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OFFICIAL STATEMENT DATED JUNE 27, 2013 $46,550,000 · 2013-07-11 · 2016 350,000 1.750 1.20...
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OFFICIAL STATEMENT DATED JUNE 27, 2013 $46,550,000 North Mason School District No. 403 Mason and Kitsap Counties, Washington Unlimited Tax General Obligation Bonds, 2013 DATED: Date of Delivery (estimated to be July 11, 2013) DUE: December 1, as shown on the inside cover RATINGS—Underlying, A1; Washington State School District Credit Enhancement Program, Aa1 (see “Ratings” and “Appendix D – Washington State School District Credit Enhancement Program” herein). NOT BANK QUALIFIED BOOK-ENTRY ONLY—North Mason School District No. 403, Mason and Kitsap Counties, Washington (the “District”) will issue its Unlimited Tax General Obligation Bonds, 2013 (the “Bonds”) in fully registered form under a book-entry only system in denominations of $5,000, or integral multiples thereof within a maturity. The Bonds and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust Company (“DTC”). DTC will act as initial securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. See “Description of the Bonds – Bond Registrar and Registration Features” and Appendix B – “Book-Entry Transfer System” herein.” PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable semiannually on June 1 and December 1 of each year, beginning on June 1, 2014, to the maturity or earlier redemption of the Bonds. Principal of the Bonds is payable upon the stated maturity dates as set forth in the maturity schedule. The Mason County Treasurer, as ex officio treasurer of the District (the “Treasurer”), has appointed the fiscal agent of the State of Washington (the “State”), currently The Bank of New York Mellon, in New York, New York, as the initial authenticating agent, paying agent and registrar for the Bonds (the “Bond Registrar”). Principal of and interest on the Bonds will be payable by the Bond Registrar. For so long as the Bonds remain in a “book-entry only” transfer system, the Bond Registrar will remit such payments only to DTC, which in turn is obligated to remit such principal and interest to its participants for subsequent disbursement to the persons in whose names such Bonds are registered (the “Beneficial Owners”) of the Bonds. See “Description of Bonds – Principal Amount, Date, Interest Rates and Maturities” and “Registrar and Registration Features” and Appendix B – “Book-Entry Transfer System” herein. PURPOSE—The Bonds are being issued to finance the costs of capital construction and capital improvements to the District’s educational facilities. See “Purpose and Use of Proceeds - Purpose” herein. MATURITY SCHEDULE LOCATED ON INSIDE COVER REDEMPTION—The Bonds are subject to redemption prior to their stated maturity dates. See “Description of the Bonds – Redemption Provisions.” SECURITY—The Bonds constitute valid and legally binding general obligations of the District. The District has irrevocably covenanted that, for as long as any of the Bonds are outstanding, the District will levy taxes annually without limitation as to rate or amount on all taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the District are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest. The Bonds do not constitute a debt or indebtedness of Mason County (the “County”), Kitsap County, the State, or any political subdivision thereof other than the District. Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the STATE OF WASHINGTON under the provisions of the Washington State School District Credit Enhancement Program. See Appendix D attached hereto and titled “WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM.” TAX MATTERS—In the opinion of K&L Gates LLP, Bond Counsel, assuming compliance with certain covenants of the District, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See “Tax Matters” herein for a discussion of the opinion of Bond Counsel. DELIVERY—The Bonds are offered for sale to Seattle-Northwest Securities Corporation (the “Underwriter”) subject to the final approving legal opinion of K&L Gates LLP, Seattle, Washington (“Bond Counsel”). It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about July 11, 2013 (the “Date of Delivery”). This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
Transcript of OFFICIAL STATEMENT DATED JUNE 27, 2013 $46,550,000 · 2013-07-11 · 2016 350,000 1.750 1.20...
OFFICIAL STATEMENT DATED JUNE 27, 2013
$46,550,000 North Mason School District No. 403
Mason and Kitsap Counties, Washington Unlimited Tax General Obligation Bonds, 2013
DATED: Date of Delivery (estimated to be July 11, 2013) DUE: December 1, as shown on the inside cover
RATINGS—Underlying, A1; Washington State School District Credit Enhancement Program, Aa1 (see “Ratings” and “Appendix D – Washington State School District Credit Enhancement Program” herein).
NOT BANK QUALIFIED
BOOK-ENTRY ONLY—North Mason School District No. 403, Mason and Kitsap Counties, Washington (the “District”) will issue its Unlimited Tax General Obligation Bonds, 2013 (the “Bonds”) in fully registered form under a book-entry only system in denominations of $5,000, or integral multiples thereof within a maturity. The Bonds and will be registered in the name of Cede & Co., as bond owner and nominee for The Depository Trust Company (“DTC”). DTC will act as initial securities depository for the Bonds. Purchasers will not receive certificates representing their interest in the Bonds purchased. See “Description of the Bonds – Bond Registrar and Registration Features” and Appendix B – “Book-Entry Transfer System” herein.”
PRINCIPAL AND INTEREST PAYMENTS—Interest on the Bonds will be payable semiannually on June 1 and December 1 of each year, beginning on June 1, 2014, to the maturity or earlier redemption of the Bonds. Principal of the Bonds is payable upon the stated maturity dates as set forth in the maturity schedule. The Mason County Treasurer, as ex officio treasurer of the District (the “Treasurer”), has appointed the fiscal agent of the State of Washington (the “State”), currently The Bank of New York Mellon, in New York, New York, as the initial authenticating agent, paying agent and registrar for the Bonds (the “Bond Registrar”). Principal of and interest on the Bonds will be payable by the Bond Registrar. For so long as the Bonds remain in a “book-entry only” transfer system, the Bond Registrar will remit such payments only to DTC, which in turn is obligated to remit such principal and interest to its participants for subsequent disbursement to the persons in whose names such Bonds are registered (the “Beneficial Owners”) of the Bonds. See “Description of Bonds – Principal Amount, Date, Interest Rates and Maturities” and “Registrar and Registration Features” and Appendix B – “Book-Entry Transfer System” herein.
PURPOSE—The Bonds are being issued to finance the costs of capital construction and capital improvements to the District’s educational facilities. See “Purpose and Use of Proceeds - Purpose” herein.
MATURITY SCHEDULE LOCATED ON INSIDE COVER
REDEMPTION—The Bonds are subject to redemption prior to their stated maturity dates. See “Description of the Bonds – Redemption Provisions.”
SECURITY—The Bonds constitute valid and legally binding general obligations of the District. The District has irrevocably covenanted that, for as long as any of the Bonds are outstanding, the District will levy taxes annually without limitation as to rate or amount on all taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds. The full faith, credit and resources of the District are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest. The Bonds do not constitute a debt or indebtedness of Mason County (the “County”), Kitsap County, the State, or any political subdivision thereof other than the District.
Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the STATE OF WASHINGTON
under the provisions of the Washington State School District Credit Enhancement Program. See Appendix D attached hereto and titled “WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM.”
TAX MATTERS—In the opinion of K&L Gates LLP, Bond Counsel, assuming compliance with certain covenants of the District, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law. Interest on the Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations. See “Tax Matters” herein for a discussion of the opinion of Bond Counsel.
DELIVERY—The Bonds are offered for sale to Seattle-Northwest Securities Corporation (the “Underwriter”) subject to the final approving legal opinion of K&L Gates LLP, Seattle, Washington (“Bond Counsel”). It is expected that the Bonds will be available for delivery to the Bond Registrar on behalf of DTC by Fast Automated Securities Transfer on or about July 11, 2013 (the “Date of Delivery”).
This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
OFFICIAL STATEMENT DATED JUNE 27, 2013
$46,550,000 North Mason School District No. 403
Mason and Kitsap Counties, Washington Unlimited Tax General Obligation Bonds, 2013
DATED: Date of Delivery (estimated to be July 11, 2013) DUE: December 1, as shown below
MATURITY SCHEDULE—
(1) Priced to the call date of December 1, 2023.
Due Interest
December 1 Rates Prices
2015 265,000$ 2.000% 0.80% 102.833 575181 EV02016 350,000 1.750 1.20 101.820 575181 EW82017 440,000 1.750 1.55 100.844 575181 EX6
2018 200,000 2.250 1.91 101.732 575181 EY42018 335,000 4.000 1.91 110.652 575181 FV9
2019 645,000 5.000 2.16 116.861 575181 EZ1
2020 250,000 2.625 2.45 101.174 575181 FA52020 520,000 5.000 2.45 117.136 575181 FW7
2021 895,000 5.000 2.71 117.077 575181 FB32022 1,040,000 5.000 2.96 116.612 575181 FC12023 1,195,000 5.000 3.15 116.279 575181 FD92024 (1) 1,360,000 5.000 3.39 113.995 575181 FE72025 (1) 1,535,000 5.000 3.50 112.966 575181 FF42026 (1) 1,725,000 5.000 3.63 111.765 575181 FG22027 (1) 1,925,000 5.000 3.75 110.669 575181 FH02028 (1) 2,145,000 5.000 3.88 109.497 575181 FJ62029 (1) 2,375,000 5.000 3.99 108.517 575181 FK32030 (1) 2,620,000 5.000 4.08 107.722 575181 FL12031 (1) 2,880,000 5.000 4.14 107.197 575181 FM92032 (1) 3,160,000 5.000 4.20 106.674 575181 FN72033 (1) 3,460,000 5.000 4.25 106.241 575181 FP22034 (1) 3,780,000 5.000 4.29 105.897 575181 FQ02035 (1) 4,115,000 5.000 4.33 105.553 575181 FR82036 (1) 4,475,000 5.000 4.37 105.211 575181 FS62037 (1) 4,860,000 5.000 4.40 104.955 575181 FT4
Amounts Yields CUSIP
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North Mason School District No. 403 71 E. Campus Drive
Belfair, Washington 98528 (360) 277-2300
www.nmsd.wednet.edu(1)
Board of Directors Laura Boad President John Campbell Member George Fouts Member Art Wightman Member Vacant(2) Member
School Administrative Staff David L. Peterson Superintendent Paula Bailey Director of Finance/Operations
Mason County Officials Melody Peterson Assessor Elisabeth Frazier Treasurer and ex officio Treasurer of the District
Bond Counsel K&L Gates LLP
Seattle, Washington
Bond Registrar The Bank of New York Mellon
New York, New York (current fiscal agent of the State)
(1) This inactive textual reference to the District’s website is contact information provided only for convenience. The
reference is not a hyperlink and, by this reference, the District’s website is not incorporated into this Official Statement. (2) In May 2013, the District became aware the person serving as representative for the District 5 position and Board Vice
President resides outside the District 5 geographical boundaries. Subsequently, the member resigned from the Board. The Board is considering appointing an interim member for the remainder of the term, which expires in November 2013, or will leave the position unfilled until the November 2013 General Election is certified. Currently, one candidate has filed to run on the November ballot for this position.
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This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to a person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the District or Underwriter to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The District makes no representation regarding the accuracy or completeness of the information provided in Appendix B—Book Entry Transfer System, which has been provided by DTC, or in Appendix D – Washington State School District Credit Enhancement Program, which has been provided by the State. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of the provisions. 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 shall, under any circumstances, create an implication that there has been no change in the affairs of the District since the date hereof. The CUSIP numbers herein are provided by CUSIP Global Services (CGS), which is managed on behalf of the American Bankers Association by Standard and Poor’s, a division of The McGraw-Hill Companies, Inc. CUSIP is a registered trademark of the American Bankers Association. CUSIP numbers are provided for convenience of reference only. CUSIP numbers are subject to change. Neither the District nor the Underwriter take any responsibility for the accuracy of such CUSIP numbers. 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, its responsibility 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. The Bonds have not been registered under the Securities Act of 1933, as amended, and the Bond Resolution has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The registration or qualification of the Bonds in accordance with applicable provisions of securities laws of the States in which the Bonds have been registered or qualified and the exemption from the registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. In connection with this offering, the Underwriter may over-allot or effect transactions that stabilize or maintain the market price of the Bonds at levels above those which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time without prior notice to any person.
