$33,995,000 PASADENA AREA COMMUNITY COLLEGE …Diane Mandrafina, Director, Fiscal Services Gail S....

Dated: April 21, 2016

NEW ISSUE — BOOK-ENTRY ONLY

Ratings:Moody’s: “Aa2”

S&P: “AA+” See “Ratings” herein.

In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the District, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In addition, in the opinion of Bond Counsel, under existing statutes, interest on the Bonds is exempt from personal income taxes imposed by the State of California. See “Tax Matters” herein.

$33,995,000 PASADENA AREA COMMUNITY COLLEGE DISTRICT

(Los Angeles County, California) 2016 General Obligation Refunding Bonds, Series A

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

The Pasadena Area Community College District (the “District”) is issuing its $33,995,000 2016 General Obligation Refunding Bonds, Series A (the “Bonds”). The Bonds are being issued pursuant to the laws of the State of California (the “State”) and a resolution approved by the Board of Trustees of the District. See “Introduction — The Bonds” herein.

The Bonds are being issued in order to current refund and defease a portion of the District’s outstanding 2002 Election General Obligation Bonds, 2006 Series B and advance refund and defease a portion of the District’s outstanding 2002 Election General Obligation Bonds, 2009 Series D. See “Plan of Refunding” herein. In addition, a portion of the proceeds of the Bonds will be used to pay costs of issuance incurred in connection with the issuance of the Bonds.

The Bonds will be issued in denominations of $5,000 principal amount or integral multiples thereof and are payable as to principal amount or redemption price at the office of U.S. Bank National Association, as paying agent for the Bonds (the “Paying Agent”). U.S. Bank National Association has been appointed as agent of the Treasurer and Tax Collector of Los Angeles County to act as Paying Agent for the Bonds. Interest on the Bonds is payable on February 1 and August 1 of each year, commencing on August 1, 2016. See “The Bonds — General Provisions” herein.

The Bonds are issued in fully registered form and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds as described herein at Appendix E — “Book-Entry Only System.”

The Bonds are subject to optional redemption and mandatory sinking fund redemption prior to maturity. See “The Bonds – Redemption” herein.

The Bonds are general obligations of the District only and are not obligations of the County of Los Angeles, the State of California or any of its other political subdivisions. The Board of Supervisors of the County of Los Angeles has the power and is obligated to levy and collect ad valorem property taxes for each fiscal year upon the taxable property of the District in an amount at least sufficient, together with other moneys available for such purpose, to pay the principal of, and premium, if any, and interest on each Bond as the same becomes due and payable.

This cover page is not intended to be a summary of the Bonds or the security thereof. Investors are advised to read the Official Statement in its entirety to obtain information essential to the making of an informed investment decision.

The Bonds will be offered when, as and if issued by the District and received by the Underwriter, subject to the approval of legality by Hawkins Delafield & Wood LLP, Los Angeles, California, Bond Counsel to the District. Certain legal matters will also be passed upon for the District by its Disclosure Counsel, Hawkins Delafield & Wood LLP, Los Angeles, California, and for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Los Angeles, California. The Bonds in book-entry form will be available for delivery through the facilities of DTC in New York, New York on or about May 12, 2016.

MATURITY DATES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS, PRICES AND CUSIP NUMBERS

________________________________ $33,995,000

Pasadena Area Community College District (Los Angeles County, California)

2016 General Obligation Refunding Bonds, Series A Base CUSIP Number: 702185

Maturity Date (August 1)

Principal Amount Interest Rate Yield Price CUSIP Suffix

2016 $ 605,000 2.00% 0.45% 100.339 EQ8 2017 490,000 2.00 0.64 101.648 ER6 2018 505,000 3.00 0.72 105.010 ES4 2019 515,000 4.00 0.82 110.082 ET2 2020 2,180,000 4.00 0.91 112.761 EU9 2021 2,265,000 4.00 1.05 114.943 EV7 2022 2,360,000 5.00 1.19 122.773 EW5 2023 2,475,000 5.00 1.31 125.337 EX3 2024 2,600,000 5.00 1.45 127.411 EY1 2025 2,730,000 5.00 1.58 129.232 EZ8 2026 2,865,000 5.00 1.70 130.834 FA2 2027 2,645,000 5.00 1.82 129.529(c) FB0 2028 1,100,000 3.00 2.18 107.473(c) FC8 2028 1,675,000 4.00 2.13 117.089(c) FG9 2029 2,880,000 4.00 2.21 116.291(c) FD6 2030 2,990,000 4.00 2.32 115.204(c) FE4 2031 3,115,000 4.00 2.43 114.129(c) FF1

_____________________________ (c) Priced to August 1, 2026 call date at par.

PASADENA AREA COMMUNITY COLLEGE DISTRICT Los Angeles County, State of California

BOARD OF TRUSTEES

Member Term Ending Linda Wah, President November 2017 Dr. Ross Selvidge, Vice President November 2017 Dr. Anthony R. Fellow, Clerk November 2017 James A. Osterling November 2019 Berlinda Brown November 2017 Hoyt R. Hilsman November 2019 John Martin November 2019

DISTRICT ADMINISTRATORS

Dr. Rajen Vurdien, Superintendent/President Joseph Simoneschi, Executive Director, Business Services

Diane Mandrafina, Director, Fiscal Services Gail S. Cooper, General Counsel

BOND COUNSEL AND DISCLOSURE COUNSEL

Hawkins Delafield & Wood LLP Los Angeles, California

UNDERWRITER

RBC Capital Markets, LLC Los Angeles, California

PAYING AGENT

U.S. Bank National Association, as agent of

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

ESCROW AGENT

U.S. Bank National Association, Los Angeles, California

VERIFICATION AGENT

Causey Demgen & Moore P.C. Denver, Colorado

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

The information set forth in this Official Statement has been obtained from the District, and other sources which are believed by the District to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will under any circumstances create any implication that there has been no change in the affairs of the District since the date hereof. All summaries of the Bonds and the Resolution (each as defined herein) and other documents summarized herein, are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions.

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

IN CONNECTION WITH THE OFFERING OF THE BONDS THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND BANKS AT YIELDS HIGHER THAN THE INITIAL PUBLIC OFFERING YIELDS STATED ON THE INSIDE FRONT COVER PAGE HEREOF AND SAID INITIAL PUBLIC OFFERING YIELDS MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

CUSIP is a registered trademark of American Bankers Association. CUSIP data in this Official Statement is provided by CUSIP Global Services, managed by Standard & Poor’s Financial Services LLC on behalf of The American Bankers Association. CUSIP data herein is set forth for convenience of reference only. The District and the Underwriter assume no responsibility for the selection or uses of the CUSIP data or for the accuracy or correctness of such data. The CUSIP number for the Bonds is subject to being changed after the delivery of the Bonds as a result of various subsequent actions.

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TABLE OF CONTENTS Page

INTRODUCTION ................................................................................................................................................. 1 General .............................................................................................................................................................. 1 The District ........................................................................................................................................................ 1 Security and Sources of Payment for the Bonds ............................................................................................... 2 The Bonds ......................................................................................................................................................... 2 Continuing Disclosure ....................................................................................................................................... 3 Tax Matters ....................................................................................................................................................... 3 Forward-Looking Statements ............................................................................................................................ 3 Miscellaneous .................................................................................................................................................... 3

PLAN OF REFUNDING ...................................................................................................................................... 4

ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................. 5

THE BONDS ........................................................................................................................................................ 5 General Provisions ............................................................................................................................................ 5 Redemption ....................................................................................................................................................... 5 Defeasance ........................................................................................................................................................ 7

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS .................................................................... 7 General Description ........................................................................................................................................... 7 Assessed Valuation of Property within the District .......................................................................................... 8 Fiscal Year Debt Service ................................................................................................................................. 15

TAX MATTERS ................................................................................................................................................. 17

LIMITATION ON REMEDIES AND BANKRUPTCY .................................................................................... 19

AMOUNTS HELD IN THE COUNTY TREASURY POOL ............................................................................ 21

CERTAIN LEGAL MATTERS .......................................................................................................................... 21

CONTINUING DISCLOSURE .......................................................................................................................... 21

FINANCIAL STATEMENTS ............................................................................................................................ 22

LITIGATION ...................................................................................................................................................... 22

RATINGS ........................................................................................................................................................... 22

VERIFICATION ................................................................................................................................................. 23

UNDERWRITING .............................................................................................................................................. 23

ADDITIONAL INFORMATION ....................................................................................................................... 23

APPENDIX A – DISTRICT FINANCIAL INFORMATION AND REGIONAL ECONOMIC AND DEMOGRAPHIC INFORMATION ................................................................................... A-1

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

APPENDIX C – FORM OF APPROVING OPINION OF BOND COUNSEL ............................................. C-1 APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ............................................... D-1 APPENDIX E – BOOK-ENTRY ONLY SYSTEM ....................................................................................... E-1 APPENDIX F – THE LOS ANGELES COUNTY TREASURY POOL ........................................................ F-1

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OFFFICIAL STATEMENT

$33,995,000 PASADENA AREA COMMUNITY COLLEGE DISTRICT

(Los Angeles County, California) 2016 General Obligation Refunding Bonds, Series A

INTRODUCTION This Introduction is only a brief description of, and is qualified by, more complete and detailed

information contained in the entire Official Statement, including the cover page through the appendices hereto, and the documents summarized or described herein. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. A full review should be made of the entire Official Statement.

General

This Official Statement, which includes the cover page through the appendices hereto, is provided to furnish information in connection with the issuance of general obligation bonds of the Pasadena Area Community College District (the “District”). The Pasadena Area Community College District (the “District”) is issuing its $33,995,000 principal amount of 2016 General Obligation Refunding Bonds, Series A (the “Bonds”). The Bonds are being issued pursuant to certain provisions of the Government Code (the “Government Code”) of the State of California (the “State”) and other applicable laws and pursuant to a resolution adopted by the District Board on March 16, 2016 authorizing the issuance of general obligation refunding bonds in an aggregate principal amount not to exceed $40,000,000 (the “Resolution”). The Bonds are being issued in order to current refund and defease a portion of the District’s outstanding 2002 Election General Obligation Bonds, 2006 Series B (the “2006 Series B Bonds”) and advance refund and defease a portion of the District’s outstanding 2002 Election General Obligation Bonds, 2009 Series D (the “2009 Series D Bonds”). See “Plan of Refunding” herein. In addition, a portion of the proceeds of the Bonds will be used to pay costs of issuance incurred in connection with the issuance of the Bonds.

The District

The Pasadena Area Community College District, a community college district of the State, was established in 1966. The District is located in the West San Gabriel Valley of the County of Los Angeles, California (the “County”). The District serves approximately 34,000 students. The District operates Pasadena City College located on a 53-acre site in the City of Pasadena, California. The District is governed by a seven-member Board of Trustees (the “District Board”), and each member, excluding the student member of the District Board, is elected to a four-year term. The student member of the District Board is elected to a one-year term. The members of the District Board elect a board president (the “President”) each year. Linda Wah is currently serving as the President of the District Board. The management and policies of the District are administered by its Superintendent/President (the “Superintendent/President”) who is appointed by the District Board and is responsible for the day-to-day affairs of the District. Dr. Rajen Vurdien is currently serving as the Superintendent/President of the District.

Additional information on the District is provided in Appendices A and B hereto. See Appendix A– “District Financial Information and Regional Economic and Demographic Information” and Appendix B– “Audited Financial Statements for the Fiscal Year ended June 30, 2015” attached hereto.

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Security and Sources of Payment for the Bonds

The Bonds are general obligation bonds approved by voters within the District and are payable from ad valorem property taxes levied by the County on behalf of the District on taxpayers within the District. The Board of Supervisors of the County has the power and is obligated under State law to annually levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), for the payment of the principal of, and premium, if any, and interest on the duly authorized general obligations bonds of the District, including the Bonds. Such ad valorem property taxes are deposited in the Interest and Sinking Fund for the Bonds held by the County and applied to pay the principal of, and premium, if any, and interest on the District’s general obligation bonds, including the Bonds, and for no other purpose.

In accordance with Section 15251 of the Education Code and Section 53515 of the Government Code, the Bonds shall be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax for Measure P, which was approved pursuant to an election held on March 5, 2002 (the “Measure P Authorization”). The lien shall automatically attach without further action or authorization by the District or the County. The lien shall be valid and binding from the time the Bonds are executed and delivered. The revenues received pursuant to the levy and collection of the tax shall be immediately subject to the lien, and the lien shall automatically attach to the revenues and be effective, binding, and enforceable against the District, its successors, transferees, and creditors, and all others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any physical delivery, recordation, filing, or further act.

Pursuant to the Resolution, the District pledges all revenues from the property taxes collected from the levy by the Board of Supervisors and amounts on deposit in the Interest and Sinking Fund of the District for the payment of the principal or redemption price of and interest on the Bonds. This pledge shall be valid and binding from the date of issuance of the Bonds for the benefit of the owners of the Bonds. The property taxes and amounts held in the Interest and Sinking Fund of the District for the Bonds shall be immediately subject to this pledge, and the pledge shall constitute a lien and security interest which shall immediately attach to the property taxes and amounts held in such Interest and Sinking Fund of the District to secure the payment of the Bonds and shall be effective, binding, and enforceable against the District, its successors, creditors and all others irrespective of whether those parties have notice of the pledge and without the need of any physical delivery, recordation, filing, or further act. This pledge is an agreement between the District and the Owners of the Bonds to provide security for the Bonds in addition to any statutory lien that may exist. The Bonds are issued to refinance one or more of the projects specified in the Measure P Authorization and not to finance the general purposes of the District.

See “Security and Sources of Payment for the Bonds” herein.

The Bonds

The Bonds will be initially issued in book-entry form only, in denominations of $5,000 principal amount or integral multiples thereof, and will be initially issued and registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). The principal of the Bonds is payable on the maturity dates set forth on the inside cover page of this Official Statement or upon the earlier redemption thereof, as described herein. Interest on the Bonds is payable on February 1 and August 1 of each year (each, an “Interest Payment Date”), commencing on August 1, 2016.

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Continuing Disclosure

The District has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District (the “Annual Report”) for each fiscal year by not later than 240 days following the end of the District’s fiscal year (currently ending June 30) commencing with the Annual Report for Fiscal Year 2015-16, and to provide notices of the occurrence of certain enumerated events. The District will provide or cause to be provided the Annual Report and such notices to the Municipal Securities Rulemaking Board (the “MSRB”) in the manner prescribed by the Securities and Exchange Commission (“SEC”). These covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the “Rule”). Reports and notices of event filings are available at the website of the MSRB’s Electronic Municipal Market Access (“EMMA”) system, emma.msrb.org. The information presented on this website is not incorporated by reference in this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. See “Continuing Disclosure” herein. The information to be contained in the Annual Report and in a notice of event is set forth in Appendix D – “Form of Continuing Disclosure Agreement” attached hereto.

Tax Matters

In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the District, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In addition, in the opinion of Bond Counsel, under existing statutes, interest on the Bonds is exempt from personal income taxes imposed by the State of California. See “Tax Matters - Bonds” herein.

Forward-Looking Statements

When used in this Official Statement or in any continuing disclosure by the District, in any press release by the District or in any oral statement made with the approval of an authorized officer of the District, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,” “intend” and similar expressions identify “forward-looking statements.” Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

Miscellaneous

This Official Statement contains brief descriptions of, among other things, the District, the Resolution and certain matters relating to the security for the Bonds. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to documents are qualified in their entirety by reference to such documents. Copies of such documents are available upon request to the Business and College Services at Pasadena Area Community College District, 1570 E. Colorado Boulevard, Pasadena, California 91106; telephone: (626) 585-7665.

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PLAN OF REFUNDING

A portion of the proceeds of the Bonds will be deposited into the Pasadena Area Community College District 2016 General Obligation Refunding Bonds Escrow Fund” (the “Escrow Fund”) established under the Escrow Agreement, dated as of May 1, 2016, by and between the District and U.S. Bank National Association, as escrow agent. Amounts in the Escrow Fund are to be invested in United States Obligations (as defined in resolutions respecting the Refunded Bonds hereinafter referred to), which, together with interest earnings thereon, if any, and any cash to be deposited in the Escrow Fund will be sufficient to fully pay on August 1, 2016 the redemption price of 100% of the principal amount, plus accrued interest thereon, of the 2006 Series B Bonds maturing on August 1, 2017 through and including August 1, 2028 and on August 1, 2031, and to pay the interest on the 2009 Series D Bonds through August 1, 2019 and on August 1, 2019 the redemption price of 100% of the principal amount of the 2009 Series D Bonds maturing on August 1, 2020 through and including August 1, 2026 (collectively, the “Refunded Bonds”). The mathematical computations used to determine the sufficiency of the escrow deposits will be verified by the Verification Agent (defined herein). See “Verification” herein.

The following are the Refunded Bonds.

Series

Maturity Dates

(August 1) Principal Amount

Redemption Price

Redemption Date

(August 1) CUSIP

(702185) 2006 Series B 2017 $ 435,000 100% 2016 EE5

2018 455,000 100 2016 EF2 2019 475,000 100 2016 EG0 2020 500,000 100 2016 EH8 2021 525,000 100 2016 EJ4 2022 555,000 100 2016 EK1 2023 580,000 100 2016 EL9 2024 615,000 100 2016 EM7 2025 645,000 100 2016 EN5 2026 680,000 100 2016 EP0 2027 3,000,000 100 2016 CH0 2028 3,145,000 100 2016 BW8 2031 10,365,000 100 2016 BX6

2009 Series D 2020 $ 1,935,000 100% 2019 CX5 2021 2,030,000 100 2019 CY3 2022 2,130,000 100 2019 CZ0 2023 2,240,000 100 2019 CU1 2024 2,350,000 100 2019 CV9 2025 2,470,000 100 2019 DD8 2026 2,590,000 100 2019 DE6

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ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds with respect to the Bonds are as follows:

Estimated Sources of Funds Principal Amount $ 33,995,000.00 Net Original Issue Premium 6,776,029.50

Total Sources $ 40,771,029.50 Estimated Uses of Funds Escrow Fund $ 40,442,249.02 Underwriter’s Discount 169,975.00 Costs of Issuance (1) 158,805.48

Total Uses $ 40,771,029.50 (1) Includes fees of Bond Counsel, Disclosure Counsel, the Paying Agent, the Escrow Agent, the rating agencies, the printer,

verification agent and other miscellaneous expenses.

THE BONDS

General Provisions

The Bonds will be dated their date of delivery, will be issued in book-entry form only, without coupons, in denominations of $5,000 principal amount or any integral multiple thereof, and, when issued, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Owners will not receive physical certificates representing their interest in the Bonds purchased, except in the event that use of the book-entry system for the Bonds is discontinued. Payments of principal of, premium, if any, and interest on the Bonds are payable by U.S. Bank National Association, as agent of the Treasurer-Tax Collector of the County of Los Angeles as paying agent for the Bonds (the “Paying Agent”) to DTC, which is obligated in turn to remit such payments to its DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. For information about the securities depository and DTC’s book-entry system, see Appendix E – “Book-Entry Only System” attached hereto.

The Bonds mature in the years and on the dates set forth on the inside front cover page hereof. Interest on the Bonds is payable on each Interest Payment Date, commencing on August 1, 2016. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. The Bonds will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless it is authenticated on or before an Interest Payment Date and after the close of business on the 15th calendar day of the month preceding such Interest Payment Date (each, a “Record Date”), in which event it shall bear interest from such Interest Payment Date, or unless it is authenticated on or before the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the date of delivery of the Bonds.

Redemption

Optional Redemption. The Bonds maturing on or before August 1, 2026 are not subject to optional redemption. The Bonds maturing on or after August 1, 2027 are subject to optional redemption on or after August 1, 2026, in whole or in part on any date, from any source of available funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption.

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Selection of Bonds for Redemption. Whenever provision is made in the Resolution for the optional redemption of outstanding Bonds and less than all of such Bonds are called for redemption, such Bonds will be redeemed in inverse order of maturities or as otherwise directed by the District, and if less than all of the Bonds of any given maturity are called for redemption, the portions of such Bonds of a given maturity to be redeemed will be determined by lot. Redemption by lot will be in such manner as the Paying Agent determines; provided, however, that the portion of any Refunding Bond to be redeemed in part will be in the principal amount of $5,000 or any integral multiple thereof.

Notice of Redemption. When redemption is authorized or required pursuant to the Refunding Resolution, the Paying Agent, upon written instruction from the District, will give notice of the redemption (the “Redemption Notice”) of the Bonds, not less than thirty 30 nor more than sixty (60) days prior to the redemption date (i) by first class mail to the County and the respective Owners thereof at the addresses appearing on the Registration Books and (ii) as may be further required in accordance with the Continuing Disclosure Agreement.

Each notice of redemption will state (i) the date of such notice; (ii) the name of the Bonds and the date of issue of the Bonds; (iii) the redemption date; (iv) the redemption price; (v) the dates of maturity or maturities of Bonds to be redeemed; (vi) if less than all of the Bonds of any maturity of a Series are to be redeemed, the distinctive numbers of the Bonds of each maturity of such Series to be redeemed; (vii) in the case of Bonds redeemed in part only, the respective portions of the principal amount of the Bonds of each maturity to be redeemed; (viii) the CUSIP number, if any, of each maturity of Bonds to be redeemed; (ix) a statement that such Bonds must be surrendered by the Owners at the principal corporate trust office of the Paying Agent, or at such other place or places designated by the Paying Agent; (x) notice that further interest on such Bonds will not accrue after the designated redemption date; and (xi) in the case of a conditional notice, that such notice is conditioned upon certain circumstances and the manner of rescinding such conditional notice. Neither the failure to receive the notice of redemption as provided in the Resolution, nor any defect in such notice will affect the sufficiency of the proceedings for the redemption of the Bonds called for redemption or the cessation of interest on the date fixed for redemption.

Partial Redemption of Bonds. Upon the surrender of any Bond of a series redeemed in part only, the Paying Agent will execute and deliver to the owner thereof a new Bond or Bonds of such series of like tenor and maturity and of authorized denominations equal in transfer amounts to the unredeemed portion of the Bond surrendered. Such partial redemption shall be valid upon payment of the amount required to be paid to such owner and the District will be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption. When Redemption Notice has been given substantially as provided for in the Resolution, and when the redemption price of the Bonds called for redemption is set aside for the purpose as described in the Resolution, the Bonds designated for redemption will become due and payable on the specified redemption date and interest will cease to accrue thereon as of the redemption date, and upon presentation and surrender of such Bonds at the place specified in the notice of redemption, such Bonds will be redeemed and paid at the redemption price thereof out of the money provided therefor. The Owners of such Bonds so called for redemption after such redemption date will be entitled to payment thereof only from the interest and sinking fund or the trust fund established for such purpose. All Bonds redeemed will be cancelled forthwith by the Paying Agent and will not be reissued.

Conditional Notice of Redemption. The District may rescind any optional redemption and notice thereof for any reason on any date prior to the date fixed for redemption by causing written notice of the rescission to be given to the owners of the Bonds so called for redemption. Any optional redemption and Redemption Notice thereof will be rescinded if for any reason on the date fixed for redemption moneys

7

are not available in the interest and sinking fund or otherwise held in trust for such purpose in an amount sufficient to pay in full on said date the principal of, interest, and any premium due on the Bonds called for redemption. Notice of rescission of redemption will be given in the same manner in which notice of redemption was originally given. The actual receipt by the owner of any Refunding Bond of notice of such rescission will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the validity of the rescission.

Defeasance

All or any portion of the outstanding maturities of a series of the Bonds may be paid and discharged by depositing in trust with the Paying Agent or an escrow agent, selected by the District, at or before maturity, money and/or Defeasance Securities (defined herein), in an amount which will, together with the interest to accrue thereon and available monies then on deposit in the interest and sinking fund of the District, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates.

The term “Defeasance Securities” means (a) non-callable direct and general obligations of the United States of America (including state and local government series), or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including (in the case of direct and general obligations of the United States of America) evidences of direct ownership of proportionate interests in future interest or principal payments of such obligations; provided that investments in such proportionate interests must be limited to circumstances wherein (i) a bank or trust company acts as custodian and holds the underlying United States obligations; (ii) the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor of the underlying United States obligations; and (iii) the underlying United States obligations are held in a special account, segregated from the custodian’s general assets, and are not available to satisfy any claim of the custodian, any person claiming through the custodian, or any person to whom the custodian may be obligated; and (b) non-callable obligations of government sponsored agencies that are rated in one of the two highest rating categories assigned by S&P (defined herein) or Moody’s (defined herein) but are not guaranteed by a pledge of the full faith and credit of the United States of America.

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

General Description

The Bonds are payable from ad valorem property taxes levied by the County on taxpayers within the District. The Board of Supervisors of the County has the power and is obligated under State law pursuant to the authority granted by voters of the District to annually levy ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), for the payment of the principal of, premium, if any, and interest on all duly authorized general obligation bonds of the District, including the Bonds. Such ad valorem property taxes are deposited in the Interest and Sinking Fund for the Bonds held by the County and applied to pay the principal of, premium, if any, and interest on the Bonds, and for no other purpose.

In accordance with Section 15251 of the Education Code and Section 53515 of the Government Code, the Bonds shall be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax for the Measure P Authorization. The lien shall automatically attach without further action or authorization by the District or the County. The lien shall be valid and binding from the time the Bonds are executed and delivered. The revenues received pursuant to the levy and collection of the tax shall be immediately subject to the lien, and the lien shall automatically attach to the revenues and be effective, binding, and enforceable against the District, its successors, transferees, and creditors, and all

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others asserting rights therein, irrespective of whether those parties have notice of the lien and without the need for any physical delivery, recordation, filing, or further act.

Pursuant to the Resolution, the District pledges all revenues from the property taxes collected from the levy by the Board of Supervisors and amounts on deposit in the Interest and Sinking Fund of the District for the payment of the principal or redemption price of and interest on the Bonds. This pledge shall be valid and binding from the date hereof for the benefit of the owners of the Bonds. The property taxes and amounts held in the Interest and Sinking Fund of the District for the Bonds shall be immediately subject to this pledge, and the pledge shall constitute a lien and security interest which shall immediately attach to the property taxes and amounts held in such Interest and Sinking Fund of the District to secure the payment of the Bonds and shall be effective, binding, and enforceable against the District, its successors, creditors and all others irrespective of whether those parties have notice of the pledge and without the need of any physical delivery, recordation, filing, or further act. This pledge is an agreement between the District and the owners of the Bonds to provide security for the Bonds in addition to any statutory lien that may exist, and the Bonds are issued to finance or refinance one or more of the projects specified in the Measure P Authorization and not to finance the general purposes of the District.

Assessed Valuation of Property within the District

General. As required by State law, the District uses the services of the County for the assessment and collection of taxes for District purposes. District taxes are collected at the same time and on the same tax rolls as are the County, the City of Los Angeles and other local agency and special district taxes.

State law exempts $7,000 of the full cash value of an owner-occupied dwelling from property tax, but this exemption does not result in any loss of revenue to local entities, including the District, because an amount equivalent to the taxes which would have been payable on such exempt values is paid by the State to the County for distribution to local agencies.

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

For assessment and collection purposes, property is classified as either “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing property (real or personal) the taxes on which are a lien sufficient, in the opinion of the County Assessor, to secure payment of the taxes. Other property is listed on the “unsecured roll.”

The County levies property taxes on behalf of taxing agencies in the County for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. However, upon a change in ownership of property or completion of new construction, State law permits an accelerated recognition and taxation of increases or decreases in real property assessed valuation (the “Supplemental Assessment”). In such instances, the property is reassessed and a supplemental tax bill is sent to the new owner based on the new value prorated for the balance of the tax year. Accordingly, each school district is to receive allocations of revenue from such Supplemental Assessments and, in accordance with various apportionment factors, to the County, the County superintendent of schools, each

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community college district, each city and each special district within the County. Such allocations are from amounts remaining after allocations to each redevelopment agency in the County in connection with the 1% ad valorem property tax levy.

The following Table 1 sets forth the gross assessed valuation of taxable property within the boundaries of the District in Fiscal Years 2011-12 through 2015-16.

TABLE 1

PASADENA AREA COMMUNITY COLLEGE DISTRICT Historical Gross Assessed Valuation of Taxable Property (1)

Fiscal Years 2011-12 through 2015-16

Fiscal Year Local Secured Utilities Unsecured Total Percent Change

2011-12 $60,006,571,467 $1,917,348 $1,078,698,047 $61,085,269,514 2.72% 2012-13 61,917,684,717 1,917,348 1,074,843,311 62,994,445,376 3.13 2013-14 65,237,810,164 1,917,348 1,062,782,802 66,302,510,314 5.25 2014-15 69,196,996,006 1,917,348 1,118,647,721 70,317,561,075 6.06 2015-16 73,846,516,979 1,971,348 1,121,013,560 74,969,447,887 6.62

(1) Full cash value.

Source: California Municipal Statistics, Inc.

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The following Table 2 sets forth the assessed valuation by land use of property within the District in Fiscal Year 2015-16.

TABLE 2 PASADENA AREA COMMUNITY COLLEGE DISTRICT

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

2015-16 Local Secured Assessed Valuation (1)

% of Total

No. of Parcels

% of Total

Non-Residential: Agricultural/Dairy $ 24,084,667 0.03% 10 0.01% Commercial/Office 9,024,862,704 12.22 4,612 3.87 Vacant Commercial 296,445,516 0.40 639 0.54 Industrial 1,349,309,959 1.83 784 0.66 Vacant Industrial 63,658,516 0.09 102 0.09 Recreational 390,681,479 0.53 123 0.10 Government/Social/Institutional 526,742,594 0.71 562 0.47 Miscellaneous 128,991,397 0.17 1,619 1.36 Subtotal Non-Residential $ 11,804,776,832 15.99% 8,451 7.09%

Residential:

Single Family Residence $ 49,268,250,508 66.72% 85,583 71.81% Condominium/Townhouse 5,311,145,088 7.19 12,365 10.37 Mobile Home Related 11,307,418 0.02 8 0.01 2-4 Residential Units 3,039,649,369 4.12 7,001 5.87 5+ Residential Units/Apartments 3,688,504,688 4.99 2,412 2.02 Vacant Residential 722,883,076 0.98 3,366 2.82 Subtotal Residential $ 62,041,740,147 84.01% 110,735 92.91%

Total $ 73,846,516,979 100.00% 119,186 100.00% (1) Local Secured Assessed Valuation for Fiscal Year 2015-16, excluding tax-exempt property.


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The following Table 3 sets forth the distribution of single-family homes within the District within various assessed valuation ranges in Fiscal Year 2015-16.


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

No. of

Parcels 2015-16

Assessed Valuation Average

Assessed Valuation Median

Assessed Valuation Single-Family Residential 85,583 $49,268,250,508 $575,678 $418,000

Assessed Valuation No. of

Parcels (1) % of Total Cumulative% of Total Total Valuation % of Total

Cumulative % of Total

$0 - $49,999 2,472 2.888% 2.888% $ 94,674,280 0.192% 0.192% $50,000 - $99,999 7,469 8.727 11.616 552,473,726 1.121 1.314

$100,000 - $149,999 5,820 6.800 18.416 725,193,516 1.472 2.785 $150,000 - $199,999 5,191 6.065 24.481 906,791,359 1.841 4.626 $200,000 - $249,999 5,402 6.312 30.793 1,216,775,834 2.470 7.096 $250,000 - $299,999 5,067 5.921 36.714 1,393,186,388 2.828 9.923 $300,000 - $349,999 5,052 5.903 42.617 1,640,291,687 3.329 13.253 $350,000 - $399,999 4,710 5.503 48.121 1,764,184,051 3.581 16.833 $400,000 - $449,999 4,422 5.167 53.287 1,877,657,968 3.811 20.645 $450,000 - $499,999 4,206 4.915 58.202 1,995,831,687 4.051 24.696 $500,000 - $549,999 3,835 4.481 62.683 2,010,457,489 4.081 28.776 $550,000 - $599,999 3,509 4.100 66.783 2,015,101,523 4.090 32.866 $600,000 - $649,999 3,059 3.574 70.357 1,909,732,509 3.876 36.742 $650,000 - $699,999 2,787 3.256 73.614 1,878,585,943 3.813 40.555 $700,000 - $749,999 2,324 2.715 76.329 1,683,642,297 3.417 43.973 $750,000 - $799,999 2,154 2.517 78.846 1,667,465,393 3.384 47.357 $800,000 - $849,999 1,797 2.100 80.946 1,480,589,981 3.005 50.362 $850,000 - $899,999 1,653 1.931 82.877 1,445,096,713 2.933 53.295 $900,000 - $949,999 1,422 1.662 84.539 1,314,190,310 2.667 55.963 $950,000 - $999,999 1,211 1.415 85.954 1,180,585,633 2.396 58.359

$1,000,000 and greater 12,021 14.046 100.000 20,515,742,221 41.641 100.000 Total 85,583 100.000% $49,268,250,508 100.000%

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

apartment buildings.


Tax Rates, Levies and Collections. Taxes are levied for each Fiscal Year on taxable real and personal property as of the preceding January 1. Real property that changes ownership or is newly constructed is revalued at the time the change occurs or the construction is completed. The current year property tax rate is applied to the reassessed value, and the taxes are then adjusted by a proration factor that reflects the portion of the remaining tax year for which taxes are due. The annual tax rate is based on the amount necessary to pay all obligations payable from ad valorem property taxes and the assessed value of taxable property in a given year.

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year, and become delinquent on December 10 and April 10, respectively. A penalty of 10% attaches immediately to all delinquent payments. Properties on the secured roll with respect to which

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taxes are delinquent become tax defaulted on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of a penalty of 1.5% per month to the time of redemption, plus costs and a redemption fee. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then may be sold at public auction by the County Treasurer and Tax Collector.

The Teeter Plan, which is an alternate method for the distribution of tax levies and collections authorized in Chapter 3, Part 8, Division 1 of the Revenue and Taxation Code of the State (comprising Sections 4701 through 4717, inclusive), commonly referred to as the “Teeter Plan,” for distribution of certain property tax and assessment levies on the secured roll. Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County has not adopted the Teeter Plan. Accordingly, the Teeter Plan is not available to local taxing entities within the County, such as the District. The District’s receipt of property taxes is therefore subject to delinquencies, and the District’s tax receipts reflect the receipt of interest and penalties relating to delinquent taxes.

Property taxes on the unsecured roll are due in one payment on the January 1 lien date and become delinquent after August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at 5 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: (i) a civil action against the taxpayer; (ii) filing a judgment in the office of the County Clerk specifying certain facts in order to obtain a lien on certain property of the taxpayer; (iii) filing a certificate of delinquency for record in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (iv) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee.

Proposition 13 and its implementing legislation impose the function of property tax allocation on counties in the State and prescribe how levies on countywide property values are to be shared with local taxing entities within each county. The limitations in Proposition 13, however, do not apply to ad valorem property taxes or special assessments to pay the interest and redemption charges on indebtedness approved by the voters such as the District’s general obligation bonds.

The County levies a 1% ad valorem property tax on behalf of all taxing agencies in the County. The taxes collected are allocated on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of ownership, inflation) prorated among the jurisdictions that serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas, which were developed to permit the levying of taxes for less than county-wide or less than city-wide special and school districts. In addition, the County levies and collects additional approved property taxes and assessments on behalf of any taxing agency within the County.

State Government Code Sections 29100 through 29107 provide the procedures that all counties must follow for calculating tax rates. The secured tax levy within the District consists of the District’s share of the 1% general ad valorem property and unitary taxes assessed on a County-wide basis and amounts levied that are in excess of the 1% general ad valorem property taxes. These tax receipts are part of the District’s operations. In addition, the secured tax levy also includes the amount for the District’s share of special voter-approved ad valorem property taxes assessed on a District-wide basis, such as the ad valorem property taxes assessed for the District’s general obligation bonds issued pursuant to the Measure P Authorization and any related general obligation refunding bonds. Ad valorem property taxes levied for general obligation bonds are deposited with the County and may only be applied to pay the principal of, redemption premium, if any, and interest on the District’s general obligation bonds and

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general obligation refunding bonds. The District does not receive such funds nor are they available to pay any of the District’s operating expenses. In addition, the total secured tax levy includes special assessments, improvement bonds, supplemental taxes or other charges which have been assessed on property within the District. Since State law allows homeowners’ exemptions (described above) and certain business exemptions from ad valorem property taxation, such exemptions are not included in the total secured tax levy. See “California Constitutional and Statutory Provisions Relating to Ad Valorem Property Taxes, District Revenues and Appropriations” herein.

