRANDON C. WALKER
LISA L. SWEM RAYMOND M. DAVIS ROBERT A. DIETZEL FREDRIC G. HEIDEMANN KEVIN S. HARTY (OF COUNSEL)
JEFFREY J. SOLES MICHELE R. EADDY ERIC D. DELAPORTE DANIEL R. MARTIN ROBERT J. ROBINSON (OF COUNSEL)
DRAFT LEGAL OPINION
Clare Public Schools Counties of Clare and Isabella State of Michigan
We have acted as bond counsel in connection with the issuance by Clare Public Schools, Counties of Clare and Isabella, State of Michigan (the "Issuer"), of 2015 School Building and Site Bonds (General Obligation - Unlimited Tax) (the "Bonds"), in the aggregate principal amount of $2,450,000.00. The Bonds are in fully registered form and issued without coupons, are dated November 10, 2015, are of $5,000 denomination or any integral multiple thereof, mature serially on May 1 of each year, and bear interest payable on May 1, 2016, and semiannually thereafter on the first day of November and May of each year, in the amounts and rates as follows:
Year Amount Rate 2016 $100,000 2.00% 2017 135,000 2.00 2018 155,000 2.00 2019 175,000 2.00 2020 195,000 2.00 2021 220,000 2.00
Year Amount Rate 2022 $245,000 2.00% 2023 270,000 2.00 2024 295,000 2.25 2025 320,000 3.00 2026 340,000 3.00
The Bonds maturing on May 1, 2026, are subject to redemption prior to maturity at the option of the Issuer on May 1, 2025, or on any date occurring thereafter in the manner, at the times and at the prices as set forth in the Bonds.
We have examined the documents which we deem authentic and pertinent to the validity of the Bonds, including the certified record evidencing the authorization of the Bonds by the electors and board of education of the Issuer, a copy of the approval of the Department of Treasury of the State of Michigan to issue the Bonds, and a specimen of the Bond certificate of said issue.
Based upon the foregoing, we are of the opinion that under existing law:
(1) the Bonds have been lawfully authorized and issued and are enforceable obligations of the Issuer in accordance with their terms;
(2) the Bonds are the general obligation of the Issuer for which its full faith, credit and resources have been irrevocably pledged;
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APPENDIX D - DRAFT LEGAL OPINION
Clare Public Schools Counties of Clare and Isabella State of Michigan November 10, 2015 Page 2
(3) the Issuer has the power, and is obligated, to levy taxes on all taxable property now situated within the corporate boundaries of the Issuer, without limitation as to rate or amount, sufficient to pay the principal of and interest on the Bonds;
(4) the Issuer has designated the Bonds as "qualified tax-exempt obligations" within the meaning of the Internal Revenue Code of 1986, as amended;
(5) the Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof; and
(6) the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that certain corporations must take into account interest on the Bonds in determining adjusted net current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. The opinions set forth in the preceding sentence are subject to the condition that the Issuer comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Issuer has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.
The rights of the owners of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement of such rights may also be subject to the exercise of judicial discretion in appropriate cases.
THRUN LAW FIRM, P.C.
TLF/MDG
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OPTIONAL DTC BOOK-ENTRY-ONLY
OFFICIAL NOTICE OF SALE $2,450,000
CLARE PUBLIC SCHOOLS COUNTIES OF CLARE AND ISABELLA
STATE OF MICHIGAN 2015 SCHOOL BUILDING AND SITE BONDS
(GENERAL OBLIGATION - UNLIMITED TAX) BIDS for the purchase of the above 2015 School Building and Site Bonds (the "Bond" or "Bonds") will be received by Clare Public Schools, Clare and Isabella Counties, Michigan (the "Issuer"), at the Issuer’s Administrative Offices at 201 E. State Street, Clare, Michigan 48617, on Monday, the 19th day of October, 2015, until 1:30 o'clock in the p.m., prevailing Eastern Time, at which time and place said bids will be publicly opened and read. BIDS also will be received on the same date and the same hour by an agent of the undersigned at the offices of the Municipal Advisory Council of Michigan, Buhl Building, 535 Griswold, Suite 1850, Detroit, Michigan 48226, where the bids will simultaneously be opened and read. Bidders may choose either location to present bids but not both locations. Award of the bids will be considered by the Board of Education of the Issuer at 7:00 o'clock in the p.m., prevailing Eastern Time, on that date.