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Table of Contents Page Description of the Bonds .......................................................................................................................................................................... 1
Principal Amount, Date, Interest Rates and Maturities .............................................................................................................. 1 Redemption Provisions ................................................................................................................................................................... 1 Purchase ............................................................................................................................................................................................ 2 Bond Registrar and Registration Features .................................................................................................................................... 2 Authorization for Issuance .............................................................................................................................................................. 2
Purpose and Use of Proceeds .................................................................................................................................................................. 3 Purpose .............................................................................................................................................................................................. 3 Sources and Uses of Funds.............................................................................................................................................................. 3
Security for the Bonds............................................................................................................................................................................... 3 General ............................................................................................................................................................................................... 3 Washington State School District Credit Enhancement Program .............................................................................................. 4
Bonded Indebtedness ............................................................................................................................................................................... 4 General Obligation Debt Limitation .............................................................................................................................................. 4 General Obligation Debt Capacity ................................................................................................................................................. 5 Outstanding Long-Term Debt ........................................................................................................................................................ 5 Short Term Borrowing ..................................................................................................................................................................... 5 Unlimited Tax General Obligation Debt Service Requirements ................................................................................................ 6 Net Direct and Overlapping Debt Summary ................................................................................................................................ 7 Overlapping Debt Calculation ........................................................................................................................................................ 7 Debt Payment Record ...................................................................................................................................................................... 7 Future Financings ............................................................................................................................................................................. 7
District Funding Sources .......................................................................................................................................................................... 8 General ............................................................................................................................................................................................... 8 Federal Funding ............................................................................................................................................................................... 8 State Funding .................................................................................................................................................................................... 8 Local Funding ................................................................................................................................................................................... 9 Assessed Value ............................................................................................................................................................................... 10 Tax Collection Procedure .............................................................................................................................................................. 11 Tax Liens and Foreclosure............................................................................................................................................................. 11 Tax Collection Record .................................................................................................................................................................... 11 Overlapping Taxing Districts ....................................................................................................................................................... 11 2013 Major Taxpayers .................................................................................................................................................................... 12
The District ............................................................................................................................................................................................... 12 Description ...................................................................................................................................................................................... 13 The Board of Directors ................................................................................................................................................................... 13 Staff and Labor Relations .............................................................................................................................................................. 13 Enrollment ....................................................................................................................................................................................... 13
Financial Factors ...................................................................................................................................................................................... 14 Accounting Policies ........................................................................................................................................................................ 14 Financial Reporting ........................................................................................................................................................................ 15 Auditing .......................................................................................................................................................................................... 15 Statement of Revenues, Expenditures and Changes in General Fund Balance ...................................................................... 16 Statement of Revenues, Expenditures and Changes in Debt Service Fund Balance ............................................................. 17 Budgetary Process .......................................................................................................................................................................... 17 Investment Policy ........................................................................................................................................................................... 17 Pension System ............................................................................................................................................................................... 18 Contribution Rates ......................................................................................................................................................................... 19
Funded Status on an Actuarial Value Basis ......................................................................................................................................... 20 Other Post-Employment Benefits ................................................................................................................................................. 20 Membership in PEBB Plan ............................................................................................................................................................ 21
Demographic Information ..................................................................................................................................................................... 21 Initiatives and Referenda ....................................................................................................................................................................... 24 Tax Matters .............................................................................................................................................................................................. 25
Not Qualified Tax-Exempt Obligations ....................................................................................................................................... 26 Continuing Disclosure ............................................................................................................................................................................ 26 Ratings ...................................................................................................................................................................................................... 28 Legal and Underwriting ......................................................................................................................................................................... 28
Approval of Counsel ...................................................................................................................................................................... 28 Litigation ......................................................................................................................................................................................... 28 Underwriting .................................................................................................................................................................................. 28
Concluding Statement ............................................................................................................................................................................ 29 Form of Bond Counsel Opinion .......................................................................................................................................... Appendix A Book-Entry Transfer System ................................................................................................................................................. Appendix B Financial Statements ............................................................................................................................................................. Appendix C Washington State School District Credit Enhancement Program ................................................................................... Appendix D
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OFFICIAL STATEMENT
North Mason School District No. 403 Mason and Kitsap Counties, Washington
$46,550,000 Unlimited Tax General Obligation Bonds, 2013
The District, a municipal corporation duly organized and existing under and by virtue of the laws of the State, furnishes this Official Statement in connection with the offering of the Bonds, dated the Date of Delivery. This Official Statement, which includes the cover page, the inside cover page and appendices, provides information concerning the District and the Bonds. Certain statements contained in this Official Statement do not reflect historical facts, but are forecasts and “forward-looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as “estimated,” “projected,” “anticipate,” “expect,” “intend,” “plan,” “believe” and similar expressions are intended to identify forward-looking statements. All projections, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement.
Description of the Bonds
Principal Amount, Date, Interest Rates and Maturities The Bonds will be issued in the aggregate principal amount of $46,550,000 and will be dated and bear interest from the Date of Delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest, payable semiannually, until the maturity or earlier redemption of the Bonds at the rates set forth on the inside cover page of this Official Statement. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. Redemption Provisions Optional Redemption. The Bonds maturing on or prior to December 1, 2023, are not subject to optional redemption prior to maturity. The Bonds maturing on or after December 1, 2024 are subject to redemption at the option of the District, prior to their stated maturity dates at any time on or after December 1, 2023, as a whole or in part, (within one or more maturities selected by the District), at the price of par, plus accrued interest, if any, to the date of redemption. Selection of Bonds for Redemption. For as long as the Bonds are in book-entry only form, if fewer than all of the Bonds of a maturity are called for redemption, the selection of Bonds within a maturity to be redeemed shall be made by DTC in accordance with its operational procedures then in effect. See Appendix B attached hereto. If the Bonds are no longer held in book-entry only form, then the Bond Registrar would select Bonds for redemption using a random selection method. Partial Redemption. Portions of the principal amount of any Bond, in denominations of $5,000 or any integral multiple thereof within a maturity (“Authorized Denominations”), may be redeemed. If less than all of the principal amount of any Bond is redeemed, upon surrender of that Bond to the Bond Registrar, there will be issued to the person in whose name a Bond is registered (the “Registered Owner”), without charge a new Bond (or Bonds, at the option of the Registered Owner) of the same maturity and interest rate in any Authorized Denomination in the aggregate principal amount remaining unredeemed.
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Notice of Redemption (Book-Entry). So long as the Bonds are in book-entry only form, the Bond Registrar will notify DTC of an early redemption not less than 20 days and not more than 60 days prior to the date fixed for redemption, and will provide such information as required by the operational arrangements of DTC referenced in the Blanket Issuer Letter of Representations from the District to DTC. The District reserves the right to rescind any redemption notice as allowed in the Bond Resolution (defined below). Notice of Redemption (No Book-Entry). During any period in which the Bonds are not in book-entry only form, unless waived by any registered owner of the Bonds to be redeemed, official notice of any redemption of Bonds will be given by the Bond Registrar on behalf of the District by mailing a copy of an official redemption notice by first class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption, to the registered owners of the Bonds to be redeemed at the address shown on the bond register or at such other address as is furnished in writing by such registered owners to the Bond Registrar. The District reserves the right to provide conditional notice and to rescind any redemption notice as allowed in the Bond Resolution (defined below). Purchase The District reserves the right and option to purchase any or all of the Bonds offered to District at any time at any price acceptable to the District. Bond Registrar and Registration Features Book-Entry System. The Bonds will be issued as fully registered bonds and, when issued, will be registered in the name of Cede & Co. as Bond Owner and as nominee for DTC. DTC will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 integral multiples thereof within a single maturity. Purchasers (“Beneficial Owners”) will not receive certificates representing their interest in the Bonds (see Appendix B attached hereto). Bond Registrar. Principal of and interest on the Bonds will be payable by the Bond Registrar (or such other fiscal agency or agencies as the Treasurer may from time to time designate). So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer by the Bond Registrar to DTC, which, in turn, is obligated to remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Bonds, as further described herein in Appendix B. Procedure in the Event of Revisions of Book-Entry Transfer System. If DTC resigns as the securities depository and the District is unable to retain a qualified successor to DTC, or the District has determined that it is in the best interest of the District not to continue the book-entry system of transfer or that interests of the Beneficial Owners of the Bonds might be adversely affected if the book-entry system of transfer is continued, the District will cause the Bond Registrar to authenticate and deliver to the Beneficial Owners of the Bonds or their nominees, replacement Bonds in fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. Thereafter, the principal of the Bonds will be payable upon due presentment and surrender thereof at the principal office of the Bond Registrar; interest on the Bonds will be delivered to the persons in whose names such Bonds are registered, at the address appearing upon the registration books on the 15th day of the month preceding an interest payment date, and the Bonds will be transferable as provided in the Bond Resolution (defined below). Authorization for Issuance The Bonds are issued pursuant to Resolution No. 10-G-13 (the “Bond Resolution”), adopted by the District’s Board of Directors (the “Board”) on May 7, 2013, and the authority of the Washington Constitution and chapters 28A.530, 39.36 and 39.46 of the Revised Code of Washington (“RCW”). The Bonds are also authorized pursuant to a favorable vote at an election held in the District on April 23, 2013, which authorized the District to issue $49,000,000 of unlimited tax general obligation bonds (the “Bond Authorization”). The Bonds represent the first and only series of bonds to be issued under the Bond Authorization. The Bonds, in the par amount of $46,550,000, plus the deposit of $2,450,000 of net original issue premium into the District’s Capital Projects Fund, expected to be generated by the sale of the Bonds, constitute the total amount of bonds approved under the Bond Authorization. Therefore, there is no remaining authority
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to issue bonds under the Bond Authorization. (see “Estimated Sources and Uses of the Funds” and “Future Financings” herein). Final election results were as follows: Number of Votes Percentage Yes 2,846 61.94% No 1,749 38.06% Authorization of any general obligation bond issue requires that 40 percent of the number of those voting in the last general election must cast a ballot, and 60 percent of those voting must approve the issue. Passage of the Bond Authorization has been certified by the Mason County Auditor. The ballot measure for the Bonds states that the Bonds will mature within a maximum of 25 years.
Purpose and Use of Proceeds Purpose Proceeds from the sale of the Bonds will be used to: (i) construct a new high school, (ii) renovate/modernize the existing high school into a middle school, (iii) make facility improvements, including replacement roofs for existing schools, (iv) convert the existing middle school to district offices, (v) undertake improvements to playfields, (vi) undertake mechanical, safety and security upgrades throughout the District and (vii) pay the costs related to the sale, issuance and delivery of the Bonds. Sources and Uses of Funds The proceeds of the Bonds are estimated to be applied as follows:
Estimated Sources and Uses of Funds
Sources of Funds Par Amount of Bonds $ 46,550,000
Original Issue Premium 3,743,192 Total Sources of Funds $ 50,293,192 Uses of Funds Project Requirements $ 49,000,000 Funds Available for Debt Service 1,025,654 Underwriting and Costs of Issuance 267,538 Total Uses of Funds $ 50,293,192
Security for the Bonds General The Bonds are general obligations of the District. For so long as the Bonds are outstanding, the District has irrevocably pledged to levy taxes annually without limitation as to rate or amount on all of the taxable property within the District in an amount sufficient, together with other money legally available and to be used therefor, to pay when due the principal of and interest on the Bonds, and the full faith, credit and resources of the District are pledged irrevocably for the annual levy and collection of those taxes and the prompt payment of that principal and interest (see “District Funding Sources” herein). The taxes, when collected, are required to be applied solely for the purpose of payment of principal of and interest on the Bonds and for no other purpose until the Bonds have been fully paid, satisfied and discharged. The District may, subject to applicable laws, apply other money legally available to make payments with respect to the Bonds and thereby reduce the amount of future tax levies for such purpose. The Bonds do not constitute a debt or indebtedness of the County, Kitsap County, the State, or any political subdivision thereof, other than the District.
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Washington State School District Credit Enhancement Program Payment of principal of and interest on the Bonds when due is guaranteed by the full faith, credit, and taxing power of the STATE OF WASHINGTON under the provisions of the Washington State School District Credit Enhancement Program, as described in Appendix D attached hereto.
Bonded Indebtedness
General Obligation Debt Limitation The power of the District to contract debt of any kind is controlled and limited by State law. All debt must be set forth in accordance with detailed budget procedures and paid for out of identifiable receipts and revenues. The budget must be balanced for each fiscal year. It is unlawful for an officer or employee of the District to incur liabilities in excess of budgetary appropriations. Authorization of Total Debt. A school district may incur a total indebtedness, including voter-approved debt, not to exceed five percent of the assessed value of taxable property (the “Bond Assessed Value”), which includes all real and personal property (as described within “District Funding Sources – Assessed Value” herein), within the school district. Following issuance of the Bonds, it is estimated the District will have $46,550,000 of voter approved debt plus $1,996,348 of non-voter approved debt outstanding, which collectively represents 2.30 percent of the District’s 2013 collection year Bond Assessed Value of $2,022,351,985. Authorization of Voted Debt. Any election to authorize such debt must have a voter turnout of at least 40 percent of those who voted in the last State general election and, of those voting, 60 percent must vote in the affirmative. The District’s bonds met all voter approval criteria (see “Description of the Bonds - Authorization for Issuance” herein). Authorization of Non-voted Debt. Washington municipal corporations, including the District, are authorized under State law to borrow money and issue short-term obligations, the proceeds of which may be used for any lawful purpose. Short-term obligations may be issued in anticipation of the receipt of revenues, taxes, or grants or the sale of bonds. These short-term obligations will be repaid out of money derived from the source or sources in anticipation of which they were issued or from any money legally available for this purpose. RCW 28A.530.080 authorizes school districts, including the District, to incur long-term indebtedness without a vote of the people through the issuance of bonds payable out of the District’s ordinary revenues. Such bonds may be issued to acquire real or personal property or make structural changes and additions to school facilities, including energy conservation improvements. School districts also are authorized to incur debt by purchasing real or personal property pursuant to conditional sales (installment purchase) contracts and financing leases. In an emergency, school districts may authorize indebtedness outside the current budget. All expenditures for emergency purposes will be paid by warrants from any available money in the fund properly chargeable with such expenditures. If there is insufficient money on hand in the fund, the warrants become registered interest-bearing warrants. In adopting the budget for any fiscal year, the school district’s board of directors will appropriate funds to retire any outstanding registered warrants issued since the adoption of the last preceding budget. The amount of all non-voted debt (including short-term obligations, conditional sales contracts, warrants and bonds) may not exceed 3/8 of one percent of the Bond Assessed Value. The District currently has $1,996,348 of non-voted debt outstanding which represents 0.10 percent of the Bond Assessed Value.
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General Obligation Debt Capacity Bond Assessed Value (2013 Collection Year) (1) $ 2,022,351,985
Total Debt: General Obligation Debt Capacity (5% of Bond Assessed Value) $ 101,117,599 Less: Outstanding Voter Approved Debt (includes this issue) (2) (46,550,000) Less: Outstanding Non-Voter Approved Debt (3) (1,996,348) Cash and Investments in Debt Service Fund (4) 70,501 Remaining Debt Capacity $ 52,641,752 Non-Voter Approved Debt: Debt Capacity (3/8 of 1% of Bond Assessed Value) $ 7,583,819 Less: Outstanding Non-Voter Approved Debt (3) (1,996,348) Remaining Debt Capacity $ 5,587,471
(1) $1,979,346,863 of the District’s Bond Assessed Value (97.9%) is within the County and $43,005,122 is within Kitsap County (2.1%).