Further, State Education Code Section 15251 provides that all taxes levied with respect to general obligation bonds when collected will be paid into the county treasury of the county whose superintendent of schools has jurisdiction over the school district on behalf of which the tax was levied, to the credit of the debt service fund (or interest and sinking fund) of the school district, and will be used for the payment of the principal of and interest on the general obligation bonds and general obligation refunding bonds of the school district and for no other purpose. Accordingly, the County may not borrow or spend such amounts nor can the District receive such funds and use them for operating purposes.

The District is a member of the California Statewide Delinquent Tax Finance Authority (“CSDTFA”). CSDTFA is a joint exercise of powers agency formed for the purpose of purchasing delinquent ad valorem property taxes of its members in accordance with Section 6516.6 of the State Government Code. The District anticipates that CSDTFA will from time to time purchase delinquent ad valorem tax receivables from the District. Any penalty charges collected with respect to such delinquencies will be retained by CSDTFA.

The following Table 4 sets forth typical tax rates for property within the District for fiscal years 2012-13 through 2015-16.


Typical Tax Rates Typical Tax Rate per $100 of Assessed Valuation (TRA 7500)

Fiscal Years 2012-13 through 2015-16

Fiscal Year

2012-13 Fiscal Year

2013-14 Fiscal Year

2014-15 Fiscal Year

2015-16 General 1.000000 1.000000 1.000000 1.000000 Pasadena Area Community College District .020556 .018993 .010315 .008722 Pasadena Unified School District .114033 .103507 .106010 .111679 The Metropolitan Water District of Southern California .003500 .003500 .003500 .003500

Total 1.138089 1.126000 1.119825 1.123901 Source: California Municipal Statistics, Inc.

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The following Table 5 sets forth the secured tax charges for the one percent General Fund apportionment and the District’s general obligation bond debt service levy on property in the District from Fiscal Years ended June 30, 2011 through June 30, 2015 and the amount and percent delinquent as of June 30 of each such fiscal year.


Property Tax Levies and Collections Fiscal Years ended June 30, 2011 to June 30, 2015

Fiscal Year ended

June 30

1% General Fund Apportionment District’s General Obligation Bond

Debt Service Levy

Secured Tax Charge (1)

Amount Delinquent (June 30)

Percent Delinquent(June 30)

Secured Tax Charge (2)

Amount Delinquent (June 30)

Percent Delinquent(June 30)

2011 $19,247,581.20 $463,571.53 2.41% $11,443,555.64 $207,076.38 1.81% 2012 19,859,487.59 415,991.16 2.09 11,510,903.60 188,048.83 1.63 2013 20,595,055.98 371,606.54 1.80 12,638,923.49 158,837.32 1.26 2014 20,306,995.49 312,867.89 1.54 12,314,594.18 141,134.08 1.15 2015 21,628,948.27 319,308.62 1.48 7,111,030.19 70,816.39 1.00

(1) 1% General Fund apportionment. Excludes redevelopment agency impounds. Reflects county-wide delinquency rate. (2) District’s general obligation bond debt service levy only.


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Largest Taxpayers in the District. The following Table 6 sets forth the 20 largest secured taxpayers in the District for Fiscal Year 2015-16.


Largest Local Secured Taxpayers Fiscal Year 2015-16

Property Owner Primary Land Use

2015-16 Assessed Valuation

% of Total (1)

1. Santa Anita Borrower LLC Shopping Center $ 374,899,867 0.51% 2. Santa Anita Land Holdings LLC Race Track 291,923,819 0.40 3. Kaiser Foundation Health Plan Inc. Office Building 245,114,876 0.33 4. Paseo Colorado Holdings LLC Shopping Center 187,817,215 0.25 5. PPF OFF 100 West Walnut Street LP Office Building 177,981,025 0.24 6. PPF OFF 74 North Pasadena Avenue and 75 Office Building 156,347,395 0.21 7. Pacific Huntington Hotel Corporation Hotel 155,194,092 0.21 8. Western Asset Plaza LLC Office Building 152,997,000 0.21 9. Tishman Speyer Archstone Smith Apartments 144,943,716 0.20 10. SPF 888 Walnut Pasadena LLC Office Building 133,500,000 0.18 11. BCSP Pasadena Towers Property LLC Office Building 127,998,427 0.17 12. Teachers Insurance and Annuity Association Apartments 126,297,605 0.17 13. SSR Paseo Colorado LLC Apartments 117,683,306 0.16 14. TC Trio Apartment LLC Apartments 116,916,707 0.16 15. HEI Pasadena LLC Hotel 99,214,821 0.13 16. PR 155 North Lake LLC Office Building 86,698,300 0.12 17. Arroyo Colorado LLC Office Building 82,312,386 0.11 18. Wells REIT II Pasadena Corporate Park LP Office Building 78,300,000 0.11 19. Baldwin Arcadia Center LP Shopping Center 78,138,114 0.11 20. South Lake Avenue Investors LLC Office Building 77,713,170 0.11 $3,011,991,841 4.08%

(1) 2015-16 Local Secured Assessed Valuation: $73,846,516,979.


Fiscal Year Debt Service

Prior to the issuance of the Bonds, the District has outstanding as of June 30, 2015 $91,620,000 aggregate principal amount of general obligation bonds, consisting of its 2006 Series B Bonds, 2002 Election General Obligation Bonds, 2006 Refunding Series C, 2009 Series D Bonds, 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E and 2014 General Obligation Refunding Bonds, Series A (collective, the “Outstanding Bonds”). A portion of the 2006 Series B Bonds and the 2009 Series D Bonds will be refunded and defeased with proceeds of the Bonds. See “Plan of Refunding” herein. The Outstanding Bonds and the Bonds are payable from ad valorem property taxes levied by the County on taxpayers within the District. The following table sets forth the semi-annual debt service obligations in each Fiscal Year for all of the District’s outstanding general obligation bonds. See Appendix A - “District Financial Information and Regional Economic and Demographic Information - District Financial Information - District Debt” attached hereto.

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TABLE 7

General Obligation Bonds, Annual Debt Service Schedule

The Bonds Aggregate Payment Date

(August 1) Outstanding General Obligation Bonds (1)(2) Principal Interest

Annual Debt Service

Annual Debt Service

2016 $ 4,827,270.90 $ 605,000.00 $ 324,470.56 $ 929,470.56 $ 5,756,741.46 2017 5,746,041.80 490,000.00 1,466,500.00 1,956,500.00 7,702,541.80 2018 5,749,791.80 505,000.00 1,456,700.00 1,961,700.00 7,711,491.80 2019 5,745,791.80 515,000.00 1,441,550.00 1,956,550.00 7,702,341.80 2020 3,813,891.80 2,180,000.00 1,420,950.00 3,600,950.00 7,414,841.80 2021 3,812,641.80 2,265,000.00 1,333,750.00 3,598,750.00 7,411,391.80 2022 3,812,641.80 2,360,000.00 1,243,150.00 3,603,150.00 7,415,791.80 2023 3,813,641.80 2,475,000.00 1,125,150.00 3,600,150.00 7,413,791.80 2024 3,810,391.80 2,600,000.00 1,001,400.00 3,601,400.00 7,411,791.80 2025 3,812,891.80 2,730,000.00 871,400.00 3,601,400.00 7,414,291.80 2026 3,810,641.80 2,865,000.00 734,900.00 3,599,900.00 7,410,541.80 2027 4,388,641.80 2,645,000.00 591,650.00 3,236,650.00 7,625,291.80 2028 4,326,053.00 2,775,000.00 459,400.00 3,234,400.00 7,560,453.00 2029 4,260,955.86 2,880,000.00 359,400.00 3,239,400.00 7,500,355.86 2030 4,193,023.90 2,990,000.00 244,200.00 3,234,200.00 7,427,223.90 2031 4,126,930.70 3,115,000.00 124,600.00 3,239,600.00 7,366,530.70 2032 4,048,004.60 -- -- -- 4,048,004.60 2033 3,970,095.60 -- -- -- 3,970,095.60 2034 3,887,538.30 -- -- -- 3,887,538.30 Total $ 81,956,882.66 $ 33,995,000.00 $ 14,199,170.56 $ 48,194,170.56 $ 130,151,053.22

(1) Accounts for the defeasance of the Refunded Bonds. (2) Excludes federal subsidies related to Build America Bonds. As a result of the Sequestration Executive Order (as defined in Appendix A hereto), there has been a

reduction in federal payments in connection with the District’s 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E that will continue until 2025 unless Congress terminates, extends or otherwise modifies the order. See Appendix A – “District Financial Information and Regional Economic and Demographic Information – District Financial Information – District Debt – General Obligation Bonds” attached hereto.

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TAX MATTERS

Opinion of Bond Counsel. In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the District, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the District in connection with the Bonds, and Bond Counsel has assumed compliance by the District with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel to the District, under existing statutes, interest on the Bonds is exempt from personal income taxes imposed by the State of California.

Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or changes in law or in interpretations thereof that may hereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds, or under state and local tax law.

Certain Ongoing Federal Tax Requirements and Covenants. The Code establishes certain ongoing requirements that must be met subsequent to the execution and delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The District has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences. The following is a brief discussion of certain collateral Federal income tax matters with respect to the Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of Bonds. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the Federal tax consequences of owning and disposing of the Bonds.

Prospective owners of the Bonds should be aware that the ownership of such obligations may result in collateral Federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest evidenced thereby is excluded from gross

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income for Federal income tax purposes. Interest on the Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Bond Premium. In general, if an owner acquires a Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts on the Bond after the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates), that premium constitutes “bond premium” on that Bond (a “Tax-Exempt Premium Bond”). In general, under Section 171 of the Code, an owner of a Tax-Exempt Premium Bond must amortize the bond premium over the remaining term of the Tax-Exempt Premium Bond, based on the owner’s yield over the remaining term of the Tax-Exempt Premium Bond determined based on constant yield principles (in certain cases involving a Tax-Exempt Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Tax-Exempt Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the bond premium allocable to that period. In the case of a Tax-Exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Tax-Exempt Premium Bond may realize a taxable gain upon disposition of the Tax-Exempt Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Tax-Exempt Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Tax-Exempt Premium Bonds.

Information Reporting and Backup Withholding. Information reporting requirements apply to interest paid on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s Federal income tax once the required information is furnished to the Internal Revenue Service.

Miscellaneous. Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Bonds. For example, the Fiscal Year 2015 Budget proposed on March 4, 2014, by the Obama Administration recommends a 28% limitation on “all itemized deductions, as well as other tax benefits” including “tax-exempt interest.” The net effect of such a proposal, if enacted into law, would be

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that an owner of a tax-exempt bond with a marginal tax rate in excess of 28% would pay some amount of Federal income tax with respect to the interest on such tax-exempt bond. Similarly, on February 26, 2014, Dave Camp, Chairman of the United States House Ways and Means Committee, released a discussion draft of a proposed bill which would significantly overhaul the Code, including the repeal of many deductions; changes to the marginal tax rates; elimination of tax-exempt treatment of interest for certain bonds issued after 2014; and a provision similar to the 28% limitation on tax-benefit items described above (at 25%) which, as to certain high income taxpayers, effectively would impose a 10% surcharge on their “modified adjusted gross income,” defined to include tax-exempt interest received or accrued on all bonds, regardless of issue date..

Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters.

LIMITATION ON REMEDIES AND BANKRUPTCY

General. State law contains a number of provisions to protect the financial solvency of school districts. However, the State Superintendent of Public Instruction (the “State Superintendent”), operating through an administrator appointed by the State Superintendent, may be authorized under State law to file a petition under Chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”) on behalf of the District for the adjustment of its debts, assuming that the District meets certain other requirements contained in the Bankruptcy Code necessary for filing a petition under Chapter 9 of the Bankruptcy Code. School districts are not themselves authorized to file a bankruptcy proceeding, and they are not subject to involuntary bankruptcy.

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

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

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Statutory Lien. Pursuant to Section 53515 of the California Government Code (which became effective on January 1, 2016, as part of Senate Bill 222), all general obligation bonds issued by local agencies, including refunding bonds (including the Refunding Bonds), will be secured by a statutory lien on all revenues received pursuant to the levy and collection of the tax. California Education Code Section 15251 provides for a similar lien for bonds issued and sold by school districts (including the Series 2016A Bonds) pursuant to Chapter 1 of Part 10 of Division 1 of Title 1 of the California Education Code. Section 53515 of the California Government Code and Section 15251 of the California Education Code provide that the lien will automatically arise, without the need for any action or authorization by the local agency or its governing board, and will be valid and binding from the time the bonds are executed and delivered. See “Security and Source of Payment for the Bonds”. Although a statutory lien would not be automatically terminated by the filing of a Chapter 9 bankruptcy petition by the District, the automatic stay provisions of the Bankruptcy Code would apply and payments that become due and owing on the Bonds during the pendency of the Chapter 9 proceeding could be delayed (unless the Bonds are determined to be secured by a pledge of “special revenues” within the meaning of the Bankruptcy Code and the pledged ad valorem taxes are applied to pay the Bonds in a manner consistent with the Bankruptcy Code).

Special Revenues. If the ad valorem tax revenues that are pledged to the payment of the Bonds (see “Security and Source of Payment for the Bonds”) are determined to be “special revenues” within the meaning of the Bankruptcy Code, then the application in a manner consistent with the Bankruptcy Code of the pledged ad valorem revenues that are collected after the date of the bankruptcy filing should not be subject to the automatic stay. “Special revenues” are defined to include, among others, taxes specifically levied to finance one or more projects or systems of the debtor, but excluding receipts from general property, sales, or income taxes levied to finance the general purposes of the debtor. The District has specifically pledged the ad valorem taxes for payment of the Bonds. Additionally, the ad valorem taxes levied for payment of the Bonds are permitted under the State Constitution only where either the applicable bond proposition is approved by 55% of the voters and such proposition contains a specific list of school facilities projects under Proposition 39. State law prohibits the use of the tax proceeds for any purpose other than payment of the bonds and the bond proceeds can only be used to fund the acquisition or improvement of real property and other capital expenditures included in the proposition so such tax revenues appear to fit the definition of special revenues. However, there is no binding judicial precedent dealing with the treatment in bankruptcy proceedings of ad valorem tax revenues collected for the payments of bonds in California, so no assurance can be given that a bankruptcy court would not hold otherwise.

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

Possession of Tax Revenues; Remedies. If the County or the District goes into bankruptcy and has possession of tax revenues (whether collected before or after commencement of the bankruptcy), and if the County or the District, as applicable, does not voluntarily pay such tax revenues to the owners of the Bonds, it is not entirely clear what procedures the owners of the Bonds would have to follow to attempt to obtain possession of such tax revenues, how much time it would take for such procedures to be completed, or whether such procedures would ultimately be successful.

Opinion of Bond Counsel Qualified by Reference to Bankruptcy, Insolvency and Other Laws Relating to or Affecting Creditor’s Rights. The proposed form of the approving opinion of Bond

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Counsel, attached hereto as Appendix C, is qualified by reference to bankruptcy, insolvency and other laws relating to or affecting creditor’s rights. Bankruptcy proceedings, if initiated, could subject the owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or modification of their rights.

AMOUNTS HELD IN THE COUNTY TREASURY POOL

The County on behalf of the District is expected to be in possession of the annual ad valorem property taxes and certain funds to repay the Bonds and may invest these funds in the County’s Treasury Pool, as described in Appendix F – “The Los Angeles County Treasury Pool” attached hereto. In the event the District or the County were to go into bankruptcy, a federal bankruptcy court might hold that the owners of the Bonds are unsecured creditors with respect to any funds received by the District or the County prior to the bankruptcy, which may include taxes that have been collected and deposited into the Interest and Sinking Fund, where such amounts are deposited into the County Treasury Pool, and such amounts may not be available for payment of the principal of, and premium, if any, and interest on the Bonds unless the owners of the Bonds can “trace” those funds. There can be no assurance that the owners could successfully “trace” such taxes on deposit in the Interest and Sinking Fund where such amounts are invested in the County Treasury Pool. The Resolution and the State Government Code require the County to annually levy ad valorem property taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates), for the payment of the principal of, and premium, if any, and interest on the Bonds.

CERTAIN LEGAL MATTERS

The validity of the Bonds and certain other legal matters are subject to the approving opinion of Hawkins Delafield & Wood LLP, Los Angeles, California, as Bond Counsel to the District, and certain other conditions. A complete copy of the proposed form of opinion of Bond Counsel with respect to the Bonds is contained in Appendix C attached hereto. Certain legal matters will also be passed upon for the District by its Disclosure Counsel, Hawkins Delafield & Wood LLP, Los Angeles, California. Certain legal matters will be passed upon for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Los Angeles, California.

CONTINUING DISCLOSURE

The District has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the District (the “Annual Report”) for each fiscal year by not later than 240 days following the end of the District’s fiscal year (currently ending June 30) commencing with the Annual Report for Fiscal Year 2015-16, and to provide notices of the occurrence of certain enumerated events. The District will provide or cause to be provided the Annual Report and these notices to the MSRB through its EMMA system, emma.msrb.org, in the manner prescribed by the SEC, although the information presented there is not incorporated by reference in this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. The specific nature of the information to be contained in the notices of events is set forth in Appendix D – “Form of Continuing Disclosure Agreement” attached hereto. These covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5) (the “Rule”).

The District did not file its Annual Report for Fiscal Year 2011-12 as required in connection with the Los Angeles County Schools Regionalized Business Services Corporation Certificates of Participation (Los Angeles County Schools Pooled Financing Program), 2003 Series A (Montebello Unified School District and Pasadena Area Community College District) (the “Series 2003 COPs”). The District’s portion of the Series 2003 COPs matured on September 1, 2013 and are not outstanding. Also, the District

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did not timely file certain portions of its Annual Report for Fiscal Years 2014 and 2015. In addition, the District did not file notice of rating changes with respect to the 2006 Series B Bonds, 2006 Refunding Series C Bonds, 2009 Series D Bonds and 2009 Series E Bonds as required with respect to each such series of bonds. The District submitted information regarding its largest local secured taxpayers and an event notice regarding rating changes and the current ratings assigned to each such series of general obligation bonds on March 19, 2014 and submitted information regarding its continuing disclosure filings with respect to the Series 2003 COPs on March 26, 2014. As of the date hereof, the District has submitted all information for its outstanding obligations required to be submitted by the District’s continuing disclosure undertakings. In order to ensure future compliance with its continuing disclosure undertakings, the District has designated the Director of Fiscal Services as the primary contact for continuing disclosure. The Director of Fiscal Services coordinates with Digital Assurance Certification, L.L.C., as dissemination agent, to file all appropriate documents and works with District staff to ensure all filings are made in a timely manner.

FINANCIAL STATEMENTS

The District’s Audited Financial Statements, including its general purpose financial statements for the Fiscal Years ended June 30, 2015, are attached hereto as Appendix B. The basic financial statements of the District for the Fiscal Year ended June 30, 2015 have been audited by Vicenti, Lloyd & Stutzman LLP (the “Auditor”), as stated in their report appearing in Appendix B. The District has not requested nor has the District obtained the consent of the Auditor to the inclusion of its report in Appendix B to this Official Statement. In connection with the inclusion of the financial statements and the report of the Auditor thereon in Appendix B to this Official Statement, the District did not request the Auditor to, and the Auditor has not undertaken to, update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report. The Auditor has not been requested to perform and has not performed any procedures relating to the Official Statement.

LITIGATION

There is no litigation pending against the District or, to the knowledge of its executive officers, threatened, seeking to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or the Measure P Authorization or any proceedings of the District taken with respect to the issuance or sale thereof, or the levy or application of ad valorem property taxes for the payment of principal of, premium, if any, and interest on the Bonds or the use of the proceeds of the Bonds. To the best of the District’s knowledge, there are no pending lawsuits that challenge the validity of the Bonds, the existence of the District, or the title of the executive officers to their respective offices. The District has certain claims pending against it. The aggregate amount of the uninsured liabilities of the District which may result from all claims will not, in the opinion of the District, materially affect the District’s finances or impair its ability to make payments of principal of, premium, if any, and interest on the Bonds.

RATINGS

Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), have assigned their municipal bond ratings of “Aa2” and “AA+”, respectively, to the Bonds. Such ratings reflect only the views of Moody’s and S&P, respectively, and an explanation of the significance of such ratings may be obtained as follows: Moody’s Investors Service, 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, tel. (212) 553-0377 and Standard & Poor’s Ratings Services, 55 Water Street, New York, New York 10041, tel.

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(212) 438-2000. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely if, in the judgment of the rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.

VERIFICATION

Upon the delivery of the Bonds, Causey Demgen & Moore P.C. (the “Verification Agent”) will deliver a report stating that the firm has verified the mathematical accuracy of the schedules with respect to the sufficiency of the Escrow Fund and that the United States Obligations (as defined in the resolutions respecting the Refunded Bonds), which, together with interest earnings thereon, if any, and any cash to be deposited in the Escrow Fund will be sufficient to fully pay the principal of, premium, if any, and interest on the Refunded Bonds as the same shall become due or pursuant to a call for redemption. The scope of the verification will be based solely on information and assumptions provided to the Verification Agent by the Underwriter. The Verification Agent will express no opinion on the assumptions provided by it to the Underwriter nor as to the exemption from taxation of the interest on the Bonds.

UNDERWRITING

The Bonds are being purchased by RBC Capital Markets, LLC (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at the purchase price of $40,601,054.50 (which is equal to the aggregate principal amount of the Bonds of $33,995,000.00, plus an original issue premium of $6,776,029.50 and less an Underwriter’s discount of $169,975.00) pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”) relating to the Bonds.

Pursuant to the Bond Purchase Agreement, the Underwriter will purchase all of the Bonds if any of such Bonds are purchased. The Underwriter may offer and sell the Bonds to certain dealers and others at prices or yields different from the initial public offering prices or yields stated on the inside cover page of this Official Statement. The initial public offering prices or yields may be changed from time to time by the Underwriter.

ADDITIONAL INFORMATION

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of the Resolution are available upon request from the Senior Vice President/Assistant Superintendent, Business and College Services, Pasadena Area Community College District, 1570 E. Colorado Boulevard, Pasadena, California 91106; telephone: (626) 585-7170. The District may impose a fee for copying and shipping.

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

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

PASADENA AREA COMMUNITY COLLEGE DISTRICT

By: /s/ Dr. Rajen Vurdien Superintendent/President

Business and College Services

APPENDIX A

DISTRICT FINANCIAL INFORMATION AND REGIONAL ECONOMIC AND DEMOGRAPHIC INFORMATION

TABLE OF CONTENTS

Page

DISTRICT GENERAL INFORMATION .................................................................................................... 1 General Information .................................................................................................................................. 1 District Governance; Senior Management ................................................................................................ 1 Accreditation ............................................................................................................................................. 1

DISTRICT FINANCIAL INFORMATION ................................................................................................. 2 District Budget .......................................................................................................................................... 2 Significant Accounting Policies, System of Accounts and Audited Financial Statements ....................... 4 Enrollment................................................................................................................................................. 3 District Employees .................................................................................................................................... 3 Retirement Systems .................................................................................................................................. 4 Other Postemployment Benefits ............................................................................................................. 11 Insurance ................................................................................................................................................. 14 District Debt ............................................................................................................................................ 15 Overlapping Debt Obligations ................................................................................................................ 17

FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA ............................................ 19 General .................................................................................................................................................... 19 State Budget ............................................................................................................................................ 20 State Funding of Schools without a State Budget ................................................................................... 23

CALIFORNIA CONSTITUTIONAL AND STATUTORY PROVISIONS RELATING TO AD VALOREM PROPERTY TAXES, DISTRICT REVENUES AND APPROPRIATIONS ................... 24

Constitutionally Required Funding of Education ................................................................................... 24 Article XIIIA of the California Constitution ........................................................................................... 24 Legislation Implementing Article XIIIA ................................................................................................ 25 Article XIIIB of the State Constitution ................................................................................................... 26 Article XIIIC and Article XIIID of the State Constitution ..................................................................... 26 Proposition 98 ......................................................................................................................................... 27 Proposition 39 ......................................................................................................................................... 27 Proposition 1A ........................................................................................................................................ 28 Proposition 22 ......................................................................................................................................... 28 Proposition 55 ......................................................................................................................................... 29 Proposition 1D ........................................................................................................................................ 29 Proposition 30 ......................................................................................................................................... 30 Proposition 2 ........................................................................................................................................... 31 Future Initiatives ..................................................................................................................................... 32

REGIONAL ECONOMIC AND DEMOGRAPHIC INFORMATION ..................................................... 32 Population ............................................................................................................................................... 32 Income .................................................................................................................................................... 33 Employment ............................................................................................................................................ 34 Commercial Activity ............................................................................................................................... 35 Major Employers .................................................................................................................................... 36 Construction ............................................................................................................................................ 37

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DISTRICT GENERAL INFORMATION

General Information

The Pasadena Area Community College District (the “District”) currently operates Pasadena City College which occupies a 53-acre site located in the City of Pasadena, California (the “City”). The District, which was formerly named Pasadena Area Junior College District, was formed in July 1967. For Fiscal Year 2014-15, the District served approximately 34,208 credit students and 6,158 noncredit students. The District is located entirely within the County of Los Angeles (the “County”), in the City of Pasadena, California. The population of the District’s service area is estimated to be approximately 403,602 based on the most recent census.

District Governance; Senior Management

The District is governed by a seven-member Board of Trustees (the “District Board”), and each member, excluding the student member of the District Board, is elected to a four-year term. The student member of the District Board is elected to a one-year term. The members of the District Board elect a board president (the “President”) each year. Linda Wah is currently serving as the President of the District Board. The management and policies of the District are administered by its Superintendent/President (the “Superintendent/President”) who is appointed by the District Board and is responsible for the day-to-day affairs of the District. Dr. Rajen Vurdien is currently serving as the Superintendent/President of the District.

Accreditation

The District is accredited by the Accrediting Commission for Community and Junior Colleges of the Western Association of Schools and Colleges (the “Accrediting Commission”). In June 2015, the Commission placed the District’s accreditation on probation and identified nine areas of improvement and specified nine recommendations with respect to the affected areas. The Accrediting Commission recommended that (i) the District systematically evaluate and improve all of its planning processes, including full integration of program review (instructional, student services, and administrative services) into the planning processes, and the use of program review and the planning processes to determine the allocation of resources and to make decisions regarding the improvement of institutional effectiveness, (ii) the District create and implement a plan to ensure the regular evaluation of all employees based upon intervals consistent with District policies, (iii) the District standardize its performance evaluation process for adjunct faculty and include assessment of student learning outcomes in its performance evaluations of adjunct faculty, staff, and management employees who are directly responsible for student progress toward achieving those learning outcomes, (iv) District constituents follow the District’s approved codes of ethics and that all constituent groups embrace and demonstrate compliance with policies adopted by the District Board, (v) the District focus on stabilizing its administrative organizational structure and complete the selection processes to fill the interim, acting and vacant administrative positions with permanent appointments, (vi) the District, through participatory governance, develop and implement a comprehensive, coordinated professional development program for all personnel, regularly assess the effectiveness of the program, and use the assessment results as the basis for continuous improvement, (vii) institutional leaders use transparent participatory processes, follow District Board policies for soliciting input from all constituent groups for institutional decision making, and model collegial communication specifically among the District Board, President and Academic Senate, for the goal of working together to demonstrate an environment of empowerment, innovation and institutional excellence for the good of the institution, (viii) the District regularly and systematically evaluate organization structures and processes to assure their integrity and effectiveness, communicates those evaluations to the District, and uses the results of those evaluations as a basis for improvement and (vi) the District address recommendations for increasing institutional effectiveness as an aspect of maintaining compliance with standards and engaging in continuous quality improvement. None of the Accrediting Commission’s recommendations are directly related to the District’s educational quality or service to the

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community. The District remains fully accredited and expects to be removed from probationary status upon the next review by the Commission, which is scheduled for November 2016.

DISTRICT FINANCIAL INFORMATION

District Budget

General. The District is required by law to adopt a balanced budget on or before September 15 each year and to maintain a balanced budget throughout each fiscal year. The budget is a fiscal line-item budget setting forth expenditures in priority sequence so that appropriations during any fiscal year can be adjusted if revenues do not meet the projections.

Fiscal Year 2015-16 District Budget. The District Board adopted the District’s final budget for Fiscal Year 2015-16 (the “Fiscal Year 2015-16 District Final Adopted Budget”) on September 2, 2015, prior to the statutory deadline therefor. The Fiscal Year 2015-16 District Final Adopted Budget projected a general fund (“General Fund”) beginning balance of $12.4 million, total General Fund revenues of approximately $147.88 million, and total General Fund appropriations of approximately $144.19 million for Fiscal Year 2015-16 inclusive of the $16.14 million ending balance designated for the general reserve. The General Fund is the largest fund of the District and supports the basic operations of the District. The District’s General Fund revenues and expenditures are allocated between the District’s unrestricted programs and restricted programs.

In the Fiscal Year 2015-16 District Final Adopted Budget, the sources of General Fund income included the State government, federal government, other State and local revenue, lottery, non-resident tuition, dedicated revenue arising from locally-managed activities, part-time faculty compensation, incoming transfers and interest. The largest source of revenues is the State general revenue, which is determined by a State funding formula that utilizes the workload measures of attendance, and enrollment, and is established from the District’s prior year base funding with adjustments for inflation and growth. See “Funding of Community College Districts in California” herein. At the time the District Board adopted the Fiscal Year 2015-16 Final Adopted Budget, the District projected that general revenue from the State would increase by approximately $16.02 million in Fiscal Year 2015-16 as compared to Fiscal Year 2014-15. In addition, the total Fiscal Year revenue projected for the General Fund of $147.9 million was approximately $19.1 million greater than the unaudited actual amount for the General Fund for Fiscal Year 2014-15.

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The following Table A-1 sets forth the District’s General Fund final adopted budgets for the Fiscal Years 2011-12 through 2015-16.

TABLE A-1 PASADENA AREA COMMUNITY COLLEGE DISTRICT

General Fund Budgets Fiscal Years 2011-12 through 2015-16

2011-12 Final Budget





REVENUES Federal $ 4,123,044 $ 6,999,330 $ 7,759,443 $ 8,677,347 $ 8,624,457 State(1) 81,822,575 73,212,144 83,464,305 92,892,365 117,402,853 Local 43,016,139 44,686,597 47,554,159 46,158,040 51,240,083

TOTAL REVENUES $ 128,961,758 $ 124,898,071 $ 138,777,907 $ 147,727,752 $ 177,267,393 EXPENDITURES

Academic Salaries $ 59,400,548 $ 57,542,424 $ 63,021,546 $ 66,473,683 $ 69,002,379 Classified Salaries 26,183,224 26,642,467 30,255,403 29,394,246 33,737,498 Employee Benefits(2) 25,601,933 27,199,503 28,771,734 29,195,116 34,304,482 Supplies and Materials 2,926,314 3,060,831 3,104,156 2,920,564 3,785,049 Services & Other

Operating Expenses 12,964,820 13,558,441 14,899,699 17,612,251 22,762,362 Capital Outlay 5,678,380 1,778,110 $ 3,018,255 1,154,780 2,898,689

TOTAL EXPENDITURES $ 132,755,219 $ 129,781,776 $ 143,070,793 $ 146,750,640 $ 166,490,459 Excess of Revenues Over/(Under) Expenditures $ (3,793,461) $ (4,883,705) $ (4,292,886) $ 977,112 $ 10,776,934 Other Financing Sources $ 1,394,000 $ 2,316,982 $ 10,000 $ 10,000 $ 5,000 Other Outgo $ 8,058,702 $ 8,047,892 $ 8,442,961 $ 8,583,471 $ 5,439,606 Net Increase/Decrease

in Fund Balance $ (10,456,163) $(10,614,615) $ (12,725,847) $ (7,596,359) $ 5,342,328 BEGINNING

FUND BALANCE, July 1

$ 22,506,163

$ 22,664,615 $ 23,351,288 $ 21,405,278 $ 14,382,363 ENDING

FUND BALANCE, June 30

$ 12,050,000

$ 12,050,000 $ 10,625,441 $ 13,808,919 $ 19,724,691 (1) General Revenues are determined by a State funding formula which is based on workload measures of attendance and

enrollment. See “Funding of Community College Districts in California – General” herein. General Revenue income includes, among other things, State apportionment, tax relief subventions, local tax revenue, and enrollment fees.

(2) Employee benefits consist of employer and employee retirement contributions and health insurance benefits.

Source: California Community Colleges, Chancellor's Office – 311 Reports – Annual Financial and Budget Report for the indicated year.

Reserves. The District does not have an operating reserve policy. However, the District Board has generally maintained reserves in an amount not less than five percent of General Fund expenditures and other out-go. Since Fiscal Year 2013-14, reserves have been approximately 10-12 percent of General Fund expenditures and other out-go.

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Significant Accounting Policies, System of Accounts and Audited Financial Statements

General. The District’s financial statements are prepared on an accrual basis of accounting in accordance with generally accepted accounting principles as set forth by the National Council on Governmental Accounting. The District currently maintains governmental funds which include the General Fund, the Special Revenue Fund, the Debt Service Fund, the Capital Servicing Fund, Capital Outlay Fund, the Self-Insurance Fund, and the Student Financial Aid Trust Fund. Amounts in the District’s General Fund are used to pay for governmental activities, including long-term debt such as capital leases, compensated absences, net OPEB (herein defined) obligations and contributions to the supplemental employee retirement plan. Amounts in the Debt Service Fund are used to pay the principal balance of the District’s capital lease with Winthrop Resources Corporation (“Winthrop”), as described below, and amounts on certificates of participation (none of which are currently outstanding). The District also maintains the Trust and Agency Fund, which primarily includes amounts relating to associated student organizations and amounts for scholarships within the District. The General Fund of the District is a combined fund comprised of moneys which are unrestricted and available to finance the legally authorized activities of the District not financed by restricted funds and moneys which are restricted to specific types of programs or purposes. General Fund revenues shown thereon are derived from such sources as taxes, aid from other government agencies, charges for current services and other revenue. The financial statements included herein were prepared by the District using information from the annual financial statements which are prepared for the District by the Fiscal Services Department and audited by independent certified public accountants each year.

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Audited Statements. The following Table A-2 sets forth the District’s General Fund statement of revenues, expenses and changes in fund balances for the Fiscal Years 2010-11 through 2014-15.


Statement of Revenues, Expenses and Changes in Fund Balances – General Fund(1)(2) Fiscal Years 2010-11 through 2014-15

Fiscal Year

2010-11 Fiscal Year

2011-12 Fiscal Year

2012-13 Fiscal Year

2013-14 Fiscal Year

2014-15 REVENUES

Federal $ 3,857,169 $ 4,349,185 $ 5,340,509 $ 5,308,923 $ 6,527,860 State 90,545,184 77,136,006 76,062,844 88,204,652 91,831,435 Local 39,136,630 42,630,670 46,579,550 46,246,929 48,423,595

TOTAL REVENUES $ 133,538,983 $ 124,115,861 $ 127,982,903 $ 139,760,504 $ 146,782,890 EXPENDITURES

Academic Salaries $ 60,325,930 $ 56,775,161 $ 57,734,183 $ 62,963,112 $ 71,551,185 Classified Salaries 27,940,857 26,406,176 26,598,942 29,848,554 29,578,402 Employee Benefits 25,930,721 24,897,675 25,787,570 27,378,337 31,273,759 Supplies and Materials 2,311,581 2,363,754 2,171,249 2,157,738 2,077,549 Services & Other

Operating Expenses 10,854,383 11,425,857 12,054,885 16,193,816 15,654,253 Capital Outlay 840,286 2,510,449 1,851,135 1,851,913 2,671,158

TOTAL EXPENDITURES $ 128,203,758 $ 124,379,072 $ 126,197,964 $ 140,393,470 $ 152,806,306 Excess of Revenues Over/(Under) Expenditures $ 5,335,225 $ (263,211) $ 1,784,939 $ (632,966) $ (6,023,416) Other Financing Sources $ 20,335 $ 1,413,215 $ 10,233 $ 104,713 $ 149,072 Other Outgo $ 5,887,710 $ 991,552 $ 1,108,499 $ 1,417,757 $ 1,148,571 Net Increase/Decrease

in Fund Balance $ (532,150) $ 158,452 $ 686,673 $ (1,946,010) $ (7,022,915) BEGINNING

FUND BALANCE, July 1 $ 23,038,313 $ 22,506,163 $ 22,664,615 $ 23,351,288 $ 21,405,278 ENDING

FUND BALANCE, June 30 $ 22,506,163 $ 22,664,615 $ 23,351,288 $ 21,405,278 $ 14,382,363 (1) Unaudited. (2) Totals may not equal sum of component parts due to rounding.