FAXED BIDS: Bidders may submit signed bids via facsimile transmission to the Issuer at (989) 386-6055 or the Municipal Advisory Council at (313) 963-0943, provided that the faxed bids are received prior to the time and date fixed for receipt of bids. Bidders submitting faxed bids bear the full risk of failed or untimely transmission of their bids. Bidders are encouraged to confirm the timely receipt of their full and complete bids by telephoning the Issuer at (989) 386-9945 or the Municipal Advisory Council at (313) 963-0420. Bidders submitting bids by fax must satisfy the requirements of the good faith deposit obligations described herein.
ELECTRONIC BIDS may be presented via PARITY on the dates and at the times shown above provided that such bidders must also comply with the good faith deposit requirements described herein. To the extent any instructions or directions set forth in PARITY conflict with this Notice, the terms of this Notice shall control. For further information about PARITY, potential bidders may contact Public Financial Management, Inc., at (734) 668-6688 or PARITY at (212) 849-5021.
OPTIONAL DTC BOOK-ENTRY-ONLY: Unless otherwise requested by the purchaser, the Bonds will be initially offered as registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ("DTC") under DTC's Book-Entry-Only system of registration. If DTC Book-Entry-Only is used, purchasers of interests in the Bonds (the "Beneficial Owners") will not receive physical delivery of bond certificates, and ownership by the Beneficial Owners of the Bonds will be evidenced by book-entry-only. As long as Cede & Co. is the registered owner of the Bonds as nominee of DTC, payments of principal and interest payments will be made directly to such
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APPENDIX E - DRAFT OFFICIAL NOTICE OF SALE
registered owner which will in turn remit such payments to the DTC participants for subsequent disbursement to the Beneficial Owners.
BOND DETAILS: Said Bonds will be fully registered Bonds, of the denomination of $5,000 each or multiples thereof up to the amount of a single maturity, shall be dated the date of delivery (anticipated to be November 10, 2015), numbered in order of issue from 1 upwards and will bear interest from their dated date payable on May 1, 2016, and semiannually thereafter.
The Bonds will mature on May 1 as follows:
Year Amount 2016 $100,000 2017 135,000 2018 155,000 2019 175,000 2020 195,000 2021 220,000
Year Amount 2022 $245,000 2023 270,000 2024 295,000 2025 320,000 2026 340,000
TERM BOND OPTION: Bidders shall have the option of designating bonds maturing in any year as serial bonds or term bonds, or both. The bidder must designate whether each of the principal amounts shown above represent a serial maturity or a mandatory redemption requirement for a term bond maturity. There may be more than one term bond maturity. In any event, the above principal amount schedule shall be represented by either serial bond maturities or mandatory redemption requirements, or a combination of both. Any such designation must be made within twenty-four (24) hours of the Bond sale.
PAYING AGENT: Principal and interest shall be payable at a bank or trust company qualified to act as a paying agent in Michigan (the "Paying Agent"), or such other Paying Agent as the Issuer may hereafter designate by notice mailed to the registered owner not less than sixty (60) days prior to any change in Paying Agent. In the event the Bonds cease to be held in book entry form only, the Paying Agent will serve as bond registrar and transfer agent, interest shall be paid by check mailed to the owner as shown by the registration books of the Issuer as of the close of business on the 15th day of the month preceding any interest payment date and the Bonds will be transferable only upon the registration books of the Issuer kept by the Paying Agent. See "Optional DTC Book-Entry-Only" above.
PRIOR REDEMPTION:
A. Mandatory Redemption - Term Bonds.
Bonds maturing in any year are eligible for designation by the original purchaser at the time of sale as serial bonds or term bonds, or both. However, principal maturities designated as term bonds shall be subject to mandatory redemption, in part, by lot, at par and accrued interest on May 1st of the year in which the Bonds are presently scheduled to mature. Each maturity of term Bonds and serial Bonds must carry the same interest rate. Any such designation must be made within twenty-four (24) hours of the Bond sale.
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When term Bonds are purchased by the Issuer and delivered to the Paying Agent for cancellation or are redeemed in a manner other than by mandatory redemption, the principal amount of the term Bonds affected shall be reduced by the principal amount of the Bonds so redeemed or purchased in the order determined by the Issuer.
B. Optional Redemption.
Bonds of this issue maturing in the years 2016 through 2025, inclusive, shall not be subject to redemption prior to maturity. Bonds or portions of Bonds in multiples of $5,000 of this issue maturing in the year 2026 shall be subject to redemption prior to maturity, at the option of the Issuer, in such order as the Issuer may determine and by lot within any maturity, on any date occurring on or after May 1, 2025, at par and accrued interest to the date fixed for redemption.