(2) Includes the Bonds. (3) Includes the outstanding limited general obligation bonds. (4) Debt Service Fund balance is as of April 30, 2013. Outstanding Long-Term Debt Date of Date of Amount Amount Unlimited Tax General Obligation Bonds Issue Maturity Issued Outstanding UTGO, 2013 (the Bonds) 07/11/13 12/01/37 $ 46,550,000 $ 46,550,000
UTGO Total 46,550,000
Limited General Obligation Bonds LGO, 2005 (Vehicles) 06/03/04 06/01/17 1,027,990 468,409 LGO, 2009 (Capital Projects) 07/23/09 12/01/13 3,115,000 830,000 LGO, 2009 (Energy) 11/02/09 12/01/20 307,000 254,156 LGO, 2011 (Energy) 11/16/11 12/01/21 215,000 443,783
LGO Total 1,996,348
Total Long-term debt outstanding: $ 48,546,348 Source: North Mason School District No. 403 Short Term Borrowing The District does not currently have any outstanding short term borrowing commitments.
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Unlimited Tax General Obligation Debt Service Requirements
Note: The numbers may not add due to rounding.
Cal. The Bonds Total DebtYear Principal Interest Service2014 0$ 3,165,399$ 3,165,399$ 2015 265,000 2,279,088 2,544,088 2016 350,000 2,273,788 2,623,788 2017 440,000 2,267,663 2,707,663 2018 535,000 2,259,963 2,794,963 2019 645,000 2,242,063 2,887,063 2020 770,000 2,209,813 2,979,813 2021 895,000 2,177,250 3,072,250 2022 1,040,000 2,132,500 3,172,500 2023 1,195,000 2,080,500 3,275,500 2024 1,360,000 2,020,750 3,380,750 2025 1,535,000 1,952,750 3,487,750 2026 1,725,000 1,876,000 3,601,000 2027 1,925,000 1,789,750 3,714,750 2028 2,145,000 1,693,500 3,838,500 2029 2,375,000 1,586,250 3,961,250 2030 2,620,000 1,467,500 4,087,500 2031 2,880,000 1,336,500 4,216,500 2032 3,160,000 1,192,500 4,352,500 2033 3,460,000 1,034,500 4,494,500 2034 3,780,000 861,500 4,641,500 2035 4,115,000 672,500 4,787,500 2036 4,475,000 466,750 4,941,750 2037 4,860,000 243,000 5,103,000
46,550,000$ 41,281,774$ 87,831,774$
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Net Direct and Overlapping Debt Summary Overlapping taxing districts are those local governments whose boundaries overlap all or a portion of the District’s boundaries. See “District Funding Sources - Overlapping Taxing Districts” herein.
Overlapping Debt Calculation (As of April 30, 2013)
Source: Mason and Kitsap County Assessors and Treasurers and individual taxing districts. The following table summarizes information regarding the District’s direct debt (including the Bonds) and the estimated portion of the debt of overlapping taxing districts allocated to the District’s residents.
Bond Assessed Value (2013 Collection Year) $ 2,022,351,985 Estimated 2012 Population 15,003
Debt Information Direct Debt (includes this issue) (1) $ 48,546,348 Less: Cash and Investments in Debt Service Fund (as of 04/30/13) (70,501)
Net Direct Debt $ 48,475,847 Estimated Net Overlapping Debt (as detailed above) 10,750,521 Total Net Direct and Overlapping Debt $ 59,226,368
Bonded Debt Ratios Net Direct Debt to Bond Assessed Value 2.40%
Net Direct and Net Overlapping Debt to Bond Assessed Value 2.93%
Per Capita Bond Assessed Value $ 134,797
Per Capita Net Direct Debt $ 3,231
Per Capita Total Net Direct and Net Overlapping Debt $ 3,948
(1) Includes the Bonds and the limited general obligation bonds (see “Outstanding Long-Term Debt” herein). Debt Payment Record The District has promptly met principal and interest payments on outstanding bonds and other indebtedness when due. Additionally, no refunding bonds have been issued for the purpose of preventing an impending default. Future Financings District voters approved a $49,000,000 bond authorization on April 23, 2013 (see “Authorization of Issuance” herein). The Bonds represent the first and only series of bonds to be issued under the Bond Authorization. The
2013 Outstanding Estimated
Assessed Percent General Obligation OverlappingValue Overlapping Debt Debt
Port of Allyn 1,495,753,051$ 100.00% 79,571$ 79,571$ Mason County Fire Protection District No. 8 209,478,819 100.00% 23,804 23,804Mason County 6,992,755,647 28.41% 28,030,512 7,964,668Mason County Fire Protection District No. 5 2,029,160,881 19.75% 751,333 148,407Mason County Hospital District No. 1 5,460,901,033 8.44% 27,600,000 2,328,726Kitsap County Fire Protection District No. 7 6,175,838,280 0.70% 720,612 5,031Port of Bremerton 8,892,393,025 0.48% 3,930,000 18,805Kitsap County 26,119,626,948 0.16% 111,831,245 181,507
Total: 172,967,077$ 10,750,521$
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Bonds, in the par amount of $46,550,000, plus the deposit of $2,450,000 of net original issue premium into the District’s Capital Projects Fund, expected to be generated by the sale of the Bonds, constitute the total amount of bonds approved under the Bond Authorization. Therefore, there is no remaining authority to issue bonds under the Bond Authorization (see ““Authorization for Issuance” and “Estimated Sources and Uses of the Funds” herein).
District Funding Sources
General The District’s primary sources of revenue for the General Fund are state funds, local property taxes and federal funds. Of these sources, State funding represents 70.5 percent of the District’s operating revenues for the General Fund, local receipts represents 20.2 percent and federal funding represents 8.7 percent, for the fiscal year ending August 31, 2012. In addition, the District may receive income from other miscellaneous sources. These additional revenues comprise less than 1 percent of total funding. Federal Funding The District receives money from federal funding for a variety of programs. Principal of and interest on the Bonds are payable from excess property tax levies unlimited as to rate or amount. Consequently, changes in federal funding due to programmatic alterations, loss of funding due to federal sequestration, or any other reason, is not expected to impair the security for the Bonds. State Funding General. The Washington Basic Education Act of 1977 (the “Act”) provides for the full funding of what the Act refers to as “basic education,” or the regular program, and of vocational education, according to statutory formulas, and for operational costs for transportation, the purchase of transportation equipment, and programs for the handicapped by the State. Legislation passed in 1979 recognized the State’s responsibility to fund bilingual and remediation programs. The Washington State Legislature (the “Legislature”), at its discretion, may provide funds for other special programs, including, but not limited to, vocational-technical institutes, gifted education and others. State funding is based primarily on average full-time equivalent student enrollment. At each regular session in an odd-numbered year, the Legislature is required to appropriate monies to the Office of the Superintendent of Public Instruction (“OSPI”) (i) from the State General Fund for the current use of the common schools during the ensuing biennium, and (ii) from the Student Achievement Fund and the Education Construction Fund for the support of the Student Achievement Act during the ensuing biennium. Basic Education Allocation. The basic education allocation distribution formula is reviewed biennially by OSPI and the governor of the State (the “Governor”). Pursuant to RCW 28A.150.260, the Governor shall, and OSPI may, recommend to the Legislature a formula based on a ratio of students to staff. Once the Legislature adopts a formula it is used for the distribution of a basic education allocation for each annual average full time equivalent student enrolled in a common school. In the event the Legislature rejects the distribution formula recommended by the Governor, without adopting a new distribution formula, the distribution formula for the previous school year will remain in effect. In the event of an unforeseen emergency, in the nature of either an unavoidable cost to a district or unexpected variation in anticipated revenues to a district, OSPI is authorized, for not to exceed two years, to make such an adjustment in the allocation of funds. An objective of the Basic Education Allocation formula is to equalize educational opportunities among the State’s public school districts. In addition to the Basic Education Allocation, eligible school districts have received local assistance funds from the State under the Local Effort Assistance Program (“LEA”). The LEA was originally implemented in 1989 and seeks to equalize the tax burden by providing matching state funds to districts with low property values and high levy rates. Eligible school districts are those school districts with an assessed value (for excess levy purposes) per pupil lower than the State average. For calendar year 2013, the District is not eligible for LEA funds.
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Beginning in 2001 portions of the state property tax and state lottery revenues were dedicated to the Student Achievement Fund, per Initiative 728 (“I-728”). I-728 directed that, beginning in 2004, school districts receive Student Achievement Fund allocations in the amount of $450 per full-time-equivalent (FTE) student, with the amount to increase by designated amounts in proceeding years. The 2003 Legislature revised the per-pupil payments to a lower amount, to increase in subsequent years. In 2009-11 payments were again reduced – from planned per-pupil allocations of $458.10 and $463.58 in school years 2009-10 and 2010-11, respectively, to $131.20 and $99.32. The I-728 payments were eliminated for the 2010-11 school year and have also been eliminated in the 2011-13 State Operating Budget. Passed by voters in November 2000, Initiative 732 (“I-732”) required the State to provide annual cost-of-living increases for Washington’s public school employees. In 2003 and again in 2009 through 2013, the Legislature suspended the inflation increases in I-732. The State’s largest General Fund expenditures are for education, social and health services and corrections. Approximately 43.1 percent of the State’s General Fund budget for 2011-2013 is for supporting public schools. The State’s General Fund has experienced revenue shortfalls. Recent State budgets, including the budget adopted by the Legislature on May 24, 2011 for the 2011-2013 biennium, have reduced funding for public schools. Continuing projected reductions in State revenue are expected to result in further reduced State funding for public schools. Constitutional Challenge to State Funding of Education. In a decision rendered on January 5, 2012, the Washington State Supreme Court affirmed a lower court decision that the State’s current approach to funding K-12 education fails the State’s "paramount duty" under the State constitution to make "ample provision" for education. The Court’s decision does not prescribe a particular funding remedy; however, the Court retained jurisdiction to monitor the State's response. The impact of this decision on potential legislative action with respect to school funding and ultimately on the District’s finances is unknown. The decision has no impact on the source of payment for the Bonds, which is an excess property tax levy. Local Funding Local property taxes, the most significant local revenue source, provide money that enhances the State-funded Basic Education Allocation. Pursuant to RCW 84.52.053 and Article VII, Section 2(a) of the State Constitution and upon voter approval, school districts in the State are authorized to levy excess property taxes for various purposes including maintenance and operation (“M&O”), capital projects (“Capital Projects Levies”), the repayment of bonds issued to finance the construction, modernization and remodeling of school district facilities (“Bond Levies”) and for transportation vehicle purposes (“Transportation Vehicle Levies”). Historically, each of these excess property tax levies were required to be approved by 60 percent of those voting and the number of yes votes must equal or exceed 40 percent of those voting in the last general election. Beginning in 2008, the voter approval requirement for M&O, Capital Projects Levies and Transportation Vehicle Levies became a simple majority. For Bond Levies, the voter approval requirement did not change. Bond Levies are dedicated exclusively to the repayment of the bonds for which the taxes were approved and those tax proceeds cannot be diverted to other purposes. Therefore, a change in M&O, Capital Projects Levies and Transportation Vehicle Levies will not affect the District’s levy of excess property taxes for the repayment of the Bonds M&O Levy. The State Constitution allows school districts to submit M&O levies for up to four years. In 1977 when the State assumed additional responsibility for funding schools, the Legislature limited school district M&O levy authority by passing the levy lid law. This law establishes the maximum amount of a school district’s M&O levy for a calendar year. In 1979 the levy lid law took effect, limiting excess General Fund revenue to 10 percent of the school district’s basic education allocation for the school year. The law allowed districts that historically relied on M&O levies to be grandfathered in and exceed the 10 percent limit. In 1987 the levy lid limit was increased to 20 percent and in 1994, the levy base increased to 24 percent. RCW 84.52.0531 outlines the process for deriving a district’s levy limit. The Legislature provided funding for additional staffing in K-4 classrooms beyond basic education through 2008. This funding was eliminated for both the 2009-2011 biennium and the 2011-2013 biennium. The Legislature, in 2010, approved Laws of 2010, Chapter 237 (“2010 Supplemental Levy Act”), enhancing the levy
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authority of school districts. For levy collections through calendar year 2017 a district’s levy base will include the amounts the districts would have received from state funding for I-728 and I-732. Districts are allowed to include in their levy bases any cuts to the K-4 class-size funding. The requirement that OSPI must offset the amount added to a district’s levy base is removed. The levy lid is increased by four percent, including districts, which are currently grandfathered above 24 percent. For non-grandfathered districts, such as the District, a district’s maximum levy percentage is increased from 24 percent to 28 percent in 2011 through 2017 and returns to 24 percent every year thereafter. The LEA percentage is increased to 14 percent for calendar years 2011 through 2017 and returns to 12 percent in calendar year 2018. Additional levies to provide for subsequently-enacted increases affecting the districts’ levy base or maximum levy percentages may be authorized by voters during the term of the levy collection period. RCW 84.52.0531 outlines the process for deriving a district’s levy limit. In February 2012, the qualified electors of the District approved an M&O levy in the amount of $3,908,213 for collection in 2013, $4,103,624 for collection in 2014, $4,349,841 for collection in 2015 and $4,654,330 for collection in 2016. By law, taxes levied to pay principal of and interest on unlimited tax general obligation bonds, such as the Bonds, are not available for any other use. Thus, any possible decline in the District’s M&O levy would not impair the security of the Bonds. Capital Projects Levies and Transportation Vehicle Levies. Capital Projects Levies (maximum term of six-years) and Transportation Vehicle Levies may also be authorized by a school district’s voters (RCW 84.52.053). These types of levies also require a simple majority vote of approval by the District’s voters. The levy lid lift described previously does not apply to Capital Projects Levies or Transportation Vehicle Levies. In May 2009, the qualified electors of the District approved a Capital Projects Levy in the amount of $889,382 for collection in 2010, $889,382 for collection in 2011, $889,382 for collection in 2012 and $889,382 for collection in 2013. The District does not have any authorized transportation vehicle levies at this time. The following table shows the District’s excess property tax levy rates and dollar amounts levied since 2009.