Sources: Pasadena Area Community College District Annual Financial and Budget Reports for Fiscal Years 2010-11 through 2014-15.

.

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The following Table A-3 sets forth the District’s audited District statement of revenues, expenses and changes in net assets for primary government for the Fiscal Years 2010-11 through 2014-15.


Statement of Revenues, Expenses and Changes in Net Assets – Primary Government(1) Fiscal Years 2010-2011 through 2014-15

Fiscal Year

2010-11 Fiscal Year

2011-12 Fiscal Year 2012-13(2)

Fiscal Year 2013-14

Fiscal Year 2014-15

OPERATING REVENUES Student Tuition and Fees $ 26,842,851 $ 25,362,093 $ 36,713,437 $ 40,552,447 $ 40,058,589

Less: Scholarship Discount and Allowance (7,871,913) (5,174,438) (16,120,245) (16,700,383) (16,163,855)

Net Tuition and Fees $ 18,970,938 $ 20,187,655 $ 20,593,192 $ 23,852,064 $ 23,894,734 Grants and Contracts, Noncapital:

Federal -- -- 34,683,755 38,980,277 42,083,260 State -- -- 6,960,223 8,436,661 14,743,186 Local -- -- 2,539,430 2,613,610 1,946,469

Auxiliary Enterprise Sales and Charges -- -- 4,579,622 5,187,574 5,008,112 Bookstore 1,446,827 1,415,406 -- -- -- Other Enterprise 442,903 413,193 -- -- --

Other Operating Revenues 170,154 158,245 -- -- -- TOTAL OPERATING REVENUES $ 21,030,822 $ 22,174,499 $ 69,356,222 $ 79,070,186 $ 87,675,761 OPERATING EXPENSES Salaries $ 89,036,882 $ 84,847,499 $ 86,357,209 $ 94,311,179 $ 102,201,413 Employee Benefits 32,488,393 24,024,344 21,223,306 24,544,944 33,549,020 Supplies, Materials, and

Other Operating Expenses and Services 19,093,594 20,325,527 25,834,827 32,471,525 29,590,793 Student Financial Aid 35,971,406 32,808,473 30,642,982 35,387,554 37,625,610 Equipment, Maintenance, And Repairs 2,321,875 3,499,571 -- -- -- Utilities -- -- 2,931,379 3,165,452 3,153,679 Depreciation 8,615,122 9,126,997 9,264,101 10,401,529 11,241,338 TOTAL OPERATING EXPENSES $ 187,527,272 $ 174,632,411 $ 176,253,804 $ 200,282,183 $ 217,361,853 OPERATING LOSS $(166,496,450) $(152,457,912) $(106,897,582) $(121,211,997) $(129,686,092) NONOPERATING REVENUES (EXPENSES) State Apportionments, Noncapital $ 80,522,558 $ 67,301,469 $ 66,336,536 $ 77,645,508 $ 78,418,013 Local Property Taxes Levied

for General Purposes 18,856,207 21,099,859 -- -- -- Local Property Taxes Levied

for Debt Repayment 12,341,718 12,031,048 -- -- -- Local Property Taxes -- -- 35,120,727 34,024,815 32,260,162 State Taxes and Other Revenues -- -- 4,883,836 5,441,214 6,930,886 Grants and Contracts, Noncapital:

Federal 38,604,171 36,156,771 -- -- -- State 10,976,468 10,786,121 -- -- --

State Lottery 3,638,641 3,730,188 Investment Income 1,799,781 1,729,725 424,217 270,997 479,709 Interest Expense on Capital Related Debt (6,547,529) (6,022,355) -- -- -- Transfer to Fiduciary Funds (273,567) (232,497) -- -- -- Other Non-Operating Revenue 1,322,854 1,541,868 -- -- -- TOTAL NONOPERATING

REVENUES (EXPENSES) $ 161,241,302 $ 148,122,197 $ 106,765,316 $ 117,382,534 $ 118,088,770 INCOME/(LOSS) BEFORE

OTHER REVENUES $ (5,255,148) $ (4,335,715) $ (132,266) $ (3,829,463) $ (11,597,322)

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(continued)

Fiscal Year

2010-11 Fiscal Year

2011-12 Fiscal Year 2012-13(2)

Fiscal Year 2013-14

Fiscal Year 2014-15

OTHER REVENUES State Revenues, Capital -- -- -- -- -- Local Revenues, Capital $ 1,797,129 $ 1,371,253 -- -- -- Local Property Taxes & Revenues, Capital -- -- $ 558,246 $ 114,087 $ (35,335) Investment Income, Capital -- -- 455,361 264,502 58,371 Other Non-Operating Revenues -- -- 1,009,759 1,167,631 922,024 Transfer to Fiduciary Funds -- -- (36,076) -- -- Interest Expense on

Capital Asset-Related Debt -- -- (3,237,622) (2,883,429) (4,707,329) TOTAL OTHER REVENUES $ 1,797,129 $ 1,371,253 $ (1,250,332) $ (1,337,209) $ (3,762,269) CHANGE IN NET ASSETS /

DECREASE IN NET POSITION $ (3,458,019) $ (2,964,462) $ (1,382,598) $ (5,166,672) $ (15,359,591) NET ASSETS, BEGINNING OF YEAR $ 188,491,044 $ 185,033,025 $ 182,068,563(2) $ 183,223,963 $ 178,057,291 Cumulative Effect of Change in

Accounting Principle -- -- 2,537,998(3) -- (110,474,456)(3) NET POSITION,

BEGINNING OF YEAR AFTER CUMULATIVE EFFECT -- -- $ 184,606,561 -- $ 67,582,835

NET ASSETS / NET POSITION, END OF YEAR $ 185,033,025 $ 182,068,563 $ 183,223,963 $ 178,057,291 $ 52,223,244

(1) Totals may not equal sum of component parts due to rounding. (2) Information for Fiscal Year 2012-13 reflects the statement of revenues, expenses and changes in net position. (3) The beginning net position of the District has been increased by $2,537,998 to record capitalized interest net of depreciation. In

accordance with GASB Statement No. 62 Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, interest costs incurred on the District’s general obligation bonds during the period assets were under construction are considered part of the historical costs of acquiring the asset.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2010-11 through 2014-15.

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The following Table A-4 sets forth the District’s statement of net assets for primary government for Fiscal Years 2010-11 through 2014-15.


Statement of Net Assets – Primary Government Fiscal Years 2010-11 through 2014-15

Fiscal Year 2010-11

Fiscal Year 2011-12

Fiscal Year 2012-13(1)

Fiscal Year 2013-14

Fiscal Year 2014-15

ASSETS CURRENT ASSETS

Cash and Cash Equivalents $ 1,232,944 $ 1,157,692 $ 44,545,652 $ 38,882,207 $ 52,633,858 Investments - Unrestricted 6,648,183 7,503,006 -- -- -- Investments - Restricted 134,376,176 105,435,064 -- -- -- Accounts Receivable 24,965,187 29,779,251 26,143,887 19,600,007 11,376,354 Student Loans Receivable 647,454 605,812 -- -- -- Due from Auxiliary -- -- -- 284,634 216,863 Prepaid Expenses 873,204 838,911 1,191,897 419,722 2,387,140 Inventories 990,087 951,505 884,941 868,784 892,839

TOTAL CURRENT ASSETS $169,733,235 $146,271,241 $ 72,766,377 $ 60,055,354 $ 67,507,054

NONCURRENT ASSETS Non-Depreciable Capital Assets $ 18,825,402 $ 28,978,170 -- -- -- Restricted Cash -- -- $ 66,060,826 $ 41,795,152 $ 29,121,240 Land -- -- 10,396,408 10,396,408 10,396,408 Work in Progress -- -- 4,020,789 -- -- Construction in Progress -- -- 38,124,572 3,140,964 3,093,214 Capital Assets, Net of Accumulated

Depreciation 162,934,032 164,424,090 161,655,782 207,412,460 201,396,243 TOTAL NONCURRENT ASSETS $181,759,434 $193,402,260 $280,258,377 $262,744,984 $244,007,105 TOTAL ASSETS $351,492,669 $339,673,501 $353,024,754 $322,800,338 $311,514,159

DEFERRED OUTFLOWS OF RESOURCES

Deferred Charge on Refunding -- -- -- $1,998,686 $1,844,941 Deferred Outflows – Pension

Contributions -- -- -- -- 7,604,688 TOTAL DEFERRED OUTFLOWS OF RESOURCES -- -- -- -- $9,449,629 TOTAL ASSETS AND DEFERRED OUTFLOW OF RESOURCES -- -- -- $324,799,024 $320,963,788

LIABILITIES CURRENT LIABILITIES

Accounts Payable $ 11,909,169 $ 11,216,172 $ 10,618,681 $ 4,568,243 $ 5,641,714 Accrued Interest Payable 2,258,272 2,236,959 1,001,652 1,003,190 800,524 Other Current Liabilities 477,266 497,109 -- -- -- Deferred Revenue 4,306,325 4,713,044 -- -- -- Claims Liability -- -- 4,449,000 4,449,000 4,449,000 Amounts held in custody

on behalf of others -- -- -- -- -- Bonds and notes payable 10,224,747 9,300,000 -- -- -- Other long-term obligations 1,362,817 1,261,863 -- -- -- Accrued liabilities -- -- 5,269,927 6,116,452 7,494,758 Tax and Revenue Anticipation Notes -- -- 10,000,000 -- -- Unearned revenue -- -- 5,746,334 4,358,589 14,305,956 Load banking -- -- 623,712 668,054 773,942 Compensated absences - current portion -- -- 1,003,709 1,594,028 1,507,594 General Obligation Bonds Payable -

Current Portion -- -- 8,539,129 8,759,771 3,687,573

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(continued) Fiscal Year

2010-11 Fiscal Year

2011-12 Fiscal Year 2012-13(1)

Fiscal Year 2013-14

Fiscal Year 2014-15

Capital Leases - Current Portion -- -- 1,361,625 1,557,208 1,658,921 Certificates of Participation -

Current Portion -- -- 625,000 -- -- Supplemental Employee Retirement Plan

- Current Portion -- -- 1,518,386 1,781,939 2,340,767 TOTAL CURRENT LIABILITIES $ 30,538,596 $ 29,225,147 $ 50,757,155 $ 34,856,474 $ 42,660,749

NONCURRENT LIABILITIES Claims Liability $ 3,856,000 $ 3,856,000 $ -- $ -- $ -- Bonds and Notes Payable 122,616,052 115,077,975 -- -- -- Other Long-Term Obligations 9,448,996 9,445,816 -- -- -- Compensated Absences -- -- 1,767,456 1,184,359 1,137,307 General Obligation Bonds Payable -- -- 105,048,733 98,237,481 94,349,239 Capital Leases -- -- 4,924,306 4,267,137 2,839,486 Other Postemployment Benefits (OPEB) -- -- 4,092,671 5,449,988 5,968,492 Net Pension Liability -- -- -- -- 93,170,964 Supplemental Employee Retirement Plan -- -- 3,210,470 2,746,294 3,199,665

TOTAL NONCURRENT LIABILITIES $135,921,048 $128,379,791 $119,043,636 $111,885,259 $200,665,153 TOTAL LIABILITIES $166,459,644 $157,604,938 $169,800,791 $146,741,733 $243,325,902

DEFERRED INFLOWS OF RESOURCES

Deferred Inflows – Pension Contributions -- -- -- -- 25,414,642 TOTAL DEFERRED OUTFLOWS OF RESOURCES -- -- -- -- $25,414,642

NET ASSETS / POSITION Invested in Capital Assets,

Net of Related Debt $113,555,461 $121,788,791 $127,977,903 $125,742,012 $124,738,254 Restricted for:

Debt Service 10,916,832 9,686,260 11,220,546 16,327,441 9,848,412 Capital Projects 27,908,075 19,458,442 12,371,565 5,268,893 5,332,261 Scholarships and Loans -- -- 697,763 624,224 724,869 Other Special Services -- -- 1,553,486 2,054,899 1,934,903

Unrestricted 32,652,657 31,135,070 29,402,700 28,039,822 (90,355,455) TOTAL NET ASSETS / POSITION $185,033,025 $182,068,563 $183,223,963 $178,057,291 $52,223,244

TOTAL LIABILITIES AND NET POSITION -- -- $353,024,754 $324,799,024 $320,963,788

(1) Information for Fiscal Year 2012-13 reflects the Statement of Net Position.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2010-11 through 2014-15.

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Enrollment

The following Table A-5 sets forth the number of the District’s Full-Time Equivalent Students (“FTES”) for Fiscal Years 2011-12 through 2015-16.


Full-Time Equivalent Students(1) Fiscal Years 2011-12 through 2015-16

Fiscal Year Funded FTEs(2) Unfunded FTEs(2) Actual FTEs 2011-12 20,645.83 779.50 21,425.33 2012-13 21,059.21 79.77 21,138.98(3) 2013-14 19,701.53 1,357.68 21,059.21 2014-15 22,460.69 379.46 23,840.15 2015-16(4) 23,362.17 0.00 23,362.19

(1) One FTES is equivalent to 525 student contact hours which is determined based on a State formula of one student

multiplied by 15 weekly contact hours multiplied by 35 weeks. Accordingly, the number of FTES in the District may not equal the number of students enrolled in the District.

(2) In allocating per-student funding each year, the State budget establishes an enrollment limit (the “Cap”) on the maximum number of FTES for which each district will be funded (the “Funded FTES”). Each community college district’s Cap is based on the previous year’s reported FTES, plus an additional growth allowance. The excess of FTES over the Cap is the unfunded FTES (the “Unfunded FTES”).

(3) The District’s Audited Financial Statements for Fiscal Year 2012-13 reflects an adjusted figure of 21,097 FTEs. (4) Estimated as of the Fiscal Year 2015-16 First Interim Report.

Source: Pasadena Area Community College District.

District Employees

The District’s Fiscal Year 2015-16 District Final Adopted Budget authorizes 408 full-time and 1,000 part-time faculty and other academic employees, and 1,289 full-time and part-time classified and unclassified employees, including all temporary hourly and unclassified employees. Classified employees of the District consist of personnel employed in non-academic positions. Unclassified employees of the District are part-time at-will employees assigned to positions that are exempt from Academic and Classified Services as specified in the State’s Education Code and include part-time recreation positions; full-time students employed part-time; part-time students employed part-time in any college work-study program or in a work experience education program conducted by a community college financed by state or federal funds; apprentice positions; and professional experts. In addition, the District budgets funding for substitute relief help which allows the District to hire hourly staff.

The District has four collective bargaining units which maintain contracts with the District and two meet and confer groups which do not have contracts with the District. Members of the District's faculty are represented by the Pasadena City College Faculty Association. Classified employees are represented by the California Federation of Teachers and the California School Employees Association, Chapter 777. The District’s peace officers are represented by the Pasadena City College Police Officers Association. In addition, the Pasadena City College Management Association serves as a meet and confer group for supervisory employees and Pasadena City College Confidential employees also operate as a meet and confer group. The following Table A-6 sets forth the employee bargaining units operating within the District, the number of employees in each such bargaining unit as of March 1, 2016 and the expiration date of each bargaining unit’s contract with the District.

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Employee Groups As of March 1, 2016

Employee Bargaining Unit Number of Employees

Contract Expiration Date(1)

California School Employees Association, Chapter 777 186 June 30, 2017 Pasadena City College Confidential Employees 42 June 30, 2017 Pasadena City College Faculty Association 1,471 June 30, 2016(2) California Federation of Teachers 753 June 30, 2017 Pasadena City College Management Association 81 June 30, 2016(2) Pasadena City College Police Officers Association 27 June 30, 2017

(1) The Pasadena City College Confidential Employees and Pasadena City College Management Association are “meet and

confer” groups and do not maintain contracts with the District. (2) Negotiations on three-year contracts for the indicated bargaining units are expected to commence in Fiscal Year 2016-17. Source: Pasadena Area Community College District.

Retirement Systems

General. The District currently participates in the California State Teachers’ Retirement System (“CalSTRS”), California Public Employees’ Retirement System (“CalPERS”), Public Agency Retirement System (“PARS”) and the Accumulation Program for Part-Time and Limited-Service Employees (the “APPLE Plan” and, together with the CalSTRS, CalPERS and PARS, the “Retirement Plans”). Academic employees are members of CalSTRS, classified employees are members of the CalPERS, part-time, seasonal and temporary employees and employees not covered by CalSTRS or CalPERS are members of the APPLE Plan, and employees who opted for an early retirement incentive and are receiving an ongoing monthly benefit are members of the District’s Supplementary Retirement Plan under PARS. The amounts of the District’s contributions to CalSTRS, CalPERS, PARS and the APPLE Plan are subject to, among other things, modifications to or approvals of collective bargaining agreements. For additional information regarding the District’s pension and retiree health care programs and costs, see the District’s financial statements for Fiscal Year 2014-15 contained in Appendix B - “Audited Financial Statements for the Fiscal Year ended June 30, 2015” attached hereto.

Both CalPERS and CalSTRS are operated on a statewide basis and, based on available information, both have substantial unfunded liabilities. Additional funding of CalSTRS by the State and the inclusion of adjustments to such State contributions based on consumer price changes are required under State law. The amounts of the pension/award benefit obligation with respect to CalPERS or actuarially accrued liability with respect CalPERS and CalSTRS will vary from time to time depending upon actuarial assumptions, rates of return on investments, salary scales, and levels of contribution. The District is unable to predict what the amount of these liabilities will be in the future or the amount of the contributions which the District may be required to make to The Retirement Plans. Accordingly, there can be no assurances that the District’s required contributions to the Retirement Plans will not significantly increase in the future.

The information set forth below regarding the Retirement Plans has been obtained from publicly available sources and has not been independently verified by the District, is not guaranteed as to the accuracy or completeness of the information and is not to be construed as a representation by the District. Furthermore, the summary data below should not be read as current or definitive, as recent gains or losses

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on investments made by the retirement systems generally may have changed the unfunded actuarial accrued liabilities stated below.

California State Teachers’ Retirement System. While CalSTRS administers several retirement plans, the District contributes exclusively to the State Teachers’ Retirement Plan (“STRP”) administered by CalSTRS. STRP is a cost-sharing multiple-employer public employee retirement system defined benefit pension plan with benefit provides that are established by State statutes, as legislatively amended, within the State Teachers’ Retirement Law. STRP is comprised of various programs, including the Defined Benefit Program (being the largest portion of STRP), the Defined Benefit Supplement Program, the Cash Balance Benefit Program and the Replacement Benefit Program.

STRP provides retirement, disability and survivor benefits to beneficiaries. Benefits are based on members’ final compensation, age and years of service credit. Members hired on or before December 31, 2012, with five years of credited service are eligible for the normal retirement benefit at age 60. Members hired on or after January 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. The normal retirement benefit is equal to 2.0% of final compensation for each year of credited service. STRP holds assets for the exclusive purpose of providing benefits to members and beneficiaries of its programs. CalSTRS also uses plan assets to defray reasonable expenses of administering STRP.

In 2014, to address a then-projected depletion of Defined Benefit Program assets, the Legislature enacted AB 1469 (Chapter 47, Statutes of 2014) (“AB 1469”), a comprehensive funding solution intended to eliminate the projected CalSTRS unfunded liability on the Defined Benefit Program by 2046. Under AB 1469, the contribution rates of the State, employees and employers (including the District) increased and will continue to increase over a number of years. Member contributions are scheduled to increase over time on July 1, 2014, 2015 and 2016 to 10.73% for members not subject to the Public Employees’ Pension Reform Act, a comprehensive pension reform package that increased the retirement age and lowered retirement benefits for most new state and local government employees hired on or after January 1, 2013 (“PEPRA”), and to 9.205% for members subject to PEPRA. Employer contributions are scheduled to increase over time on each July 1 of 2014 through 2020 to 19.1% of creditable compensation in Fiscal Year 2020-21 through Fiscal Year 2045-46. Beginning in Fiscal Year 2021-22 through Fiscal Year 2045-46, AB 1469 authorizes the CalSTRS Board to adjust the employer contribution up or down 1% age point each year, but no higher than 20.25% total and no lower than 8.25%, to eliminate the remaining unfunded obligation that existed on July 1, 2014.

AB 1469 also provides the CalSTRS Board with limited authority to increase or decrease the school and state contributions based on changing conditions. However, while AB 1469 provides for significant increases in the statutorily required contributions to CalSTRS from the State, employers and members, it does not provide that such statutory rates be adjusted to equal actuarially required amounts from time to time. Actuarially required amounts will vary from time to time based on a variety of factors, including actuarial assumptions, investment performance and member benefits. To the extent rates established pursuant to AB 1469 are less than actuarially required amounts from time to time, such circumstances could materially adversely affect the funded status of CalSTRS.

As of June 30, 2015, the District’s proportionate share of the STRP net pension liabilities was $67,786,920 (being $108,720,000 when accounting for the reduction of State pension support to the District), proportionate pension expense was $5,852,200, deferred inflows of resources was $4,859,625 and deferred outflows of resources was $16,692,400. Based on the STRP actuarial valuation as of June 30, 2013, which included the then-applicable assumed investment rate of return of 7.60% (which was subsequently reduced to 7.50%, as described below), the District’s net pension liability was projected to be $36,205,920 if the discount rate was increased to 8.60% and $105,662,080 if the discount rate was

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decreased to 6.60%. See Note 9 of the District’s financial statement for Fiscal Year 2014-15 attached as Appendix B – “Audited Financial Statements for the Fiscal Year ended June 30, 2015.”

As of June 30, 2015, the District’s required employer contribution rate was 8.88%, the employee required contribution rate was 8.15% and the State (being both an employer and non-employer contributing entity to STRP) contribution rate was 5.95%, with each contribution rate being expressed as a level percentage of payroll using the entry age normal actuarial method.

The following Table A-7 sets forth the District’s regular annual contributions to CalSTRS for Fiscal Years 2011-12 through 2014-15, the estimated regular annual contribution for Fiscal Year 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16. The District has always paid all required CalSTRS annual contributions.


Annual Regular CalSTRS Contributions Fiscal Years 2011-12 through 2015-16

Fiscal Year District

Contributions

District Contribution as Percentage of Total

General Fund Expenditures 2011-12 $3,890,391 3.1% 2012-13 4,042,431 3.2 2013-14 4,464,570 3.6 2014-15 4,859,625 3.6 2015-16(1) 5,225,256 3.8

(1) Estimated.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2011-12 through 2014-15 and Department of Fiscal Services for Fiscal Year 2015-16.

The Defined Benefit Program is the largest component of STRP. The Defined Benefit Program Actuarial Valuation as of June 30, 2014 (the “2014 Defined Benefit Program Valuation”) states that, based on the scheduled contribution increases set forth in AB 1469 and based on the valuation assumptions and the valuation policy adopted by the CalSTRS Board at its February 2015 meeting, the future revenue from contributions and appropriations for the Defined Benefit Program is projected to be sufficient to finance its obligations. The 2014 Defined Benefit Program Valuation utilized the entry age actuarial cost method and included the following assumptions: an investment return rate of 7.50% (net of investment and administrative expenses), interest on member accounts of 4.50%, wage growth of 3.75% and inflation of 3.00%. The funding progress for the Defined Benefit Program for Fiscal Years 2009-10 through 2013-14 is set forth in the following Table A-8. Pursuant to CalSTRS Board policy, a three-year asset smoothing methodology is used and there were investment gains of $10,911 million (the difference between the actuarial and fair market value of assets) that have not yet been recognized. The individual funding progress for the District is not provided in the 2014 Defined Benefit Program Valuation.

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TABLE A-8 Actuarial Value of State Teachers’ Retirement Fund Defined Benefit Program

Valuation Dates June 30, 2010 through June 30, 2014 ($ in billions)

Valuation Date

(June 30) Actuarial

Obligation

Actuarial Value of Assets(1)

Fair Market Value

Unfunded Actuarial

Obligation Funded Ratio

(Actuarial Value) Funded Ratio

(Fair Market Value) 2010 $196.315 $140.291 $123.242 $56.024 71% 63% 2011 208.405 143.930 147.140 64.475 69 71 2012 215.189 144.232 143.118 70.957 67 67 2013 222.281 148.614 157.176 73.667 67 71 2014 231.213 158.495 179.479 72.718 69 78

(1) Actuarial Value of Assets does not include amounts allocable to the CalSTRS Supplemental Benefits Maintenance Account.

Sources: California State Teachers’ Retirement System Defined Benefit Program Actuarial Valuations as of June 30, 2010 through June 30, 2015.

The actuarial valuation for the Defined Benefit Supplement Program of STRP as of June 30, 2014 (the “2014 Defined Benefit Supplement Program Valuation”) reflected actuarial value of assets being in excess of actuarial obligations by $1,472,355,000. The actuarial valuation of the Cash Balance Benefit Program of STRP as of June 30, 2014 (the “2014 Cash Balance Benefit Program Valuation”) reflected actuarial value of assets being in excess of actuarial obligations by $33,818,000. Each for the foregoing valuations states that if all assumptions are met, the funding surplus will slowly grow in the future. If future experience is worse than assumed, an unfunded actuarial obligation may develop. There is currently no provision in the Education Code to increase contributions to make up any such shortfall, if it were to occur.

CalSTRS produces a comprehensive annual financial report which includes financial statements and required supplementary information. Copies of the CalSTRS’ comprehensive annual financial report may be obtained from CalSTRS, P.O. Box 15275, Sacramento, California 95851. The information presented in these reports is not incorporated by reference in this Official Statement.

California Public Employees’ Retirement System. Qualified employees of the District are eligible to participate in the Schools Pool Plan under CalPERS (the “Schools Pool Plan”), a cost-sharing multiple employer public employee retirement system defined benefit pension plan administered by CalPERS that provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the California Public Employees’ Retirement Law (the “Public Employees’ Retirement Law”).

The following Table A-9 sets forth the District’s regular annual contributions to CalPERS for Fiscal Years 2011-12 through 2014-15, the estimated contribution for Fiscal Year 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16. The District has always paid all required CalPERS annual contributions.

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Annual Regular CalPERS Contributions Fiscal Years 2011-12 through 2015-16(1)


Contributions(1)


General Fund Expenditures 2011-12 $2,223,229 1.8% 2012-13 2,461,548 2.0 2013-14 2,823,838 1.7 2014-15(1) 2,588,244 1.9 2015-16(2) 2,890,972 2.1

(1) Reflects amounts payable from the District General Fund and not reimbursed by other resources. District contribution,

including amounts reimbursable from other resources, is $2,745,063, as set forth in Note 9 to the District’s Audited Financial Statements for Fiscal Year 2014-15.

(2) Estimated.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2011-12 through 2014-15 and the Department of Fiscal Services for Fiscal Year 2015-16.

The unfunded actuarial accrued liabilities and funded status of the schools portion of CalPERS as of June 30 of Fiscal Years June 30, 2010 through June 30, 2014 are set forth in the following Table A-10.

TABLE A-10

Actuarial Value of Schools Portion of CalPERS Historical Funding Status

Valuation Dates June 30, 2010 through June 30, 2014 ($ in millions)

Valuation Date

(June 30)

Actuarial Accrued

Liabilities

Market Value of Assets (MVA)

Funded Status (MVA)

Unfunded Liabilities/ (Surplus) (MVA)

Projected Payroll for

Determining Contributions

Unfunded/ (Surplus) as a % of Payroll

2010 $55,306.96 $38,435.17 69.5% $16,871.79 $11,283.40 149.5% 2011 58,358.41 45,900.99 78.7 12,457.42 10,540.43 118.2 2012 59,439.13 44,853.80 75.5 14,585.33 10,242.25 142.4 2013 61,487.18 49,481.90 80.5 12,005.28 10,423.82 115.2 2014 65,599.71 56,838.24 86.6 8,761.47 11,293.82 77.6 Source: CalPERS State & Schools Actuarial Valuation as of June 30, 2014.

On April 17, 2013, the CalPERS Board of Administration (the “CalPERS Board”) approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing policy, which spread investment returns over a 15-year period while experience gains and losses were amortized over a rolling 30-year period. Effective with the June 30, 2014 valuation, CalPERS no longer uses actuarial value of assets and employs an amortization and smoothing policy that will spread rate increases or decreases over a 5-year period, and amortizes all experience gains and losses over a fixed 30-year period. The 2014 CalPERS Schools Pool Plan Valuation also includes a 7.5% discount rate (net of administrative expenses), annual increases in

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salary growth ranging from 3.20% to 10.80% based on entry age and duration of service, a 3% overall payroll growth and a 2.75% inflation rate.

Subsequent to the completion of the 2014 CalPERS Schools Pool Plan Valuation, the Board approved several changes to the demographic assumptions that more closely align with actual experience, including recognition of the mortality improvement among the CalPERS membership. The new actuarial assumptions will be incorporated in the June 30, 2015 valuation for the Schools Pool Plan. The increase in liability due to the new actuarial assumptions will be amortized over 20 years and phased in over 5 years in accordance with Board policy, beginning with the contribution requirement for Fiscal Year 2016-17. The increase in liability due to new actuarial assumptions will be calculated in the 2015 actuarial valuation and will be amortized over a 20-year period with a 5-year incremental increase or decrease as established pursuant to CalPERS Board policy.

CalPERS produces a comprehensive annual financial report which includes financial statements and required supplementary information. Copies of the CalPERS’ comprehensive annual financial report may be obtained from CalPERS, 400 Q Street, Sacramento, CA 95811. The information presented in these reports is not incorporated by reference in this Official Statement.

Public Agency Retirement System. PARS is a multiple-employer retirement trust. PARS is operated as a private company, the board of which consists of public agency employers. In June 2011, the District Board adopted a resolution adopting PARS as an early retirement incentive for faculty and management/confidential employees. The District worked with PARS to create a plan for classified and academic employees employed as of February 2, 2011, with five years of District service and having reached the age of 55. The eligible employees will be paid 75% of their salary for the last year of service.

The following Table A-11 sets forth the District’s annual contributions to PARS for Fiscal Years 2011-12 and 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16. The District has always paid all required PARS annual contributions.


Annual PARS Contributions Fiscal Years 2011-12 through 2015-16


Contributions



(1) Estimated.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2011-12 through 2014-15 and the Department of Fiscal Services for Fiscal Year 2015-16.

The District’s PARS plan includes 81 faculty, 19 management/confidential and 58 non-management employees. The total cost to the District is approximately $11.7 million. The District will pay benefits in future years, through 2019-20, totaling approximately $5.5 million.

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Accumulation Program for Part-Time and Limited Services Employees. Part-time, seasonal and temporary employees and employees not covered by STRS or CalPERS are members of the APPLE Plan. The APPLE Plan is a defined contribution plan qualifying under Section 401(a) and Section 501 of the Internal Revenue Code. The benefit provisions and contribution requirements of APPLE Plan members and the District are established and may be amended by an administration committee.

The total required contribution to the APPLE Plan is 7.5% of covered compensation. Employees participating in the APPLE Plan are required to make contributions in the amount of 3.75% of covered compensation. During Fiscal Year 2014-15, employee contributions to the APPLE Plan were approximately $450,378 (inclusive of amounts to be reimbursed from non-General Fund resources) based on covered contributions of $14,278,856. The District contributes the additional 3.75% to the APPLE Plan. Total contributions made were 100% of required contributions required for the Fiscal Year 2014-15. The following Table A-12 sets forth the District’s contributions to the APPLE Plan for Fiscal Years 2011-12 through 2014-15, the estimated contribution for Fiscal Year 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16.


Annual APPLE Plan Contributions Fiscal Years 2011-12 and 2015-16


Contributions


General Fund Expenditures 2011-12 $418,721 0.34% 2012-13 423,728 0.34 2013-14 499,473 0.27 2014-15(1) 450,378 0.33 2015-16(2) 420,600 0.30

(1) Reflects amounts payable from the District General Fund and not reimbursed by other resources. District

contribution, including amounts reimbursable from other resources, is $535,457, as set forth in Note 9 to the District’s Audited Financial Statements for Fiscal Year 2014-15.

(2) Estimated.

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Year 2011-12 through 2014-15 and Department of Fiscal Services for Fiscal Years 2015-16.

Contributions to Retirement Programs. The following Table A-13 sets forth the District’s aggregate contributions to CalSTRS, CalPERS, PARS and the APPLE Plan for Fiscal Years 2011-12 through 2014-15, the projected annual contribution to CalSTRS, CalPERS, PARS and the APPLE Plan for Fiscal Year 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16.

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Annual CalSTRS, CalPERS, and PARS Contributions Fiscal Years 2009-10 through 2015-16

Fiscal Year

District Aggregate

Contributions



(1) Estimated.

Sources: Department of Fiscal Services.

Other Postemployment Benefits

In addition to employee health care costs, the District provides postemployment health care benefits (the “OPEB Plan”) in accordance with its collective bargaining agreements. The District provides medical and dental insurance benefits to eligible retirees and their spouses. The OPEB Plan provides health and dental benefits to all full-time faculty, management and classified employees who have reached age 55 and retire with at least 14 years of service. Retiree benefits paid by the District begin at age 55 and terminate on June 30 of the fiscal year during which the retiree reaches age 65. After such date, the District pays to the retiree $1,440 annually to assist the retiree in obtaining Medicare Supplement coverage. As of February 1, 2016, membership of the OPEB Plan consisted of 42 retirees receiving benefits and 638 active OPEB Plan members.

The contribution requirements of OPEB Plan members and the District are established and may be amended by the District and its bargaining units. The required contribution is based on projected pay-as-you-go financing requirements with an additional amount to prefund benefits as determined annually through agreements between the District and the bargaining units. The District contributes 100% of the cost of current year premiums. The District has not established an irrevocable trust for the purpose of funding postemployment benefits. However, the District has designated resources in the amount of $14,685,458 as of June 30, 2015 for the purpose of funding postemployment benefits. The designation is not a binding commitment and has not been included by the Actuarial Consultant (defined herein) in its actuarial determination of plan assets.

The following Table A-14 sets forth the District’s funding of other postemployment benefits (“OPEB”) for Fiscal Years 2011-12 through 2014-15, the estimated contribution for Fiscal Year 2015-16 and the contributions as a percentage of the District’s General Fund expenditures for Fiscal Years 2011-12 through 2015-16.

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Expenditures for Other Postemployment Benefits Fiscal Years 2011-12 through 2015-16

Fiscal Year Amount Expenditure as Percentage of Total


(1) Budgeted on a pay-as-you-go basis.

Source: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2011-12 through 2014-15 and the District for Fiscal Year 2015-16.

The most recent actuarial report prepared for the District is its “Actuarial Study of Retiree Health Liabilities as of February 1, 2014,” dated April 11, 2014 (the “2014 Postemployment Valuation”).

The principal actuarial assumptions used in the 2014 Postemployment Valuation include, among others, (i) “entry age normal” actuarial cost method to estimate the actuarial accrued liability; (ii) a closed 30-year amortization period for the initial UAAL and an open 30-year amortization period for any residual UAAL; (iii) inflation: 2.75% per year; (iv) 4.75% investment return per year based on assumed long-term return on employer assets; (v) 4% long-term trend with respect to medical costs (vi) 2.75% payroll increase per year; (viii) CalSTRS rates for mortality for faculty employees and Miscellaneous employees for other groups; (ix) CalSTRS retirement rates for faculty employees and school employees for other employees; (x) vesting periods of 14 years for faculty members, classified members and management members; (xi) participation rate of 100%; (xii) CalSTRS-determined rates for turnover for faculty employees and school employees for other employees.

The 2014 Postemployment Valuation sets forth the District’s actuarial valuation of postemployment medical benefits as of February 1, 2014 for its employees and retirees. The 2014 Postemployment Valuation sets forth the liabilities of the postemployment benefit plan based upon GASB Statement Nos. 43 and 45. The 2014 Postemployment Valuation reports that, as of April 11, 2014, the actuarial accrued liability (“AAL”) of the District’s OPEB plan was $20,286,529 which amount is approximately 34% of covered payroll. The Actuarial Consultant states the remaining unamortized balance of the initial unfunded AAL is $13,466,044 and the residual AAL is $6,820,485. Pursuant to Statement No. 45, OPEB expense in an amount equal to annual OPEB cost is recognized in government-wide financial statements on an accrual basis. Net OPEB obligations, if any, including amounts associated with under-contributions or over-contributions from governmental funds, are to be displayed as liabilities (or assets) in government-wide financial statements.

The 2014 Postemployment Valuation recommended an annual required contribution (“ARC”) of $2,486,953 for the Fiscal Year ended June 30, 2014. Based on the 2014 Postemployment Valuation, the “pay-as-you-go” cost of providing postemployment benefits was projected to be $888,117 for year beginning February 1, 2014. Accordingly, the District’s net OPEB obligation (“Net OPEB Obligation”) as of February 1, 2014 is expected to be greater than the Net OPEB Obligation as of December 1, 2013. Net OPEB Obligation is the cumulative difference between the annual pension cost (the “Annual OPEB Cost”) to the District of the postemployment benefit plan and the actual contribution in a particular year.