Notice of redemption of any Bond shall be given not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption by mail to the Registered Owner at the registered address shown on the registration books kept by the Paying Agent. Bonds shall be called for redemption in multiples of $5,000 and Bonds of denominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the denomination of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemed in part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered shall be issued to the Registered Owner thereof. No further interest payment on the Bonds or portions of Bonds called for redemption shall accrue after the date fixed for redemption, whether presented for redemption, provided funds are on hand with the Paying Agent to redeem the same.
If less than all of the Bonds of any maturity shall be called for redemption prior to maturity unless otherwise provided, the particular Bonds or portions of Bonds to be redeemed shall be selected by the Paying Agent, in such manner as the Paying Agent in its discretion may deem proper, in the principal amounts designated by the Issuer. Upon presentation and surrender of such Bonds at the corporate trust office of the Paying Agent, such Bonds shall be paid and redeemed.
INTEREST RATE AND BIDDING DETAILS: The Bonds shall bear interest at a rate or rates not exceeding four percent (4%) per annum, to be fixed by the bids therefor, expressed in multiples of 1/8 or 1/20 of 1%, or both. The interest on any one Bond shall be at one rate only. All Bonds maturing in any one year must carry the same interest rate. The difference between the highest and lowest interest rates bid shall not exceed two percent (2%) per annum. No proposal for the purchase of less than all of the Bonds or at a price less than 99% or greater than 102% of the par value, or at a price which will cause the net interest cost on the Bonds to exceed four percent (4%) per annum, will be considered. THE INTEREST RATE BORNE BY BONDS MATURING IN ANY YEAR SHALL NOT BE LESS THAN THE INTEREST RATE BORNE BY BONDS MATURING IN THE PRECEDING YEAR.
PURPOSE AND SECURITY: The Bonds were authorized at an election on August 4, 2015, for the purpose of partially remodeling, furnishing and refurnishing, and equipping and re-equipping school district buildings; acquiring, installing and equipping instructional technology
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for school district buildings, together with related infrastructure improvements; purchasing school buses; developing, equipping and improving a playground; and developing and improving sites. The Bonds will pledge the full faith, credit and resources of the Issuer for payment of the principal and interest thereon, and will be payable from ad valorem taxes, which may be levied without limitation as to rate or amount as provided by Article IX, Section 6, of the Michigan Constitution of 1963.
GOOD FAITH: A certified or cashier's check in the amount of $49,000 may be submitted contemporaneously with the bid or, in the alternative, a deposit in the amount of $49,000 shall be made by the winning bidder by federal wire transfer as directed by Public Financial Management, Inc., to be received by the Issuer not later than noon, prevailing Eastern Time, on the next business day following the award as a guarantee of good faith on the part of the bidder to be forfeited as liquidated damages if such bid be accepted and the bidder fails to take up and pay for the Bonds. Any award made to the low bidder is conditional upon receipt of the good faith deposit. The good faith deposit will be applied to the purchase price of the Bonds. In the event the Purchaser fails to honor its accepted bid, the good faith deposit will be retained by the Issuer. No interest shall be allowed on the good faith deposit. Payment for the balance of the purchase price of the Bonds shall be made at the closing. Good faith checks of unsuccessful bidders will be returned via U.S. Mail.
AWARD OF BONDS: The Bonds will be awarded to the bidder whose bid produces the lowest true interest cost which is the rate that will discount all future cash payments so that the sum of the present value of all cash flows will equal the Bond proceeds computed from November 10, 2015 (the anticipated date of delivery).
LEGAL OPINION: Bids shall be conditioned upon the unqualified approving opinion of Thrun Law Firm, P.C., East Lansing, Michigan, bond counsel, the original of which will be furnished without expense to the Purchaser of the Bonds at the delivery thereof. The fees of Thrun Law Firm, P.C. for services rendered in connection with such approving opinion are expected to be paid from Bond proceeds. Except to the extent necessary to issue its approving opinion as to the validity of the above Bonds, Thrun Law Firm, P.C. has not been requested to examine or review, and has not examined or reviewed, any financial documents, statements or other materials that have been or may be furnished in connection with the authorization, marketing or issuance of the Bonds and, therefore, has not expressed and will not express an opinion with respect to the accuracy or completeness of any such financial documents, statements or materials.