Ad Valorem Tax Levies
Levy Rates Collection (Dollars per $1,000 of Assessed Value) Levy Amounts Year M&O Capital Total M&O Capital Total 2013 $ 1.9477 $ 0.4398 $ 2.3875 $ 3,908,213 $ 889,382 $ 4,797,595 2012 1.7131 0.4085 2.1216 3,709,957 889,382 4,599,339 2011 1.6101 0.4029 2.0130 3,533,107 889,382 4,422,489 2010 1.8207 0.4780 2.2987 3,364,371 889,382 4,253,753 2009 1.6474 -- 1.6474 3,038,500 -- 3,038,500 Sources: Mason and Kitsap County Assessors and Treasurers. Assessed Value The Mason County Assessor, or equivalent thereof (the “Assessor”), determines the value of all real property (including all land, buildings, structures and improvements to land) and personal property (including machinery and equipment, fixtures, furniture and other items that are movable in nature) throughout the County that is subject to ad valorem taxation, except certain utility properties which are valued by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue. For tax purposes, the assessed value of property is 100 percent of its market value. Three approaches may be used to determine real property value: market data, replacement cost and income generating capacity. In the
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County, all property is subject to an annual property valuation and all properties are physically inspected at least once every six years. The property is listed by the Assessor on a roll at its current assessed value and the roll is filed in the Assessor’s office. The Assessor’s determinations are subject to revisions by the County Board of Equalization and, for certain property, subject to further revisions by the State Board of Tax Appeals. Tax Collection Procedure Property taxes are levied in specific amounts and the rate for all taxes levied for all taxing districts in the County is determined, calculated and fixed by the Assessor based upon the assessed value of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district on a tax roll which contains the total amount of taxes to be so levied and collected. The tax roll is delivered to the Treasurer, or equivalent thereof, by January 15, who creates a tax account for each taxpayer and is responsible for the collection of taxes due to each account. All such taxes are due and payable on April 30 of each year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance no later than October 31, of each year. Delinquent taxes are subject to interest at the rate of 12 percent per year computed on a monthly basis from the date of delinquency until paid. In addition, a penalty of three percent will be assessed on June 1st of the year in which the tax was due and eight percent on December 1st of the year due. All collections of interest on delinquent taxes will be credited to the County’s current expense fund. The method of giving notice of payment of taxes due, the accounting for the money collected, the division of the taxes among the various taxing districts, notices of delinquency and collection procedures are covered by detailed statutes. Tax Liens and Foreclosure Property taxes and all charges and expenses relating to the taxes constitute a statutory lien on the property taxed. The lien attaches to the property from and including January 1 in the year in which the tax is levied, and is discharged only when taxes are paid. The lien for ad valorem property taxes on personal property, which have been levied prior to the filing of federal tax liens, is prior to such federal tax liens. In addition, a federal civil judgment lien (but not a federal tax lien) is senior to real property taxes that are incurred after the judgment lien has been recorded. In other respects, and subject to the “Homestead Exemption,” the lien for delinquent property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law the Treasurer may not commence foreclosure of a tax lien on real property until three years have passed since the first delinquency. The State’s courts have not decided whether the Homestead Law (chapter 6.13 RCW) may give the occupying homeowner a right to retain the first $125,000 of proceeds of the forced sale of the family residence or other “homestead” property for delinquent general property taxes. (See Algona v. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982), holding the homestead right superior to the improvement district assessments). The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not.
Tax Collection Record Bond Tax Collection Collection Assessed Ad Valorem Year As of Year Value (1) Tax Levy of Levy 4/30/13 2013 $ 2,022,351,985 $ 4,797,595 (2) (2) 2012 2,177,073,114 4,599,339 95.8% 97.6% 2011 2,207,567,259 4,422,489 95.0 98.6 2010 1,859,750,798 4,253,753 95.5 99.4 2009 1,860,737,623 3,038,500 94.9 99.9 (1) Bond Assessed Value is based upon the aggregate assessed value, and is adjusted to exclude exempt senior citizens
and to include Timber Assessed Value, which is $31,613,021 for collection year 2013. (2) In process of collection. Source: Mason and Kitsap County Assessors’ and Treasurers’ Offices. Overlapping Taxing Districts The overlapping taxing districts within the District have the statutory power to levy regular property taxes at the following rates subject to the limitations provided by chapter 84.55 RCW and levy excess voter approved
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property taxes. Representative levy rates for levy code 241 of the County, located entirely within the District, as well as the statutory levy authority of each type of potential overlapping district are listed below. Levy code 241 does not include all of the property within the District; as a result, additional taxing districts, not listed below, levy taxes within the District.
Representative Levy Rates Statutory Levy Authority Per $1,000 of Per $1,000 of Assessed Value Assessed Value
Mason County $1.2910 $1.800 (2) County (Road Levy) 1.4467 2.250 Inter-County Library District 0.4150 0.500 Fire Protection District No. 2 1.4179 1.500 Port of Allyn 0.1687 0.450 City n/a (1) 3.375 Cities and Towns n/a 0.225 (3) Hospital District No. 2 0.3143 0.750 State Schools 2.3189 3.600 (4) The District 2.3875 Emergency Medical Services 0.4449 Total rate for Mason County levy code 241: $10.2049 (1) Mason County levy code 241 is included within the unincorporated portion of the County and therefore does not have
a city levy. (2) Pursuant to RCW 84.52.043(1), a county may increase its levy from $1.80 per $1,000 to a rate not to exceed $2.475 per
$1,000 for general county purposes if (i) the total levies for both the county and any road district within the county do not exceed $4.05 per $1,000 and (ii) no other taxing district has its levy reduced as a result of the increased county levy.
(3) RCW 41.16.060. To be used for pension funding purposes, if required; otherwise this tax may be levied and used for any other municipal purpose.
(4) RCW 84.52.043(1). The levy by the State shall not exceed $3.60 per $1,000 assessed value adjusted to the State equalized value in accordance with the indicated ratio fixed by the State Department of Revenue to be used exclusively for the support of the common schools.
Source: Mason County Assessor’s Office.
2013 Major Taxpayers Percent of 2013 Collection Year District’s Taxpayer Type of Business Assessed Value (A.V.) Total A.V. Safeway Grocer $ 8,230,925 0.41% Quality Food Center (QFC) Grocer 7,640,248 0.38 Qwest Corporation Utility 5,350,901 0.26 John Fuchs Warehouse 5,025,155 0.25 Continental Wholesale Florist Floral/Evergreens 4,210,827 0.21 Anderson & Sons, Inc. Water company 4,166,077 0.21 First Olympic Holding LLC Variety store 3,976,315 0.20 Individual Taxpayer Property owner 3,101,900 0.15 Sung Ki Min Commercial 3,090,435 0.15 Belfair Center LLC Commercial 3,048,980 0.15 Subtotal – District’s Ten Largest Taxpayers $ 47,841,763 2.37% All Other District Taxpayers 1,974,510,222 97.63 Total District Taxpayers $ 2,022,351,985 100.00% Source: Mason County Assessor’s Office.
The District Washington school districts are municipal corporations empowered to provide elementary and secondary educational services. Their operations are supported primarily by State funds, excess property taxes (the most
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significant local revenue source) and federal grants. School districts are governed by a board of directors elected by the voters of the school district. The chief administrative officer is a superintendent chosen by the board of directors. Description The District is located primarily in the County with a small portion in Kitsap County. The District has an estimated population of 15,003, and encompasses approximately 132-square miles. The District operates two elementary schools, one middle school, one high school, the Pace Academy (grades 9 thru 12) and the Homelink program. The Board of Directors The policies of the District are established by the Board. The District’s current members are listed below.
Member Position Term Expires Laura Boad President November 2015 John Campbell Member November 2015 George Fouts Member November 2003 Arthur Wightman Member November 2015 Vacant (1) Member November 2013 (1) In May 2013, the District became aware the person serving as representative for the District 5 position and Board
Vice President resides outside the District 5 geographical boundaries. Subsequently, the member resigned from the Board. The Board is considering appointing an interim member for the remainder of the term or will leave the position unfilled until the November 2013 General Election is certified. Currently, one candidate has filed to run on the November ballot for this position.
Staff and Labor Relations The District employs 352 employees, which includes 171 certificated and 181 classified staff members. The majority of employees, who are eligible under State law to be represented by a labor organization, are employed under provisions of negotiated contracts with five labor organizations. The District enters into written bargaining agreements with each of the bargaining organizations. Agreements contain provisions on such matters as salaries, vacation, sick leave, medical and dental insurance, working conditions and grievance procedures. Following are the bargaining groups which represent District employees:
Bargaining Group Number of Employees Contract Expires North Mason Education Association (Certificated) 110 August 31, 2014 Public School Employees (Classified) 101 August 31, 2014 UFCW Local 21 42 August 31, 2015 Association of NMSD Administrators 8 June 30, 2013 NM Extra-Curricular Association 37 August 31, 2008 (1) (1) No current negotiations. An agreement is in place to continue the current contract. Enrollment Historical and projected Annual Full-Time Equivalent (“AAFTE”) enrollments for the District are shown in the following table.
AAFTE Enrollment
Historical Projected 2012-2013 (1) 2,017 2017-2018 1,897 2011-2012 2,045 2016-2017 1,915 2010-2011 2,075 2015-2016 1,915 2009-2010 2,077 2014-2015 1,952 2008-2009 2,129 2013-2014 1,974 (1) Current annualized average as of April 2013. Source: North Mason School District No. 403.
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Financial Factors
Accounting Policies Washington school districts prepare their financial statements on the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, (issued jointly by the State Auditor and the Superintendent of Public Instruction, by the authority of RCW 43.09.200, RCW 28A.505.140, RCW 28A.505.010(1) and RCW 28A.505.020) which is an Other Comprehensive Basis Of Accounting (“OCBOA”) that differs from Generally Accepted Accounting Principles (“GAAP”). Financial statements for school districts in the State fall into one of three categories: (i) GAAP- School districts that issue GAAP financial statements; (ii) OCBOA- School districts that issue GAAP financial statements except that the General Fixed Asset Group, district-wide financial statements and the original budget are not reported; debt is reported in the notes to the financial statements; and management’s discussion and analysis are not required and (iii) School districts with less than 1,000 FTE students for the preceding fiscal year may issue cash basis financial statements. The District prepares its financial reports utilizing OCBOA. All governmental and expendable trust funds are accounted for on a spending or “financial flow” measurement focus. This means that only current assets and current liabilities are included on their balance sheets. The modified accrual basis of accounting is used for all governmental and expendable trust funds. Revenues are recognized when they become measurable and available. Property taxes receivable are measurable but not available and are, therefore, not accrued. However, categorical program claims and interdistrict billings are measurable and available and are, therefore, accrued. Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred. The fund liability is incurred when the goods or services have been received. The one exception is the recognition of principal of and interest on long-term debt which is recognized when due. Fund Accounting. The accounts of the District are organized on the basis of funds and account groups, each of which is a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. The various funds are grouped into governmental funds. Governmental Funds General Fund. This fund is used to account for all expendable financial resources, except those required to be accounted for in another fund. Debt Service Fund. This fund is used to account for revenue sources that are legally restricted for the payment of general long-term debt principal, interest and related expenditures. Capital Projects Fund. This fund is used to account for resources set aside for the acquisition and construction of major capital facilities. The fund is generally financed from the proceeds from the sale of voted and/or non-voted bonds, state matching revenues, lease or sale of surplus real property, interest earnings, and special levies. In all instances where moneys are raised by voter-approved bond issues, the proposition must include a description of the projects for which the money is being raised. Transportation Vehicle Fund. This fund is used to account for expenditures related to student transportation vehicle expenses. Special Revenue Funds. These funds account for the proceeds of specific revenue sources that are legally restricted for specific purposes. The Associated Student Body Program Fund (ASB Fund) is the only fund of this type. This fund is accounted for as a special revenue fund since the financial resources legally belong to the District.
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Financial Reporting The District presents governmental fund financial statements and related notes in accordance with OCBOA (see “Accounting Policies” above). The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The regulatory agencies require all funds be presented as major funds. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures (or expenses), as appropriate. The Government Accounting Standards Board (“GASB”) has issued a new standard concerning Accounting and Financial Reporting by Employers for Post Employment Benefits Other than Pensions (“GASB 45”). In addition to pensions, many state and local governmental employers provide other post employment benefits (“OPEB”) as a part of total compensation to attract and retain the services of qualified employees. OPEB includes post employment healthcare, as well as other forms of post employment benefits when provided separately from a pension plan. The new standard provides for the measurement, recognition and display of OPEB expenses/expenditures, related liabilities (assets), note disclosures, and if applicable, required supplementary information in the financial reports. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future. The District currently prepares its financial reports utilizing OCBOA (see “Accounting Policies” above) and therefore does not anticipate it will incorporate this reporting standard into its basis of accounting. Auditing The State Auditor is required to examine the financial affairs of school districts. School districts are audited annually, biennially or triennially depending on their size and whether or not they receive certain federal funding. Additionally, annual audits may be conducted at the request of a school district or the State. The District is audited annually. The examination must include, among other things, the financial conditions and resources of the school district, compliance with the State constitution and laws, and the methods and accuracy of the accounts and reports of the school district. Reports of the auditor’s examinations are required to be filed in the office of the State Auditor and in the auditing department of the school district. The audited financial statements of the District for the fiscal year ended August 31, 2012, attached as Appendix C, are incorporated by reference to this Official Statement which Official Statement which will be filed by the Underwriter with the Municipal Securities Rulemaking Board (the “MSRB”). A five-year summary of the Statement of Revenues, Expenditures and Changes in the General Fund Balance and a three-year summary of the District’s Debt Service Fund Income Statement follow.
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Statement of Revenues, Expenditures and Changes in General Fund Balance (Fiscal Years Ended August 31)
(1) The estimated ending General Fund balance for August 31, 2013 is $1,652,000. Source: North Mason School District No. 403, Financial Statements.