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The Fiscal Year 2015-16 District Final Adopted Budget includes funding of $1,750,000 for OPEB, which amount is $550,000 more than the contribution for OPEB for Fiscal Year 2014-15. The following Table A-15 below reflects the District’s ARC, Annual OPEB Cost, Annual OPEB Cost Contributed, the percentage of Annual OPEB Cost contributed to the plan, and the net OPEB obligation for Fiscal Years 2010-11 through 2014-15.


Annual Required Contributions, OPEB Costs and Net OPEB Obligations Fiscal Years 2010-11 through 2014-15

Fiscal Year Annual Required

Contribution Annual

OPEB Cost

Annual OPEB Cost Contributed

Percentage Annual OPEB Cost Contributed

Net OPEB Obligation

2010-11 $1,608,500 $1,648,124 $ 956,199 58% $2,202,301 2011-12 2,073,548 2,152,275 1,025,498 48 3,329,078 2012-13 2,113,557 2,122,860 1,359,267 64 4,092,671 2013-14 2,486,953 2,604,512 1,247,195 48 5,449,988 2014-15 2,486,953 2,643,499 2,124,995 80 5,968,492 (1) Annual OPEB Cost is equal to (i) the ARC, (ii) one year’s interest on the Net OPEB Obligation, and (iii) an adjustment to

the ARC to offset, approximately, the amount included in item (i) for amortization of the past contribution deficiencies. Source: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2010-11 through 2014-15.

Table A-16 below sets forth the schedules of funding progress of the District’s actuarial accrued liability (“AAL”) with respect to OPEB as of the valuation dates of August 25, 2008, June 10, 2010 and December 1, 2011. Funding progress is measured by a comparison of assets which have been set aside by the District to pay OPEB benefits with plan liabilities.

TABLE A-16

PASADENA AREA COMMUNITY COLLEGE DISTRICT OPEB Schedule of Funding Progress

Valuation Date

Actuarial Value of Assets

Actuarial Accrued Liability

Unfunded Actuarial Accrued Liability

Funded Ratio

Covered Payroll

UAAL as a % ofCovered Payroll

8/25/2008 $ -- $13,305,204 $13,305,204 0% $60,439,599 22% 6/10/2010 -- 13,181,136 13,181,136 0 51,831,265 26 12/1/2011 -- 15,674,507 15,674,507 0 51,822,405 30 4/11/2014 -- 20,286,529 20,286,529 0 59,070,408 34

Sources: Pasadena Area Community College District Audited Financial Statements for Fiscal Year 2014-15.

In the opinion of District management, any further increase in the District’s UAAL as described in the 2014 Postemployment Valuation will not adversely affect the District’s ability to pay debt service on its general fund obligations or general obligation bonds, including the Bonds described in the forepart of this Official Statement, the last of which are payable from voter-approved ad valorem property taxes. For additional information regarding the District’s OPEB, see Appendix B - “Audited Financial Statements for the Fiscal Year ended June 30, 2015” attached hereto.

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Insurance

The District maintains insurance for property damage, general public liability, excess liability, workers’ compensation and excess workers’ compensation. The District is self-insured for up to a maximum of $25,000 for property damage, $50,000 for general liability and $500,000 for workers’ compensation. In addition, the District acquires coverage through joint powers authorities, including the Statewide Association of Community Colleges (“SWACC”) Joint Powers Authority for property and liability insurance coverage and the Schools Alliance for Workers' Compensation Excess II (“SAWCX II”) Joint Powers Authority, an insurance purchasing pool. The District maintains insurance for property damage up to a maximum of $250,000,000 and general liability up to $5,000,000 through SWACC. SAWCX provides excess workers' compensation coverage up to a maximum of $25,000,000 for each accident per person. The District budgets amounts available for self-insurance in the General Fund.

The District made total claim payments of approximately $2,511,287 in Fiscal Year 2014-15 and $4,757,482 in Fiscal Year 2013-14 for general liability claims and worker’s compensation claims. In addition, based upon prior claims experience, the District believes that the recorded liabilities for self-insured claims are adequate in that the recorded liabilities reflect the likely loss, but not the highest possible loss, the District could incur if claims were upheld in court.

The following Table A-17 sets forth the Risk Management claims liability amount with respect to workers’ compensation in Fiscal Years 2012-13 through 2014-15.


Risk Management Claims Liability – Workers’ Compensation Fiscal Years 2012-13 through 2014-15

Fiscal Year Beginning of Fiscal-

Year Liability

Current-Year Claims and Changes

in Estimates Claim Payments Balance at

Fiscal Year-End 2012-13 $3,631,000 $1,693,000 $(1,100,000) $4,224,000 2013-14 4,224,000 3,902,708 (3,902,708) 4,224,000 2014-15 4,224,000 1,540,182 (1,540,182) 4,224,000

Source: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2012-13 through 2014-15.

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The following Table A-18 sets forth the Risk Management claims liability amount with respect to general liability in Fiscal Years 2012-13 through 2014-15.


Risk Management Claims Liability – General Liability Fiscal Years 2012-13 through 2014-15

Fiscal Year Beginning of Fiscal-

Year Liability

Current-Year Claims and Changes

in Estimates Claim Payments Balance at

Fiscal Year-End 2012-13 $225,000 $ 850,000 $ (850,000) $225,000 2013-14 225,000 854,774 (854,774) 225,000 2014-15 225,000 3,902,708 (971,105) 225,000

Source: Pasadena Area Community College District Audited Financial Statements for Fiscal Years 2012-13 through 2014-15.

District Debt

General Obligation Bonds. Pursuant to Sections 15106 and 15270 of the State Education Code, the District’s bonding capacity for general obligation bonds is 2.5% of taxable property valuation in the District. The taxable property valuation in the District for Fiscal Year 2014-15 is approximately $75.0 billion, which results in a total bonding capacity of approximately $1.87 billion for the District, of which approximately $1.72 billion is unused. The District may not issue general obligation bonds without voter approval and may not issue general obligation bonds in an amount greater than its bonding capacity. A $150 million general obligation bond authorization was approved by voters on March 5, 2002 (the “Measure P Authorization”). The District has issued the amount authorized pursuant to the Measure P Authorization.

The following Table A-19 sets forth the general obligation bonds and general obligation refunding bonds issued by the District in connection with the Measure P Authorization prior to the issuance of the Bonds described in the forepart of this Official Statement.

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Outstanding General Obligation Bonds As of June 30, 2015

Bonds Issued Amount of

Original Issue

Outstanding Principal Amount as of June 30, 2015 Date of Issue

Stated Date of Final

Maturity 2002 Election General Obligation Bonds, 2006 Series B

$ 65,000,000 $25,385,000 July 12, 2006 Aug. 1, 2034

2002 Election General Obligation Bonds 2009 Series D

26,705,000 24,160,000 Oct. 15, 2009 Aug. 1, 2026

2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E

25,295,000 25,295,000 Oct. 15, 2009 Aug. 1, 2034

2014 General Obligation Refunding Bonds, Series A

16,980,000 16,780,000 April 16, 2014 Aug. 1, 2026

TOTAL $156,637,774 $91,620,000 Source: Pasadena Area Community College District Audited Financial Statements for Fiscal Year 2014-15.

Limitations Related to Receipt of Federal Funds. On March 1, 2013, President Barack Obama signed an executive order (the “Sequestration Executive Order”) to reduce budgetary authority in certain accounts subject to sequester in accordance with the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012. Pursuant to the Sequestration Executive Order, budget authority for all accounts in the domestic mandatory spending category including, among others, accounts for the payments to issuers of “Direct Pay Bonds”, which includes the District’s outstanding 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E (the “Series 2009 BABs”). Direct Pay Bonds are issued as taxable bonds and provide credits to the District from the federal government pursuant to Section 54AA(d) and 54AA(g) of the Code. Under the Sequestration Executive Order, the District’s credits were reduced by 5.1% for federal Fiscal Year ending September 30, 2013.

Pursuant to the Bipartisan Budget Act of 2013 which was signed into law in December 2013, the District’s Series 2009 BABs are subject to the full amount of sequestration budget cuts and will have their planned federal payments reduced until the federal Fiscal Year ending September 30, 2023. The federal subsidy for the District’s Series 2009 BABs for the Federal Fiscal Year ending September 30, 2014 was reduced by 7.2%. The federal subsidy for the District’s Series 2009 BABs for the Federal Fiscal Year ending September 30, 2015 will be reduced by 7.3%. The reduction to the federal subsidy for Direct Pay Bonds for the federal Fiscal Year ending June 30, 2016 is expected to be announced prior to September 30, 2016. The District’s Series 2009 BABs are payable from and secured by ad valorem taxes which are to be assessed in amounts sufficient to pay principal of and interest on the Series 2009 BABs when due. The County has levied and will continue to levy ad valorem property taxes in an amount sufficient to pay principal of and interest on the Series 2009 BABs when due.

Winthrop Capital Lease. On December 1, 2012, the District entered into a five-year lease agreement with Winthrop (the “Winthrop Lease”) to finance up to $8,339,044 of hardware, software and implementation services associated with the purchase and improvement of the Ellucian/Banner software program and related network expansion costs. Principal of the Winthrop Lease, which accrues at 2.284% per annum, is paid from amounts in the Debt Service Fund and interest on the Winthrop Lease is paid from amounts in the General Fund. The principal amount of the Winthrop Lease is currently $4,378,232.

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See Note 6.B. of the Audited Financial Statements of the District for the Fiscal Year Ended June 30, 2015 attached as Appendix B hereto.

Overlapping Debt Obligations

Set forth on Table A-20 on the following page is the Schedule of Direct and Overlapping Bonded Debt (the “Debt Report”) dated March 1, 2016 prepared by California Municipal Statistics, Inc., which provides information with respect to direct and overlapping debt within the District as of March 1, 2016. The Debt Report is included for general information purposes only and does not include debt issued subsequent to its date, including the Bonds described in the forepart to this Official Statement. The District has not reviewed the Debt Report for completeness or accuracy and makes no representations in connection therewith. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District. Such long-term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The first column in Table A-20 names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. Column 2 shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in Table A-20) produces the amount shown in column 3, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.

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TABLE A-20

PASADENA AREA COMMUNITY COLLEGE DISTRICT Schedule of Direct and Overlapping Bonded Debt

As of March 1, 2016

2015-16 Assessed Valuation: $74,969,447,887 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 3/1/16 Los Angeles County Flood Control District 6.001% $ 757,926 Metropolitan Water District 2.958 2,746,947 Pasadena Area Community College District 100.00 88,355,000(1) Arcadia Unified School District 100.00 187,723,308 La Canada Unified School District 100.00 24,318,870 Pasadena Unified School District 100.00 313,510,000 San Marino Unified School District 100.00 28,664,808 South Pasadena Unified School District 100.00 35,961,982 Temple City Unified School District 100.00 54,179,978 High School and School Districts 34.891-100.00 138,517,001 City of Arcadia 98.473 12,186,034 Palmdale Water District 0.028 14,781 Community Facilities Districts 100.00 6,005,000 County 1915 Act Bonds 100.00 1,840,000 Los Angeles County Regional Park and Open Space Assessment District 5.883 2,977,386 TOTAL GROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $897,759,021 Less: Palmdale Water District bonds partially supported by net operating revenues 9,460 TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $897,749,561 OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 5.883% $ 104,869,222 Los Angeles County Superintendent of Schools Certificates of Participation 5.883 467,367 School District Certificates of Participation Various 8,046,509 City of Pasadena General Fund Obligations 100.00 456,841,949 City of Pasadena Pension Obligations 100.00 119,460,000 Other City General Fund Obligations Various 11,969,540 Los Angeles County Sanitation District Authorities Various 18,501,343 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $720,155,930 Less: City of Pasadena general fund obligations supported by other revenue sources 388,104,790 TOTAL NET OVERLAPPING GENERAL FUND DEBT $332,051,140 OVERLAPPING TAX INCREMENT DEBT: $32,996,684 GROSS COMBINED TOTAL DEBT $1,650,911,635(2) NET COMBINED TOTAL DEBT $1,262,797,385 Ratios to 2015-16 Assessed Valuation: Direct Debt ($88,355,000) ............................................................... 0.12% Total Direct and Overlapping Tax and Assessment Debt ................. 1.20% Gross Combined Total Debt ............................................................. 2.20% Net Combined Total Debt ................................................................. 1.68% Ratios to Redevelopment Incremental Valuation ($5,112,783,198): Total Overlapping Tax Increment Debt ............................................ 0.65%

(1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease

obligations.


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FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA

General

The operating income for community college districts consists primarily of two components, State Aid funded from the State General Fund and a locally generated portion derived from the district’s share of the general 1% ad valorem property tax levy authorized by the State Constitution. In addition, community college districts also receive revenues from enrollment fees and tuition fees, and categorical aid funds received from the State and federal government under various programs, which are amounts restricted to specific categories of use. Currently, the District receives approximately 81% of its General Fund revenues from funds of or controlled by the State. As a result, decreases in State revenues, or in State legislative appropriations made to fund education, may significantly affect District operations. See “District Financial Information – District Budget”, “District Financial Information – Significant Accounting Policies, System of Accounts and Audited Financial Statements” and “Funding of Community College Districts in California - State Budget” herein.

Payments made to K-12 public schools and public colleges and universities are priority payments for State funds and are expected to be made prior to other State payment obligations. Although the State Constitution protects the priority of payments to K-12 schools, colleges and universities, it does not protect the timing of such payments, and other obligations may be scheduled and have been scheduled to be paid in advance of those dates on which payments to community college districts are scheduled to be made. See “ – State Cash Management Plan” herein.

A large percentage of a community college district’s budgeted revenues comes from categorical funds which are provided exclusively by the State and federal government. Categorical funds are to be used for specific programs and typically cannot be used for any other purpose. The State lottery is another source of funding for community college districts, providing approximately 2.3% of the District’s General Fund revenues for Fiscal Year 2014-15. Each community college district receives the same amount of lottery funds per FTES from the State. Pursuant to State law, school and community college districts must use lottery funds for instructional purposes and may not use such funds for land acquisition, construction or research and development. In addition, a small part of a community college district’s budget is from local sources other than property taxes, such as interest income, donations and sales of property. Some community college districts derive a significant portion of their operating funds from voter-approved parcel taxes.

Pursuant to Section 84750.5 and 84760.5 of the Education Code, the State funds community college districts with an annual allocation based on the number of colleges and comprehensive centers within the districts plus an amount calculated based upon the number of credit and noncredit FTES. Pursuant to the Education Code, the State must allocate an amount not less than $4,675 per credit FTES plus cost-of-living adjustments funded through the annual State Budget Act (defined herein). The State funds noncredit instruction at a uniform rate of $2,811 per FTES plus a cost-of-living adjustment funded through the annual State Budget Act. In addition, the State funds career development and college preparation at a rate of $4,675 per FTES.

In addition, the Education Code authorizes funding for community college districts for certain career development courses, college preparation courses and classes for which no credit is given, and which are offered in a sequence of courses which lead to, among other things, certificates of completion, improved employability or job placement opportunities, certificates of competency in a recognized career field, completion of an associate of arts degree, or for transfer to a 4-year degree program. Pursuant to the Education Code, increases in career development and college preparation FTES will result in an increase in revenues in the year of the increase and at the average rate per career development and college

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preparation FTES, including any cost-of-living adjustment authorized by statute or by the annual State Budget Act and decreases in career development and college preparation FTES will result in a revenue reduction in the year following the decrease and at the average rate per career development and college preparation FTES.

Except as otherwise provided by State law, categorical programs providing direct services to students including, among other things, extended opportunity programs and services, and disabled students programs and services, will be funded separately through the annual State Budget Act and are not assumed under the budget formula referenced above.

State Budget

General. The largest percentage of community college district revenues comes from the State in accordance with the State’s formula for funding community college districts and the Proposition 98 minimum guarantee with respect to education appropriations. See “Funding of Community College Districts in California – State Budget – Fiscal Year 2015-16 State Budget Act”, “Funding of Community College Districts in California– State Budget – Fiscal Year 2016-17 Proposed State Budget”, and “California Constitutional and Statutory Provisions relating to Ad Valorem Property Taxes, District Revenues and Appropriations - Proposition 98” herein. The following description of the State’s budget has been obtained from publicly available information which the District believes to be reliable; however, neither the District nor its counsel (including Disclosure Counsel) guarantees the accuracy or completeness of this information and have not independently verified such information. Additional information regarding State budgets is available at various State-maintained websites, including www.dof.ca.gov. These websites are not incorporated herein by reference and neither of the District nor its counsel (including Disclosure Counsel), make any representation as to the accuracy of the information provided therein.

The State Budget Process. The State’s fiscal year begins on July 1 and ends on June 30. According to the State Constitution, the Governor of the State (the “Governor”) is required to propose a budget for the next fiscal year (the “Governor’s Budget”) to the State Legislature no later than January 10 of each year. State law requires the Governor to update the Governor’s Budget projections and budgetary proposals by May 14 of each year (the “May Revision”). Proposition 25, which was adopted by voters in the State at an election held on November 2, 2010, amended the State Constitution such that a final budget must be adopted by a simple majority vote of each house of the State Legislature by no later than June 15 and the Governor must sign the adopted budget by no later than June 30. The budget becomes law upon the signature of the Governor (the “ State Budget Act”).

Under State law, the annual proposed Governor’s Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor’s Budget, the State Legislature takes up the proposal. Under the State Constitution, money may be drawn from the State Treasury only through an appropriation made by law. The primary source of the annual expenditure authorizations is the State Budget Act, as approved by the State Legislature and signed by the Governor. The Governor may reduce or eliminate specific line items in the State Budget Act or any other appropriations bill without vetoing the entire bill. Such individual line-item vetoes are subject to override by a two-thirds majority vote of each House of the State Legislature. Appropriations also may be included in legislation other than the State Budget Act. Bills containing appropriations (except for K-12 school districts and community college districts (collectively, “K-14 districts”) must be approved by a two-thirds majority vote in each House of the State Legislature and be signed by the Governor. Bills containing education appropriations for K-14 districts require only a simple majority vote. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution. Funds necessary to meet an appropriation need not be in the

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State Treasury at the time such appropriation is enacted; revenues may be appropriated in anticipation of their receipt. However, delays in the adoption of a final State budget in any fiscal year may affect payments of State funds during such budget impasse. See “Funding of Community College Districts in California - State Funding of Schools without a State Budget” herein for a description of payments of appropriations during a budget impasse.

Fiscal Year 2015-16 State Budget Act. On June 24, 2015, the Governor approved the State Budget Act for Fiscal Year 2015-16 (the “2015-16 Budget”), which projected total fiscal year 2015-16 State general fund revenues of $115 billion and total expenditures of $115.4 billion, leaving the State with a year-end general fund balance of approximately $2.1 billion. The 2015-16 Budget projected total year-end reserves of $4.6 billion, including $1.1 billion in the traditional general fund reserve and $3.5 billion in the BSA.

As a result of higher than anticipated State revenues, the 2015-16 Budget includes revised estimates of the Proposition 98 minimum funding guarantees for fiscal years 2013-14 and 2014-15. The 2013-14 minimum guarantee was revised upward to $58.9 billion, an increase of $612 million over the estimate included in the 2014-15 State budget. For Fiscal Year 2014-15, the 2015-16 Budget revised the minimum guarantee upward to $66.3 billion, an increase of $5.4 billion over the estimate included in the 2014-15 Budget.

The 2015-16 Budget set the Proposition 98 minimum funding guarantee for Fiscal Year 2015-16 at $68.4 billion, including $49.4 billion of support from the State general fund. This represented a year-to-year increase of $2.1 billion over the revised level for Fiscal Year 2014-15. For community college districts, the 2015-16 Budget provides total Proposition 98 funding of $7.4 billion, including $4.8 billion from the State general fund. These amounts did not include the $500 million the budget provided for the Adult Education Block Grant described below. Under the 2015-16 Budget, per-FTES spending in fiscal year 2015-16 was $6,379, an increase of $626 (or 10.9%) from the prior year.

Certain of the features of the 2015-16 Budget pertaining to community college districts in the State include the following:

1. Apportionments. Ongoing apportionment funding increased approximately 12% from fiscal year 2014-15, including the following major apportionment increases: (1) an increase of $156.5 million in Proposition 98 funding for general purpose apportionments to fund 3% enrollment growth, supporting about 30,000 additional FTES Statewide, to be distributed in accordance with an allocation model that determines need for access based on specified economic and demographic criteria; (2) $63 million to fund a 1.02% COLA; (3) $50 million to increase the rate for certain noncredit courses (Career Development and College Preparation (“CDCP”) courses) to the credit rate, consistent with 2014-15 trailer legislation. (4) a $267 million increase to be used for any educational or operational purpose including in the areas of facilities, retirement benefits and professional development; and (5) $62 million for hiring of additional full-time faculty, to be allocated among districts according to districts’ number of FTES relative to its number of full-time faculty.

2. K-14 Deferrals. $992 million to eliminate all outstanding apportionment deferrals, including $94 million for community college districts, consistent with a revenue-based trigger mechanism included in the 2014-15 State budget.

3. Student Success. A funding increase of $200 million to the Student Success and Support Program, including $100 million for orientation, counseling and other student services primarily for new students; $85 million to improve access and outcomes for disadvantaged groups; and $12 million for

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community college personnel workshops and training; and $3 million for local technical assistance to community college districts that demonstrate low performance in any area of operations.

4. Extended Opportunity Programs and Services (EOPS). The budget provided $35 million to restore EOPS to its pre-recession funding level of $123 million. EOPS provides academic and support counseling, financial aid, and other support services to disadvantaged students.

5. Cal Grant B Access Awards. $39 million in Proposition 98 funding to augment the Cal Grant B Access Awards, to assist students taking more than 12 units with living costs. The 2015-16 Budget also provides $3 million to assist districts establish administrative procedures to distribute these additional funds.

6. Apprenticeship Programs. $29.1 million to support the expansion of apprenticeship programs. This includes $14 million to grow such existing programs and $15 million to create new apprenticeships in high-demand occupations.

7. Basic Skills. $10 million of Proposition 98 funding to support a pilot program designed to incentivize high schools, community college districts and the California State University system to coordinate the delivery of basic skills instruction to incoming CSU students. The 2015-16 Budget also provides $60 million to assist community college districts to improve the delivery of basic skills instruction by adopting or expanding the use of evidenced-based models of placement, remediation and student support for underprepared students.

8. Career Technical Education Pathways Program. $48 million in one-time Proposition 98 funding to support the Career Pathways Trust Program, which provides grant awards to community college districts to develop, enhance and expand career technical education programs that build upon existing regional capacity to meet labor demands.

9. Deferred Maintenance and Instructional Equipment. $148 million in one-time Proposition 98 funding that community college districts can use to fund deferred facility maintenance, instructional equipment, or specified water conservation projects. Districts will not be required to provide matching funds for deferred maintenance.

10. Mandates. $621 million in Proposition 98 funding to reduce a backlog of unpaid reimbursement claims to community college districts for the cost of State-mandated programs.

11. Adult Education Block Grant Program. $500 million to fund the Adult Education Block Grant program. Prior budgetary legislation mandated the establishment of regional adult education consortia composed of school districts, community college districts and certain other stakeholders to coordinate the delivery of adult education services. Up to $375 million is available to be distributed directly to K-12 school districts and county offices of education to match amounts that have been spent on adult education within the past two years. The balance will be apportioned directly to consortia for distribution to their member agencies. Beginning in fiscal year 2016-17, all funds for adult education will be apportioned directly to consortia. The 2015-16 Budget also provides $25 million in one-time Proposition 98 funding to assist consortia develop or update data systems necessary to evaluate the effectiveness of their programs, as well as to fund State-level activities to develop consistent data policies and data collection procedures.

Fiscal Year 2016-17 Proposed State Budget. On January 7, 2016, the Governor released his proposed State budget for fiscal year 2016-17 (the “Proposed Budget”). The following information is

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based on the State Department of Finance’s summary of the Proposed Budget, as well as the LAO’s overview of the Proposed Budget, dated January 11, 2016.

The Proposed Budget assumes, for fiscal year 2015-16, total general fund revenues of $121.2 billion and total expenditures of $116.1 billion. The State is projected to end the 2015-16 fiscal year with a general fund surplus of $4.2 billion. The Proposed Budget also projects a year-end balance in the BSA of $4.5 billion. For fiscal year 2016-17, the Proposed Budget assumes total general fund revenues of $125.8 billion and authorizes expenditures of $122.6 billion. The State is projected to end the 2016-17 fiscal year with a general fund surplus of $2.2 billion. The Proposed Budget projects that the BSA balance will grow by approximately $1.6 billion as a result of projected increases to State revenues. The Proposed Budget also authorizes an additional deposit of $2 billion to the BSA, bringing the total balance of the BSA to $8 billion by the end of fiscal year 2016-17.

The Proposed Budget provides for retroactive increases to the Proposition 98 minimum funding guarantee for fiscal years 2014-15 and 2015-16 of $400 million and $800 million, respectively. For fiscal year 2016-17, the Proposed Budget sets the minimum funding guarantee at $71.6 billion. Per-FTES Proposition 98 spending in fiscal year 2016-17 is set at $7,003, reflecting an increase of $125 above the revised prior-year level.

The Proposed Budget includes $4.3 billion in Proposition 98 funding increases. For community college districts, the largest proposals are $255 million for deferred maintenance and instructional equipment and $200 million for a new community college workforce development program. Total Proposition 98 funding for community college districts is proposed in the amount of $8.3 billion, consisting of $5.5 billion from the General Fund and $2.8 billion in local property taxes. This would represent an increase of approximately $900 million, or 12%, over the 2015-16 Budget.

Additional Information Regarding State spending for Education. Information about the State budget and State spending for education is regularly available at various State-maintained websites. Text of the State budget may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” Various analyses of the budget may be found at the website of the LAO at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on community college districts in the State, may be found via the website of the State Treasurer, www.treasurer.ca.gov. The information presented in these websites is not incorporated by reference in this Official Statement.

Future State Budgets. The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address the State’s future budget deficits and cash management practices. Future State budgets will be affected by national and State economic conditions, including economic downturns and other factors over which the District has no control. To the extent that the State budget process results in reduced revenues, deferred revenues or increased expenses for the District, the District will be required to make adjustments to its budget and cash management practices. In the event current or future State Budgets decrease the District’s revenues or increase required expenditures by the District from the levels assumed by the District, the District will be required to generate additional revenues, curtail programs or services, or use its reserve funds to ensure a balanced budget.

State Funding of Schools without a State Budget

Although the State Constitution requires that the State Legislature adopt a budget for the State by June 15 of the prior Fiscal Year and that the Governor sign a budget by June 30, this deadline has been missed from time to time. Delays in the adoption of a State Budget Act in any Fiscal Year could impact the receipt of State funding by the District. In November 2010, California voters approved Proposition 25,

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the “On-Time Budget Act of 2010” (“Proposition 25”), which reduced the minimum legislative vote necessary to pass the State Budget Act from a two-thirds vote of the State Assembly and the State Senate to a majority vote of the State Assembly and the State Senate and requires legislators to forfeit their pay if the State Legislature fails to pass the State Budget Act by the June 15 deadline therefor. However, Proposition 25 does not address the two-thirds legislative vote requirement to increase State tax revenues which may subject to budget negotiations. Nevertheless, according to the analysis of the LAO, Proposition 25 could make it easier for the State Legislature to send a budget bill to the Governor and for the State Budget Act to be enacted in a timely manner.

On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California), et al. (also referred to as White v. Davis) (“Connell”). The California Court of Appeal concluded that, absent an emergency appropriation, the State Controller may authorize the payment of State funds during a budget impasse only when payment is either (i) authorized by a “continuing appropriation” enacted by the State Legislature, (ii) authorized by a self-executing provision of the State Constitution, or (iii) mandated by federal law. The Court of Appeal specifically concluded that the provisions of Article XVI, Section 8 of the State Constitution—the provision establishing minimum funding of education for K-14 districts enacted as part of Proposition 98—did not constitute a self-executing authorization to disburse funds, stating that such provisions merely provide formulas for determining the minimum funding to be appropriated every budget year but do not appropriate funds. Nevertheless, the State Controller has concluded that the provisions of the State Education Code establishing K-12 and county office of education revenue limit funding do constitute continuing appropriations enacted by the State Legislature and, therefore, has indicated that State payments of such amounts would continue during a budget impasse. The State Controller, however, has concluded that K-12 categorical programs are not authorized pursuant to a continuing appropriation enacted by the State Legislature and, therefore, cannot be paid during a budget impasse. To the extent the Connell decision applies to State payments budgeted to be received by the District in the District’s budget, the requirement that there be either a final budget bill or an emergency appropriation may result in the delay of some payments to the District while such required legislative action is delayed, unless the payments are self-executing authorizations, continuing appropriations or are subject to a federal mandate.

CALIFORNIA CONSTITUTIONAL AND STATUTORY PROVISIONS RELATING TO AD VALOREM PROPERTY TAXES, DISTRICT REVENUES AND APPROPRIATIONS

Constitutionally Required Funding of Education

The State Constitution requires that from all State revenues there shall first be set apart the moneys to be applied by the State for the support of the public school system and public institutions of higher education. California community college districts receive a significant portion of their funding from State appropriations. As a result, decreases as well as increases in State revenues can significantly affect appropriations made by the State Legislature to community college districts.

Article XIIIA of the California Constitution

On June 6, 1978, California voters approved Proposition 13, adding Article XIIIA to the California Constitution (“Article XIIIA”). Article XIIIA, among other things, affects the valuation of real property for the purpose of taxation in that it defines the full cash property value to mean “the county assessor’s valuation of real property as shown on the 1975/76 tax bill under ‘full cash value,’ or thereafter, the appraised value of real property newly constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data for

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the area under taxing jurisdiction, or reduced in the event of declining property value caused by substantial damage, destruction or other factors including a general economic downturn. Any reduction in assessed value is temporary and may be adjusted for any given year by the Assessor. The assessed value increases to its pre-reduction level (escalated to the annual inflation rate of no more than two percent) following the year(s) for which the reduction is applied. Article XIIIA further limits the amount of any ad valorem tax on real property to 1% of the full cash value except that additional taxes may be levied to pay (i) debt service on indebtedness approved by the voters prior to July 1, 1978, (ii) bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two thirds of the votes cast by the voters voting on the proposition; and (iii) bonded indebtedness incurred by a school district, community college district or county office of education (which is separate from the County) for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the school district, community college district or the County, as appropriate, but only if certain accountability measures are included in the proposition.

Future assessed valuation growth allowed under Article XIIIA due to new construction, change of ownership, or growth up to the permitted 2% inflation factor will be allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies, school districts and community college districts will share the growth of “base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation the following year.

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax. The 1% ad valorem property tax is automatically levied by the County and distributed according to a formula among taxing agencies. Any such allocation made to a local agency continues as part of its allocation in future years. Separate ad valorem property taxes to pay voter approved indebtedness such as the Bonds are levied by the County on behalf of the local agencies. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the Proposition 13 limit except for taxes to support such indebtedness.

The full cash value of taxable property under Article XIIIA represents the maximum taxable value for property. Accordingly, the fair market value for a given property may not be the equivalent of the full cash value under Article XIIIA. During periods in which the real estate market within the District evidences an upward trend, the fair market value for a given property, which has not been reappraised due to a change in ownership, may exceed the full cash value of such property. During periods in which the real estate market demonstrates a downward trend, the fair market value of a given property may be less than the full cash value of such property and the property owner may apply for a “decline in value” reassessment pursuant to Proposition 8 (“Proposition 8 Reassessments”). Proposition 8 Reassessments, if approved by the Office of the County Assessor, lower valuations of properties (where no change in ownership has occurred) if the current value of such property is lower than the full cash value of record of the property. The value of a property reassessed as a result of a decline in value may change, but in no case may its full cash value exceed its fair market value. When and if the fair market value of a property which has received a Proposition 8 Reassessment increases above its Proposition 13 factored base year value, the Office of the County Assessor will enroll such property at its Proposition 13 factored base year value.

Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of assessed

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value and all general tax rates reflect $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness are also applied to 100% of assessed value.

Article XIIIB of the State Constitution

An initiative to amend the State Constitution entitled “Limitation of Government Appropriations” was approved on September 6, 1979 thereby adding Article XIIIB to the State Constitution (“Article XIIIB”). Article XIIIB has been amended by Proposition 98 which was approved by voters in November 1998, Proposition 111 which was approved by voters in June 1990, Proposition 10 which was approved by voters in November 1998 and Proposition 1A which was approved by voters in November 2004. Under Article XIIIB, the State and each local governmental entity have an annual “appropriations limit” and are not permitted to spend certain moneys that are called “appropriations subject to limitation” (consisting of tax revenues, State subventions and certain other funds) in an amount higher than the appropriations limit.

Article XIIIB of the California Constitution limits the annual appropriations of the State and any city, county, school district, community college district, special district, authority or other political subdivision of the State (e.g. local governments) to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the governmental entity. The “base year” for establishing such appropriation limit is the 1986-87 fiscal year. Article XIIIB does not affect the appropriations of moneys that are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. Increases in appropriations by a governmental entity are also permitted (i) if financial responsibility for providing services is transferred to a governmental entity, or (ii) for emergencies so long as the appropriations limits for the three years following the emergency are reduced accordingly to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing services is transferred from the government entity

Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. However, in the event that a community college district’s revenues exceed its spending limit, the community college district may, in any fiscal year, increase its appropriations limit to equal its spending by borrowing appropriations limit from the State, provided the State has sufficient excess appropriations limit in such year. See “Funding of Community College Districts in California—State Budget” herein.

The District Board adopted the annual appropriation limit for Fiscal Year 2015-16 of approximately $185,046,337. The limitation applies only to Proceeds of Taxes (as defined in Article XIIIB) and therefore does not apply to service fees and charges, investment earnings on non-proceeds of taxes, fines, and revenue from the sale of property and taxes received from the State and federal governments that are tied to special programs. For Fiscal Year 2014-15, the projected funds subject to limitation totaled approximately $98,520,264 and were approximately $86,526,073 below the Article XIIIB limit.

Article XIIIC and Article XIIID of the State Constitution

On November 5, 1996, the voters of the State approved Proposition 218, the so called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution (“Article XIIIC” and “Article XIIID”), which contain a number of provisions affecting the ability of local

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agencies, including community college districts, to levy and collect both existing and future taxes, assessments, fees and charges.

Article XIIID deals with assessments and property related fees and charges. Article XIIID explicitly provides that nothing in Article XIIIC or XIIID shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development; however, it is not clear whether the initiative power is therefore unavailable to repeal or reduce developer and mitigation fees imposed by the District.

Proposition 98

On November 8, 1988, State voters approved Proposition 98, a combined initiative, constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). The Accountability Act changed State funding of public education below the university level, and the operation of the State’s Appropriations Limit, primarily by guaranteeing State funding for K-14 districts.

Under Proposition 98 (as modified by Proposition 111, which was enacted on June 5, 1990), K-14 districts are guaranteed the greater of (i) in general, a fixed percent of the State General Fund’s revenues (“Test 1”), (ii) the amount appropriated to K-14 districts in the prior year, adjusted for changes in the cost of living (measured as in Article XIIIB by reference to State per capita personal income) and enrollment (“Test 2”), or (iii) a third test, which would replace Test 2 in any year when the percentage growth in per capita State General Fund revenues from the prior year plus 0.05% is less than the percentage growth in State per capita personal income (“Test 3”). Under Test 3, schools would receive the amount appropriated in the prior year adjusted for changes in enrollment and per capita State General Fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 would become a “credit” to schools which would be the basis of payments in future years when per capita State General Fund revenue growth exceeds per capita personal income growth. Legislation adopted prior to the end of Fiscal Year 1988-89 that implemented Proposition 98, determined the K-14 districts’ funding guarantee under Test 1 to be 40.3% of the State General Fund tax revenues, based on 1986-87 appropriations. However, that percentage has been adjusted to 34.559% to account for a subsequent redirection of local property taxes whereby a greater proportion of education funding now comes from local property taxes.

Proposition 98 permits the State Legislature, by a two-thirds vote of both houses of the State Legislature and with the Governor’s concurrence, to suspend the K-14 districts’ minimum funding formula for a one-year period. In the fall of 1989, the State Legislature and the Governor utilized this provision to avoid having 40.3% of revenues generated by a special supplemental sales tax enacted for earthquake relief go to K-14 districts. In the fall of 2004, the State Legislature and the Governor agreed to suspend the K-14 districts’ minimum funding formula set forth pursuant to Proposition 98 in order to address a projected shortfall during Fiscal Year 2004-05. Proposition 98 also contains provisions transferring certain State tax revenues in excess of the Article XIIIB limit to K-14 districts.