TAX MATTERS: In the opinion of bond counsel, assuming continued compliance by the Issuer with certain requirements of the Internal Revenue Code of 1986, as amended (the "Code"), interest on the Bonds is excluded from gross income for federal income tax purposes, as described in the opinion, and the Bonds and interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof. The Issuer has designated the Bonds as "QUALIFIED TAX-EXEMPT OBLIGATIONS" within the meaning of the Code, and has covenanted to comply with those requirements of the Code necessary to continue the exclusion of interest on the Bonds from gross income for federal income tax purposes.
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OFFICIAL STATEMENT: Upon the sale of the Bonds, the Issuer will publish an Official Statement in substantially the same form as the Preliminary Official Statement, subject to minor additions, deletions and revisions as required to complete the Preliminary Official Statement. Promptly after the sales date, but in no event later than seven (7) business days after such date, the Issuer will provide the successful bidder with a reasonable number of final Official Statements. Such final Official Statements may be obtained without cost to the successful bidder in a reasonable amount from the financial consultant as set forth herein. The successful bidder agrees to supply to the Issuer all necessary pricing information and any underwriter identification necessary to complete the Official Statement within 24 hours after the award of Bonds. Additional copies of the final Official Statement may be obtained up to three months following the sale of the Bonds by a request and payment of costs to the financial consultant. The Issuer agrees to provide to the successful bidder at closing a certificate executed by appropriate officers of the Issuer acting in their official capacities, to the effect that as of the date of delivery the information contained in the Official Statement, and any supplement to the Official Statement, relating to the Issuer and the Bonds are true and correct in all material respects, and that the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
CONTINUING DISCLOSURE: As more particularly described in the Official Statement, the Issuer will agree in the bond resolution or sales resolution to provide or cause to be provided, in accordance with the requirements of Rule 15c2-12 (the "Rule") promulgated by the Securities and Exchange Commission, (i) on or prior to the 180th day after the end of the fiscal year of the Issuer, commencing with the fiscal year ended June 30, 2015, certain annual financial information and operating data, including audited financial statements for the preceding fiscal year, generally consistent with the information contained or cross-referenced in the Official Statement relating to the Bonds, (ii) timely notice of the occurrence of certain significant events with respect to the Bonds and (iii) timely notice of a failure by the Issuer to provide the required annual financial information on or before the date specified in (i) above.
CERTIFICATE REGARDING "ISSUE PRICE": The successful bidder will be required to furnish, prior to the delivery of the Bonds, a certificate in a form acceptable to bond counsel as to the "issue price" of the Bonds within the meaning of Section 1273 of the Internal Revenue Code of 1986, as amended. In addition, if the successful bidder will obtain a municipal bond insurance policy or other credit enhancement for the Bonds in connection with their original issuance, the successful bidder will be required, as a condition of delivery of the Bonds, to certify whether the premium therefor will be less than the present value of the interest expected to be saved as a result of such insurance or other credit enhancement. The form of an acceptable certificate will be provided by bond counsel.
DELIVERY OF BONDS: The Issuer will furnish Bonds ready for execution at its expense. Bonds will be delivered without expense to the Purchaser at a place to be mutually agreed upon with the Purchaser. The usual closing documents, including a certificate that no litigation is pending affecting the issuance of the Bonds, will be delivered at the time of the delivery of the Bonds. If the Bonds are not tendered for delivery by twelve o'clock, noon, prevailing Eastern Time, on the 45th day following the date of sale, or the first business day thereafter if the 45th day is not a business day, the successful bidder may on that day, or any time
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thereafter until delivery of the Bonds, withdraw the proposal by serving notice of cancellation in writing, on the undersigned, in which event the Issuer shall promptly return the good faith deposit. Accrued interest to the date of delivery of the Bonds shall be paid by the Purchaser at the time of delivery. Payment for the Bonds shall be made in federal reserve funds. Unless the Purchaser furnishes the Paying Agent with a list giving the denominations and names in which it wishes to have the certificates issued at least five (5) business days prior to delivery of the Bonds, the Bonds will be delivered in the form of a single certificate for each maturity registered in the name of the Purchaser.
CUSIP NUMBERS: CUSIP numbers will be imprinted on the Bonds at the expense of the Issuer. An improperly imprinted number or failure to print CUSIP numbers shall not constitute basis for the Purchaser to refuse to accept delivery of the Bonds. The Purchaser shall be responsible for requesting assignment of numbers and for the payment of any charges for the assignment of numbers. If the Purchaser requires CUSIP numbers on the Bonds, the Purchaser shall request assignment of CUSIP numbers for the Bonds and provide the numbers to Public Financial Management, Inc. and Thrun Law Firm, P.C., within forty-eight (48) hours of the bond sale.