Budget
2012-2013 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008Revenues
Local Funds 4,267,712$ 3,992,468$ 3,891,101$ 3,641,661$ 3,422,149$ 3,412,486$ State Funds 14,076,412 13,959,881 13,598,588 14,027,486 14,384,146 14,745,217 Federal Funds 1,562,003 1,707,721 1,631,314 1,622,941 1,532,950 1,453,177 Federal Stimulus 0 6,754 789,669 547,891 982,229 0 Other 150,000 144,708 141,715 145,033 133,761 159,228
Total Revenues 20,056,127 19,811,532 20,052,387 19,985,012 20,455,235 19,770,108
Expenditures
Regular Instruction 10,181,027 10,019,911 9,804,290 10,123,900 8,990,226 9,449,321 Federal Stimulus 0 6,754 770,668 538,480 982,599 0 Special Education Instruction 2,717,988 2,713,121 2,595,256 2,752,164 2,801,370 2,465,247 Vocational Education 932,508 863,206 682,343 598,643 619,381 582,046 Skills Center Instruction 0 0 0 0 0 0 Compensatory Education 1,239,264 856,763 854,424 879,506 1,594,490 1,719,209 Other Instructional Programs 53,566 109,776 76,619 87,643 131,340 135,104 Community Services 35,000 16,946 37,313 43,082 36,488 35,239 Support Services 5,010,682 4,799,261 4,948,192 5,098,252 5,166,815 4,671,405 Capital Outlay 0 7,568 46,506 59,178 41,782 8,626
Debt Service 0 0 0 0 0 0
Total Expenditures 20,170,035 19,393,308 19,815,611 20,180,849 20,364,492 19,066,198
Rev. over/(under) Expenditures (113,908) 418,224 236,776 (195,837) 90,743 703,910 Net Adjustments/Transfers (114,077) (82,194) (57,070) (39,510) (100,798) (63,321) Prior Year(s) Correction or Restatements 0 0 0 0 0 0 Beginning Fund Balance 1,240,000 1,156,005 976,299 1,211,646 1,221,702 581,113
Ending Fund Balance 1,012,015$ (1) 1,492,035$ 1,156,005$ 976,299$ 1,211,646$ 1,221,702$
Balance Sheet InformationNonspendable, Restricted & Committed/Reserved 1,132,328$ 994,021$ 1,081,388$ 186,720$ 129,933$ 497,291$ Assigned/Unreserved, Designated 0 30,000 0 0 0 0 Unassigned/Unreserved, Undesignated (120,313) 468,015 74,618 789,579 1,081,713 724,410
Ending Fund Balance 1,012,015$ (1) 1,492,035$ 1,156,005$ 976,299$ 1,211,646$ 1,221,702$
Audited
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Statement of Revenues, Expenditures and Changes in Debt Service Fund Balance
(Fiscal Years Ended August 31)
Source: North Mason School District No. 403, Financial Statements. Budgetary Process General Budgetary Policies. Chapter 28A.505 RCW and Chapter 392-123 Washington Administrative Code mandate school district budget policies and procedures. The budget is adopted by the board after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period. Budgetary Basis of Accounting. For budget and accounting purposes, revenues and expenditures are accounted for on the modified accrual basis as prescribed by law for all governmental funds. Fund balance is budgeted as available resources and, pursuant to law, the budgeted ending fund balance cannot be negative. Encumbrances. Encumbrance accounting is employed in governmental funds. Purchase orders, contracts and other commitments for the expenditure of moneys are recorded in order to reserve a portion of the applicable appropriation. Encumbrances are closed at the end of the fiscal year and reopened the following year. Investment Policy The Treasurer is the ex officio treasurer for the District. In this capacity, the Treasurer receives deposits and makes investments on the District’s behalf. All temporary investments are stated at cost plus accrued interest, which approximates market. Investments are shown on the combined balance sheet at cost, net of amortized premium or discount. Reductions in market value are not reflected on the financial statements. Gains or losses on investments sold or exchanged are recognized at the time of sale or exchange. Chapter 39.59 RCW limits the investment of public funds by local governments to the following authorized instruments: (i) bonds of the State or any local government in the State or general obligation bonds of any other state or political subdivision thereof which has at the time of investment one of the three highest credit
Unaudited
2011-2012 2010-2011 2009-2010RevenuesLocal 17,478$ 20,799$ 14,853$ State Funds 0 0 (21) Federal 0 0 0
Total Resources 17,478 20,799 14,832
ExpendituresPrincipal 918,150 824,914 109,388 Interest and Other 126,440 138,217 130,816
Total Expenditures 1,044,590 963,131 240,204
Revenues Over/(Under) Expenditures (1,027,112) (942,332) (225,372) Transfers In/(Out) 1,044,287 962,829 239,902 Beginning Fund Balance 243,218 222,720 208,190
Ending Fund Balance 260,393$ 243,218$ 222,720$
Audited
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ratings of a nationally recognized rating agency, (ii) registered warrants of a local government in the same county as the local government making the investment, (iii) certificates of deposit and (iv) any investments authorized by law for the State Treasurer. In addition to these instruments, bond proceeds may be invested in qualified money market and mutual funds which restrict their portfolios to specified securities and post a bond with the State (RCW 39.59.030). Investments authorized by law for the State Treasurer include (i) obligations of the U.S. government, its agencies and wholly owned corporations, (ii) bankers’ acceptances, (iii) commercial paper, (iv) obligations of the Federal Home Loan Bank, Fannie Mae and other government-sponsored enterprises, (v) motor vehicle fund warrants and (vi) certificates of deposit (chapter 43.84 RCW). Utility revenue bonds and warrants of any city and bonds or warrants of a local improvement district are also eligible investments (RCW 35.39.030). The District invests its funds with the Treasurer. At the request of one or more local governments that invest their money with a county, a county treasurer may pool those moneys for the purposes of investment (RCW 36.29.022). The County currently does not have such an investment pool. The Treasurer may also invest public funds in the Local Government Investment Pool (the “LGIP”), authorized by chapter 43.250 RCW and administered by the State Treasurer. The LGIP is comparable to a Rule 2a-7 money market fund, as recognized by the Securities and Exchange Commission, and its weighted average maturity does not exceed 90 days. For a full description of the LGIP and its investment structure visit the Washington State Treasurer’s website at http://tre.wa.gov/LGIP. Pension System Pensions for District employees are provided through the State Department of Retirement Systems (the “DRS”). Substantially all District full-time and qualifying part-time employees participate in one of the following three state-wide retirement systems: (i) the State Teachers’ Retirement System (“TRS”) for certificated employees, (ii) the Public Employees’ Retirement System (“PERS”) for non-certificated employees and (iii) the School Employees’ Retirement System (“SERS”) for classified employees. TRS includes three plans (Plans 1, 2 and 3), PERS includes three plans (Plans 1, 2 and 3), and SERS includes two plans (Plans 2 and 3). Participants who joined the retirement system by September 30, 1977 are eligible to be either TRS or PERS Plan 1 members. Those who joined thereafter are enrolled in TRS Plans 2 or 3, PERS Plans 2 or 3 or SERS Plans 2 or 3. All Plans 1 and 2 are defined benefit plans. New PERS and SERS participants have the irrevocable option of choosing membership in either their respective Plans 2 or Plans 3. This option must be exercised within 90 days, and if not exercised the participant will be placed in PERS Plan 3. New TRS participants must join TRS Plan 3. Each of the PERS Plan 3, the SERS Plan 3 and the TRS Plan 3 consist of a defined benefit and a defined contribution portion. Retirement benefits under all Plans 1 and 2 are vested after completion of five years of eligible service. PERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. TRS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in TRS Plan 2 by July 1, 1996. Plan 3 members are immediately vested in the defined contribution portion of their plan. SERS Plan 3 members are vested after ten years of eligible service; or after five years of eligible service if one service credit year is earned after the age of 44; or after five service credit years earned in PERS Plan 2 by September 1, 2000. The District contributed $681,202 in fiscal year 2011 and $896,923 in fiscal year 2012 to these pension plans. District employees also are eligible to participate in the federal social security program.
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The Legislature establishes all employer and employee contribution rates for all plans during even numbered years according to a statutory rate-setting process. The following table lists current contribution rates for employers and employees as well as adopted rates for the State’s 2013-2015 biennium:
Contribution Rates (in percentage)
Current Rates Adopted Rates for 2013-15 Employer
Rate(1) Employee
Rate Employer
Rate(1) Employee
Rate
PERS Plan 1 7.21% 6.00% 9.21% 6.00% PERS Plan 2/3(2) 7.21 4.64 9.21 4.92 TRS Plan 1 8.05 6.00 10.39 6.00 TRS Plan 2/3(2) 8.05 4.69 10.39 4.96 SERS Plan 2/3(2) 7.59 4.09 9.82 4.64
(1) Includes a 0.16 percent Department of Retirement Systems administrative expense rate. (2) Plan 3 members do not contribute to the defined benefit plan. Source: Department of Retirement Systems. While the District’s contributions in 2012 represent its full current liability under the retirement systems, any unfunded pension benefit obligations could be reflected in future years as higher contribution rates. It is expected that the contribution rates for employees and employers in the TRS Plans 2 and 3 and PERS Plans 2 and 3 will increase in the coming years. The State Actuary’s website (which is not incorporated into this Official Statement by reference) includes information regarding the values, funding levels and investments of these retirement plans. For additional information, see Note 5 to the Audited Financial Statements for the Year Ended August 31, 2012, attached hereto as Appendix C. The Actuarial Valuation Report – Washington 2011, produced by the Office of the State Actuary, states that as of June 30, 2011, PERS Plans 2 and 3 and TRS Plans 2 and 3 had no unfunded actuarial accrued liability. However, during the years 2001 through 2010 the rates adopted by the Legislature were lower than those that would have been required to produce actuarially required contributions to PERS Plan 1 and TRS Plan 1, closed plans with a large proportion of the retirees. The following table shows the funded status of the PERS, TRS and SERS for 2002-2011. The assumptions used by the State Actuary in calculating the unfunded liability are a 7.9 percent annual rate of investment return, 3.75 percent general salary increases, 3.0 percent consumer price index increase and 0.95 percent growth in membership (0.80 percent for TRS). The long-term investment return assumption is used as the discount rate for determining the liabilities for a plan. The OSA uses two funded status measures. The first funded status measure compares the Actuarial Value of Assets (“AVA”) to the “Projected Unit Credit (“PUC”) liabilities. The PUC cost method projects future benefits using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The asset valuation method smoothes the inherent volatility in the Market Value of Assets (“MVA”) by deferring a portion of the annual investment gains or losses over a period of up to eight years. This method is consistent with governmental accounting standards. The OSA also uses a second measure, comparing the MVA to the PUC liabilities calculated using a short-term interest rate assumption. This measure is used for the closed plans, PERS 1 and TRS 1. Additional information on this measure is provided in the 2011 Actuarial Valuation Report. In 2011, the Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member’s total years of service, for most retirees in the PERS Plan 1 and TRS Plan 1 plans, which is forecast to reduce the unfunded accrued actuarial liability in PERS Plan 1 and TRS Plan 1. A lawsuit has been filed challenging this legislation.
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Funded Status on an Actuarial Value Basis (1) PERS TRS SERS Plan 1 Plan 2/3 Plan 1 Plan 2/3 Plan 2/3
PUC Liability(2) $12,567 $18,815 $9,258 $6,299 $2,607 Valuation Assets(2) 8,883 20,997 7,485 7,141 2,872 Unfunded Liability(2) $ 3,684 $ (2,182) $1,773 $ (842) $ (265)
Funded Ratio (%) 2002 92 158 98 182 169 2003 82 142 89 155 138 2004 81 134 88 153 137 2005(3) 74 127 80 134 122 2006(3) 74 121 80 133 125 2007(3) 71 120 76 130 126 2008(3) 71 119 77 125 121 2009(3) 70 116 75 118 116 2010 74 113 84 116 113 2011(3) 71 112 81 113 110
(1) Liabilities valued using the Projected Unit Credit (“PUC”) cost method at an interest rate of 7.9 percent while assets have been valued under the actuarial value of assets.
(2) Dollars in millions. Based on actuarial valuation as of June 30, 2011. (3) Actuarial assumptions changed. Source: Office of the State Actuary, 2011 Actuarial Valuation Report, September 2012. Other Post-Employment Benefits PEBB Overview. The Public Employee Benefits Board (“PEBB”), created within the State Health Care Authority (“HCA”), administers medical, dental and life insurance plans for State public employees and retirees and offers retirees access to OPEB benefits (the “PEBB Plan”). Employers who participate in the PEBB Plan include the State, K-12 school districts, numerous political subdivisions of the State and tribal governments. Employers subsidize a portion of the cost of some PEBB Plan benefits. The relationship between the PEBB Plan and its member employers and their employees and retirees is not formalized in a contract or plan document; rather, the benefits are provided in accordance with a substantive plan, which GASB defines as the plan as understood by employers employees members. The District does not offer any OPEB to current or past employees and does not plan to offer any such benefits in the future.
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PEBB Membership. Retirees’ access to PEBB depends on the retirement eligibility of their respective retirement system. PEBB members are covered in the PERS, TRS and SERS retirement systems. The following table shows PEBB plan membership.
Membership in PEBB Plan (As of June 30, 2012)
Active
Employees Retirees(1) Total State 106,255 27,807 134,062 K-12 Schools and ESDs(2) 1,800 29,245 31,045 Political Subdivision 11,375 1,261 12,636 Total 119,430 58,313 177,743
(1) Retirees include retired employees, surviving spouses, and terminated members entitled to a benefit. (2) In Fiscal Year 2012, there were 98,349 full-time equivalent active employees in the 246 K-12 schools and ESDs, which
schools and ESDs elected to limit participation in PEBB only to their retirees. Source: Washington State Comprehensive Annual Financial Report (“CAFR”) for Fiscal Year Ended June 30, 2012. Funding of PEBB Plan. In the State, retiree benefits and contributions by the State and local governments for their respective employees are set each biennium as part of the budget process. These benefits are funded on a pay-as-you-go basis.