Proposition 39

Proposition 39, which was approved by California voters in November 2000 (“Proposition 39”), provides an alternative method for passage of school facilities bond measures by lowering the constitutional voting requirement from two-thirds to 55% of voters and allows property taxes to exceed the current 1% limit in order to repay such bonds. The lower 55% vote requirement would apply only to bond issues to be used for construction, rehabilitation, or equipping of school facilities or the acquisition of real property for school facilities. The State Legislature enacted additional legislation which placed

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certain limitations on this lowered threshold, requiring that (i) two-thirds of the governing board of a community college district approve placing a bond issue on the ballot, (ii) the bond proposal be included on the ballot of a Statewide or primary election, a regularly scheduled local election, or a Statewide special election (rather than a community college district election held at any time during the year), (iii) the tax rate levied as a result of any single election not exceed $25 for a community college district, $60 for a unified school district, or $30 for an elementary school or high school district per year per $100,000 of taxable property value, and (iv) the governing board of the school district or community college district appoint a citizen’s oversight committee to inform the public concerning the spending of the bond proceeds. In addition, the school board of the applicable district is required to perform an annual, independent financial and performance audit until all bond funds have been spent to ensure that the funds have been used only for the projects listed in the measure. The District’s Measure P Authorization bond program was authorized pursuant to Proposition 39. See “District Financial Information - District Debt - General Obligation Bonds” herein. The District presently believes that it is in compliance with all Proposition 39 requirements.

Proposition 1A

Proposition 1A (“Proposition 1A”), proposed by the Legislature as a Senate Constitutional Amendment in connection with the 2004-05 Budget Act and approved by California voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provided, however, that beginning in fiscal year 2008-09, the State could shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses of the State Legislature and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the VLF rate below 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. The Revised 2009-10 State Budget Act enacted a shift of approximately $1.9 billion of city, county, and special district property taxes pursuant to Proposition 1A and used such funds to offset State General Fund spending for education and other programs. The State repaid this obligation by June 15, 2013, the deadline therefor. The State’s ability to initiate future exchanges and shifts of funds will be limited by Proposition 22. See “California Constitutional and Statutory Provisions Relating to Ad Valorem Property Taxes, District Revenues and Appropriations - Proposition 22” below.

Proposition 22

Proposition 22 (“Proposition 22”), which was approved by California voters in November 2010, prohibits the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services and prohibits fuel tax revenues from being loaned for cash-flow or budget balancing purposes to the State General Fund or any other State fund. Due to the prohibition with respect to State’s ability to take, reallocate, and borrow money raised by local governments for local purposes, Proposition 22 supersedes certain provisions of

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Proposition 1A of 2004. See “ California Constitutional and Statutory Provisions Relating to Ad Valorem Property Taxes, District Revenues and Appropriations - Proposition 1A” herein. In addition, Proposition 22 generally eliminated the State’s authority to temporarily shift property taxes from cities, counties, and special districts to schools, temporarily increased school and community college district’s share of property tax revenues, prohibited the State from borrowing or redirecting redevelopment property tax revenues or requiring increased pass-through payments thereof, and prohibited the State from reallocating vehicle license fee revenues to pay for State-imposed mandates. In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with cities and counties. The LAO stated that Proposition 22 would prohibit the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies. However, the California Supreme Court, in California Redevelopment Association v. Matosantos, held that the dissolution provisions set forth in ABx1 26 were constitutional and permitted the State to allocate revenues that would have been directed to the redevelopment agencies to make pass-through payments (i.e., payments that such entities would have received under prior law) to local agencies and to successor agencies for retirement of the debts and certain administrative costs of the redevelopment agencies.

Proposition 22 prohibits the State from borrowing sales taxes or excise taxes on motor vehicle fuels or changing the allocations of those taxes among local government except pursuant to specified procedures involving public notices and hearings. In addition, Proposition 22 requires that the State apply the formula setting forth the allocation of State fuel tax revenues to local agencies revert to the formula in effect on June 30, 2009. The LAO stated that Proposition 22 would require the State to adopt alternative actions to address its fiscal and policy objectives, particularly with respect to short-term cash flow needs..

Proposition 55

The Kindergarten-University Public Education Facilities Bond Act of 2004 appeared on the March 2, 2004 ballot as Proposition 55 and was approved by State voters (“Proposition 55”). This measure authorizes the sale and issuance of $12.3 billion in general obligation bonds by the State for funding the construction and renovation of public K-12 school facilities ($10 billion) and public higher education facilities ($2.3 billion). Proposition 55 includes $5.26 billion for the acquisition of land and construction of new school buildings. A school district would be required to pay for 50% of costs with local resources unless it qualifies for state hardship funding. The measure also provides that up to $300 million of these new construction funds is available for charter school facilities.

Proposition 55 makes $2.25 billion available for the reconstruction or modernization of existing public school facilities. Districts would be required to pay 40% of project costs from local resources. Proposition 55 directs a total of $2.44 billion to school districts with schools which are considered critically overcrowded. These funds would go to schools that have a large number of pupils relative to the size of the school site. Proposition 55 also makes a total of $50 million available to fund joint-use projects. Proposition 55 includes $2.3 billion to construct new buildings and related infrastructure, alter existing buildings and purchase equipment for use in these buildings for the State’s public higher education systems. The measure allocates $690 million to the University of California and California State University and $920 million to community colleges in the State. The Governor and the State Legislature select specific projects to be funded by the bond proceeds.

Proposition 1D

The Kindergarten-University Public Education Facilities Bond Act of 2006 appeared on the November 7, 2006 ballot as Proposition 1D and was approved by State voters (“Proposition 1D”). This measure authorizes the sale and issuance of $10.4 billion in general obligation bonds by the State for

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funding the construction and renovation of public K-12 school facilities ($7.3 billion) and public higher education facilities ($3.1 billion). Proposition 1D includes $1.9 billion for the acquisition of land and construction of new school buildings. A school district would be required to pay for 50% of costs with local resources unless it qualifies for state hardship funding. Proposition 1D also provides that up to $500 million of these construction funds is available for charter school facilities.

Proposition 1D makes $3.3 billion available for the reconstruction or modernization of existing public school facilities. Districts would be required to pay 40% of project costs from local resources. Proposition 1D directs a total of $1.0 billion to school districts with schools that are considered critically overcrowded. These funds would go to schools that have a large number of pupils relative to the size of the school site. Proposition 1D also makes a total of $29 million available to fund joint-use projects. Proposition 1D includes $3.1 billion to construct new buildings and related infrastructure, alter existing buildings and purchase equipment for use in these buildings for California’s public higher education systems. The measure allocates $890 million to the University of California campuses and $690 million to the California State University campuses and $1.5 billion to California community colleges. Pursuant to Proposition 1D, the Governor and the State Legislature select specific projects to be funded by the bond proceeds.

The District applies for apportionments from State bond initiatives and historically has received funding from such State bond initiatives. No assurances can be given that the District will continue to apply for apportionments from current or future State bond initiatives or that the District will continue to receive funding from State bond initiatives for which it applies.

Proposition 30

On November 6, 2012, voters of the State approved the Temporary Taxes to Fund Education, Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment (also known as “Proposition 30”), which temporarily increases the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposes an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposes an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017, for storage, use, or other consumption in the State.

This excise tax will be levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing on January 1, 2012 and ending in the taxable year commencing on December 31, 2018, Proposition 30 increases the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,001 for single filers (over $500,000 but less than $600,001 for joint files and over $340,000 but less than $408,001 for head-of-household filers), (ii) 2% for taxable income over $300,000 but less than $500,001 for single filers (over $600,000 but less than $1,000,001 for joint filers and over $408,000 but less than $680,001 for head-of-household filers), and (iii) 3% for taxable income over $500,000 for single filers (over $1,000,000 for joint filers and over $680,000 for head-of-household filers).

The revenues generated from the temporary tax increases will be included in the calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts.

From an accounting perspective, the revenues generated from the temporary tax increases are being deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to school districts and 11% provided to community college districts. The funds

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will be distributed to school districts and community college districts in the same manner as existing unrestricted per-student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per FTES. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.

Proposition 2

On November 4, 2014, voters approved the Rainy Day Budget Stabilization Fund Act (also known as “Proposition 2”). Proposition 2 is a legislatively-referred constitutional amendment which makes certain changes to State budgeting practices, including substantially revising the conditions under which transfers are made to and from the State’s Budget Stabilization Account (the “BSA”) established by the California Balanced Budget Act of 2004 (also known as Proposition 58).

Under Proposition 2, and beginning in fiscal year 2015-16 and each fiscal year thereafter, the State will generally be required to annually transfer to the BSA an amount equal to 1.5% of estimated State general fund revenues (the “Annual BSA Transfer”). Supplemental transfers to the BSA (a “Supplemental BSA Transfer”) are also required in any fiscal year in which the estimated State general fund revenues that are allocable to capital gains taxes exceed 8% of total estimated general fund tax revenues. Such excess capital gains taxes (net of any portion thereof owed to K-14 school districts pursuant to Proposition 98) will be transferred to the BSA. Proposition 2 also increases the maximum size of the BSA to an amount equal to 10% of estimated State general fund revenues for any given fiscal year. In any fiscal year in which a required transfer to the BSA would result in an amount in excess of the 10% threshold, Proposition 2 requires such excess to be expended on State infrastructure, including deferred maintenance.

For the first 15-year period ending with the 2029-30 fiscal year, Proposition 2 provides that half of any required transfer to the BSA, either annual or supplemental, must be appropriated to reduce certain State liabilities, including making certain payments owed to K-14 school districts, repaying State interfund borrowing, reimbursing local governments for State mandated services, and reducing or prefunding accrued liabilities associated with State-level pension and retirement benefits. Following the initial 15-year period, the Governor and the State Legislature are given discretion to apply up to half of any required transfer to the BSA to the reduction of such State liabilities. Any amount not applied towards such reduction must be transferred to the BSA or applied to infrastructure, as described above.

Proposition 2 changes the conditions under which the Governor and the State Legislature may draw upon or reduce transfers to the BSA. The Governor does not retain unilateral discretion to suspend transfers to the BSA, nor does the State Legislature retain discretion to transfer funds from the BSA for any reason, as previously provided by law. Rather, the Governor must declare a “budget emergency,” defined as an emergency within the meaning of Article XIIIB of the Constitution or a determination that estimated resources are inadequate to fund State general fund expenditures, for the current or ensuing fiscal year, at a level equal to the highest level of State spending within the three immediately preceding fiscal years. Any such declaration must be followed by a legislative bill providing for a reduction or transfer. Draws on the BSA are limited to the amount necessary to address the budget emergency, and no draw in any fiscal year may exceed 50% of funds on deposit in the BSA unless a budget emergency was declared in the preceding fiscal year.

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Proposition 2 also requires the creation of the Public School System Stabilization Account (the “PSSSA”) into which transfers will be made in any fiscal year in which a Supplemental BSA Transfer is required (as described above). Such transfer will be equal to the portion of capital gains taxes above the 8% threshold that would be otherwise paid to K-14 school districts as part of the Minimum Funding Guarantee. A transfer to the PSSSA will only be made if certain additional conditions are met, as follows: (i) the Minimum Funding Guarantee was not suspended in the immediately preceding fiscal year, (ii) the operative Proposition 98 formula for the fiscal year in which a PSSSA transfer might be made is “Test 1,” (iii) no maintenance factor obligation is being created in the budgetary legislation for the fiscal year in which a PSSSA transfer might be made, (iv) all prior maintenance factor obligations have been fully repaid, and (v) the Minimum Funding Guarantee for the fiscal year in which a PSSSA transfer might be made is higher than the immediately preceding fiscal year, as adjusted for ADA growth (FTES growth, for community college districts) and cost of living. Proposition 2 caps the size of the PSSSA at 10% of the estimated Minimum Funding Guarantee in any fiscal year, and any excess funds must be paid to K-14 school districts. Reductions to any required transfer to the PSSSA, or draws on the PSSSA, are subject to the same budget emergency requirements described above. However, Proposition 2 also mandates draws on the PSSSA in any fiscal year in which the estimated Minimum Funding Guarantee is less than the prior year’s funding level, as adjusted for ADA growth and cost of living.

Future Initiatives

The foregoing described amendments to the State Constitution and propositions were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time, other initiative measures could be adopted that further affect District revenues or the District’s ability to expend revenues.

REGIONAL ECONOMIC AND DEMOGRAPHIC INFORMATION

The District is located in the City of Pasadena and portions of the County of Los Angeles. The following economic and demographic information pertains to the City of Pasadena and the County of Los Angeles. The Refunding Bonds are general obligations of the District, but are not general obligations of the City or the County.

Population

The following Table A-21 sets forth the estimates of the population of the City, the County and the State in calendar years 2011 through 2015.

TABLE A-21 Population Estimates

As of January 1, 2011 through 2015

Year (as of January 1)

City of Pasadena

County of Los Angeles

State of California

2011 138,768 9,847,712 37,427,946 2012 139,291 9,889,520 37,668,804 2013 140,020 9,958,091 37,966,471 2014 140,949 10,054,852 38,357,121 2015 141,510 10,136,559 38,714,725

Source: State of California Department of Finance Demographic Research Unit.

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Income

The following Table A-22 summarizes the median household income for the City, the County, the State and the United States for calendar years 2010 through 2014.

TABLE A-22 Median Household Income(1)

2010 through 2014

Year City of

Pasadena County of

Los Angeles State of

California United States of

America 2010 $67,047 $55,476 $60,883 $51,914 2011 72,265 56,266 61,632 52,762 2012 65,423 56,241 61,400 53,046 2013 69,302 55,909 61,094 53,046 2014 70,873 55,746 61,933 53,657

(1) Estimated. In inflation-adjusted dollars.

Source: U.S. Census Bureau – Economic Characteristics – American Community Survey.

Set forth in Table A-23 below is the distribution of income by certain income groupings per household for the City, the County, the State and the United States for calendar year 2014.

TABLE A-23 Income Groupings 2014(1)(2)

Income Per Household City of

Pasadena County of

Los Angeles State of

California United States of

America $24,999 & Under 19.4% 23.1% 20.4% 23.2% $25,000-49,999 17.3 22.3 21.1 23.7 $50,000 & Over 63.5 54.7 58.3 53.0

(1) Estimated. In inflation-adjusted dollars. (2) Percent of Households.

Source: U.S. Census Bureau – Economic Characteristics – American Community Survey.

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Employment

The District is within the Los Angeles-Long Beach Primary Metropolitan Statistical Area Labor Market (Los Angeles County). Table A-24 below summarizes wage and salary employment in the County for calendar years 2011 through 2015.

TABLE A-24 Labor Force and Employment in Los Angeles County(1)

2011 2012 2013 2014 2015 Civilian Labor Force(2) 4,929,500 4,914,500 4,982,300 5,025,900 5,011,700

Employment 4,326,100 4,378,800 4,495,700 4,610,800 4,674,800 Unemployment 603,400 535,800 486,600 415,100 336,900 Unemployment Rate 12.2% 10.9% 9.8% 8.3% 6.7%

Wage and Salary Employment(3)

Farm 5,600 5,400 5,500 5,300 4,967 Mining and Logging 4,100 4,300 4,600 4,700 3,883 Construction 105,100 109,200 116,200 120,200 126,125 Manufacturing 366,900 367,400 368,200 364,900 360,792 Trade, Transportation and Utilities 750,700 767,500 782,200 800,700 817,842 Information 192,000 191,500 196,400 195,900 202,692 Financial Activities 208,600 211,000 211,700 209,700 214,175 Professional and Business Services 544,000 571,600 594,700 609,400 600,258 Educational and Health Services 643,200 674,300 719,600 748,000 742,192 Leisure and Hospitality 394,700 415,400 439,300 464,600 488,142 Other Services 137,000 141,700 145,700 151,700 151,658 Government 565,500 556,800 551,200 556,700 566,433

Total(1) 3,917,400 4,016,100 4,135,300 4,231,800 4,279,159

(1) Totals may not equal sum of component parts due to rounding. All data are annual averages and updated per March 2015

Benchmark. (2) Based on place of residence. (3) As of January 22, 2016, the State Employment Development Department reported a seasonally adjusted unemployment rate

in Los Angeles County of 5.9% for December 2015, compared to a rate of 8.0% for December 2014. (4) Based on place of work.

Source: State Employment Development Department, Labor Market Information Division.

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Commercial Activity

Table A-25 below sets forth taxable sales in the City for the calendar years 2011 through 2013 and through the third quarter of calendar year 2014.

TABLE A-25 City of Pasadena

Taxable Transactions (in Thousands of Dollars) Calendar Years 2011 through 2013 and Third Quarter 2014

Type of Business 2011

Annual 2012

Annual 2013

Annual 2014

Third Quarter Motor Vehicle and Parts Dealers $ 330,681 $ 348,238 $ 369,637 $295,080 Home Furnishings and Appliance Stores 191,128 199,356 197,264 132,930 Building Materials; Garden Equipment

and Supplies 73,615 89,810 101,812 83,252 Food and Beverage Stores 142,513 146,520 150,555 112,019 Gasoline Stations 172,412 176,701 165,094 126,053 Clothing and Clothing Accessories Stores 206,176 217,405 235,425 163,566 General Merchandise Stores 218,148 216,736 205,336 138,037 Food Services and Drinking Places 402,405 436,941 456,063 366,188 Other Retail Group 503,891 488,450 459,542 312,304

Total Retail and Food Services $2,240,968 $2,320,157 $2,340,726 $1,729,429 All Other Outlets 483,210 497,480 517,665 393,812 TOTAL ALL OUTLETS(1) $2,724,178 $2,817,637 $2,858,392 $2,123,241

(1) Totals may not equal sum of component parts due to rounding.

Source: California State Board of Equalization, Taxable Sales in California.

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Major Employers

The economic base of the City is diverse with no one sector being dominant. Some of the leading activities include government (including education), business/professional management services (including engineering), health services (including training and research), tourism, distribution, and entertainment. The top nineteen employers in the City, as set forth in the City’s Comprehensive Annual Financial Report for the Year Ended June 30, 2015 are set forth below in Table A-26.

TABLE A-26 City of Pasadena Major Employers

Employer Product/Service Employees California Institute of Technology Research and Development 5,000 Kaiser Permanente Healthcare 4,813 California Institute of Technology - Campus Education 3,900 Huntington Memorial Hospital Healthcare 3,238 The City of Pasadena Government 2,106 Pasadena Unified School District Education 2,037 Bank of America Financial Services 1,883 Pasadena City College Education 2,037 Art Center College of Design Education 701 Hathaway-Sycamores Child and Family Services 681 AT&T (SBC IN 2006) Telecommunications 634 Parsons Corporation Healthcare 547 The Langham Huntington Hotel (The Ritz-Carlton) Hospitality 559 Western Asset Financial Services 552 East West Bank Construction 467 One West Bank (IndyMac in 2006) Financial Services 555 Rusnak Pasadena Automobile Dealer 346 Pacific Clinics Administration Financial Services 280 Avon Products Consumer Goods 170

Source: City of Pasadena Comprehensive Annual Financial Report Year Ended June 30, 2015.

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Construction

The following Table A-27 sets forth the valuation and number of permits for residential buildings and non-residential units issued in the City for the years 2011 through 2015.

TABLE A-27 City of Pasadena

Building Permit Valuations and Permit Activity 2011 to 2015(1)

($ in Millions)

2011 2012 2013 2014 2015 Building Permit Valuations

Nonresidential $56.3 $ 92.5 $ 96.7 $ 103.7 $ 106.4 Residential 24.4 24.3 27.4 42.3 50.3 Residential New Construction 9.8 61.2 18.9 82.4 89.0

Total(1) $90.5 $ 178.1 $143.0 $ 228.4 $ 245.7 Number of Permits Issued

Nonresidential 619 717 Residential 2,077 3,022 101 547 578 Residential New Construction 39 25 N/A N/A N/A

Total(2) 2,735 7,764 7,764 7,764 7,764 (2) Total may not equal sum of component parts due to rounding.

Source: City of Pasadena, Planning and Permitting Department.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2015


LOS ANGELES COUNTY

REPORT ON AUDIT OF FINANCIAL STATEMENTS

AND SUPPLEMENTARY INFORMATION INCLUDING REPORTS ON COMPLIANCE

June 30, 2015


AUDIT REPORT June 30, 2015

CONTENTS

Page

INDEPENDENT AUDITOR’S REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................... i-ix BASIC FINANCIAL STATEMENTS:

Statement of Net Position............................................................................................ 1 Statement of Revenues, Expenses and Changes in Net Position ................................ 2 Statement of Cash Flows ............................................................................................. 3-4 Statement of Fiduciary Net Position ........................................................................... 5 Statement of Changes in Fiduciary Net Position ........................................................ 6

NOTES TO FINANCIAL STATEMENTS ................................................................. 7-47 REQUIRED SUPPLEMENTARY INFORMATION:

Schedule of Postemployment Healthcare Benefits Funding Progress ........................ 48 Schedule of the District’s Proportionate Share of the Net Pension Liability – State Teachers’ Retirement Plan ...................................................................................... 49 Schedule of the District’s Proportionate Share of the Net Pension Liability – California Public Employees’ Retirement System – Schools Pool Plan.......................... 50 Schedule of District Contributions – State Teachers’ Retirement Plan ............................ 51 Schedule of District Contributions – California Public Employees’ Retirement System –

Schools Pool Plan ........................................................................................................ 52 Notes to Required Supplementary Information .......................................................... 53

SUPPLEMENTARY INFORMATION:

History and Organization ............................................................................................ 54 Schedule of Expenditures of Federal Awards ............................................................. 55-56 Schedule of State Financial Assistance - Grants ......................................................... 57 Schedule of Workload Measures for State General Apportionment Recal

(Actual) Attendance ............................................................................................... 58 Reconciliation of Annual Financial and Budget Report With Audited

Financial Statements .............................................................................................. 59 Reconciliation of 50 Percent Law Calculation............................................................ 60-61 Proposition 30 Education Protection Account Expenditure Report ............................ 62 Notes to Supplementary Information .......................................................................... 63


AUDIT REPORT June 30, 2015

CONTENTS

Page

OTHER INDEPENDENT AUDITOR’S REPORTS: Independent Auditor’s Report on Internal Control over Financial Reporting and

on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ........................... 64-65

Independent Auditor’s Report on Compliance for Each Major Federal Program; and Report on Internal Control Over Compliance Required by OMB Circular A-133 ........................................................................................................ 66-68

Independent Auditor’s Report on State Compliance .................................................. 69-71

FINDINGS AND RECOMMENDATIONS: Schedule of Findings and Questioned Costs – Summary of Auditor Results ............. 72 Schedule of Findings and Questioned Costs Related to Federal Awards ................... 73-75 Schedule of Findings and Questioned Costs Related to State Awards ....................... 76-77 Status of Prior Year Findings and Questioned Costs .................................................. 78-89

INDEPENDENT AUDITOR'S REPORT The Board of Trustees Pasadena Area Community College District 1570 East Colorado Blvd. Pasadena, CA 91106 Report on the Financial Statements We have audited the accompanying basic financial statements of the Pasadena Area Community College District (the District) as of and for the year ended June 30, 2015, and the related notes to the 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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain 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, we consider internal control relevant to the District’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Board of Trustees Pasadena Area Community College District We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements listed in the aforementioned table of contents present fairly, in all material respects, the financial position of the Pasadena Area Community College District as of June 30, 2015, and the results of its operations, changes in net position and cash flows for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 15 to the basic financial statements, in 2015 the Pasadena Area Community College District adopted new accounting guidance, GASB Statement No. 68, Accounting and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an Amendment to GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of postemployment healthcare benefits funding progress, schedules of the District’s proportionate share of the net pension liability (STRS and CalPERS), and schedules of District pension contributions (STRS and CalPERS) 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS Fiscal Year Ending June 30, 2015

INTRODUCTION This section of our annual financial report offers a narrative overview and analysis of the financial activities of the Pasadena Area Community College District (the District) for the year ended June 30, 2015. This analysis is presented with comparative information from our June 30, 2015 and June 30, 2014 fiscal year ends to highlight changes from one year to the next. This section of our report should be read in conjunction with the basic financial statements, including footnotes. Responsibility for the completeness and accuracy of this information rests with the District’s management. USING THIS ANNUAL REPORT As required by generally accepted accounting principles, the annual report consists of three basic financial statements that provide information on the District’s activities as a whole; the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position, and the Statement of Cash Flows. The Pasadena Area Community College District’s financial statements are presented in accordance with Governmental Accounting Standards Board (GASB) Statements No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, and No. 35, Basic Financial Statements – and Management’s Discussion and Analysis – for Public College and Universities. These statements allow for the presentation of financial activity and results of operations which focuses on the District as a whole. The entity-wide financial statements present the overall results of operations whereby all of the District’s activities are consolidated into one total versus the traditional presentation by fund type. The focus of the Statement of Net Position is designed to be similar to bottom line results for the District. This statement combines and consolidates current financial resources (net short-term spendable resources) with capital assets and long-term obligations. The Statement of Revenues, Expenses, and Changes in Net Position focuses on the costs of the District’s operational activities with revenues and expenses categorized as operating and non-operating, and expenses are reported by natural classification. This approach is intended to summarize and simplify the user’s analysis of the cost of various District services to students and the public. The Statement of Cash Flows provides an analysis of the sources and uses of cash with the operations of the District. The California Community Colleges Chancellor’s Office has recommended that all State community colleges follow the Business-Type Activity (BTA) model for financial statement reporting purposes.

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FINANCIAL HIGHLIGHTS

The District ended the year with a General Fund (Unrestricted [Fund 01] and Restricted [Fund 03]) balance of $14,382,363. The State Chancellor’s Office recommends reserve levels of five percent of total General Fund expenditure. The District, has exceeded the recommended five percent reserve requirement by setting aside an amount for economic uncertainty greater than $7.6 million (total ending fund balance of $12,447,460 in Fund 01 only). While the ending balance is comprised primarily of cash and receivables, the Board of Trustees authorized the use of inter-fund borrowing to ensure the orderly conduct of District business. Inter-fund borrowing was not needed to cover cash flow requirements during the 2014-15 fiscal year.

The primary expenditure of the General Fund of the District is for the salaries and benefits of the Academic, Classified, and Administrative salaries of District employees. Approximately 86.6 percent of total General Fund expenditures were consumed by employee compensation.

As a condition of the passage of the District’s $150 million General Obligation Bond, Measure P, a Citizens’ Oversight Committee was formed under Proposition 39 requirements and met quarterly. The meetings are generally held at 6:00 pm every quarter during the months of January, April, August, and October at Pasadena City College and are open to the public.

The District provided Federal, State and Local student financial aid to qualifying District students in the amount of approximately $53.4 million. This represents an increase of $1.5 million from the 2013-2014 fiscal year. This aid is provided through grants, loans, and tuition reductions from the Federal government, State Chancellor’s Office, and local funding.

The District’s total reported FTES including non-credit FTES for the years ended 2015 and 2014, were 22,984 and 21,127, respectively.

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FINANCIAL HIGHLIGHTS (continued)

As of June 30, 2015 the District reported a liability for its proportionate share of Net Pension Liability (NPL) that reflected a reduction for State pension support provided to the District. This is a result of implementation of new GASB Statements No. 68 and No. 71, which requires that the District report its proportionate share of the net pension liabilities, pension expense and deferred inflow and outflow of resources.

The District’s Change in Net Position for the current fiscal year of $15.3 million is higher by approximately $10 million compared to the prior fiscal year ($5.2 million). This is due to an increase in Grants revenue of approximately $7.5 million primarily due to an increase in state funding for categoricals such as Student Success and Physical Plant Support. In addition, the District expended an additional $17 million (approximately) for Salaries and Benefits; this was primarily due to salary increases for staff (including a retroactive salary increase for Faculty) as well as increased cost of health benefits.

Condensed financial information is included on the following page.

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CONDENSED FINANCIAL INFORMATION IS AS FOLLOWS Statement of Net Position as of June 30,

(in thousands) (in thousands)2015 2014

ASSETS Cash and investments 81,755$ 80,677$ Receivables 11,376 19,600

Inventories and other assets 3,497 1,573

Total 96,628 101,850

Capital assets, net of depreciation 214,886 220,950

TOTAL ASSETS 311,514 322,800


Deferred charge on refunding 1,845 1,999

Deferred outflows - pension contributions 7,605 -

Total Deferred Outflows of Resource 9,450 1,999

TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 320,964$ 324,799$

LIABILITIESAccounts payable and accrued liabilities 13,937$ 11,688$ Claims liability 4,449 4,449 Other current liabilities 774 668 Unearned revenue 14,306 4,358 Long-term liabilities - current portion 9,195 13,693

Total 42,661 34,856

Long-term liabilities less current portion 200,665 111,885

TOTAL LIABILITIES 243,326 146,741

DEFERRED INFLOWS OF RESOURCES

Deferred inflows - pension contributions 25,415

TOTAL DEFERRED INFLOWS OF RESOURCES 25,415 -

NET POSITIONInvested in capital assets, net of related debt 124,738 125,742 Restricted 17,840 24,276 Unrestricted (90,355) 28,040

TOTAL NET POSITION 52,223 178,058

TOTAL LIABILITIES AND DEFERRED INFLOWS

OF RESOURCES AND NET POSITION 320,964$ 324,799$

Note: The prior year has not been restated for the implementation of new accounting standards.

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CONDENSED FINANCIAL INFORMATION IS AS FOLLOWS (continued) This schedule has been prepared from the District’s Statements of Net Position, which is presented on an accrual basis of accounting whereby capital assets are capitalized, depreciated, and all liabilities of the District are recognized. Capital assets, net of depreciation is stated at the net historical value (original cost) of land, buildings, construction in progress, and equipment less accumulated depreciation. Long-term obligations consist primarily of the general obligation bond issue, Public Agency Retirement Services (PARS) - Supplementary Retirement Plan (SRP), Other Post-Employment Benefits Obligation (OPEB), compensated absences and proportionate share of Net Pension Liability (NPL) for CalSTRS and CalPERS. Long-term obligation increased by approximately $84 million. This primarily resulted from recording NPL ($93.1 million). This is a result of implementation of new GASB Statements No. 68 and No. 71, which requires that the District report its proportionate share of the net pension liabilities, pension expense and deferred inflow and outflow of resources. In addition there was a net decrease of $9.1 million due to retirement of debt ($12.4 million) and funding OPEB ($.5 million) and entering into a SRP ($2.8 million). In 2014-15, the District’s long-term credit rating ranged from upper medium grade to high grade with S&P’s AA+ and Moody’s Aa2.

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CONDENSED FINANCIAL INFORMATION IS AS FOLLOWS (continued) Statement of Revenues, Expenses and Change in Net Position for the Year Ended June 30,


Operating RevenuesNet tuition and fees 23,895$ 23,852$ Grants and contracts, non-capital 58,773 50,030 Auxiliary sales and charges 5,008 5,188

Total operating revenues 87,676 79,070

Operating ExpensesSalaries and benefits 135,750 118,856 Supplies, materials and other operating

expenses and services 32,745 35,637 Financial aid 37,626 35,387 Depreciation 11,241 10,402

Total operating expenses 217,362 200,282

Operating loss (129,686) (121,212)

Non-operating revenuesState apportionments, non-capital 78,418 77,646 Local property taxes 32,260 34,025 State revenues 6,931 5,441 Investment income, net 480 271

Total non-operating revenues 118,089 117,383

Other revenues, (expenses), gains or (losses)Local revenues, capital 23 379 Interest expense (4,707) (2,883) Other nonoperation revenues and transfers 922 1,167

Total other revenues, (expenses), gains or (losses) (3,762) (1,337)

Decrease in net position before cumulative effect of change in accounting principle (15,359)$ (5,166)$

Note: The prior year has not been restated for the implementation of new accounting standards

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CONDENSED FINANCIAL INFORMATION IS AS FOLLOWS (continued) The operating revenue for the District is specifically defined as revenues from users of the colleges’ facilities and programs. Excluded from the operating revenues are the components of the primary source of District funding – the State apportionment process. Two main components include State apportionment and local property taxes, as these resources of revenue are from the general population of the State of California, and not from the direct users of the educational services (students), they are considered to be non-operating. As a result, the operating loss of $129.7 million is balanced by the other funding sources. Total District revenues were less than expenditures by $15.4 million for the year ended June 30, 2015. Auxiliary revenue consists primarily of bookstore revenues. The bookstore is maintained to provide books, supplies, and other items to the students and faculty of the District. The operations are self-supporting through product sales. Profits from the bookstore are used for student government and club activities. Grants and contracts revenue relate to student financial aid, as well as specific Federal and State grants received for programs serving the students of the District. These grant and program revenues are restricted as to the allowable expenses related to the programs. The interest income is primarily the result of cash held at the Los Angeles County Treasury. The interest expense relates to interest payments on the General Obligation Bonds, lease commitments, and a note payable described in Notes 6-8 of the financial statements. Statement of Cash Flows for the Year Ended June 30,


Cash Provided By (Used in)

Operating activities (113,698)$ (113,402)$ Non-capital financing activities 132,609 114,695 Capital and related financing activities (18,297) (31,678) Investing activities 464 456

Net increase (decrease) in cash and cash equivalents 1,078$ (29,929)$

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CONDENSED FINANCIAL INFORMATION IS AS FOLLOWS (continued) The Statement of Cash Flows provides information about cash receipts and payments during the year. This statement also assists users in assessing the District’s ability to meet its obligations as they come due and its need for external financing. The primary operating receipts are federal, state and local grants along with student tuition and Bookstore sales. The primary operating expenses of the District is the payment of salaries and benefits to instructional and classified support staff, as well as District administrators. Capital financing activities relate to the spending of Measure P bond proceeds. ECONOMIC FACTORS AFFECTING THE FUTURE OF PASADENA AREA COMMUNITY COLLEGE DISTRICT The financial strength and stability of the Pasadena Area Community College District is closely aligned with California's economic position as State apportionments and property taxes allocated to the District represent approximately 85 percent of the unrestricted General Fund. As a result of the passage of Proposition 30 and the improving State economy Proposition 98 funds increased, but it remains far from what is needed in terms of funding and stability. As a result, it continues to be prudent for the District to maintain its diligent practice of funding strong reserves to manage economic challenges. The District will continue Measure P construction activities throughout the 2015-16 fiscal year. Over the next 24 months Measure P construction and renovation projects will include campus wide reconstruction projects, an access compliance project, infrastructure upgrades and restroom modifications in the ‘E’ Building. The District's budget continues to be stable and Proposition 30 continues to have a positive impact on the California Community College System and the Pasadena Area Community College District, but presents unknowns in regards to the future budgets and cash flows once the tax increases end. However, it is believed that either the taxes will be extended or the State will backfill Proposition 30 resources through the normal appropriation funding process.

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ECONOMIC FACTORS AFFECTING THE FUTURE OF PASADENA AREA COMMUNITY COLLEGE DISTRICT (continued) Items that are of concern to the District, and are being addressed, are related to escalating costs for Health and Welfare Benefits and the Affordable Care Act (ACA), funding the District’s underfunded Worker’s Compensation Self Insured Fund and future funding of CalPERS and CalSTRS pension obligations. The District has been meeting with its Benefits Committee on plan design changes to ensure continued coverage while ensuring cost reduction. We have also worked with our third party benefits administrator on potential impacts related to the ACA and any changes that must be addressed prior to the law’s impact. Despite the challenges the District is facing, student enrollment continues to be strong. We continue to be recognized on the Federal and State level for initiatives such as Career Pathways. Further, the economic outlook at the State continues to be positive and reflect steady growth. An analysis of the adopted and final expense budget amounts shows that the District has been successful at budgeting expenses appropriately, and working within the defined general fund budgeted dollar amounts. CONTACTING THE DISTRICT This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the District at: Pasadena Area Community College District, 1570 East Colorado Boulevard, Pasadena, California, 91106-2003 or call (626) 585-7170.