BIDDER CERTIFICATION - NOT "IRAN-LINKED BUSINESS": By submitting a bid, the bidder shall be deemed to have certified that it is not an "Iran-Linked Business" as defined in Act 517, Public Acts of Michigan, 2012; MCL 129.311, et seq.
FURTHER INFORMATION may be obtained from Public Financial Management, Inc., 3989 Research Park Drive, Ann Arbor, Michigan 48108. Telephone: (734) 668-6688.
THE RIGHT IS RESERVED TO REJECT ANY OR ALL BIDS.
ENVELOPES containing the bids should be plainly marked "Proposal for Clare Public Schools 2015 School Building and Site Bonds".
Carol J. Santini . Secretary, Board of Education
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APPENDIX F - MUNICIPAL BOND INSURANCE AND SPECIMENPOLICY
BOND INSURANCE POLICY
Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company (“BAM”) will issue itsMunicipal Bond Insurance Policy for the Bonds (the “Policy”). The Policy guarantees the scheduled payment of principalof and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this OfficialStatement.
The 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
BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely toissuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integralparts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of theU.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM.
The address of the principal executive offices of BAM 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.
BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State ofNew York and in particular Articles 41 and 69 of the New York Insurance Law.
BAM’s financial strength is rated “AA/Stable” by Standard and Poor’s Ratings Services, a Standard & Poor’s FinancialServices LLC business (“S&P”). An explanation of the significance of the rating and current reports may be obtainedfrom S&P at www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflectsthe S&P’s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance.The above rating is not a recommendation to buy, sell or hold the Bonds, and such rating is subject to revision orwithdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Anydownward revision or withdrawal of the above rating may have an adverse effect on the market price of the Bonds. BAMonly guarantees scheduled principal and scheduled interest payments payable by the issuer of the Bonds on the date(s)when such amounts were initially scheduled to become due and payable (subject to and in accordance with the termsof the Policy), and BAM does not guarantee the market price or liquidity of the Bonds, nor does it guarantee that therating on the Bonds will not be revised or withdrawn.
Capitalization of BAM
BAM's total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2015 and as prepared inaccordance with statutory accounting practices prescribed or permitted by the New York State Department of FinancialServices were $472.1 million, $31.0 million and $441.1 million, respectively.
BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the paramount outstanding for each policy issued by BAM, subject to certain limitations and restrictions.
BAM's most recent Statutory Annual Statement, which has been filed with the New York State Insurance Departmentand posted on BAM's website at www.buildamerica.com, is incorporated herein by reference and may be obtained,without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financialstatements will similarly be made available when published.
BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM hasnot independently verified, makes no representation regarding, and does not accept any responsibility for the accuracyor completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, otherthan with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading"Appendix F – Municipal Bond Insurance and Specimen Policy".
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Additional Information Available from BAM
Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video thatprovides a discussion of the obligor and some of the key factors BAM's analysts and credit committee considered whenapproving the credit for insurance. The Credit Insights videos are easily accessible on BAM's website atbuildamerica.com/creditinsights/.
Obligor Disclosure Briefs. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare apre-sale Obligor Disclosure Brief for those bonds. These pre-sale Obligor Disclosure Briefs provide information aboutthe 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 thatincludes bonds insured by BAM, any pre-sale Obligor Disclosure Briefs will be updated and superseded by a finalObligor Disclosure Brief to include information about the gross par insured by CUSIP, maturity and coupon. BAMpre-sale and final Obligor Disclosure Briefs are easily accessible on BAM's website at buildamerica.com/obligor/. BAMwill produce an Obligor Disclosure Brief for all bonds insured by BAM, whether or not a pre-sale Obligor DisclosureBrief has been prepared for such bonds.
Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are notrecommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and otheranalyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as ofthe date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor DisclosureBriefs and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or theunderwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content.
BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds.Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initialoffering or otherwise.
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MUNICIPAL BOND INSURANCE POLICY
ISSUER: [NAME OF ISSUER]
MEMBER: [NAME OF MEMBER]
Policy No: _____
BONDS: $__________ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on]
Effective Date: _________
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.
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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
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Notices (Unless Otherwise Specified by BAM) Email: [email protected] Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)
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Additional information relative to this Bond issue may be obtained from:
Public Financial Management, Inc.3989 Research Park DriveAnn Arbor, Michigan 48108
734-668-6688 Facsimile: 734-668-6723