Demographic Information The District is located in western Washington State with 97.9 percent of its assessed value in the County and the remainder in Kitsap County. Historical population for the County, the City of Shelton (the only incorporated community within the County) and the community of Belfair follows.
Population
Year Mason County City of Shelton
Community of Belfair
2012 61,450 9,870 3,956 2011 61,100 9,855 3,934 2010(1) 60,699 9,834 3,931 2009 60,237 9,736 3,910 2008 59,536 9,667 3,873
(1) Official 2010 U.S. Census figure. Source: Washington State Office of Financial Management, May 2013.
Mason County Washington
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Income. Historic personal income and per capita income levels for the County and the State are shown below:
Mason County and State of Washington Total Personal and Per Capita Income
Mason County State of Washington
Year Total Personal
Income (in thousands) Per Capita
Income Total Personal
Income (in thousands) Per Capita
Income 2011 $1,851,604 $30,345 $299,685,263 $43,878 2010 1,792,242 29,496 283,367,864 42,024 2009 1,771,708 29,365 276,727,871 41,504 2008 1,821,581 30,469 289,433,693 44,106 2007 1,715,613 29,237 272,624,864 42,192
Source: U.S. Department of Commerce, Bureau of Economic Analysis, May 2013. Median Household Income. Median household income estimation is based on 1990 and 2000 Census data, and on the Census Bureau's American Community Surveys' estimates for 2006-2010.
Year Mason County State of
Washington 2012(1) $ 48,804 $ 56,444 2011(2) 47,724 55,500 2010 47,273 54,888 2009 47,898 55,458 2008 48,655 57,858
(1) The Revenue Forecast Council's September 2012 forecast of the state personal income is used in the projection of 2012 median household income.
(2) In addition to the state personal income data published by BEA, the payroll data compiled by the state Employment Security Department are used in the Preliminary estimates of 2011 median household income.
Source: Washington State Department of Revenue, May 2013.
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Taxable Retail Sales. Taxable retail sales reflect only those sales subject to retail sales tax. Historic taxable retail sales for the County and the City of Shelton are shown below:
Taxable Retail Sales
Mason County City of Shelton 2012 $ 497,590,471 $ 219,154,275 2011 500,778,280 205,904,243 2010 492,543,720 212,466,002 2009 491,033,029 217,998,199 2008 547,027,151 215,992,014 2007 562,231,416 220,137,193
Source: Washington State Department of Revenue, May 2013. Building Permits. The number and valuation of new single-family and multi-family residential building permits in the County are listed below:
Mason County Residential Building Permits
New Single Family Units New Multi-Family Units Total Year Number Construction Cost Number Construction Cost Construction Cost 2013(1) 15 $ 3,997,789 0 $ 0 $ 3,997,789 2012 121 26,595,407 0 0 26,595,407 2011 134 26,809,325 0 0 26,809,325 2010 140 28,394,240 0 0 28,394,240 2009 149 20,445,490 11 895,243 21,340,733 2008 236 31,726,072 14 1,147,668 32,873,740
(1) Unincorporated Mason County Only, through March. Source: U.S. Bureau of the Census, May 2013. Employment. Major employers located within the County include the following:
Mason County 2012 Major Employers
Employer Type of Business Number of Employees
Little Creek Casino Hotel Hotel and Casino 726 Washington Corrections Center Correctional 647 Shelton School District Educational facility 600 Mason General Hospital Medical facility 540 N. Mason School District Educational 351 Wal-Mart Retail store 343 Taylor Shellfish, Inc. Shellfish 325 Mason County Government 320 Squaxin Indian Tribe Tribal facility 265 Simpson Lumber Company Lumber 260 Olympic Panel Products Plywood, veneer 250 Island Enterprises (inc. subsid) Tribal companies 185 Fir Lane Health & Rehab. Care provider 153
Source: Economic Development Council of Mason County, May 2013.
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Employment within the County is described in the following tables. Civilian Labor Force data is based on household surveys of residents. NAICS data are estimates based on surveys of employers and benchmarked based on covered employment as reported by all employers.
Mason County
Nonagricultural Wage & Salary Workers(1) and Labor Force and Employment Data
Annual Average 2013(2) 2012 2011 2010 2009 Civilian Labor Force 23,860 24,050 24,440 25,140 25,330 Total Employment 21,180 21,550 21,710 22,220 22,620 Total Unemployment 2,680 2,500 2,730 2,920 2,710 Percent of Labor Force 11.2% 10.4% 11.2% 11.6% 10.7%
NAICS INDUSTRY(3) 2013(2) 2012 2011 2010 2009 Total Nonfarm 12,860 13,080 12,990 13,140 13,500 Total Private 7,510 7,720 7,690 7,830 8,120 Goods Producing 2,090 2,160 2,100 2,110 2,250 Natural Resources, Mining, and Construction 750 770 710 780 870 Manufacturing 1,340 1,390 1,380 1,330 1,380 Service Providing 10,780 10,920 10,900 11,030 11,250 Trade, Transportation, and Utilities 1,990 2,060 2,050 2,110 2,130 Wholesale Trade 370 470 470 500 490 Retail Trade 1,480 1,450 1,420 1,440 1,450 Transportation, Warehousing, and Utilities 150 140 160 170 190 Information and Financial Activities 500 520 520 530 550 All Other Services 2,930 2,990 3,020 3,070 3,180 Government 5,360 5,350 5,310 5,320 5,380 Federal Government 70 70 70 100 80 State and Local Government 5,290 5,280 5,240 5,220 5,300 Educational Services 1,410 1,380 1,380 1,400 1,390 Workers in Labor/Management Disputes 0 0 0 0 0
(1) Excludes proprietors, self-employed, members of the armed services, workers in private households, and agriculture. Includes all full- and part-time wage and salary workers receiving pay during the pay period including the 12th of the month.
(2) Data through March 2013. (3) North American Industry Classification System. Source: Washington State Employment Security Department, May 2013.
Initiatives and Referenda General. Under the State constitution, the voters of the State have the ability to initiate legislation and to modify existing statutes through the powers of initiative and referendum. Initiatives and referenda are submitted to the voters upon receipt of a petition signed by at least eight percent (initiatives) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Any law approved through the power of initiative by a majority of the voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature, but thereafter is subject to amendment or repeal by the Legislature in the same manner as other laws. Future Initiatives. Initiative petitions affecting tax collections and levy rates (not including the taxes pledged to the repayment of the Bonds) and other matters may be filed in the future. The District cannot predict whether any such initiatives will qualify to be submitted to the voters or, if submitted, will be approved. Likewise, the
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District cannot predict what actions the Legislature might take, if any, regarding future initiatives approved by voters.
Tax Matters In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, interest on the Bonds is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. Federal income tax law contains a number of requirements that apply to the Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the use of proceeds of the bonds and the facilities financed with proceeds of the Bonds and certain other matters. The District has covenanted to comply with all applicable requirements. Bond Counsel’s opinion is subject to the condition that the District comply with the above-referenced covenants and, in addition, will rely on representations by the District and its advisors with respect to matters solely within the knowledge of the District and its advisors, respectively, which Bond Counsel has not independently verified. If the District fails to comply with such covenants or if the foregoing representations are determined to be inaccurate or incomplete, interest on the Bonds could be included in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds, regardless of the date on which the event causing taxability occurs. Except as expressly stated above, Bond Counsel expresses no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements. Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Bonds. Bond Counsel expresses no opinion regarding any collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors regarding collateral federal income tax consequences. Payments of interest on tax-exempt obligations such as the Bonds, are in many cases required to be reported to the Internal Revenue Service (“IRS”). Additionally, backup withholding may apply to any such payments made to any owner who is not an “exempt recipient” and who fails to provide certain identifying information. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. Bond Counsel gives no assurance that any future legislation or clarifications or amendments to the Internal Revenue Code of 1986, as amended (the “Code”), if enacted into law, will not cause the interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of the interest on the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal legislation, as to which Bond Counsel expresses no view. Bond Counsel’s opinion is not a guarantee of result and is not binding on the IRS; rather, the opinion represents Bond Counsel’s legal judgment based on its review of existing law and in reliance on the representations made to Bond Counsel and the District’s compliance with its covenants. The IRS has established an ongoing program to audit tax-exempt obligations to determine whether interest on such obligations is includable in gross income for federal income tax purposes. Bond Counsel cannot predict
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whether the IRS will commence an audit of the Bonds. Owners of the Bonds are advised that, if the IRS does audit the Bonds, under current IRS procedures, at least during the early stages of an audit, the IRS will treat the District as the taxpayer, and the owners of the Bonds may have limited rights to participate in the audit. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome. Not Qualified Tax-Exempt Obligations The District has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code.
Continuing Disclosure In accordance with Section (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”), the District has agreed in the Bond Resolution for the benefit of the Bond Owners and Beneficial Owners of the Bonds to provide or cause to be provided to the MSRB in accordance with the Rule, the following annual financial information and operating data for the prior fiscal year (commencing in 2014 for the fiscal year ended August 31, 2013): (i) annual financial statements, which statements may or may not be audited, showing ending fund balances for the District’s General Fund, prepared in accordance with regulations prescribed by the Superintendent of Public Instruction and the State Auditor pursuant to RCW 28A.505.020, RCW 28A.505.090, RCW 28A.505.140, and RCW 43.09.200 (or any successor statutes) and generally of the type included in this Official Statement for the Bonds under the headings “Statement of Revenues, Expenditures and Changes in General Fund Balance” and “Statement of Revenues, Expenditures and Changes in Debt Service Fund Balance,” (ii) the assessed valuation of taxable property in the District; (iii) ad valorem taxes due and percentage of taxes collected; (iv) property tax levy rate per $1,000 of assessed valuation; and (v) outstanding general obligation debt of the District. Such annual information and operating data described above will be so provided on or before the end of nine months after the end of the District’s fiscal year. The District may adjust such date if the District changes its fiscal year by providing written notice of the change of fiscal year and the new reporting date to the MSRB. The District’s current fiscal year ends on August 31. In lieu of providing such annual financial information and operating data, the District may cross-reference to other documents available to the public on the MSRB’s internet website or filed with the Securities and Exchange Commission. If not provided as part of the annual financial information discussed above, the District will provide its audited annual financial statement prepared in accordance with regulations prescribed by the Superintendent of Public Instruction and the State Auditor pursuant to the statutes cited above (or any successor statutes) when and if available to the MSRB. The District further agrees to provide or cause to be provided to the MSRB notice of the occurrence of any of the following events with respect to the Bonds not in excess of ten business days after the occurrence of the event: (i) principal and interest payment delinquencies; (ii) non-payment related defaults, if material; (iii) unscheduled draws on debt service reserves reflecting financial difficulties; (iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution of credit or liquidity providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) modifications to the rights of Bond owners, if material; (viii) Bond calls, if material, and tender offers; (ix) defeasances; (x) release, substitution or sale of property, securing repayment of the Bonds, if material; (xi) rating changes (xi) bankruptcy, insolvency, receivership or similar event of the District; (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; and (xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material.
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The District agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information and operating data described above on or prior to the date set forth above. With reference to events (iii) and (x) above, solely for the purposes of disclosure and not intending to modify its undertaking, the District advises that there is no debt service reserve fund or account for the Bonds and no property secures the repayment of the Bonds. Until otherwise designated by the MSRB or the Securities and Exchange Commission, any information or notices submitted to the MSRB in compliance with the Rule are to be submitted through the MSRB’s Electronic Municipal Market Access system (“EMMA”), currently located at www.emma.msrb.org. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB. The District’s obligations to provide annual financial information and notices of material events will terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. Such undertaking, or any provision hereof, will be null and void if the District (i) obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require such undertaking, or any such provision, are invalid, have been repealed retroactively or otherwise do not apply to the Bonds; and (ii) notifies the MSRB of such opinion and the cancellation of such undertaking. Notwithstanding any other provision of the undertaking, the District may amend the provisions described in this section and any provision of such undertaking may be waived, with an approving opinion of nationally recognized bond counsel and in accordance with the Rule. In the event of any amendment of or waiver of a provision of such undertaking, the District will describe such amendment in the next annual report, and will include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the District. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change will be given in the same manner as for a material event, and (ii) the annual report for the year in which the change is made will 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. A Bond Owner’s or Beneficial Owner’s right to enforce the provisions of the District’s undertaking described in the Bond Resolution will be limited to a right to obtain specific enforcement of the District’s obligations thereunder, and any failure by the District to comply with the provisions of the undertaking will not be an event of default with respect to the Bonds. For purposes of this section, “Beneficial Owner” means any person who 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 or depositories. Prior Compliance with Continuing Disclosure Undertakings. The District entered into an undertaking under the Rule with respect to its obligations issued after July 3, 1995 and has not failed to comply with any prior undertaking under the Rule in the past five years.
28
Ratings As noted on the cover page of this Official Statement, Moody’s Investors Service (“Moody’s”) has assigned its credit enhanced rating of “Aa1” based upon the District’s participation in the Washington State School District Credit Enhancement Program (see Appendix D attached hereto). Moody’s has also assigned an underlying rating of “A1” to the Bonds. The ratings reflect only the views of the rating agency and an explanation of the significance of the ratings may be obtained from the rating agency. There is no assurance that the ratings will be retained for any given period of time or that the ratings will not be revised downward or withdrawn entirely by the rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of the ratings will likely have an adverse effect on the market price of the Bonds.