BASIC FINANCIAL STATEMENTS

-1-

ASSETSCurrent Assets:

Cash and cash equivalents 52,633,858$ Accounts receivable, net 11,376,354 Due from auxiliary 216,863 Inventories 892,839 Prepaid expenses 2,387,140

Total Current Assets 67,507,054

Non-current Assets:Restricted cash 29,121,240 Land 10,396,408Construction in progress 3,093,214Capital assets, net of accumulated depreciation 201,396,243

Total Non-current Assets 244,007,105

Total Assets 311,514,159


Deferred charge on refunding 1,844,941 Deferred outflows - pension contributions 7,604,688

Total Deferred Outflows of Resources 9,449,629

TOTAL ASSETS AND DEFERRED OUTFLOW OF RESOURCES 320,963,788$

LIABILITIESCurrent Liabilities:

Accounts payable 5,641,714$ Accrued liabilities 7,494,758 Accrued interest payable 800,524 Unearned revenue 14,305,956 Estimated claims liability 4,449,000 Load banking 773,942 Compensated absences - current portion 1,507,594 General obligation bonds payable - current portion 3,687,573 Capital leases - current portion 1,658,921 Supplemental employee retirement plan - current portion 2,340,767

Total Current Liabilities 42,660,749

Non-current Liabilities:Compensated absences 1,137,307 General obligation bonds payable 94,349,239 Capital leases 2,839,486 Other postemployment benefits (OPEB) 5,968,492 Net pension liability 93,170,964 Supplemental employee retirement plan 3,199,665

Total Non-current Liabilities 200,665,153

Total Liabilities 243,325,902

DEFERRED INFLOWS OF RESOURCESDeferred inflows - pension contributions 25,414,642

TOTAL DEFERRED INFLOWS OF RESOURCES 25,414,642

Net PositionInvested in capital assets, net of related debt 124,738,254 Restricted-expendable for:

Capital projects 5,332,261Debt service 9,848,412Scholarships and loans 724,869Other special services 1,934,903

Unrestricted (90,355,455)

Total Net Position 52,223,244

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES,AND NET POSITION 320,963,788$


STATEMENT OF NET POSITIONJune 30, 2015

See the accompanying notes to the financial statements.

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OPERATING REVENUESTuition and fees (gross) 40,058,589$

Less: Scholarship discounts and allowances (16,163,855)

Net tuition and fees 23,894,734

Grants and contracts, non-capital:

Federal 42,083,260

State 14,743,186

Local 1,946,469

Auxiliary enterprise sales and charges 5,008,112

TOTAL OPERATING REVENUES 87,675,761

OPERATING EXPENSESSalaries 102,201,413

Employee benefits 33,549,020

Supplies, materials, and other operating expenses and services 29,590,793

Financial aid 37,625,610

Utilities 3,153,679

Depreciation 11,241,338

TOTAL OPERATING EXPENSES 217,361,853

Operating loss (129,686,092)

NON-OPERATING REVENUESState apportionments, non-capital 78,418,013

Local property taxes 32,260,162

State taxes and other revenues 6,930,886

Investment income - non-capital 479,709

TOTAL NON-OPERATING REVENUES 118,088,770

Loss before other revenues, (expenses), gains or (losses) (11,597,322)

OTHER REVENUES, (EXPENSES), GAINS OR (LOSSES)Local property taxes and revenues, capital (35,335)

Investment income, capital 58,371

Other non-operating revenues 922,024

Interest expense on capital asset-related debt (4,707,329)

TOTAL OTHER REVENUES, (EXPENSES), GAINS OR (LOSSES) (3,762,269)

Decrease in net position (15,359,591)

NET POSITION, BEGINNING OF YEAR AS PREVIOUSLY REPORTED 178,057,291

Cumulative effect of change in accounting principles (See note 15) (110,474,456)

NET POSITION, BEGINNING OF YEAR AS RESTATED 67,582,835

NET POSITION, END OF YEAR 52,223,244$


STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

For the Fiscal Year Ended June 30, 2015


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CASH FLOWS FROM OPERATING ACTIVITIESTuition and fees 24,295,771$ Federal grants and contracts 40,101,815 State grants and contracts 24,262,477 Local grants and contracts 2,180,633 Sales 5,081,900 Payments to suppliers (40,600,922) Payments to/on-behalf of employees (132,529,057) Payments to/on-behalf of students (36,490,152)

Net cash used by operating activities (113,697,535)

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIESState apportionments and receipts 91,639,329 Property taxes 32,260,162 Grants and gifts for other than capital purposes 8,649,914 Interfund borrowing from fiduciary fund 67,771 Net transfers between fiduciary funds (8,200)

Net cash provided by non-capital financing activities 132,608,976

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESNet purchase and sale of capital assets (4,027,451) Interest on capital investments 81,895 Local revenue from capital purposes 922,024 Principal and interest paid on capital debt (15,273,898)

Net cash used by capital and related financing activities (18,297,430)

CASH FLOWS FROM INVESTING ACTIVITIESInterest on investments 463,728

Net cash provided by investing activities 463,728

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,077,739

CASH BALANCE - Beginning of Year 80,677,359

CASH BALANCE - End of Year 81,755,098$


STATEMENT OF CASH FLOWSFor the Fiscal Year Ended June 30, 2015


-4-

CASH USED BY OPERATING ACTIVITIES

Operating loss (129,686,092)$ Adjustments to reconcile net loss to net cash used by operating activities:

Depreciation expense 11,241,338 Changes in assets and liabilities: Receivables, net (4,963,582)

Inventory (24,055) Prepaid expenses (1,967,418) Accounts payable (412,039) Accrued liabilities 663,840 Unearned revenue 9,947,368 Compensated absences (27,598) Post-employment retiree benefits 518,504 Supplemental employee retirement plan, net 1,012,199

Net cash used by operating activities (113,697,535)$

Breakdown of ending cash balance:Cash and cash equivalents 52,633,858$ Restricted cash and cash equivalents 29,121,240

Total 81,755,098$

Reconciliation of Operating Loss toNet Cash Used by Operating Activities


STATEMENT OF CASH FLOWSFor the Fiscal Year Ended June 30, 2015


-5-

Associated Student Body

FundTrust and

Agency Fund

ASSETSCash and cash equivalents 246,813$ 1,200,738$

Investments 120,672 1,094,469

Capital assets, net of accumulated depreciation 9,110

TOTAL ASSETS 376,595 2,295,207

LIABILITIES AND NET POSITION

LIABILITIES

Accounts payable 9,846 18,948

Due to District 216,863

Amounts held in trust 2,059,396

TOTAL LIABILITIES 9,846 2,295,207

NET POSITIONUnrestricted 366,749 -

TOTAL NET POSITION 366,749$ -$


STATEMENT OF FIDUCIARY NET POSITION

June 30, 2015


-6-

Associated Student Body

Fund

ADDITIONS

Interest 90$ Other local sources 188,180

TOTAL ADDITIONS 188,270

DEDUCTIONS

Supplies, materials, and other operating expenses and services 212,927 Depreciation 4,342

TOTAL DEDUCTIONS 217,269

Decrease in net position (28,999)

NET POSITION, BEGINNING OF YEAR 395,748

NET POSITION, END OF YEAR 366,749$


STATEMENT OF CHANGES IN FIDUCIARY NET POSITION



-7-


NOTES TO FINANCIAL STATEMENTS June 30, 2015

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. REPORTING ENTITY

The District is the level of government primarily accountable for activities related to public education. The governing authority consists of elected officials who, together, constitute the Board of Trustees. The District considered its financial and operational relationships with potential component units under the reporting entity definition of GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units and GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. The basic, but not the only, criterion for including another organization in the District’s reporting entity for financial reports is the ability of the District’s elected officials to exercise oversight responsibility over such agencies. Oversight responsibility implies that one entity is dependent on another and a financial benefit or burden relationship is present and that the dependent unit should be reported as part of the other. Oversight responsibility is derived from the District’s power and includes, but is not limited to: financial interdependency; selection of governing authority; designation of management; ability to significantly influence operations; and accountability for fiscal matters. Due to the nature and significance of their relationship with the District, including ongoing financial support of the District or its other component units, certain organizations warrant inclusion as part of the financial reporting entity. A legally separate, tax-exempt organization should be reported as a component unit of the District if all of the following criteria are met:

1. The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the District, its component units, or its constituents.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)

A. REPORTING ENTITY (continued)

2. The District, or its component units, is entitled to or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization.

3. The economic resources received or held by an individual organization

that the District, or its component units, is entitled to or has the ability to otherwise access are significant to the District.

The following potential component unit has been excluded from the District’s reporting entity: The Pasadena City College Foundation - The Foundation is a separate not-for-profit corporation created for the benefit of the District and its students and organized for educational purposes. The Foundation is not included as a component unit because the third criterion was not met; the economic resources received and held by the Foundation are not significant to the District. During the fiscal year ended June 30, 2015, the Foundation expended amounts on-behalf of the District for scholarships and campus projects. To assist the Foundation in carrying out its purpose, the District provides administrative services to the Foundation. The District pays salaries and benefits of the executive director and accountant. In addition, working space for employees who perform administrative services for the Foundation is provided by the District at no charge. Separate financial statements for the Foundation may be obtained through the District.

B. FINANCIAL STATEMENT PRESENTATION

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The financial statement presentation required by GASB provides a comprehensive, entity-wide perspective of the District’s financial activities. The entity-wide perspective replaces the fund-group perspective previously required. Fiduciary activities, with the exception of the Student Financial Aid Fund, are excluded from the basic financial statements.

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B. FINANCIAL STATEMENT PRESENTATION (continued)

The District operates a Warrant Pass-Through agency fund as a holding account for amounts collected from employees for Federal taxes, state taxes and other contributions. The District had a negative cash balance in the County Treasury amounting to ($509,357) on June 30, 2015, which represents a prepayment of withholdings payable. The Warrant Pass-Through Fund is not reported in the basic financial statements.

C. BASIS OF ACCOUNTING

Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of measurement made, regardless of the measurement focus applied. For financial reporting purposes, the District is considered a special-purpose government engaged in business-type activities. Accordingly, the District’s basic financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. For internal accounting purposes, the budgetary and financial accounts of the District have been recorded and maintained in accordance with the Chancellor’s Office of the California Community College’s Budget and Accounting Manual. To ensure compliance with the California Education Code, the financial resources of the District are divided into separate funds for which separate accounts are maintained for recording cash, other resources and all related liabilities, obligations and equities. By state law, the District's Governing Board must approve a budget no later than September 15. A public hearing must be conducted to receive comments prior to adoption. The District's Governing Board satisfied these requirements. Budgets for all governmental funds were adopted on a basis consistent with generally accepted accounting principles (GAAP).

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C. BASIS OF ACCOUNTING (continued) These budgets are revised by the District's Governing Board during the year to give consideration to unanticipated income and expenditures. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. Expenditures cannot legally exceed appropriations by major object account. 1. Cash and Cash Equivalents

The District’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash in the County Treasury is recorded at cost, which approximates fair value, in accordance with the requirements of GASB Statement No. 31.

2. Accounts Receivable Accounts receivable consists primarily of amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the District’s grant and contracts. All material receivables are considered fully collectible. The District recognized for budgetary and financial reporting purposes any amount of state appropriations deferred from the current fiscal year and appropriated from the subsequent fiscal year for payment of current year costs as a receivable in the current year. Accounts receivable from students for tuition and fees is recorded net of a provision for uncollectable amounts.

3. Inventories Inventories are presented at the lower of cost or market on an average basis and are expensed when used. Inventory consists of items held for resale in the bookstore and expendable instructional, custodial, health and other supplies held for consumption.

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C. BASIS OF ACCOUNTING (continued) 4. Prepaid Expenses

Payments made to vendors for goods or services that will benefit periods beyond June 30, 2015, are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure/expense is reported in the year in which goods or services are consumed.

5. Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents are those amounts designated for acquisition or construction of noncurrent assets or that are segregated for the liquidation of long-term debt.

6. Capital Assets Capital assets are recorded at cost at the date of acquisition. Donated capital assets are recorded at their estimated fair value at the date of donation. For equipment, the District’s capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life of greater than one year. Buildings as well as renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend the asset's life is recorded in operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method with a half-year convention over the estimated useful lives of the assets, generally 50 years for buildings and building and land improvements, 20 years for site improvements, 5 to 15 years for equipment.

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C. BASIS OF ACCOUNTING (continued)

7. Deferred Outflow of Resources

Deferred outflow of resources represent a consumption of net position that applies to a future period(s) thus, will not be recognized as an outflow of resources (expense/expenditures) until then. The District has the following deferred outflows:

Deferred charge on refunding: A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Deferred outflow – pension contributions: The deferred outflow of resources related to pensions resulted from District contributions to employee pension plans subsequent to the measurement date of the actuarial valuations for the pension plans. The deferred outflow – pension contributions will be recognized as a reduction of the net pension liability in the subsequent fiscal year.

8. Accounts Payable and Accrued Liabilities

Accounts payable consists of amounts due to vendors for goods and services received prior to June 30. Accrued liabilities consist of salaries and benefits payable.

9. Unearned Revenue Cash received for Federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Unearned revenue is recorded to the extent cash received on specific projects and programs exceed qualified expenditures. Unearned revenue also includes summer enrollment fees received but not earned.

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10. Compensated Absences and Load Banking In accordance with GASB Statement No. 16, Accumulated unpaid employee vacation benefits are recognized as a liability of the District as compensated absences in the Statement of Net Position when incurred. The entire compensated absences liability is accrued when incurred in the government-wide financial statements. The District has accrued a liability for the amounts attributable to load banking. Load banking hours consist of hours worked by instructors in excess of a full-time load for which they may carryover for future paid time off.

Sick leave benefits are accumulated without limit for each employee. The employees do not gain a vested right to accumulated sick leave. Accumulated employee sick leave benefits are not recognized as a liability of the District. The District's policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires and within the constraints of the appropriate retirement systems.

11. Net Pension Liability For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) plan for schools (Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalSTRS and CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Member contributions are recognized in the period in which they are earned. Investments are reported at fair value.

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12. Deferred Inflow of Resources

Deferred inflows of resources represent an acquisition of net assets by the District that is applicable to a future reporting period. The deferred inflow of resources – pensions, results from the difference between the estimated and actual return on pension plan investments. This amount is deferred and amortized over 5 years.

13. Net Position

Invested in capital assets, net of related debt: This represents the District’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net position – expendable: Restricted expendable net position includes resources in which the District is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties or by enabling legislation adopted by the District. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. Restricted net position – nonexpendable: Nonexpendable restricted net position consists of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The District had no restricted net position – nonexpendable. Unrestricted net position: Unrestricted net position represents resources available to be used for transactions relating to the general operations of the District, and may be used at the discretion of the governing board, as designated, to meet current expenses for specific future purposes.

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C. BASIS OF ACCOUNTING (continued) 14. State Apportionments

Certain current year apportionments from the state are based upon various financial and statistical information of the previous year.

Any prior year corrections due to the recalculation in February of 2016 will be recorded in the year computed by the State.

15. Property Taxes Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1. Unsecured property taxes are payable in one installment on or before August 31.

Real and personal property tax revenues are reported in the same manner in which the County auditor records and reports actual property tax receipts to the Department of Education. This is generally on a cash basis. A receivable has not been accrued in these financial statements because it is not material. Property taxes for debt service purposes have been accrued in the basic financial statements.

16. Classification of Revenues

The District has classified its revenues as either operating or nonoperating revenues according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as student fees, net of scholarship discounts and allowances, and Federal and most state and local grants and contracts. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as State apportionments, taxes, and other revenue sources that are defined as nonoperating revenues by GASB.

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17. Scholarship Discounts and Allowances

Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the statement of revenues, expenses, and changes in net position. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the District, and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as operating revenues in the District’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the District has recorded a scholarship discount and allowance.

18. Interest Capitalization Interest costs are capitalized as part of the historical cost of acquiring certain assets. To qualify for interest capitalization, assets must require a period of time before they are ready for their intended purpose. Interest earned on proceeds of the District’s general obligation bonds restricted to the acquisition of qualifying assets is offset against interest costs in determining the amount to be capitalized. For the year ended June 30, 2015, no interest was capitalized.

19. Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

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NOTE 2 - DEPOSITS AND INVESTMENTS:

A. Deposits

Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. The District does not have a deposit policy for custodial risk. As of June 30, 2015, $7,776,567 of the District’s bank balance of $8,324,924 was exposed to credit risk as follows:

Uninsured and uncollateralized $7,776,567 Total $7,776,567

Cash in County In accordance with the Budget and Accounting Manual, the District maintains substantially all of its cash in the Los Angeles County Treasury as part of the common investment pool. These pooled funds are carried at amortized cost which approximates fair value. The County is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et. seq. The County is restricted by Government Code Section 53635 pursuant to Section 53601 to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer’s investment pool, bankers’ acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements. The funds maintained by the County are either secured by federal depository insurance or are collateralized. The County investment pool is not required to be rated. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool.

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NOTE 2 - DEPOSITS AND INVESTMENTS: (continued)

B. Investments

Policies Under provisions of California Government Code Sections 16430, 53601 and 53602 (and District Board Policy Section 6006), the District may invest in the following types of investments: State of California Local Agency Investment Fund (LAIF) Los Angeles County Investment Pools (OCIP) U.S. Treasury notes, bonds, bills or certificates of indebtedness U.S. Government Agency guaranteed instruments Fully insured or collateralized certificates of deposit Fully insured and collateralized credit union accounts The District did not violate any provisions of the California Government Code during the year ended June 30, 2015. Investments at June 30, 2015 are presented below: Fair Standard & Investment Maturities Value Poor’s Rating Certificates of Deposit 1-5 Years $930,901 Nonrated Stocks 124,179 Nonrated Mutual Funds 160,061 Nonrated Total $1,215,141 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Information about the exposure of the District’s investments to this risk is provided above.

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NOTE 2 - DEPOSITS AND INVESTMENTS: (continued)

B. Investments (continued)

Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligations. This is measured by assignment of a rating by a nationally recognized rating organization. U.S. government securities or obligations explicitly guaranteed by the U.S. government are not considered to have credit risk exposure. The District follows Government Code to reduce exposure to investment credit risk. Information about the District’s investment ratings is provided on the previous page. The District places no limit on the amount that may be invested in any one issuer. Certificates of Deposits which are not rated, nor are required to be rated. Ratings for the District’s investments in Stocks and mutual funds were not available.

NOTE 3 - ACCOUNTS RECEIVABLE:

The accounts receivable balance as of June 30, 2015 consists of the following:

Federal and State $3,666,810 Miscellaneous 5,994,546 Tuition and fees (net of allowance of doubtful accounts $1,391,333) 1,714,998 $11,376,354

NOTE 4 - INTERFUND TRANSACTIONS:

Interfund transfers consist of operating transfers from funds receiving resources to funds through which the resources are to be expended. Interfund receivables and payables result when the interfund transfer is transacted after the close of the fiscal year. Interfund activity within the government funds has been eliminated in the basic financial statements.

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NOTE 5 - CAPITAL ASSETS:

The following provides a summary of changes in capital assets for the year ended June 30, 2015:

June 30, 2014 Additions

Retirements and

Adjustments June 30, 2015

Capital assets not depreciated:Land 10,396,408$ $ $ 10,396,408$ Construction in progress 3,140,964 3,829,210 (3,876,960) 3,093,214

Total capital assets not depreciated 13,537,372 3,829,210 (3,876,960) 13,489,622

Capital assets depreciated:Buildings and improvements 270,581,020 3,876,960 274,457,980 Site improvements 22,003,495 22,003,495 Equipment 28,120,579 1,390,570 (1,180,908) 28,330,241

Total of capital assets depreciated 320,705,094 5,267,530 (1,180,908) 324,791,716

Less accumulated depreciation for:Buildings and improvements (87,598,128) (8,095,376) (95,693,504) Site improvements (11,204,773) (1,070,521) (12,275,294) Equipment (14,489,733) (2,075,441) 1,138,499 (15,426,675)

Total accumulated depreciation (113,292,634) (11,241,338) 1,138,499 (123,395,473)

Governmental capital assets, net 220,949,832$ (2,144,598)$ (3,919,369)$ 214,885,865$

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NOTE 6 - LEASES:

A. Capital Leases

The District leases equipment valued at approximately $315,700 under agreements which provide for title to pass upon expiration of the lease period. Future minimum lease payments are as follows

Fiscal Year Lease Payment 2015-16 $ 63,240 2016-17 63,240 2017-18 63,240 2018-19 36,090 2019-20 5,960 Total 231,770 Less amount representing interest (500) Present value of net minimum lease payments $ 231,270

The District will receive no sublease rental revenues nor pay any contingent rentals for this equipment.

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NOTE 6 – LEASES: (continued)

B. Capital Leases - Winthrop

On December 1, 2012 the District entered into a lease agreement with Winthrop Resources Corporation (Winthrop) to finance $8,339,044 over a period of five years for hardware, software and implementation services associated with the purchase and implementation of Ellucian/Banner and related hardware and network expansion costs. Lease schedules were prepared periodically by Winthrop to memorialize the actual equipment accepted for lease by Winthrop during the installation period. Each lease schedule shall contain a minimum of 25% of hardware costs and 65% of combined hardware cost and software/ Ellucian agreement software cost. The lease rate is fixed at 2.284%. Equipment and software of totaling $7,873,957 has been purchased under the lease agreement. The principal is fully funded by the Debt Service Fund. Interest payments are funded each year by the General Fund. The repayment schedule as of June 30, 2015 is as follows:

Fiscal Year Principal Interest Total

2015-16 1,595,781$ 68,955$ 1,664,736$ 2016-17 1,635,931 28,805 1,664,736 2017-18 936,865 6,981 943,846 2018-19 98,560 6,354 104,914

Total 4,267,137$ 111,095$ 4,378,232$

The District will receive no sublease rental revenues nor pay any contingent rentals for this equipment.

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NOTE 6 - LEASES: (continued)

C. Operating Lease

The District has entered into various operating lease agreements for the use of facilities and equipment with lease terms in excess of one year. Annual future minimum lease payments under these agreements are approximately $232,000 and extend through June 30, 2056. Current year expenditures for operating leases is approximately $155,229. The District will receive no sublease rental revenues nor pay any contingent rentals for these properties.

NOTE 7 – GENERAL OBLIGATION BONDS:

On March 5, 2002, the District voters authorized the issuance and sale of general obligation bonds totaling $150,000,000. Proceeds from the sale of the bonds will be used to finance the construction, acquisition, furnishing and equipping District facilities. Series A general obligation bonds were sold in June 2003, for $33,000,000. The bonds were issued as Current Interest Bonds, and were fully redeemed as of June 30, 2014. Series B and C general obligation bonds were sold in July 2006, for $87,657,774. The bonds were issued as Current Interest Bonds in the aggregate principal amount of $65,000,000 (Series B) and as Capital Appreciation Bonds in the aggregate principal amount of $22,657,774 (Series C). The bonds were issued to refund certain outstanding general obligation bonds (Series A Bonds) of the District and to pay for certain capital improvements. The proceeds associated with the refunding were deposited in an escrow fund for future repayment. The bonds are considered in substance defeased and are not recorded on the financial statements.

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NOTE 7 – GENERAL OBLIGATION BONDS: (continued)

The capital appreciation bonds were issued with maturity dates of August 1, 2007 through August 1, 2014. Prior to the applicable maturity date, each bond accreted interest on the principal component. At June 30, 2015, bonds were paid in full. Series D and E general obligation bonds were sold in September 2009, for $52,000,000. The bonds were issued as Current Interest Bonds in the aggregate principal amount of $26,705,000 (Series D) and as Build America Bonds in the aggregate principal amount of $25,295,000 (Series E). The Series E bonds are designated as “Build America Bonds” under the provisions of the American Recovery and Reinvestment Act of 2009. With respect to the Series E bonds, the District expects to receive, on or about each bond payment date, a cash subsidy payment from the United States Treasury equal to the amount of interest determined at a federal tax credit rate under Section 54A(b)(3) of the tax code. The cash subsidy is deposited with the County and credited to the Bond Interest and Redemption Fund for debt service payments. On April 2, 2014, the District offered for sale $16,980,000 in general obligation refunding bonds. The bonds were issued to refund certain outstanding general obligation bonds (Series B) of the District to pay for certain capital improvements. The bonds were issued as current interest bonds. The proceeds associated with the refunding were deposited in an escrow fund for future repayment. Proceeds received in excess of debt are added to the maturity amount and amortized to interest expense over the life of the liability. The Series B, C, D bonds and 2014 Refunding bonds included a premium of $1,965,547, $7,582,736, $3,582,086, and $2,608,686, respectively, which are amortized using the straight-line method. Amortization of $78,622, $947,842, $143,283 and $200,669 was recognized during the 2014-15 year for Series B, C, D bonds, and 2014 Refunding bonds respectively.

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NOTE 7 – GENERAL OBLIGATION BONDS: (continued)

The outstanding bonded debt for Pasadena Area Community College District at June 30, 2015 is:

Date of Issue

Interest Rate %

Maturity Date

Amout of Original Issue

Outstanding June 30, 2014

Issued Current Year

Redeemed Current Year

Outstanding June 30, 2015

Series B 7/12/2006 4.5 - 5.25% 8/1/2031 65,000,000$ 26,985,000$ $ 1,600,000$ 25,385,000$ Series C 7/12/2006 3.95 - 4.44% 8/1/2014 22,657,774 4,305,024 4,305,024 - Series D 9/30/2009 3.0 - 5.0% 8/1/2026 26,705,000 25,645,000 1,485,000 24,160,000 Series E 9/30/2009 6.5 - 6.7% 8/1/2034 25,295,000 25,295,000 - 25,295,000 2014 Refunding 4/2/2014 2.0 - 5.0% 8/1/2026 16,980,000 16,980,000 200,000 16,780,000

156,637,774$ 99,210,024$ -$ 7,590,024$ 91,620,000$

The annual requirements to amortize all bonds payable, outstanding as of June 30, 2015, are as follows:

Year Ending

June 30 Principal Interest Total

2016 3,265,000$ 4,803,142$ 8,068,142$ 2017 3,395,000 4,662,417 8,057,417 2018 3,460,000 4,504,167 7,964,167 2019 3,635,000 4,326,792 7,961,792 2020 3,810,000 4,163,092 7,973,092

2021-25 21,880,000 17,806,703 39,686,703 2026-30 28,315,000 11,408,719 39,723,719 2031-35 23,860,000 3,242,206 27,102,206

Total 91,620,000$ 54,917,238$ 146,537,238$

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NOTE 8 - LONG-TERM DEBT:

A schedule of changes in long-term debt for the year ended June 30, 2015 is shown below:

Balance Additions Balance Due in 6/30/2014 and Adjustments Deletions 6/30/2015 One Year

Compensated Absences 2,778,387$ $ 133,486$ 2,644,901$ $

Net Pension Liability(1) 117,407,150 24,236,186 93,170,964 Capital Lease - Winthrop 5,824,345 1,557,208 4,267,137 1,595,781

Capital Lease 231,270 231,270 63,140 G. O. Bonds 99,210,024 7,590,024 91,620,000 3,265,000

Bond Premium 7,787,228 1,370,416 6,416,812 422,573 OPEB 5,449,988 518,504 5,968,492 -

PARS - Supplemental Plan 4,528,233 2,794,138 1,781,939 5,540,432 2,340,767 242,985,355$ 3,543,912$ 36,669,259$ 209,860,008$ 7,687,261$

(1) The beginning balance of long-term debt has been restated to reflect the beginning net pension liability resulting from the implementation of GASB Statements No. 68 and No. 70. See note 15.

Liabilities are liquidated by the General Fund for governmental activities, including capital leases, compensated absences, net OPEB obligations and supplemental employee retirement plan. The capital lease principal balance with Winthrop and COPs is funded by the Debt Service Fund. General obligation bond liabilities are liquidated through property tax collections as administered by the County Controller’s office through the Bond Interest and Redemption Fund.

NOTE 9 - EMPLOYEE RETIREMENT PLANS:

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Academic employees are members of the California State Teachers’ Retirement System (CalSTRS) and classified employees are members of the California Public Employees’ Retirement System (CalPERS) and part-time, seasonal and temporary employees and employees not covered by CalSTRS or CalPERS are members of the Accumulated Program for part-time and Limited Services Employees (APPLE) plan.

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NOTE 9 - EMPLOYEE RETIREMENT PLANS: (continued)

As of June 30, 2015, the District implemented GASB Statements No. 68 and No. 71, and as a result, reported its proportionate share of the net pension liabilities, pension expense and deferred inflows of resources for each of the above plans and a deferred outflows of resources for each of the above plans as follows:

CalSTRS 67,786,920$ 4,859,625$ 16,692,400$ 5,852,200$ CalPERS 25,384,044 2,745,063 8,722,242 2,256,123

Totals 93,170,964$ 7,604,688$ 25,414,642$ 8,108,323$

Proportionate Share of Net Pension

Liability

Deferred Outflows of Resources

Proportionate Share of Deferred Inflows

of Resources

Proportionate Share of Pension

ExpensePension Plan

The details of each plan are as follows: California State Teachers’ Retirement System (CalSTRS)

Plan Description

The District contributes to the State Teachers’ Retirement Plan (STRP) administered by the California State Teachers’ Retirement System (CalSTRS). STRP is a cost-sharing multiple-employer public employee retirement system defined benefit pension plan. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers’ Retirement Law. Benefits Provided The STRP provides retirement, disability and survivor benefits to beneficiaries. Benefits are based on members’ final compensation, age and years of service credit. Members hired on or before December 31, 2012, with five years of credited service are eligible for the normal retirement benefit at age 60. Members hired on or after January 1, 2013, with five years of credited service are eligible for the normal retirement benefit at age 62. The normal retirement benefit is equal to 2.0 percent of final compensation for each year of credited service. The STRP is comprised of four programs: Defined Benefit Program, Defined Benefit Supplement Program, Cash Balance Benefit Program and Replacement Benefits Program. The STRP holds assets for the exclusive purpose of providing benefits to members and beneficiaries of these programs. CalSTRS also uses plan assets to defray reasonable expenses of administering the STRP. Although CalSTRS is the administrator of the STRP, the state is the sponsor of the STRP and obligor of the trust. In addition, the state is both an employer and nonemployer contributing entity to the STRP.

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The District contributes exclusively to the STRP Defined Benefit Program, thus disclosures are not included for the other plans. The STRP provisions and benefits in effect at June 30, 2015, are summarized as follows:

Hire date On or Before December 31, 2012 On or after January 1, 2013

Benefit formula 2% at 60 2% at 62

Benefit vesting schedule 5 years of service 5 years of serviceBenefit payments Monthly for life Monthly for life

Retirement age 60 62

Monthly benefits as a percentage of eligible compensation 2.0% - 2.4% 2.0% - 2.4%

Required employee contribution rate 8.15% 8.15%Required employer contribution rate 8.88% 8.88%

Required state contribution rate 5.95% 5.95%

STRP Defined Benefit Program

Contributions

Required member, District and State of California contributions rates are set by the California Legislature and Governor and detailed in Teachers’ Retirement Law. The contributions rates are expressed as a level percentage of payroll using the entry age normal actuarial method. The contribution rates for each plan for the year ended June 30, 2015 are presented above and the total District contributions were $4,859,625. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2015, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for State pension support provided to the District. The amount recognized by the District as its proportionate share of the net pension liability, the related state support and the total portion of the net pension liability that was associated with the District were as follows:

District proportionate share of net pension liability 67,786,920$ State's proportionate share of the net pension liability associated with the District 40,933,080

Total 108,720,000$

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The net pension liability was measured as of June 30, 2014. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts and the State, actuarially determined. At June 30, 2014, the District’s proportion was 0.1160%.

For the year ended June 30, 2015, the District recognized pension expense of $5,852,200 and revenue of $3,533,846 for support provided by the State. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Pension contributions subsequent to

measurement date 4,859,625$ $Net differences between projected

and actual earnings on plan investments 16,692,400

Total 4,859,625$ 16,692,400$

The deferred outflow of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. The deferred inflows of resources will be amortized over a closed 5-year period and will be recognized as a reduction in pension expense as follows:

Year EndedJune 30 Amortization

2016 4,173,100$ 2017 4,173,100 2018 4,173,100 2019 4,173,100

16,692,400$

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Actuarial Methods and Assumptions Total pension liability for STRP was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2013, and rolling forward the total pension liability to June 30, 2014. The financial reporting actuarial valuation as of June 30, 2013 used the following methods and assumptions, applied to all prior periods included in the measurement: Valuation date June 30, 2013 Measurement date June 30, 2014 Experience study July 1, 2006 through June 30, 2010 Actuarial cost method Entry age normal Discount rate 7.60% Investment rate of return 7.60% Consumer price inflation 3.00% Wage growth 3.75%

CalSTRS uses custom mortality tables to best fit the patterns of mortality among its members. These custom tables are based on RP2000 series tables adjusted to fit CalSTRS experience. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant. Based on the model for CalSTRS consulting actuary’ investment practice, a best estimate range was determined be assuming the portfolio is re-balanced annually and that the annual returns are lognormally distributed and independently from year to year to develop expected percentile for the long-term distribution of annualized returns. The assumed asset allocation is based on board policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the board. Best estimates of 10-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:

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Long-term

Assumed Asset Expected Real

Asset Class Allocation Rate of ReturnGlobal equity 47% 4.50%

Private equity 12% 6.20%

Real estate 15% 4.35%

Inflation sensitive 5% 3.20%Fixed income 20% 0.20%

Cash/liquidity 1% 0.00% Discount Rate The discount rate used to measure the total pension liability was 7.60%. The projection of cash flows used to determine the discount rate assumed the contributions from plan members and employers will be made at statutory contribution rates. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7.60%) and assuming that contributions, benefit payments and administrative expense occurred midyear. Based on these assumptions, the STRP’s fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine total pension liability. The following presents the District’s proportionate share of the net pension liability calculated using the current discount rate as well as what the net pension liability would be if it were calculated using a discount rate that is one percent lower or higher than the current rate:

Net Pension

Discount rate Liability

1% decrease (6.60%) 105,662,080$

Current discount rate (7.60%) 67,786,920

1% increase (8.60%) 36,205,920

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Plan Fiduciary Net Position Detailed information about CalSTRS plan fiduciary net position is available in a separate comprehensive annual financial report. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7667 Folsom Boulevard, Sacramento, CA 95826. California Public Employees Retirement System (CalPERS)

Plan Description

Qualified employees are eligible to participate in the Schools Pool Plan under the California Public Employees’ Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees’ Retirement Law. Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of service credit, a benefit factor and the member’s final compensation. Members hired on or before December 31, 2012, with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. Members hired on or after January 1, 2013, with five years of total service are eligible to retire at age 52 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The Basic Death Benefit is paid to any member’s beneficiary if the member dies while actively employed. An employee’s eligible survivor may receive the 1957 Survivor Benefit if the member dies while actively employed, is at least age 50 (or 52 for members hired on or after January 1, 2013), and has at least 5 years of credited service. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The CalPERS provisions and benefits in effect at June 30, 2015, are summarized as follows:

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Hire date On or Before December 31, 2012 On or after January 1, 2013

Benefit formula 2% at 55 2% at 62

Benefit vesting schedule 5 years of service 5 years of service

Benefit payments Monthly for life Monthly for lifeRetirement age 55 62

Monthly benefits as a percentage of eligible compensation 1.1% - 2.5% 1.0% - 2.5%

Required employee contribution rate 6.974% 6.000%Required employer contribution rate 11.771% 11.771%

School Employer Pool (CalPERS)

Contributions

Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The contributions rates are expressed as percentage of annual payroll. The contribution rates for each plan for the year ended June 30, 2015 are presented above and the total District contributions were $2,745,063. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

As of June 30, 2015, the District reported net pension liabilities for its proportionate share of the CalPERS net pension liability totaling $25,834,044. The net pension liability was measured as of June 30, 2014. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating school districts, actuarially determined. At June 30, 2014, the District’s proportion was 0.2236%.

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For the year ended June 30, 2015, the District recognized pension expense of $2,256,123. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Pension contributions subsequent to

measurement date 2,745,063$ $

Net differences between projected and actual earnings on plan investments 8,722,242

Total 2,745,063$ 8,722,242$ The deferred outflow of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. The deferred inflow of resources will be amortized over a closed 5-year period and will be recognized as a reduction in pension expense as follows:

Year EndedJune 30 Amortization

2016 2,180,560$ 2017 2,180,560 2018 2,180,561 2019 2,180,561

8,722,242$

Actuarial Methods and Assumptions Total pension liability for the School Employer Pool was determined by applying update procedures to a financial reporting actuarial valuation as of June 30, 2013, and rolling forward the total pension liability to June 30, 2014. The financial reporting actuarial valuation as of June 30, 2013 used the following methods and assumptions, applied to all prior periods included in the measurement:

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Valuation date June 30, 2013 Measurement date June 30, 2014 Experience study July 1, 1997 through June 30, 2011 Actuarial cost method Entry age normal Discount rate 7.50% Investment rate of return 7.50% Consumer price inflation 2.75% Wage growth 3.00%

Mortality assumptions are based on mortality rates resulting from the most recent CalPERS experience study adopted by the CalPERS Board. For purposes of the post-retirement mortality rates, those revised rates include five years of projected ongoing mortality improvement using Scale AA published by the Society of Actuaries. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-term Assumed Asset Expected Real

Asset Class Allocation Rate of ReturnGlobal equity 47% 5.25%Global fixed income 19% 0.99%

Private equity 12% 6.83%

Real estate 11% 4.50%Inflation sensitive 6% 0.45%

Infrastructure and Forestland 3% 4.50%

Liquidity 2% -0.55%

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Discount Rate The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed the contributions from plan members and employers will be made at statutory contribution rates. Based on these assumptions, the School Employer Pool fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine total pension liability. The following presents the District’s proportionate share of the net pension liability calculated using the current discount rate as well as what the net pension liability would be if it were calculated using a discount rate that one percent lower or higher than the current rate:

Net PensionDiscount rate Liability

1% decrease (6.50%) 44,529,408$

Current discount rate (7.50%) 25,384,044

1% increase (8.50%) 9,386,163

Plan Fiduciary Net Position Detailed information about CalPERS School Employer plan fiduciary net position is available in a separate comprehensive annual financial report. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA 95814.

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Accumulation Program for Part-Time and Limited Services Employees (APPLE) (continued)

Plan Description

The Accumulation Program for Part-Time and Limited Service Employees (APPLE) is a defined contribution plan qualifying under Section 401(a) and 501 of the Internal Revenue Code. This plan covers part-time, seasonal and temporary employees and employees not covered by Section 3121(b)(7)(F) of the Internal Revenue Code. The benefit provisions and contribution requirements of plan members and the District are established and may be amended by APPLE Administration Committee.

Funding Policy

Contributions of 3.75% of covered compensation of eligible employees are made by the employee. Total District contributions were made in the amount of $535,457 during the fiscal year. The total amount of covered compensation was $14,278,856. Total contributions made are 100% of the amount of contributions required for the fiscal year 2014-15. Total required contribution is 7.5%; the District contributes 3.75% in addition to the employees’ contribution of 3.75%

NOTE 10 – SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN: The District has Supplemental Employee Retirement Plans for faculty and management/confidential employees. The accumulated future liability for the District at June 30, 2015 is $5,540,432, and has been reflected in these financial statements. In 2011-12, 2012-13, 2013-14 and 2014-15 the Board of Trustees approved the implementation of District Supplemental Employee Retirement Plans for faculty, management, confidential and non-management employees.

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NOTE 10 – SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN: (continued)

A total of 81 faculty, 19 management/confidential, and 58 non-management employees participate in the plan. The total cost to the District is approximately $11.7 million. The District will pay benefits in future years, through 2019-20, totaling approximately $5.5 million.

NOTE 11 – POSTEMPLOYMENT HEALTHCARE BENEFITS:

Plan Description The District administers a single-employer defined benefit healthcare plan (the Retiree Health Plan). The plan provides health and dental benefits to all full-time Faculty, Management and Classified employees who have reached age 55 and retire with at least 14 years of service, however, District-paid retiree benefits begin at age 55 and terminate on the June 30th for the fiscal year during which the retiree reaches age 65. Beyond this age, the District pays $1,440 annually to assist retirees in obtaining Medicare Supplement coverage. Benefit provisions are established through negotiations between the District and the bargaining unions representing employees and are renegotiated each three-year bargaining period. The Retiree Health Plan does not issue a separate financial report. Funding Policy The District currently finances benefits on a pay-as-you-go basis. The District contributes 100 percent of the cost of current year premiums for eligible retired plan members and their spouses as applicable. For fiscal year ended 2015, the District and member contributions to the plan totaled $2,124,995. Annual OPEB Cost and Net OPEB Obligation The District’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

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NOTE 11 – POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued)

Annual OPEB Cost and Net OPEB Obligation (continued) The following table shows the components of the District’s annual OPEB cost for the year, the amount actually contributed, and changes in the OPEB obligation:

Annual required contribution 2,486,953$

Interest on net OPEB obligation 258,874

Adjustment to annual required contribution (102,328)

Annual OPEB cost (expense) 2,643,499

Contributions made (2,124,995)

Change in net OPEB obligation 518,504

Net OPEB obligation - beginning of year 5,449,988

Net OPEB obligation - end of year 5,968,492$

The District’s annual OBEB cost for the year, the percentage of annual OPEB cost contributed, and the net OPEB obligation for fiscal year ended 2015 was as follows:

Percentage ofFiscal Year Annual Annual OPEB Net OPEB

Ended OPEB Cost Cost Contributed Obligation

6/30/2013 2,122,860$ 64.0% 4,092,671$ 6/30/2014 2,604,512 47.9% 5,449,988 6/30/2015 2,643,499 80.4% 5,968,492

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NOTE 11 – POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued)

Funding Status and Funding Progress As of April 11, 2014, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits as well as the unfunded actuarial accrued liability (UAAL) was $20,286,529. The covered payroll (annual payroll of active employees covered by the plan) was $59,070,408, and the ratio of the UAAL to the covered payroll was 34.34%. Although the plan has no segregated assets, the District does maintain a retiree benefits fund to designate resources for retiree health care costs. At June 30, 2015, the fund’s designated balance was $14,685,458. Actuarial valuations of an ongoing benefit plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of postemployment healthcare benefits funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets, if any, is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, if any, consistent with the long-term perspective of the calculations.

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NOTE 11 - POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued)

Actuarial Methods and Assumptions (continued) In the April 11, 2014 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 4.75 percent investment rate of return (net of administrative expenses) which is a blended rate of the expected long-term investment returns on plan assets and on the employers own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 4 percent. Both rates included a 2.75 percent inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level dollar of projected payroll on a closed basis. The remaining amortization period will expire on June 30, 2038.

NOTE 12 - JOINT POWERS AGREEMENT:

The District participates in three joint powers agreement (JPA) entities; the Statewide Association of Community Colleges (SWACC); and the Schools Excess Liability Fund (SELF) and the Schools Alliance for Workers’ Compensation Excess Group Purchase (SAWCX II).

SWACC provides liability and property insurance for forty-seven community colleges. SWACC is governed by a Board comprised of a member of each of the participating districts. The board controls the operations of SWACC, including selection of management and approval of members beyond their representation on the Board. Each member shares surpluses and deficits proportionately to its participation in SWACC. SELF arranges for and provides a self-funded or additional insurance for excess liability fund for approximately 1,100 public educational agencies. SELF is governed by a board of 16 elected voting members, elected alternates, and two ex-officio members. The board controls the operations of SELF, including selection of management and approval of operating budgets, independent of any influence by the members beyond their representation on the board. Each member pays an annual contribution based upon that calculated by SELF's board of directors and shares surpluses and deficits proportionately to its participation in SELF.

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NOTE 12 - JOINT POWERS AGREEMENT: (continued)

SAWCX II provides reinsurance for workers’ compensation claims above the District’s self-insured limit. Each JPA is governed by a board consisting of a representative from each member district. Each governing board controls the operations of its JPA independent of any influence by the Pasadena Area Community College District beyond the District’s representation on the governing boards. Each JPA is independently accountable for its fiscal matters. Budgets are not subject to any approval other than that of the respective governing boards. Member districts share surpluses and deficits proportionately to their participation in the JPA. The relationships between the Pasadena Area Community College District and the JPAs are such that neither JPA is a component unit of the District for financial reporting purposes. Condensed financial information of SWACC, SELF and SAWCX II for the most current information available is as follows:

SWACC SELF SAWCX II6/30/2015 6/30/2015 6/30/2014(Unaudited) (Audited) (Unaudited)

Total assets 53,936,821$ 154,826,708$ 16,894,958$ Total liabilities 23,420,128 122,637,079 15,667,412

Retained earnings 30,516,693$ 32,189,629$ 1,227,546$

Total revenues 18,085,402$ 11,968,752$ 252,316$ Total expenditures (credits) 18,077,751 23,063,637 (183,514)

Net increase/(decrease) 7,651$ (11,094,885)$ 435,830$

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NOTE 13 - INTERNAL SERVICE FUND:

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; and medical claims. During the fiscal year, the District maintained an Internal Service Fund to account for and finance its uninsured risks of loss. The Self Insurance Fund provides coverage for up to a maximum of $500,000 for each workers’ compensation claim, $50,000 for each general liability claim and $25,000 for each property damage claim. The District participates in a JPA to provide excess insurance coverage above the self-insured retention level for workers’ compensation claims. Settled claims have not exceeded the coverage provided by the JPA in any of the past three fiscal years. Funding of the Internal Service Fund is based on estimates of the amounts needed to pay prior and current year claims. Workers’ Compensation claims are charged to the respective funds which generate the liability and the Property and Liability claims are paid by the General Fund. At June 30, 2015, the District accrued the claims liability in accordance with GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The present value of the liability is estimated at $4,449,000. Changes in the reported liability are shown below:

Current YearBeginning Claims and Ending

Fiscal Year Changes in Claims Fiscal YearLiability Estimates Payments Liability

Property and Liability 225,000$ 971,105$ (971,105)$ 225,000$ Workers' Compensation 4,224,000 1,540,182 (1,540,182) 4,224,000

4,449,000$ 2,511,287$ (2,511,287)$ 4,449,000$

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NOTE 14 – FUNCTIONAL EXPENSE: Operating expenses are reported by natural classification in the statement of revenues, expenses and change in net position. A schedule of expenses by function is shown below:

Supplies,Materials, Utilities Student

Employee Other Expenses FinancialSalaries Benefits and Services Aid Depreciation Total

Instructional 60,781,111$ 15,868,808$ 1,850,955$ 11,426$ $ 78,512,300$ Academic Support 8,969,306 3,145,639 886,679 9,955 13,011,579 Student Services 13,325,037 4,371,114 2,746,365 484,414 20,926,930 Operation & Maintenance of Plant 4,645,882 2,319,947 2,439,891 9,405,720 Institutional Support 10,555,252 6,612,005 8,005,225 9,740 25,182,222 Community Services and Economic Development 583,137 235,551 179,080 997,768 Ancillary Services and Auxiliary Operations 3,339,110 995,769 3,107,111 244,350 7,686,340 Physical Property & Related Acquisition 2,578 187 4,970,855 4,973,620 Long-Term Debt & Other Financing 8,558,311 8,558,311 Student Aid 36,865,725 36,865,725 Depreciation Expense 11,241,338 11,241,338

Total 102,201,413$ 33,549,020$ 32,744,472$ 37,625,610$ 11,241,338$ 217,361,853$

NOTE 15 – CUMULATIVE EFFECT OF ACCOUNTING CHANGES AND RESTATEMENT TO BEGINNING NET POSITION AND NEGATIVE UNRESTRICTED NET POSITION:

The beginning net position of the basic financial statements has been restated by $(110,474,456) to recognize the beginning balance of the net pension liability and deferred outflow of resources resulting from the implementation of GASB Statements No. 68 and No. 71. Beginning net position was not restated for the effect of deferred inflows of resources as the amount was not practical to determine. The effect of this implementation has resulted in a negative unrestricted net position at June 30, 2015. The retirement plan administrators for CalSTRS and CalPERS will require increases in contribution amounts to reduce the net pension liability in future years. The District has budgeted for increased contributions in the 2016 year.

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NOTE 16 - COMMITMENTS AND CONTINGENCIES:

A. Litigation

The District is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the District’s financial statements.

B. State and Federal Allowances, Awards and Grants

The District has received state and Federal funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursement will not be material.

C. Purchase Commitments

As of June 30, 2015, the District was committed under various capital expenditure purchase agreements for construction and modernization projects totaling approximately $5,299,000. Projects will be funded through bond proceeds, state funds and general funds.

D. Subsequent Events Damages have been asserted against the District related to the Center for the Arts construction projects. On October 15, 2015 a final demand of $1.6m was made. The Board has approved settlement for the matter for $1.6m to be paid from the District’s Measure P escrow account. This matter is expected to be fully settled in the near future.

NOTE 17 - GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENTS ISSUED, NOT YET EFFECTIVE:

The Governmental Accounting Standards Board (GASB) has issued several pronouncements prior to June 30, 2015, that have effective dates that may impact future financial presentations; however, the impact of the implementation of each of the statements below to the District’s financial statements has not been assessed at this time.

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NOTE 17 - GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENTS

ISSUED, NOT YET EFFECTIVE: (continued) Statement No. 72 - Fair Value Measurement and Application This statement was issued in February 2015 and provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements by establishing a hierarchy of inputs to valuation techniques used to measure fair value. The statement is effective for the fiscal year 2015-16. Statement No. 73 - Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 This statement was issued in June 2015 and extends the approach to accounting and financial reporting established in Statement No. 68 to all pensions, with modifications as necessary to reflect that for accounting and financial reporting purposes, any assets accumulated for pensions that are provided through pension plans that are not administered through trusts that meet the criteria specified in Statement No. 68 should not be considered pension plan assets. The object is to provide information about financial support provided by certain non-employer entities for pensions that are provided to the employees of other entities and that are not within the scope of Statement No. 68 and to provide information about the effects of pension-related transactions and other events on the elements of the basic financial statements of state and local governmental employers. The statement is effective for the fiscal year 2015-16 except those provisions that address employers and governmental non-employer contributing entities for pensions that are not within the scope of Statement No. 68, which are effective for the fiscal year 2016-17.

Statement No. 74 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans This statement was issued in June 2015 and establishes standards of financial reporting for defined benefit OPEB plans and defined contribution OPEB plans. This statement is closely related in some areas to Statement No. 75. The statement is effective for the fiscal year 2016-17.

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NOTE 17 - GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENTS

ISSUED, NOT YET EFFECTIVE: (continued) Statement No. 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions This statement was issued in June 2015 and establishes standards for governmental employer recognition, measurement, and presentation of information about OPEB. The statement also establishes requirements for reporting information about financial support provided by certain non-employer entities for OPEB that is provided to the employees of other entities. This statement is closely related in some areas to Statement No. 74. The statement is effective for the fiscal year 2017-18. Statement No. 76 - The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments This statement was issued in June 2015 and reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. The statement is effective for the fiscal year 2015-16. Statement No. 77 - Tax Abatement Disclosures This statement was issued in August 2015 and establishes financial reporting standards for tax abatement agreements entered into by state and local governments. The statement is effective for the fiscal year 2016-17.

REQUIRED SUPPLEMENTARY INFORMATION

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See the accompanying notes to the required supplementary information.

Actuarial AccruedActuarial Value Liability

Actuarial of

Assets (Entry Age Normal

Cost Method)Unfunded Actuarial Accrued Liability Funding Covered

UAAL as a Percentage of

Valuation Date (AVA) (AAL) (UAAL) Ratio Payroll Covered Payroll

6/10/2010 $ 13,381,136$ 13,381,136$ 0% 51,831,265$ 25.82%12/1/2011 15,674,507 15,674,507 0% 51,822,405 30.25%4/11/2014 20,286,529 20,286,529 0% 59,070,408 34.34%


SCHEDULE OF POSTEMPLOYMENT HEALTHCARE BENEFITS FUNDING PROGRESSFor the Fiscal Year Ended June 30, 2015

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2015

District's proportion of the net pension liability (assets) 0.1160%

District's proportionate share of the net pension liability (asset) 67,786,920$

State's proportionate share of the net pension liability (asset) associated with the District 40,933,080

Total 108,720,000$

District's covered-employee payroll reported as of the previous fiscal year to align with the measurement date of the net pension liability 51,472,000$

District's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 131.70%

Plan fiduciary net position as a percentage of the total pension liability 77.00%

Note: Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available.

SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY


STATE TEACHERS' RETIREMENT PLANFor the Fiscal Year Ended June 30, 2015


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2015

District's proportion of the net pension liability (assets) 0.2236%

District's proportionate share of the net pension liability (asset) 25,384,044$

District's covered-employee payroll reported as of the previous fiscal year to align with the measurement date of the net pension liability 23,477,000$

District's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 108.12%

Plan fiduciary net position as a percentage of the total pension liability 83.37%


SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITYCALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM - SCHOOLS POOL PLAN




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2015

Contractually required contribution 4,859,625$

Contributions in relation to the contractually required contribution 4,859,625

Contribution deficiency (excess) -$

District's covered-employee payroll 53,590,000$

Contributions as a percentage of covered employee payroll 9.07%


SCHEDULE OF DISTRICT CONTRIBUTIONSSTATE TEACHERS' RETIREMENT PLAN




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2015

Contractually required contribution 2,745,063$

Contributions in relation to the contractually required contribution 2,745,063

Contribution deficiency (excess) -$

District's covered-employee payroll 24,691,000$

Contributions as a percentage of covered employee payroll 11.12%



SCHEDULE OF DISTRICT CONTRIBUTIONSCALIFORNIA PUBLIC EMPLOYEES RETIREMENT PLAN



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NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2015

NOTE 1 - PURPOSE OF SCHEDULE:

A. Schedule of Postemployment Healthcare Benefits Funding Progress

This schedule is prepared to show information for the three most recent actuarial valuations in accordance with Statement No. 45 of the Governmental Accounting Standards Board, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The schedule is intended to show trends about the funding progress of the District’s actuarially determined liability for postemployment benefits other than pensions.

B. Schedules of the District’s Proportionate Share of the Net Pension Liability – STRP and CalPERS – Schools Pool Plan The schedule presents information on the District’s proportionate share of the net pension liability, the plans’ fiduciary net position and, when applicable, the State’s proportionate share of the net pension liability associated with the District. In the future, as data becomes available, 10 years of information will be presented.

C. Schedules of District Contributions – STRP and CalPERS

The schedule presents information on the District’s required contribution, the amounts actually contributed and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented.

SUPPLEMENTARY INFORMATION

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HISTORY AND ORGANIZATION June 30, 2015

The Pasadena Area Community College District was established in 1967 and serves communities in the Los Angeles County. There were no exterior boundary changes during the current year. The District currently operates one college. BOARD OF TRUSTEES Member Office Term Expiration Berlinda Brown President December 2017 Linda S. Wah Vice President December 2017 Jeanette Mann PhD Clerk December 2015 Ross Selvidge, PhD Member December 2017 Anthony R. Fellow PhD Member December 2017 William E. Thomson, Jr. Member December 2015 John H. Martin Member December 2015 Marshall Lewis Student Trustee June 2015

DISTRICT EXECUTIVE OFFICERS Robert B. Miller, DPA Interim Superintendent/President and Board of Trustee Secretary Robert H. Bell, EdD Assistant Superintendent/Senior Vice President, Academic and Student Affairs Joseph W. Simoneschi-Sloan Acting Assistant Superintendent/Senior Vice President, Business and College Services

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Pass-ThroughFederal Entity TotalCatalog Identifying Program

Program Name Number Number Expenditures

Federal Categorical Aid Programs:

Department of Education:

Direct:

Student Financial Aid Cluster

Pell Grant 84.063 N/A 32,458,850$

Supplemental Educational Opportunity Grant (SEOG) 84.007 N/A 724,419

Federal Work-Study Program (531300) 84.033 N/A 50,000

Federal Work-Study Program (531400) 84.033 N/A 423,533

Federal Family Education Loans (Direct Loans) 84.032 N/A 1,560,805

Direct Loan Plus N/A 5,264

Total Student Financial Aid Cluster: 35,222,871

Passed through from the California Department of Education:TRIO Cluster:

Upward Bound Classic 84.047A (1) 282,484

Upward Bound Math and Science 84.047M (1) 263,578

Student Support Services and Student Grants 84.042A (1) 406,371

Talent Search 84.044A (1) 142,307

Upward Bound Classic-Rosemead 84.044A (1) 200,849

Upward Bound Math and Science - El Monte 84.044A (1) 262,538

Total TRIO Cluster: 1,558,127

Department of Agriculture:Forest Reserve 10.665 N/A 16,213

Summer Food Math Science Upward Bound 10.559 N/A 21,940 Passed through the California Department of Education Child & Adult Care Food Program 10.558A 3278-1A 47,085

National Science Foundation:Direct:

Carleton College Integrate 47.076 N/A 8,630

Carleton College Integrate (Prior Year) 47.076 N/A 7,141

Department of Education:Passed through the California State Chancellor's Office

CTEA I-C 84.048 03579 487,570

CTE Transitions 84.048 03579 41,209

Passed through the California Department of Education

Workforce Investment Act: Adult Basic Education 84.002A 3905 290,506

ASE 84.002A 3913 268,493

El Civics 84.002A 3926 29,370

XL for life: Transforming Developmental Education at PCC to 84.031S N/A 718,787

Improve Hispanic Student Success

HSI: Developing accessible intersegmental STEM pathway 84.031C N/A 1,435,353

environmental sciences for underserved Hispanic students

Design Technology Pathway 84.031S N/A 782,144


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFor the Fiscal Year Ended June 30, 2015

See the accompanying notes to the supplementary information.

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Pass-ThroughFederal Entity TotalCatalog Identifying Program

Program Name Number Number Expenditures

Department of Health and Human Services:Passed through the California State Chancellor's Office

Foster Care 93.658 (1) 55,888

Temporary Assistance for Needy Families (TANF) 93.558 (1) 68,805

Passed through the California Department of Education

Child Development - CCTR (Based of Attendance/Enrollment) 93.575 000324 92,940

Child Development -CSPP (Based of Attendance/Enrollment) 93.596 000321 26,789

Passed through the California Department of Social Services

Los Angeles County DPSS 93.558 (1) 56,660

Small Business Administration:Small Business Development 59.037 N/A 72,883

Total Federal Expenditures: 41,309,404$

Reconciliation to Federal Revenue:

Total federal program expenditures 41,309,404$

Revenues in excess of expenditures related to federal entitlement program:

Build America Bonds 541,683 CTEA I-C 21,790 Pell Grant 42,406 Pell Grant Administration Grant 130,771 Supplemental Educational Opportunity Grant 3,348 Federal Family Education Loans (Direct Loans) 33,858

Total Federal Revenue 42,083,260$

Student Financial Aid Loan Programs:

Note: (1) Pass-through entity identifying number not readily available.

N/A Pass-through entity identifying number not applicable

The Pasadena Area Community College District is in the process of closing out the Perkins program, CFDA 84.038. Loans outstanding at 6/30/15 is expected to be immaterial to the Student Financial Aid Cluster.



SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

See accompanying notes to the supplementary information.

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Program Name Cash ReceivedAccounts Receivable

Unearned Revenue Total

State Categorical Aid Program:

Child Development Program 6,569$ 13,157$ $ 19,726$ 19,726$ Child Development Program 110,124 4,374 105,750 105,750 Child Development Program 143,344 143,344 143,344 Child Development Program 1,971 407 2,378 2,378 Cooperative Agencies Resources For Education (CARE) 74,971 921 74,050 74,050 Extended Opportunity Program and Services (EOP&S) 847,321 7,976 839,345 839,345 Extended Opportunity Program and Services (EOP&S) 92,285 45,922 46,363 46,363 Extended Opportunity Program and Services (EOP&S) prior y 31,683 31,683 31,683 Disabled Students Program and Services (DSPS) 1,130,666 1,130,666 1,130,666 Matriculation - Non Credit 185,956 26,118 159,838 159,838 Matriculation - Credit 2,914,553 1,306,736 1,607,817 1,607,817 Matriculation - Credit (Prior Year) 209,746 209,746 209,746 Student Equity 1,009,466 993,854 15,612 15,612 Matriculation - Administration 599,995 406,625 193,370 193,370 Matriculation - Administration (Prior Year) 248,730 248,730 248,730 Instructional Equipment 1,342,404 272,109 1,070,295 1,070,295 Associate Degree Nursing 112,637 177,499 88,310 201,826 201,826 Economic Development - Applied Biological Technology 16 16 16 CTE 140 Community Collaborative Projects 96,756 360,180 179,255 277,681 277,681 Basic Skills 179,502 72,323 107,179 107,179 Basic Skills (Prior Year) 15,670 15,670 15,670 Student Financial Aid Administration 224,556 224,556 224,556 SFAA Augmentation 518,037 518,037 518,037 Calworks 329,197 21,154 308,043 308,043 Staff Diversity - AB1725 9,051 9,051 9,051 Faculty/Staff Professional Development 333 333 333 California Governor's Office of Business

and Economic Development 34,815 34,815 34,815 MESA 38,607 16,791 55,398 55,398 Foster Care Education Program 37,096 34,010 71,106 71,106 Bridges to Stem Cell Research 991,199 29,082 481,423 538,858 538,858 AMETLL 170 170 170 Linked Learning Pathways to Bacca 50,000 41,122 8,878 8,878 Prop 39 Clean Energy Work 9,742 9,622 120 120 AB 86 237,351 30,578 206,773 206,773 California Career Pathways Grant (LaHi-Tech Cont.) 7,499,526 7,397,495 102,031 102,031 Cal Grant "B" 2,250,481 4,458 5,287 2,249,652 2,249,652 Cal Grant "C" 18,821 18,821 18,821 TOTALS 21,568,013$ 670,918$ 11,391,204$ 10,847,727$ 10,847,727$

Program Revenues


SCHEDULE OF STATE FINANCIAL ASSISTANCE - GRANTSFor the Fiscal Year Ended June 30, 2015

Total Program

Expenditures


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Reported Audit AuditedData Adjustments Data

A. Summer Intersession (Summer 2014 only)

1. Noncredit1 149.61 149.61 2. Credit 1,331.86 1,331.86

B. Summer Intersession (Summer 2015 - Prior to July 1, 2015)

1. Noncredit1 139.66 139.66 2. Credit 1,382.66 1,382.66

C. Primary Terms (Exclusive of Summer Intersession)

1. Census Procedure Courses(a) Weekly Census Contact Hours 15,902.11 (28.75) 15,873.36 (b) Daily Census Contact Hours 483.80 483.80

2. Actual Hours of Attendance Procedure Courses

(a) Noncredit1 1,046.69 1,046.69 (b) Credit 793.49 793.49

3. Alternative Attendance Accounting Procedure(a) Weekly Census Procedure Courses 1,103.40 (20.36) 1,083.04 (b) Daily Census Procedure Courses 651.07 651.07 (c) Noncredit Independent Study/Distance - -

Education Courses

D. Total FTES 22,984.35 (49.11) 22,935.24

Supplemental Information (subset of above information)

E. In-Service Training Courses (FTES) -

H. Basic Skills courses and Immigrant Education

(a) Noncredit1 1,061.02 (b) Credit 604.92

CCFS 320 AddendumCDCP Noncredit FTES 789.45

Centers FTESNoncredit 1,066.93 Credit 613.35

1Including Career Development and College Preparation (CDCP) FTES


Annual - Factored FTES


SCHEDULE OF WORKLOAD MEASURES FOR STATE GENERAL APPORTIONMENTANNUAL (ACTUAL) ATTENDANCE


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RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS

For the Fiscal Year Ended June 30, 2015 The audit resulted in no adjustments to the fund balances reported on the June 30, 2015 Annual Financial and Budget Report (CCFS-311) based upon governmental accounting principles. Additional entries were made to comply with the GASB 34/35 reporting requirements. These entries are not considered audit adjustments for purposes of this reconciliation.


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Object/TOP Reported Audit Revised Reported Audit RevisedCodes Data Adjustments Data Data Adjustments Data

Instructional SalariesContract or Regular 1100 28,502,458$ $ 28,502,458$ 29,357,338$ $ 29,357,338$ Other 1300 27,490,325 27,490,325 27,490,325 27,490,325

Total Instructional Salaries 55,992,783 55,992,783 56,847,663 56,847,663 Non-Instructional Salaries

Contract or Regular 1200 - 9,988,186 9,988,186 Other 1400 - 547,465 547,465

Total Non-Instructional Salaries - - 10,535,651 10,535,651 Total Academic Salaries 55,992,783 - 55,992,783 67,383,314 - 67,383,314

Non-Instructional SalariesRegular Status 2100 - 19,512,065 19,512,065 Other 2300 - 3,863,029 3,863,029

Total Non-Instructional Salaries - - - 23,375,094 - 23,375,094 Instructional Aides

Regular Status 2200 86,162 86,162 86,162 86,162 Other 2400 - -

Total Instructional Aides 86,162 86,162 86,162 86,162 Total Classified Salaries 86,162 - 86,162 23,461,256 - 23,461,256

Employee Benefits 3000 13,800,185 13,800,185 28,896,176 28,896,176 Supplies and Materials 4000 - 779,029 779,029 Other Operating Expenses 5000 44,805 44,805 12,299,362 12,299,362 Equipment Replacement 6420 - -

Total Expenditures Prior to Exclusions 69,923,935 - 69,923,935 132,819,137 - 132,819,137

Activity (ECSB)ECS 84362 B

Total CEEAC 0100-6799


RECONCILIATION OF 50 PERCENT LAW CALCULATIONFor the Fiscal Year Ended June 30, 2015

Academic Salaries

Classified Salaries

Activity (ECSA)ECS 84362 A

Instructional Salary CostAC 0100-5900 & AC 6110

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Object/TOP Reported Audit Revised Reported Audit RevisedCodes Data Adjustments Data Data Adjustments Data

Activities to ExcludeInstructional Staff–Retirees’ Benefits and Retirement Incentives 5900 1,220,604 1,220,604 1,220,604 1,220,604 Student Health Services Above Amount Collected 6441 - - Student Transportation 6491 - 84,858 84,858 Non-instructional Staff-Retirees’ Benefits and Retirement Incentives 6740 - 1,523,078 1,523,078

Objects to ExcludeRents and Leases 5060 - 754,517 754,517 Lottery Expenditures

Academic Salaries 1000 - - Classified Salaries 2000 - - Employee Benefits 3000 - - Supplies and Materials 4000 - -

Software 4100 - - Books, Magazines, & Periodicals 4200 - - Instructional Supplies & Materials 4300 - - Noninstructional, Supplies & Materials 4400 - -

Total Supplies and MaterialsOther Operating Expenses and Services 5000 - 2,997,467 2,997,467 Capital Outlay 6000 - -

Library Books 6300 - - Equipment 6400 - -

Equipment - Additional 6410 - - Equipment - Replacement 6420 - -

Total EquipmentTotal Capital OutlayOther Outgo 7000 - -

Total Exclusions 1,220,604 - 1,220,604 6,580,524 - 6,580,524 Total for ECS 84362, 50% Law 68,703,331$ - 68,703,331$ 126,238,613$ - 126,238,613$ Percent of CEE (Instructional Salary Cost / Total CEE) 54.42% 0% 54.42% 100% 0% 100%50% of Current Expense of Education 63,119,306$ - 63,119,306$


RECONCILIATION OF 50 PERCENT LAW CALCULATIONFor the Fiscal Year Ended June 30, 2015

Activity (ECSA) Activity (ECSB)ECS 84362 A ECS 84362 B

Exclusions

Instructional Salary Cost Total CEEAC 0100-5900 & AC 6110 AC 0100-6799

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Object UnrestrictedActivity Classification Code

19,528,621$ EPA Proceeds: 8630

Salaries Operating Capital TotalActivity and Benefits Expenses Outlay

Activity Classification Code (1000 - 3000) (4000 - 5000) (6000)Instructional Activities 0100-5900 19,528,621$ $ $ $ 19,528,621

-

- - - - - - - Total Expenditures for EPA* 19,528,621$ -$ $ - 19,528,621 Revenues less Expenditures -

*Total Expenditures for EPA may not include Administrator Salaries and Benefits or other administrative costs.


PROPOSITION 30 EDUCATION PROTECTION ACCOUNT EXPENDITURE REPORTFor the Fiscal Year Ended June 30, 2015

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NOTES TO SUPPLEMENTARY INFORMATION For the Fiscal Year Ended June 30, 2015

NOTE 1 - PURPOSE OF SCHEDULES:

A. Schedules of Expenditures of Federal Awards and State Financial Assistance-Grants The audit of the Pasadena Area Community College District for the year ended June 30, 2015 was conducted in accordance with OMB Circular A-133, which requires a disclosure of the financial activities of all federally funded programs. The Schedule of Federal Awards and the Schedule of State Financial Assistance was prepared on the modified accrual basis of accounting.

B. Schedule of Workload Measures for State General Apportionment Recal

(Actual) Attendance

The Schedule of Workload Measures for State General Apportionment represents the basis of apportionment of the Pasadena Area Community College District's annual source of funding.

C. Reconciliation of Annual Financial and Budget Report with Audited Financial

Statements

This schedule reports any audit adjustments made to the fund balances of all funds as reported on the Annual Financial and Budget Report (Form CCFS-311).

D. Reconciliation of 50 Percent Law Calculation

This schedule reports any audit adjustments made to the 50 percent law calculation (Education Code Section 84362).

E. Proposition 30 Education Protection Account Expenditure Report

This schedule reports how funds received from the passage of Proposition 30 Education Protection Act were expended.

OTHER INDEPENDENT AUDITOR’S REPORTS

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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS The Board of Trustees Pasadena Area Community College District 1570 East Colorado Blvd Pasadena, CA 91109 We have audited, 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, the basic financial statements of the Pasadena Area Community College District (the District) as of and for the year ended June 30, 2015 and have issued our report thereon dated November 24, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency or a combination of deficiencies in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; AND REPORT ON

INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133

The Board of Trustees Pasadena Area Community College District 1570 East Colorado Blvd. Pasadena, CA 91109 Report on Compliance for Each Major Federal Program We have audited the Pasadena Area Community College District’s (the District) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the District’s major federal programs for the year ended June 30, 2015. The District’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the District’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District's compliance.

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; AND REPORT ON

INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133

Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2015. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items 2015-001 and 2015-002. Our opinion on each major federal program is not modified with respect to these matters. The District’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The District’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance, for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over compliance.

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INDEPENDENT AUDITOR’S REPORT ON STATE COMPLIANCE The Board of Trustees Pasadena Area Community College District 1570 East Colorado Blvd. Pasadena, CA 91109 We have audited the Pasadena Area Community College District’s (the District) compliance with the types of compliance requirements described in the 2013-14 Contracted District Audit Manual, published by the California Community Colleges Chancellor’s Office for the year ended June 30, 2015. The District’s State compliance requirements are identified below. Management’s Responsibility Management is responsible for compliance with the State laws and regulations as identified below. Auditor’s Responsibility Our responsibility is to express an opinion on the District’s compliance based on our audit of the types of compliance requirements referred to below. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the 2014-15 Contracted District Audit Manual, published by the California Community Colleges Chancellor’s Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the specific areas listed below has occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on state compliance. However, our audit does not provide a legal determination of the District’s compliance.

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INDEPENDENT AUDITOR’S REPORT ON STATE COMPLIANCE Compliance Requirements Tested In connection with our audit referred to above, we selected and tested transactions and records to determine the District’s compliance with the State laws and regulations applicable to the following items:

Section

Description

Procedures Performed

421 Salaries of Classroom Instructors (50 Percent Law) Yes 423 Apportionment for Instructional Service Agreements/Contracts Yes 424 State General Apportionment Funding System Yes 425 Residency Determination for Credit Courses Yes 426 Students Actively Enrolled Yes 427 Concurrent Enrollment of K-12 Students in Community

College Credit Courses Yes

430 Scheduled Maintenance Program Yes 431 Gann Limit Calculation Yes 435 Open Enrollment Yes 438 Student Fees – Health Fees and Use of Health Fee Funds Yes 439 Proposition 39 Clean Energy Funds Yes 440 Intersession Extension Program Not applicable 474 Extended Opportunity Programs and Services (EOPS) and

Cooperative Agencies Resources for Education (CARE) Yes

475 Disabled Student Programs and Services (DSPS) Yes 479 To Be Arranged Hours (TBA) Yes 490 Proposition 1D State Bond Funded Projects Yes 491 Proposition 30 Education Protection Account Funds Yes

In our opinion, the Pasadena Area Community College District complied with the laws and regulations of the state programs referred to above in all material respects for the year ended June 30, 2015. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the 2014-15 Contracted District Audit Manual, published by the California Community Colleges Chancellor’s Office, and which is described in the accompanying schedule of findings and questioned costs as items 2015-003, and 2015-004. Our opinion on each state program is not modified with respect to this matter. The District’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The District’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

FINDINGS AND RECOMMENDATIONS

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS SUMMARY OF AUDITOR RESULTS

June 30, 2015 Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting:

Material weakness(es) identified? Yes X No Significant deficiency(ies) identified not considered

to be material weaknesses? Yes X None reported

Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs:

Material weakness(es) identified? Yes X No Significant deficiency (ies) identified not considered

to be material weaknesses? X Yes None reported Type of auditor’s report issued on compliance for

major programs: Unmodified

Any audit findings disclosed that are required to be Reported in accordance with Circular A-133, Section .510(a) X Yes No

Identification of major programs tested

CFDA Number(s) Name of Federal Program or Cluster 84.007, 84.032, 84.033, and 84.063 Student Financial Aid Cluster 84.048 Perkins Title I, Part C - CTEA

Dollar threshold used to distinguish between Type A and Type B programs: $300,000

Auditee qualified as low-risk auditee? X Yes No

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS

June 30, 2015

FINDING 2015-001: RETURN TO TITLE IV Original Finding: 2014-001 CFDA Title and Number: Student Financial Aid Cluster (84.007, 84.033, 84.063, and 84.268) Federal Award Number and Year: P063P14004, 2014-15 Name of Federal Agency: Department of Education Name of the Pass-through Agency: Not Applicable Criteria: According to 34 CFR 668.22(j)(2) and 34 CFR 668.22(1)(3), an institute must return the amount of title IV funds for which it is responsible as soon as possible but no later than 30 days after the date of the institution’s determination that the student withdrew as defined in paragraph (1)(3) of this section. When a student unofficially drops, the school must ensure that Title IV funds are returned within a reasonable period of time. A school must determine the withdrawal date (for a student who withdrew without providing notification) within 30 calendar days from the earlier of (1) the end of the payment period or period of enrollment, as applicable, (2) the end of the academic year, or (3) the end of the student’s educational program. Condition: During the testing of the requirements for Return to Title IV, the following exceptions were noted: Fall Semester 2014

Five of ten students selected that withdrew for Fall 2014, the calculation for Return to Title IV funds were not completed until April 2015 for Fall 2014 semester. Based on the criteria, the District did not complete the Return to Title IV calculation within the required 30 days after the end of the payment period or period of enrollment.