Legal and Underwriting Approval of Counsel Legal matters incident to the authorization, issuance and sale of Bonds by the District are subject to the approving legal opinion of Bond Counsel. The approving opinion of K&L Gates LLP, Bond Counsel, concerning the validity of the Bonds, will be attached to the final Official Statement in Appendix A. Bond Counsel has not been retained to review and has not reviewed this Official Statement for completeness or accuracy and will not offer an opinion concerning this Official Statement. Litigation There is no litigation pending or threatened questioning the validity of the Bonds nor the power and authority of the District to issue the Bonds. There is no litigation pending or threatened which would materially affect the finances of the District or affect the District’s ability to meet debt service requirements on the Bonds. Public Disclosure Law. Chapter 42.17 RCW (the Public Disclosure Law) provides, among other things, for reporting procedures relating to the financing of election campaigns. Public agencies are prohibited from making expenditures to promote ballot propositions. One of the civil remedies and sanctions which may be imposed by court order, if the court finds the violation of any provision of such law “probably affected the outcome of any election,” is that the result of such election may be held void and a special election is ordered to be held within 60 days of that finding. Any action to void an election must be commenced within one year of the date of the election in question. RCW 42.17.400 provides that the State Attorney General and the prosecuting authorities of political subdivisions of the State (the “Prosecuting Attorney”) may bring civil actions in the name of the State for any appropriate civil remedy, including the remedy referred to in the immediately preceding paragraph. If after written notification to the State Attorney General and the Prosecuting Attorney such officials do not commence an action within 45 days after such notice, the notifying citizen may bring a citizen’s action to enforce the remedy. The election in the District which approved the issuance of the Bonds was held on April 23, 2013. No proceedings have been instituted nor demands made upon the appropriate officials to institute any proceedings, nor are threats thereof known to any of the District’s officials, challenging such election. Underwriting The Bonds are being purchased by the Underwriter. The purchase contract provides that the Underwriter will purchase all of the Bonds, if any are purchased, at a price of 107.6162 percent of the par value of the Bonds. The Bonds will be reoffered at an average price of 108.0412 percent of the par value of the Bonds. After the initial public offering, the public offering prices may be varied from time to time. The Underwriter has entered into a distribution agreement with UBS Financial Services Inc. for the retail distribution of certain municipal securities at the original issue prices. Pursuant to this agreement, the Underwriter will share a portion of its underwriting compensation with respect to the Bonds with UBS Financial Services Inc.
29
On April 17, 2013, the Underwriter entered into a merger agreement with Piper Jaffray Companies. Under the terms of the merger agreement, the Underwriter will be merged into a subsidiary of Piper Jaffray Companies upon closing of the proposed transaction. The transaction was approved by the shareholders of the Underwriter on June 6, 2013. The transaction is subject to approval by applicable regulatory authorities. At this time, the Underwriter cannot be certain if and when final regulatory approval will be granted. Until such approval is obtained, the Underwriter will continue to operate independently.
Concluding Statement The information contained herein should not be construed as representing all conditions affecting the District or the Bonds. Additional information may be obtained from the District. The statements relating to the Bond Resolution are in summarized form, and in all respects are subject to and qualified in their entirety by express reference to the provisions of the Bond Resolution in its complete form. The information assembled herein is not to be construed as a contract with owners of the Bonds.
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Appendix A
Form of Bond Counsel Opinion
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July 11, 2013
North Mason School District No. 403
Mason and Kitsap Counties, Washington
Seattle-Northwest Securities Corporation
Seattle, Washington
Re: North Mason School District No. 403, Mason and Kitsap Counties, Washington
Unlimited Tax General Obligation Bonds, 2013 - $46,550,000
Ladies and Gentlemen:
We have acted as bond counsel to North Mason School District No. 403, Mason and
Kitsap Counties, Washington (the “District”), and have examined a certified transcript of the
proceedings taken in the matter of the issuance by the District of its Unlimited Tax General
Obligation Bonds, 2013 (the “Bonds”), dated the date hereof, in the aggregate principal amount
of $46,550,000, issued pursuant to Resolution No. 10-G-13 of the District’s Board of Directors
adopted on May 7, 2013 (the “Bond Resolution”) for the purpose of providing funds to
undertake certain capital improvements to facilities of the District. Capitalized terms used in this
opinion and not otherwise defined herein shall have the meanings given such terms in the Bond
Resolution.
The Bonds are subject to redemption prior to their stated maturities as set forth in the
Purchase Contract.
Regarding questions of fact material to our opinion, we have relied on representations of
the District in the Bond Resolution and in the certified proceedings and on other certifications of
public officials and others furnished to us without undertaking to verify the same by independent
investigation.
Based on the foregoing, we are of the opinion that, under existing law:
1. The Bonds have been legally issued and constitute valid and binding general
obligations of the District, except to the extent that the enforcement of the rights and remedies of
the holders and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency,
moratorium, reorganization or other similar laws of general application affecting the rights of
creditors, by the application of equitable principles and the exercise of judicial discretion.
2. By the Bond Resolution, the District has covenanted that, for as long as any of the
Bonds are outstanding, the District shall levy taxes annually without limitation as to rate or
amount on all taxable property within the District in an amount sufficient, together with other
North Mason School District No. 403
Seattle-Northwest Securities Corporation
July 11, 2013
Page 2
money legally available and to be used therefor, to pay when due the principal of and interest on
the Bonds. The full faith, credit and resources of the District are irrevocably pledged for the
annual levy and collection of such taxes and for the prompt payment of such principal and
interest.
3. Interest on the Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations; however, interest on the Bonds is taken into account in
determining adjusted current earnings for the purpose of computing the alternative minimum tax
imposed on certain corporations. The opinion set forth in the preceding sentence is subject to the
condition that the District comply with all requirements of the Internal Revenue Code of 1986, as
amended (the “Code”), that must be satisfied subsequent to the issuance of the Bonds in order
that the interest thereon be, and continue to be, excludable from gross income for federal income
tax purposes. The District has covenanted to comply with all applicable requirements. Failure to
comply with certain of such covenants may cause interest on the Bonds to be included in gross
income for federal income tax purposes retroactively to the date of issuance of the Bonds.
The District has not designated the Bonds as “qualified tax-exempt obligations” within
the meaning of Section 265(b)(3) of the Code.
Except as expressly stated above, we express no opinion regarding any other federal or
state income tax consequences of acquiring, carrying, owning or disposing of the Bonds.
Owners of the Bonds should consult their tax advisors regarding the applicability of any
collateral tax consequences of owning the Bonds, which may include original issue discount,
original issue premium, purchase at a market discount or at a premium, taxation upon sale,
redemption or other disposition, and various withholding requirements.
We have not been engaged nor have we undertaken to review the accuracy, completeness
or sufficiency of the official statement or other offering material related to the Bonds (except to
the extent, if any, stated in the official statement), and we express no opinion relating thereto, or
relating to the undertaking by the District to provide ongoing disclosure pursuant to Securities
and Exchange Commission Rule 15c2-12.
This opinion is given as of the date hereof, and we assume no obligation to update, revise
or supplement this opinion to reflect any facts or circumstances that may hereafter come to our
attention or any changes in law that may hereafter occur.
Very truly yours,
K&L GATES LLP
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Appendix B
Book Entry Transfer System
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The Depository Trust Company A subsidiary of The Depository Trust & Clearing Corporation
Sample Offering Document Language Describing DTC and Book-Entry-Only Issuance
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’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 issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.]
2. DTC, the world’s largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
SOL 08-10-11
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3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities 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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities 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.
5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has 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.]
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an
issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
SOL 08-10-11
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8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. A Beneficial Owner shall give notice to elect to have its Securities purchased or
tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.
10. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry-only transfers through
DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
12. The information in this section concerning DTC and DTC’s book-entry system has
been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
[8/11]
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Appendix C
Financial Statements
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Independent Auditor’s Report on Financial Statements
North Mason School District No. 403Mason County
September 1, 2011 through August 31, 2012
Board of DirectorsNorth Mason School District No. 403Belfair, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of North Mason School District No. 403, Mason County, Washington, as of and for the year ended August 31, 2012, as listed on page 17.
Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting that demonstrates compliance with the Washington State statutes and the Accounting Manual for Public Schools in the State of Washington described in Note 1. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for 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 ResponsibilityOur 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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 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 account estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of North Mason School District No. 403, as of August 31, 2012, and the changes in financial position thereof for the year then ended on the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington described in Note 1.
Basis of AccountingWe draw attention to Note 1 of the financial statements, which describes the basis of accounting. As described in Note 1 to the financial statements, the financial statements are prepared in accordance with the basis of accounting that demonstrates compliance with Washington State statutes and the Accounting Manual for Public Schools in the State of Washington, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Other MattersOur audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. The accompanying Schedule of Long-Term Liabilities is also presented for purposes of additional analysis as required by the prescribed accounting manual. These schedules are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole.
Purpose of this ReportThis report is intended for the information and use of management, the Board of Directors,federal awarding agencies and pass-through entities of the District. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS
In accordance with Government Auditing Standards, we have also issued our report on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards andshould be considered in assessing the results of our audit.
TROY KELLEYSTATE AUDITOR
March 13, 2013
Financial Section
North Mason School District No. 403Mason County
September 1, 2011 through August 31, 2012
FINANCIAL STATEMENTS
Balance Sheet – Governmental Funds – 2012Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental
Funds – 2012Notes to Financial Statements – 2012
SUPPLEMENTARY INFORMATION
Schedule of Long-Term Liabilities – 2012Schedule of Expenditures of Federal Awards – 2012Notes to the Schedule of Expenditures of Federal Awards – 2012
North Mason School District No. 403
Balance Sheet
Governmental Funds
August 31, 2012
Debt Capital Transportation General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total
ASSETS:
Cash and Cash Equivalents 1,407,019.21 37,733.19 96.08 179,237.82 74,880.79 0.00 1,698,967.09
Minus Warrants Outstanding -1,281,198.53 -14,804.71 0.00 -151,087.30 0.00 0.00 -1,447,090.54
Taxes Receivable 1,802,235.54 137.56 429,550.83 0.00 2,231,923.93
Due From Other Funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Due From Other Governmental 108,605.40 0.00 0.00 0.00 0.00 0.00 108,605.40 Units
Accounts Receivable 60,309.65 0.00 0.00 0.00 0.00 0.00 60,309.65
Interfund Loans Receivable 0.00 0.00 0.00
Accrued Interest Receivable 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Inventory 100,129.12 0.00 100,129.12
Prepaid Items 49,395.30 11,040.09 0.00 0.00 0.00 60,435.39
Investments 1,246,041.51 195,775.20 260,297.26 1,600,131.00 220,001.29 0.00 3,522,246.26
Investments/Cash With Trustee 0.00 0.00 0.00 0.00 0.00 0.00
Investments-Deferred 0.00 0.00 0.00 Compensation
Self-Insurance Security 0.00 0.00 Deposit
TOTAL ASSETS 3,492,537.20 229,743.77 260,530.90 2,057,832.35 294,882.08 0.00 6,335,526.30
LIABILITIES:
Accounts Payable 155,238.07 2,298.27 0.00 122,630.77 0.00 0.00 280,167.11
Contracts Payable Current 0.00 0.00 0.00 0.00 0.00 0.00
Accrued Interest Payable 0.00 0.00
Accrued Salaries 37,712.44 0.00 0.00 37,712.44
Revenue Anticipation Notes 0.00 0.00 0.00 0.00 0.00 Payable
Payroll Deductions and Taxes 4,715.74 0.00 0.00 4,715.74 Payable
Due To Other Governmental 0.00 0.00 0.00 0.00 0.00 0.00 Units
Deferred Compensation Payable 0.00 0.00 0.00
Estimated Employee Benefits 0.00 0.00 Payable
Due To Other Funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00
___________________________________________________________________________________________________ W
ashington State A
uditor's Office
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North Mason School District No. 403
Balance Sheet
Governmental Funds
August 31, 2012
Debt Capital Transportation General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total
LIABILITIES:
Interfund Loans Payable 0.00 0.00 0.00 0.00 0.00
Deposits 600.00 0.00 0.00 600.00
Matured Bonds Payable 0.00 0.00
Matured Bond Interest Payable 0.00 0.00
Arbitrage Rebate Payable 0.00 0.00 0.00 0.00 0.00
Deferred Revenue 1,802,235.54 0.00 137.56 429,550.83 0.00 0.00 2,231,923.93
TOTAL LIABILITIES 2,000,501.79 2,298.27 137.56 552,181.60 0.00 0.00 2,555,119.22
FUND BALANCE:
Nonspendable Fund Balance 149,524.42 11,040.09 0.00 0.00 0.00 0.00 160,564.51
Restricted Fund Balance 250,045.12 216,405.41 260,393.34 690,279.27 0.00 0.00 1,417,123.14
Committed Fund Balance 594,451.00 0.00 0.00 0.00 0.00 0.00 594,451.00
Assigned Fund Balance 30,000.00 0.00 0.00 815,371.48 294,882.08 0.00 1,140,253.56
Unassigned Fund Balance 468,014.87 0.00 0.00 0.00 0.00 0.00 468,014.87
TOTAL FUND BALANCE 1,492,035.41 227,445.50 260,393.34 1,505,650.75 294,882.08 0.00 3,780,407.08
TOTAL LIABILITIES AND FUND 3,492,537.20 229,743.77 260,530.90 2,057,832.35 294,882.08 0.00 6,335,526.30 BALANCE See accompanying notes to financial statements.