Five of ten students selected that withdrew for Fall 2014, the Return to Title IV funds

were returned April, 2015 for Fall 2014. Since the calculation was performed late, consequently, the funds were returned after the required 30 days after the end of the payment period or period of enrollment.

Cause: The District implemented a new Student Accounting Software during 2013-14. Procedures have improved in Fall 2014 and Spring 2015, however, a review process was not established to ensure all compliance requirements were followed.

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June 30, 2015

FINDING 2015-001: RETURN OF TITLE IV (continued)

Recommendation: Implement procedures, either utilizing the system or other means, to comply with Return of Title IV requirements. Perform calculations on all eligible students to allow timely communication so that Title IV funds are returned to the granting agency. Questioned Costs: Not quantified, the District has returned the Title IV funds by offsetting against positive awards during the draw down process. Effect: Not in compliance with 34 CFR sections 668.22(j)(2) and 668.22(l)(3) District Response: The District has revised its policies and procedures to ensure timely calculation in compliance with return to Title IV funds.

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June 30, 2015

FINDING 2015-002: TIME AND EFFORT REPORT CFDA Title and Number: Perkins Title I, Part C – CTEA (84.048A) Federal Award Number and Year: 14-Col-040, 2014-15 Name of Federal Agency: Department of Education Name of the Pass-through Agency: Not Applicable Criteria: As required by 2 C.F.R. Part 225, monthly time and effort reports should be prepared for Multiple Cost Objective and semi-annual Time and Effort Reports should be prepared for Single Cost Objective to support wages funded by federally funded programs. Reports should be prepared timely and signed by the individual and their reporting supervisor. Condition: It was noted through testing, time and effort reports were not prepared for the programs tested. Questioned Costs: Not quantified, satisfactory evidence was obtained to verify employee’s time and effort towards the program. Effect: Not in compliance with 2 C.F.R. Part 225. Recommendation: Implement procedures to ensure time and effort reports are prepared on a timely basis. District Response: The District has developed and implemented policies and procedures to accommodate time and effort reporting for federally funded grants. The District will monitor that all federally funded grants adhere to the district policies and procedures.

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS RELATED TO STATE AWARDS

June 30, 2015 FINDING 2015-003: SECTION 424 - STATE GENERAL APPORTIONMENT SYSTEM

Criteria: Per CCR, title 5, Article 4, section 58030 - The governing board of each district shall adopt procedures that will document all course enrollment, attendance and disenrollment information required by the provisions of this subchapter. Authorized procedures shall include rules for retention of support documentation which will enable an independent determination regarding the accuracy of tabulations submitted by the district to the Chancellor's Office as the basis of its claim for State support. Such support documentation procedures shall provide for accurate and timely attendance and contact hour data and shall be so structured as to provide for internal controls. Condition: It was noted through recalculation of contact hours for BIOL 001, which is an Independent Study Weekly courses. The contact hours reported on the Detail CCFS-320 Report, which was used to prepare the actual P2 CCFS-320 Report, did not agree with auditor’s recalculation. The District performed an internal investigation and noted an error in the system set-up of this course. Context: A statistical sample was derived from the P-2 report. The issue appears to be an isolated incident as all Independent Study Weekly courses were not affected. Questioned Costs: FTES reported in error for independent weekly census is 20.36; this calculates to approximately $94,399 based on a per FTES amount of $4,636.49 Effect: Not in compliance with CCR Title 5 regulations as detailed above. Recommendation: Investigate the cause for this issue and implement a review and approval process to prevent potential errors in calculating FTES. District Response: The District has developed and implemented appropriate procedures so courses are appropriately entered in the system. The discrepancies were located in instances where classes were scheduled as hybrid instruction: to be completed on campus and via the web with an attendance method of Independent Study Weekly. The corrective course of action involves coding each scheduled segment of a section with the corresponding unit value for those specific contact hours which in total equates to the course’s total unit value.

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS RELATED TO STATE AWARDS

June 30, 2015

FINDING 2015-004: SECTION 423 - INSTRUCTIONAL SERVICE AGREEMENTS Criteria: Per CCR, title 5, Article 5, section 58058 - Where the instructor is not a paid employee of the district, the college or district must furnish a written agreement or contract with each instructor conducting instruction. Such written agreement or contact shall state that the college or district has the primary right to control and direct the instructional activities of the instructor. Condition: It was noted through testing, a written contract between the District and the instructor, who is an employee of the contracting party was not furnished prior to the commencement of instruction. Context: This is a systemic issue as all Instructional Service Agreement classes were affected. Questioned Costs: 28.75 FTES, which calculates to approximately $133,317 based on a per FTES amount of $4,636.49. Effect: Not in compliance with CCR Title 5 regulations as detailed above. Recommendation: Develop policies and procedures that requires a written contract to be completed with the instructor prior to instruction. District Response: The District has developed and is implementing a procedure to accommodate proper and timely execution of Instructional Service Agreements.

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STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS June 30, 2015

Finding No.

Finding

Recommendation

Current Status

2014-001 RETURN OF TITLE IV

CFDA Title and Number: Student Financial Aid Cluster (84.007, 84.033, 84.063, and 84.268) Federal Award Number and Year: P063P140040, 2013-14 Name of Federal Agency: Department of Education Name of the Pass-through Agency: Not Applicable Criteria: According to 34 CFR sections 668.22(a)(1) through (a)(5), when a recipient of Title IV grant or loan assistance withdraws or fail to meet academic progress during a payment period or period of enrollment in which the recipient began attendance, the institution must determine the amount of Title IV aid earned by the student as of the student’s withdrawal date. If the total amount of Title IV assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the date of the institution’s determination that the student withdrew, the difference must be returned to the Title IV programs and no additional disbursements may be made to the student for the payment period or period of enrollment. In addition, the institution must return the lesser of the total amount of unearned Title IV assistance to be returned, or an amount equal to the total institutional charges incurred by the student for the payment period (34 CFR section 668.22(g)). Condition: During the testing of the requirements for Return to Title IV, the following exceptions were noted:

Implement procedures, either utilizing the system or other means, to comply with Return of Title IV requirements. Perform calculations on all eligible students to allow timely and accurate communication so that Title IV funds are returned to the granting agency.

Partially Implemented See Finding 2015-001

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Finding No.

Finding

Recommendation

Current Status

2014-001 RETURN OF TITLE IV (continued)

Fall Semester 2013 Six of seven students selected in the initial sample

for Fall Semester 2013, the Return of Title IV calculation was not performed.

The District subsequently provided documentation for 45 students that withdrew in the months of August, September and October 2013. However, the calculation for Return to Title IV funds was not completed until January 23, 2014 through January 28, 2014.

Based on further research, it was determined that an additional 193 students who either withdrew or did not meet academic progress. Timely calculations were not performed to determine the amount of Title IV funds to return, if any, owed by the student and by the District. Students were not notified and no Title IV funds were returned to the Department of Education.

Spring Semester 2014 Return of Title IV charges were not posted

accurately to student accounts. This was noted for one of two students where the calculation had been performed.

Partial calculations were performed for students who withdrew in Spring semester 2014 under the requirement of Return to Title IV using the District’s Student Services software; however, students were not notified as required.

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Finding No.

Finding

Recommendation

Current Status

2014-001 RETURN OF TITLE IV (continued)

Based on further research, it was determined

that an additional 151 students either withdrew or did not meet academic progress. Timely calculations were not performed to determine the amount of Title IV funds to return, if any, owed by the student and by the District. Students were not notified and no Title IV funds were returned to the Department of Education.

Cause: The District implemented a new Student Accounting Software during 2013-14. Procedures were not established to monitor Return to Title IV requirements for the Fall Semester 2013. Procedures were improved during the Spring Semester 2014, but a review process was not established to ensure all compliance requirements were being followed. Questioned Costs: Records were reconstructed for both Fall 2013 and Spring 2014 Semesters to the best of management’s ability. These reconstructed records supported questioned costs of $33,502 for Fall 2013 and $27,009 for Spring 2014. Effect: Not in compliance with 34 CFR sections 668.22(1)(1) through (a)(5) and 34 CFR Section 668.22(g).

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Finding No.

Finding

Recommendation

Current Status

2014-002 TIME AND EFFORT REPORT

CFDA Title and Number: XL for Life: Transforming Developmental Education at PCC to Improve Hispanic Student Success (84.031S), TRIO Cluster (84.047A, 84.047M, 84.042A, and 84.044A) Federal Award Number and Year: XL for Life – P0315100008 and 4 TRIO Cluster – P042A100931-13 and 4 P044A110921-13 and 3 P047A121353-13 and 2 P047A121270-13 and 2 P047M120274-13 and 2 P047M120273-13 and 2 Name of Federal Agency: Department of Education Name of the Pass-through Agency: Not Applicable Criteria: As required by 2 C.F.R. Part 225, monthly time and effort reports should be prepared for Multiple Cost Objective and semi-annual Time and Effort Reports should be prepared for Single Cost Objective to support wages funded by federally funded programs. Reports should be prepared timely and signed by the individual and their reporting supervisor. Condition: It was noted through testing, time and efforts reports were not prepared timely for the programs tested. Questioned Costs: Not quantified, satisfactory evidence was obtained to verify employee’s time and effort towards the program. Effect: Not in compliance with 2 C.F.R. Part 225.

Implement procedures to ensure time and effort reports are prepared on a timely basis.

Implemented for these Program:

- XL for Life - Trio Cluster

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Finding No.

Finding

Recommendation

Current Status

2014-003 SECTION 424: GENERAL APPORTIONMENT

SYSTEM Criteria: Per CCR Title 5, Article 3, Section 58020 - Tabulations, Census Day Procedure Tabulations, states that “(a) For each course section census week, as defined in Section 58003.1(b) of the Education Code, or each course section census day, as defined in Section 58003.1(c) of the Education Code, a separate tabulation is required for each of the course categories using a census day procedure. Each tabulation shall provide a detailed listing for each course section…[(3)] Number of class hours each daily census course section is scheduled to meet on the census day or number of class hours each weekly census course is scheduled to meet during the census week.” Condition: The District’s detail report does not contain the place holder or information for the number of class hours each daily census course section is scheduled or number of class hours each weekly census course is schedule to meet. Context: This is a systemic issue as all reports for the weekly and daily census type were affected. Questioned Costs: No dollar value was quantified as the issue is a report format and did not impact the number of full-time equivalent students reported. Effect: Not in compliance with CCR Title 5 regulations as detailed above.

Work with the consultants or internal information technology staff to revise the report format to include the required information.

Implemented

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Finding No.

Finding

Recommendation

Current Status

2014-004 SECTION 479: TO BE ARRANGED HOURS

Original Finding: 2013-3 Criteria: The Contracted District Audit Manual (CDAM) defines TBA as “Some courses with regularly scheduled hours of instruction have ‘hours to be arranged (TBA)’ as part of the total contact hours for the course. The TBA portion of the course uses an alternate method for regularly scheduling a credit course for purposes of applying either the Weekly or Daily Census Attendance Accounting Procedures pursuant to CCR Title 5, sections 58003.1(b) and (c), respectively.” TBA hours are only an option for credit courses that apply the Weekly or Daily Attendance Accounting Procedures and not to those that apply the Alternative Attendance Accounting Procedure pursuant to CCR Title 5, section 58003.1(f). The guidance provided by the Chancellor’s Office further requires the following elements related to TBA courses:

The official course outline of record must include the number of TBA hours. This requirement should also be listed in the published class schedule, whether printed, online, or an addenda to the original schedule.

Student participation must be carefully tracked to ensure TBA hours are not claimed for apportionment for students who have documented zero hours as of the census date for the course.

Establish procedures to ensure that on a semester basis TBA courses are proper in accordance with the CDAM Section 479 and supplementary guidance released by the Chancellor’s Office.

The District did not have TBA courses in 2014-15.

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Finding No.

Finding

Recommendation

Current Status


(continued)

Require all students enrolled in a course with TBA hours to fulfill the hours and other conditions for TBA; ensure all student participation is documented.

TBA hours may not be claimed for apportionment under the auspices of individual student tutoring.

Condition: When auditing TBA courses we noted the following exceptions:

TBA hour requirements did not agree between the class schedule and course syllabus/outline for three courses.

TBA hour requirements were not clearly identified on the course syllabus/outline for two courses.

Context: A statistical sample was derived from the P-2 report. The issue appears to be systemic due to the error rate experienced.

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Finding No.

Finding

Recommendation

Current Status


(continued) Questioned Costs: All FTES reported are considered to be in error of 65.87 for weekly census; this calculates to approximately $300,685 based on a per FTES amount of $4,564.83. The FTES identified are reflected as an audit adjustment in the supplementary section of this report. Effect: The issues appear to be the result of system limitations. The District has begun use of a new student information system.

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Finding No.

Finding

Recommendation

Current Status


SYSTEMS Criteria:

1. According to the Student Attendance Accounting Manual, Chapter 3: “The units of actual FTES generated in other than weekly census procedure course during the academic year, exclusive of intersessions, are adjusted by a computed flexible time adjustment (F) factor so as to provide the same level of FTES as would have been generated had the flexible time not been permitted and regularly scheduled instruction had taken place.”

2. According to CCR, Title 4, Sections 58030 Support Documentation, the District is required to maintain support for the number of FTES claimed.

Condition:

1. The District’s detail report indicated that some students in certain positive attendance courses reported more contact hours than the total contact hours for the course.

2. The District was unable to substantiate the total number of FTES that increased between Period Annual and the Recal.

Work with the software company consultants or other district’s using the Ellucian software to determine if internal controls can be set up in the system to restrict entering more contact hours than the total for the course. Implement the review of detail by District personnel to ensure that instructors are not entering more contact hours than allowed. If additional hours are to be inputted, then the (F) factor should be applied and an audit trail be maintained as evidence. Maintain documentation for all changes in FTES from Period Annual to Recal.

Implemented

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Finding No.

Finding

Recommendation

Current Status


SYSTEMS (continued) Context:

1. This is potentially a systemic issue; however, it occurred randomly and no consistent pattern was determined. This appears to be the result of the recent implementation of a new student attendance accounting system.

2. No documentation was maintained for changes made. Management relied on data from system.

Questioned Costs:

1. FTES in error are 7.80 for positive attendance; this calculates to approximately $35,604 based on a per FTES amount of $4,564.83.

2. FTES not supported are 42.86; this calculates to approximately $195,649 based on a per FTES amount or $4,564.83.

Effect: Not in compliance with the Student Attendance Accounting Manual and CCR Title 5 regulations as detailed above.

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Finding No.

Finding

Recommendation

Current Status

2014-006 SECTION 474: EXTENDED OPPORTUNITY

PROGRAM AND SERVICES (EOPS) & COOPERATIVE AGENCIES RESOURCES FOR EDUCATION (CARE) Criteria: CCR Title 5, Article 1, Section 56208 – Advisory Committee states “the EOPS Advisory Committee shall meet at least once during each academic year.” Education Code Section 79154 states “the Board of Governors of the California Community Colleges, in conjunction with the State Department of Social Services and the State Employment Development Department, shall adopt guidelines for the cooperative agencies resources for education program. The board of governors shall be responsible for the administration of the funds for the program.” The 2013-14 Contracted District Audit Manual Section 474.04 states that the CARE Advisory Committee must meet twice during each academic year. Condition: The District did not conduct at least one EOPS advisory meeting and at least two CARE Advisory meetings during the 2013-14 academic year. Context: This is a systemic issue as no meetings were conducted.

Conduct at least one EOPS Advisory Committee meeting and at least two CARE Advisory Committee meetings for each academic year.

Implemented

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Finding No.

Finding

Recommendation

Current Status

2014-006 SECTION 474: EXTENDED OPPORTUNITY

PROGRAM AND SERVICES (EOPS) & COOPERATIVE AGENCIES RESOURCES FOR EDUCATION (CARE) (continued) Questioned Costs: No dollar amount was quantified as the issue related to committee meetings and does not impact the number of full-time equivalent students reported, eligibility of students served or allowable expenditures. Effect: Not in compliance with CCR Title 5 regulations, Education Code, and Contracted District Audit manual as detailed above.

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APPENDIX C

FORM OF APPROVING OPINION OF BOND COUNSEL

Upon issuance of the Bonds, Hawkins Delafield & Wood LLP, Bond Counsel, proposes to render its final approving opinion with respect to the Bonds in substantially the following form:

May 12, 2016

Pasadena Area Community College District

Pasadena, California

Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance of the $33,995,000 principal amount of 2016 General Obligation Refunding Bonds, Series A (the “Bonds”) by Pasadena Area Community College District (the “District”). The Bonds are being issued pursuant to the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code and other applicable law (the “Act”) and a resolution adopted by the Board of Trustees of the District (the “Board of Trustees”) on March 16, 2016 (the “Resolution”).

In such connection, we have examined the Resolution, certain estimates, expectations and assumptions made by or on behalf of the District, originals, or copies identified to our satisfaction as being true copies, of such records and proceedings of the District and such other documents, including a certificate of the District relating to certain federal income tax matters (the “Tax Certificate”), and other matters deemed necessary to render the opinions set forth herein.

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

(1) The Resolution has been duly adopted by the District and constitutes a valid and binding obligation of the District enforceable against the District in accordance with its terms.

(2) The Bonds constitute valid and binding general obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount (except as to certain personal property which is taxable at limited rates).

(3) Under existing statutes and court decisions, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations.

The Code establishes certain requirements which must be met subsequent to the issuance of the Bonds in order that the interest on the Bonds be and remain excluded from gross income for federal income tax purposes under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of proceeds of the Bonds, restrictions on the investment of proceeds of the Bonds prior to expenditure and the requirement that certain earnings be rebated to the federal government. Noncompliance with such requirements may cause the interest on the Bonds to

C-2

become subject to federal income taxation retroactive to its their date of execution and delivery, irrespective of the date on which such noncompliance occurs or is ascertained.

On the date of issuance of the Bonds, the District will execute a Tax Certificate relating to the Bonds containing provisions and procedures pursuant to which such requirements can be satisfied. In executing the Tax Certificate, the District represents that it will comply with the provisions and procedures set forth therein and that it will do and perform all acts and things necessary or desirable to assure that the interest on the Bonds will, for federal income tax purposes, be excluded from gross income.

In rendering the opinion in this paragraph (3), we have relied upon and assumed (i) the material accuracy of the District’s representations, statements of intention and reasonable expectations, and certifications of fact contained in the Tax Certificate with respect to matters affecting the status of the interest on the Bonds, and (ii) compliance by the District with procedures and covenants set forth in the Tax Certificate as to such matters.

(4) Under existing statutes, interest on the Bonds is exempt from State of California personal income tax.

The foregoing opinions are qualified to the extent that the enforceability of the Bonds and the Resolution may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor’s rights or remedies and is subject to general principles of equity (regardless of whether such enforceability is considered in equity or at law), to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against governmental entities in the State of California.

Except as stated in paragraphs (3) and (4) above, we express no opinion regarding any other Federal, state or local tax consequences with respect to the Bonds or the ownership or disposition thereof. Further, we express no opinion herein as the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Bonds, or under state and local tax law.

We render our opinion under existing statutes and court decisions as of the date of issuance of the Bonds, and we assume no obligation to update, revise or supplement this opinion after the issue date to reflect any action hereafter taken or not taken, or any facts or circumstances, or any change in law or in interpretations thereof, or otherwise, that may hereafter arise or occur, or for any other reason.

This letter is furnished by us as Bond Counsel and is solely for your benefit and it is not to be used, circulated, quoted, or otherwise referred to for any purposes other than the issuance and delivery of the Bonds and may not be relied upon by any other person or entity without our express written permission, except that references may be made to it in any list of closing documents pertaining to the delivery of the Bonds.

Very truly yours,

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APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement (the “Disclosure Agreement”) dated as of May 1, 2016 by and between the Pasadena Area Community College District (the “District”) and Digital Assurance Certification, L.L.C., as dissemination agent (the “Dissemination Agent”), in connection with the issuance of the District’s $33,995,000 principal amount of 2016 General Obligation Refunding Bonds, Series A (the “Bonds”), which are being issued pursuant to a resolution of the District’s Board of Trustees adopted on March 16, 2016 (the “Resolution”). The District covenants and agrees as follows:

Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Disclosure Agreement, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 4 and 5 of this Disclosure Agreement.

“Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Bonds” shall mean the District’s 2016 General Obligation Refunding Bonds, Series A.

“County” shall mean the County of Los Angeles, California.

“CUSIP Numbers” shall mean the Committee on Uniform Securities Identification Procedures’ unique identification numbers for each public issue of a security.

“Disclosure Counsel” shall mean an attorney-at-law, or a firm of such attorneys, of nationally recognized standing in matters pertaining to the disclosure obligations under Rule 15c2-12(b)(5) of the Securities and Exchange Commission of the United States of America, duly admitted to the practice of law before the highest court of any state of the United States of America.

“Dissemination Agent” shall mean Digital Assurance Certification, L.L.C. or any successor Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“EMMA System” shall mean the MSRB’s Electronic Municipal Market Access system.

“Holder” shall mean either the registered owners of the Bonds, or if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in such depository system.

“Listed Events” shall mean any of the events listed in Section 6(b) of this Disclosure Agreement.

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“MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Agreement.

“Official Statement” shall mean the Official Statement dated April 21, 2016 with respect to the Bonds.

“Participating Underwriter” shall mean the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

Section 3. Transmission of Notices, Documents and Information. (a) Unless otherwise required by the MSRB, all notices, documents and information provided to the MSRB shall be provided to the MSRB’s EMMA System, the current internet address of which is http://emma.msrb.org.

(b) All notices, documents and information provided to the MSRB shall be provided in an electronic format as prescribed by the MSRB.

Section 4. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than 240 days following the end of the District’s fiscal year (currently ending June 30), commencing with the report for the 2015-16 Fiscal Year (which is due not later than February 25, 2017), provide to the MSRB through its EMMA System an Annual Report which is consistent with the requirements of Section 5 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 5 of this Disclosure Agreement. If the District’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 6(c).

(b) Not later than thirty (30) days (not more than sixty (60) days) prior to the date on which the Annual Report is to be provided pursuant to Section 4(a), the Dissemination Agent shall give notice to the District that the Annual Report is so required to be filed in accordance with the terms of this Disclosure Agreement. Not later than fifteen (15) days prior to said date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If the District is unable to provide to the MSRB through its EMMA System an Annual Report by the date required in Section 4(a), the Dissemination Agent shall send a notice of such fact to the MSRB through its EMMA System.

(c) The Dissemination Agent shall: (i) determine each year, prior to the date for providing the Annual Report to the MSRB through the EMMA System, the date on which such Annual Report shall be due and notify the District of such date; and (ii) (if the Dissemination Agent is other than the District) file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and that it was provided to the MSRB through the EMMA System.

Section 5. Content of Annual Reports. The District’s Annual Report shall contain or include by reference the following:

(a) Audited financial statements of the District for the preceding fiscal year, prepared in accordance with the laws of the State of California and including all statements and information prescribed for inclusion therein by the Controller of the State of California. If the District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 4 hereof, the Annual Report shall contain unaudited financial statements in a format similar to the

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financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) To the extent not included in the audited financial statement of the District, the Annual Report shall also include the following:

(i) Table 1 “Historical Gross Assessed Valuation of Taxable Property”, if and to the extent provided to the District by the County;

(ii) Table 2 “Assessed Valuation and Parcels by Land Use”;

(iii) Table 3 “Assessed Valuations of Single Family Homes Per Parcel”;

(iv) Table 5 “Property Tax Levies and Collections”;

(v) Table 6 “Largest Local Secured Taxpayers”;

(vi) Table A-1 “General Fund Budgets” for the current fiscal year;

(vii) Table A-2 “Statement of Revenues, Expenses and Changes in Fund Balances – General Fund” for the prior fiscal year;

(viii) Table A-3 “Statement of Revenues, Expenses and Changes in Net Assets – Primary Government” for the prior fiscal year;

(ix) Table A-4 “Statement of Net Assets – Primary Government” for the prior fiscal year;

(x) Table A-5 “Full Time Equivalent Students”, as may be reasonably available;

(xi) Table A-7 “Annual Regular CalSTRS Contributions” for the prior fiscal year;

(xii) Table A-9 “Annual Regular CalPERS Contributions” for the prior fiscal year;

(xiii) Table A-11 “Annual PARS Contributions” for the prior fiscal year;

(xiv) Table A-12 “Annual APPLE Plan Contributions” for the prior fiscal year;

(xv) Table A-14 “Expenditures for Other Postemployment Benefits” for the prior fiscal year;

(xvi) Table A-15 “Annual Required Contributions, OPEB Costs and Net OPEB Obligations” for the prior fiscal year;

(xvii) Table A-17 “Risk Management Claims Liability – Workers’ Compensation” for the prior fiscal year;

(xviii) Table A-18 “Risk Management Claims Liability – General Liability” for the prior fiscal year; and

(xix) Table A-19 “Outstanding General Obligation Bonds”.

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(c) It shall be sufficient for purposes of Section 4 hereof if the District provides annual financial information by specific reference to documents (i) available to the public on the MSRB website (currently, www.emma.msrb.org) or (ii) filed with the Securities and Exchange Commission. The District shall clearly identify each such other document so included by reference. The provisions of this Section 5(c) shall not apply to notices of Listed Events pursuant to Section 6 hereof.

(d) The descriptions of financial information and operating data to be included in the Annual Report contained in Section 5(b) above are of general categories or types of financial information and operating data. When such descriptions include information that no longer can be generated because the operations to which it related have been materially changed or discontinued, or due to changes in accounting practices, legislative or organizational changes, a statement to that effect shall be provided in lieu of such information. Comparable information shall be provided if available.

Section 6. Reporting of Listed Events. (a) If a Listed Event occurs, the District shall provide or caused to be provided, in a timely manner not in excess of ten (10) business days of the District having notice of such Listed Event, notice of such Listed Event to (i) the EMMA System of the MSRB and (ii) the Dissemination Agent.

(b) Pursuant to the provisions of this Section 6, the District shall give, or cause to be given, notice of the occurrence of any of the following events (each, a “Listed Event”) with respect to the Bonds:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) modifications to rights of Holders, if material;

(iv) bond calls, if material and tender offers;

(v) defeasances;

(vi) rating changes;

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

(viii) unscheduled draws on the debt service reserves reflecting financial difficulties;

(ix) unscheduled draws on the credit enhancements reflecting financial difficulties;

(x) release, substitution or sale of property securing repayment of the certificates, if material;

(xi) bankruptcy, insolvency, receivership or similar event of the District (such event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the District in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under State or federal law in which a court or government authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the

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entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District);

(xii) substitution of credit or liquidity providers, or their failure to perform;

(xiii) the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive 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;

(xiv) appointment of a successor or additional Bond Registrar or the change of name of a Bond Registrar, if material; and

(xv) any amendment or waiver of a provision of this Disclosure Agreement.

The District notes that items (viii), (ix), (x) and (xii) are not applicable to the Bonds.

(c) If the District determines that a Listed Event has occurred, the District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to Section 3 hereof.

If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB through its EMMA System.

Notwithstanding the foregoing, notice of Listed Events described in Section 6(b)(iv) and Section 6(b)(v) need not be given under this Section 6 any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolution.

Section 7. CUSIP Numbers. Whenever providing information to the Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, audited financial statements and notices of Listed Events, the District shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates.

Section 8. Termination of Reporting Obligation.

The District’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 6(c).

This Disclosure Agreement, or any provision hereof, shall cease to be effective in the event that the District (1) delivers to the Dissemination Agent an opinion of Disclosure Counsel, addressed to the District and the Dissemination Agent, to the effect that those portions of the Rule which require this Disclosure Agreement, or such provision, as the case may be, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, or otherwise, as shall be specified in such opinion, and (2) delivers copies of such opinion to the MSRB.

Section 9. Dissemination Agent. The District may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

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The Dissemination Agent shall be Digital Assurance Certification, L.L.C. If at any time there is no designated Dissemination Agent appointed by the District, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of the Dissemination Agent hereunder, the District shall be the Dissemination Agent and undertake or assume its obligations hereunder. The Dissemination Agent (other than the District) shall not be responsible in any manner for the content of any notice or report required to be delivered by the District pursuant to this Disclosure Agreement.

Section 10. Amendment; Waiver. (a) This Disclosure Agreement may be amended by the District without the consent of the Holders of the Bonds, if all of the following conditions are satisfied:

(i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the District or the type of business conducted thereby;

(ii) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances;

(iii) the District shall have received an opinion of Hawkins Delafield & Wood LLP or other nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the District, to the same effect as set forth in Section 10(a)(ii) above;

(iv) either (1) the District shall have received an opinion of Hawkins Delafield & Wood LLP or other nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the District, to the effect that the amendment does not materially impair the interests of the holders of the Bonds or (2) is approved by the Holders of the Bonds in the same manner as provided in the Resolution; and

(v) the District shall have delivered copies of such opinion and amendment to the MSRB through its EMMA System within ten (10) business days from the execution thereof.

(b) In addition to Section 10(a) above, this Disclosure Agreement may be amended and any provision of this Disclosure Agreement may be waived, by written certificate of the District, without the consent of the Holders of the Bonds, if all of the following conditions are satisfied:

(i) an amendment to the Rule is adopted, or a new or modified official interpretation of the Rule is issued, after the effective date of this Disclosure Agreement which is applicable to this Disclosure Agreement;

(ii) the District shall have received an opinion of Hawkins Delafield & Wood LLP or other nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the District, to the effect that performance by the District under this Disclosure Agreement as so amended or giving effect to such waiver, as the case may be, will not result in a violation of the Rule; and

(iii) the District shall have delivered copies of such opinion and amendment to the MSRB through its EMMA System.

(c) In the event of any amendment or waiver of a provision of this Disclosure Agreement, the District shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being

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presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 6 hereof, and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure 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 Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 12. Default. In the event of a failure of the District to comply with any provision of this Disclosure Agreement, the Dissemination Agent may (and, at the request of any Participating Underwriter or the Holders or Beneficial Owners of at least 25% of aggregate principal amount of the Bonds then outstanding, shall) or any Holders or Beneficial Owners of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Superior Court of the State of California in and for the County of Los Angeles or in the U.S. District Court in the County of Los Angeles. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of any failure of the District to comply with this Disclosure Agreement shall be an action to compel performance.

Section 13. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross negligence or willful misconduct. The obligations of the District under this Section 13 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

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Section 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.


By: Superintendent/President Business and College Services

DIGITAL ASSURANCE CERTIFICATION, L.L.C.

By: Name: Title:

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APPENDIX E

BOOK-ENTRY ONLY SYSTEM

THE INFORMATION IN THIS APPENDIX E CONCERNING THE DEPOSITORY TRUST COMPANY, NEW YORK, NEW YORK AND ITS BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT THE DISTRICT AND THE UNDERWRITER BELIEVE TO BE RELIABLE, BUT THE DISTRICT AND THE UNDERWRITER TAKE NO RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF. THERE CAN BE NO ASSURANCE THAT THE DEPOSITORY TRUST COMPANY WILL ABIDE BY ITS PROCEDURES OR THAT SUCH PROCEDURES WILL NOT BE CHANGED FROM TIME TO TIME.

The Depository Trust Company, New York, New York (“DTC”), will act as securities depository for Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of each series of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

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To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the 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 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and other payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC or the District subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and other payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District. Under such circumstances, in the event that a successor depository is not obtained, security certificates are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC and the requirements of the Paying Agent Agreement with respect to certificated Bonds will apply.

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THE DISTRICT, THE COUNTY AND THE PAYING AGENT CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SECURITIES (I) PAYMENTS OF PRINCIPAL OF AND INTEREST EVIDENCED BY THE SECURITIES (II) CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE SECURITIES OR (III) OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE REGISTERED OWNER OF THE SECURITIES, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.

NEITHER THE DISTRICT, THE COUNTY AND THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OF DTC OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OR COMPLETENESS OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR INTEREST ON SECURITIES; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY NOTICE TO ANY BENEFICIAL OWNER THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS UNDER THE TERMS OF THE TRUST AGREEMENT; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS OWNER OF THE SECURITIES.

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APPENDIX F

THE LOS ANGELES COUNTY TREASURY POOL

In accordance with California Government Code Section 53600 et seq., funds are deposited with the Treasurer (defined herein) by County (defined herein) school and community college districts, various special districts and some cities. State law generally requires that all moneys of the County, school districts and certain special districts be held in the County’s Treasury Pool (defined herein) as described below. The composition and value of investments under management in the Treasury Pool vary from time to time, depending on the cash flow needs of the County and the other public agencies invested in the Treasury Pool, the maturity or sale of investments, purchase of new securities and fluctuations in interest rates generally. The Treasurer maintains a website, the address of which is http://ttc.lacounty.gov, on which the Treasurer periodically places information relating to the Treasury Pool. However, the information presented there is not part of this Official Statement, is not incorporated by reference herein and should not be relied upon in making an investment decision with respect to the Bonds.

Los Angeles County Pooled Surplus Investments

The Treasurer and Tax Collector (the “Treasurer”) of the County of Los Angeles (the “County”) has the delegated authority to invest funds on deposit in the County Treasury (the “Treasury Pool”). As of February 29, 2016, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts:

Local Agency Invested Funds

(in billions) County of Los Angeles and Special Districts $ 11.003 Schools and Community Colleges 12.455 Independent Public Agencies 2.239 Total $25.697

The Treasury Pool participation composition is as follows:

Non-discretionary Participants 91.29% Discretionary Participants:

Independent Public Agencies 7.62 County Bond Proceeds and Repayment Funds 1.09

Total 100.00%

Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer’s prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on March 31, 2015, reaffirmed the following criteria and order of priority for selecting investments:

F-2

1. Safety of Principal 2. Liquidity 3. Return on Investment

The Treasurer prepares a monthly Report of Investments (the “Investment Report”) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to the Investment Report dated March 31, 2016, the February 29, 2016 book value of the Treasury Pool was approximately $25.697 billion and the corresponding market value was approximately $25.666 billion.

An internal controls system for monitoring cash accounting and investment practices is in place. The Treasurer’s Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor’s staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. On a quarterly basis, the County’s outside independent auditor (the “External Auditor”) reviews the cash and investment reconciliations for completeness and accuracy. Additionally, the External Auditor reviews investment transactions on a quarterly basis for conformance with the approved Investment Policy and annually accounts for all investments.

The following table identifies the types of securities held by the Treasury Pool as of February 29, 2016:

Type of Investment % of Pool U.S. Government and Agency Obligations 53.80% Certificates of Deposit 15.77 Commercial Paper 30.05 Bankers Acceptances 0.00 Municipal Obligations 0.18 Corporate Notes & Deposit Notes 0.20 Asset Backed Instruments 0.00 Repurchase Agreements 0.00 Other 0.00 100.00%

The Treasury Pool is highly liquid. As of February 29, 2016, approximately 45.08% of the investments mature within 60 days, with an average of 541 days to maturity for the entire portfolio.

$33,995,000 PASADENA AREA COMMUNITY COLLEGE …Diane Mandrafina, Director, Fiscal Services Gail S....

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