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uditor's Office
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North Mason School District No. 403
Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds
For the Year Ended August 31, 2012
Debt Capital Transportation General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total
REVENUES:
Local 3,992,467.73 372,572.45 17,478.00 897,886.36 2,640.74 5,283,045.28
State 13,959,880.78 0.00 247,892.58 287,853.23 14,495,626.59
Federal 1,707,721.36 0.00 0.00 0.00 1,707,721.36
Federal Stimulus 6,754.00 6,754.00
Other 144,708.13 0.00 74,819.00 0.00 219,527.13
TOTAL REVENUES 19,811,532.00 372,572.45 17,478.00 1,145,778.94 365,312.97 0.00 21,712,674.36
EXPENDITURES: CURRENT:
Regular Instruction 10,019,911.40 10,019,911.40
Federal Stimulus 6,754.00 6,754.00
Special Education 2,713,121.08 2,713,121.08
Vocational Education 863,206.40 863,206.40
Skills Center 0.00 0.00
Compensatory Programs 856,763.16 856,763.16
Other Instructional Programs 109,776.36 109,776.36
Community Services 16,946.32 16,946.32
Support Services 4,799,261.37 4,799,261.37
Student Activities/Other 356,175.70 0.00 356,175.70
CAPITAL OUTLAY:
Sites 72,874.81 72,874.81
Building 289,386.89 289,386.89
Equipment 0.00 0.00
Instructional Technology 0.00 0.00
Energy 635,719.89 635,719.89
Transportation Equipment 213,568.33 213,568.33
Sales and Lease 0.00 0.00
Other 7,567.88 7,567.88
DEBT SERVICE:
Principal 0.00 918,149.99 0.00 0.00 918,149.99
Interest and Other Charges 0.00 126,440.01 0.00 0.00 126,440.01
Bond/Levy Issuance 0.00 0.00 0.00
TOTAL EXPENDITURES 19,393,307.97 356,175.70 1,044,590.00 997,981.59 213,568.33 0.00 22,005,623.59
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North Mason School District No. 403
Statement of Revenues, Expenditures, and Changes in Fund Balance
Governmental Funds
For the Year Ended August 31, 2012
Debt Capital Transportation General ASB Service Projects Vehicle Permanent Fund Fund Fund Fund Fund Fund Total
DEBT SERVICE:
REVENUES OVER (UNDER) EXPENDITURES 418,224.03 16,396.75 -1,027,112.00 147,797.35 151,744.64 0.00 -292,949.23
OTHER FINANCING SOURCES (USES):
Bond Sales & Refunding Bond Sales 0.00 3,459.22 0.00 0.00 3,459.22
Long-Term Financing 0.00 423,804.54 0.00 423,804.54
Transfers In 0.00 1,040,828.21 0.00 0.00 1,040,828.21
Transfers Out (GL 536) -82,194.02 0.00 -852,225.00 -106,409.19 0.00 -1,040,828.21
Other Financing Uses (GL 535) 0.00 0.00 0.00 0.00 0.00
Other 0.00 0.00 0.00 0.00 0.00
TOTAL OTHER FINANCING SOURCES (USES) -82,194.02 1,044,287.43 -428,420.46 -106,409.19 0.00 427,263.76
EXCESS OF REVENUES/OTHER FINANCING SOURCES 336,030.01 16,396.75 17,175.43 -280,623.11 45,335.45 0.00 134,314.53 OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES BEGINNING TOTAL FUND BALANCE 1,156,005.40 211,048.75 243,217.91 1,786,273.86 249,546.63 0.00 3,646,092.55
Prior Year(s) Corrections or 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Restatements
ENDING TOTAL FUND BALANCE 1,492,035.41 227,445.50 260,393.34 1,505,650.75 294,882.08 0.00 3,780,407.08
See accompanying notes to financial statements.
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uditor's Office
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North Mason School District No. 403Notes to Financial Statements
September 1, 2011 through August 31, 2012
Note 1: Summary of Significant Accounting Policies (SSAP)
Description of the government-wide financial statements, noting that neither fiduciary funds nor component units that are fiduciary in nature are included.
The North Mason School District is a municipal corporation organized pursuant to Title 28A Revised Code of Washington (RCW) for the purpose of providing public school services to students in grades K–12. Oversight responsibility for the District’s operations is vested with the independently elected board of directors. Management of the district is appointed by and is accountable to the board of directors. Fiscal responsibility, including budget authority and the power to set fees, levy property taxes, and issue debt consistent with provisions of state statutes, also rests with the board of directors.
The District presents governmental fund financial statements and related notes on the modifiedaccrual basis of accounting as prescribed by generally accepted accounting principles (GAAP)and required by its regulatory agencies, the Office of Superintendent of Public Instruction andthe State Auditor’s Office. The District’s accounting policies, as reflected in the accompanyingfinancial statements, conform to the Accounting Manual for Public School Districts in the Stateof Washington, issued jointly by the State Auditor’s Office and the Superintendent of PublicInstruction by the authority of RCW 43.09.200, RCW 28A.505.140, RCW 28A.505.010(1), andRCW 28A.505.020. This manual allows for a practice that differs from generally acceptedaccounting principles in the following manner:
(1) District-wide statements are not presented.(2) The financial statements do not report capital assets.(3) Debt is not reported on the face of the financial statements. It is reported on the notes
to the financial statements and on the Schedule of Long-Term Liabilities. The Schedule of Long-Term Liabilities is required supplemental information.
(4) The original budget is not presented. This information is available through the Office ofSuperintendent of Public Instruction.
(5) The Management Discussion and Analysis is not required.(6) The financial statements do not report a liability for Other Post-Employment Benefits
(GASB Statement 45).(7) Other departures from GAAP that are material in nature are indicated throughout the
Notes.
Description of the activities accounted for in each of the following columns— major funds, internal service funds, and fiduciary fund types—presented in the basic financial statements.
The District presents financial information on the basis of funds, each of which is considered a separate accounting entity. The regulatory agencies require all funds be presented as major funds. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures (or expenses) as appropriate. The various funds in the report are grouped into governmental (and fiduciary) funds as follows:
GOVERNMENTAL FUNDS
General Fund
This fund is used to account for all expendable financial resources, except for those that arerequired to be accounted for in another fund. In keeping with the principle of as few funds as are necessary, activities such as food services, maintenance, data processing, printing, and transportation activities are included in the General Fund.
Capital Projects Funds
These funds account for financial resources to be used for the construction or acquisition of major capital assets. There are two funds that are considered to be of capital projects fund type: the Capital Projects Fund and the Transportation Vehicle Fund.
Capital Projects Fund. This fund is used to account for resources set aside for the acquisition and construction of major capital assets such as land and buildings.
Transportation Vehicle Fund. This fund is used to account for the purchase, major repair, rebuilding, and debt service expenditures related to pupil transportation equipment.
Debt Service Fund
This fund is used to account for the accumulation of resources for and the payment of matured general long-term debt principal and interest.
Special Revenue Fund
In Washington State, the only allowable special revenue fund for school districts is the Associated Student Body (ASB) Fund. This fund is accounted for in the District’s financial statements as the financial resources legally belong to the District. As a special revenue fund, amounts within the ASB Fund may only be used for those purposes that relate to the operation of the Associated Student Body of the District.
Permanent Funds
These funds are used to report resources that are legally restricted such that only earnings, and not principal, may be expended. Amounts in the Permanent Fund may only be spent in support of the District’s programs and may not be used to the benefit of any individual.
Proprietary Funds
School districts in the State of Washington are not allowed to utilize proprietary fund types, which is a departure from GAAP.
The measurement focus and basis of accounting used in the government-widestatements.
The District’s accounting policies conform to the Accounting Manual for Public School Districtsin the State of Washington, issued jointly by the State Auditor and the Superintendent of PublicInstruction. The District’s financial statements are presented in conformity with that publication.
The measurement focus for the District’s funds is the modified accrual basis and the currentfinancial resources focus. This basis of accounting focuses primarily on the sources, uses, andbalances of current financial resources and often has a budgetary orientation. This means thatonly current assets and current liabilities are included on their balance sheets.
Revenues are recognized as soon as they are measurable and available. “Measurable” meansthe amount of the transaction can be readily determined. Revenues are considered “available” ifthey are collected within 60 days after year-end to pay liabilities of the current period. Propertytaxes receivable are measurable but not available and are, therefore, not accrued. Categoricalprogram claims and interdistrict billings are measurable and available and are, therefore,accrued.
Expenditures are recognized under the modified accrual basis of accounting when the relatedfund liability is incurred, except for unmatured principal and interest on long-term debt which rerecorded when due. The fund liability is incurred when the goods or services have been received. For federal grants, the recognition of expenditures is dependent on the obligation date. (Obligation means a purchase order has been issued, contracts have been awarded, or goods and/or services have been received.)
Budgetary Data
General Budgetary PoliciesChapter 28A.505 RCW and Chapter 392-123 Washington Administrative Code (WAC) mandate school district budget policies and procedures. The board adopts the budget after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period.
Budgetary Basis of AccountingFor budget and accounting purposes, revenues and expenditures are accounted for on the modified accrual basis as prescribed in law for all governmental funds. Fund balance is budgeted as available resources and, under statute, may not be negative, unless the District enters into binding conditions with state oversight pursuant to RCW 28A.505.110.
The government’s policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available.
The District receives state funding for specific categorical education-related programs. Amounts that are received for these programs that are not used in the current fiscal year may be carried forward into the subsequent fiscal year, where they may be used only for the same purpose as they were originally received. When the District has such carryover, those funds are expended before any amounts received in the current year are expended.
Additionally, the District has other restrictions placed on its financial resources. When expenditures are recorded for purposes for which a restriction or commitment of fund balance is available, those funds that are restricted or committed to that purpose are considered first before any unrestricted or unassigned amounts are expended.
The government’s fund balance classifications policies and procedures.
The District classifies ending fund balance for its governmental funds into five categories.
Nonspendable Fund Balance. The amounts reported as Nonspendable are resources of the District that are not in spendable format. They are either non-liquid resources such as inventory or prepaid items, or the resources are legally or contractually required to be maintained intact.
Restricted Fund Balance. Amounts that are reported as Restricted are those resources of the District that have had a legal restriction placed on their use either from statute, WAC, or other legal requirements that are beyond the control of the board of directors. Restricted fund balance includes anticipated recovery of revenues that have been received but are restricted as to their usage.
Committed Fund Balance. Amounts that are reported as Committed are those resources of the District that have had a limitation placed upon their usage by formal action of the District’s board of directors. Commitments are made either through a formal adopted board resolution or are related to an established policy of the board. Commitments may only be changed when the resources are used for the intended purpose or the limitation is removed by a subsequent formal action of the board of directors.
Assigned Fund Balance. In the General Fund, amounts that are reported as Assigned are those resources that the District has set aside for specific purposes. These accounts reflect tentative management plans for future financial resource use such as the replacement of equipment or the assignment of resources for contingencies. Assignments reduce the amount reported as Unassigned Fund Balance, but may not reduce that balance below zero.
In other governmental funds, Assigned fund balance represents a positive ending spendable fund balance once all restrictions and commitments are considered. These resources are only available for expenditure in that fund and may not be used in any other fund without formal action by the District’s board of directors and as allowed by statute.
Unassigned Fund Balance. In the General Fund, amounts that are reported as Unassigned are those net spendable resources of the District that are not otherwise Restricted, Committed, or Assigned, and may be used for any purpose within the General Fund.
In other governmental funds, Unassigned fund balance represents a deficit ending spendable fund balance once all restrictions and commitments are considered.
A negative Unassigned fund balance means that the legal restrictions and formal commitments of the District exceed its currently available resources.
Assets, Liabilities, and Fund Equity
All of 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.
Receivables and Payables
There are no receivables not expected to be collected within one year.
Inventory
Inventory is valued at cost using the first-in, first-out (FIFO) method. The consumption method of inventory is used, which charges inventory as an expenditure when it is consumed. A portion of fund balance, representing inventory, is considered Nonspendable. USDA commodity inventory consists of food donated by the United States Department of Agriculture. It is valued at the prices paid by the USDA for the commodities.
NOTE 2: CASH DEPOSITS WITH FINANCIAL INSTITUTIONS
The Mason County Treasurer is the ex officio treasurer for the District and holds all accounts of the District. The District directs the County Treasurer to invest those financial resources of the District that the District has determined are not needed to meet the current financial obligations of the District.
All of the District’s investments (except for investments of deferred compensation plans) during the year and at year-end were insured or registered and held by the District or its agent in the District’s name.
The district’s investments as of August 31, 2012, are as follows:
Number of Securities
Carrying Amount
Market Value
Certificates of Deposit or Other Time DepositsRepurchase AgreementsBankers’ AcceptanceObligations of the U.S. Government or Its Subsidiary CorporationsInvestments Held by Broker-Dealers UnderReverse Repurchase Agreements:U.S. Government SecuritiesU.S. Instrumentality Securities
State Treasurer’s Investment PoolCounty Treasurer’s Investment Pool 3,522,246 3,522,246Total Investments 3,522,246 3,522,246
NOTE 3: SIGNIFICANT CONTINGENT LIABILITIES
LitigationThe District has no known legal obligations that would materially impact the financial position of the District.
NOTE 4: SIGNIFICANT EFFECTS OF SUBSEQUENT EVENTS
There were no events after the balance sheet date that would have a material impact on the next or future fiscal years.
NOTE 5: ANNUAL PENSION COST AND NET PENSION OBLIGATIONS
General Information
Substantially all District full-time and qualifying part-time employees participate in one of the following three contributory, multi-employer, cost-sharing statewide retirement systems managed by the Washington State Department of Retirement Systems (DRS): Teachers’ Retirement System (TRS), Public Employees’ Retirement System (PERS) and School Employees’ Retirement System (SERS). Participation in the programs was as follows:
Membership by retirement system program as of June 30, 2010:
Program Active MembersInactive Vested
Members Retired Members
TRS 66,325 8,950 40,570PERS 156,526 28,860 76,899SERS 52,339 9,700 5,384
Membership by retirement system program as of June 30, 2011:
Program Active MembersInactive Vested
Members Retired Members
TRS 66,203 9,204 41,709PERS 152,417 29,925 79,363SERS 52,332 10,262 6,428Data is as of last actuarial valuation date of June 30, 2011.
Certificated public employees are members of TRS. Noncertificated public employees are members of PERS (if Plan 1) or SERS.
Plan 1 under the TRS and PERS programs are defined benefit pension plans whose members joined the system on or before September 30, 1977. Plan 1 members are eligible to retire with full benefits after five years of credited service and attainment of age 60, after 25 years of credited service and attainment of age 55, or after 30 years of credited service.
Plan 2 under the TRS or SERS programs are defined benefit pension plans whose members joined on or after October 1, 1977, but before June 30, 1996 or August 31, 2000, for TRS or SERS programs, respectively. Members of TRS and SERS are eligible to retire with full benefits after five years of credited service and attainment of age 65, after 20 years of credited service and attainment of age 55 with the benefit actuarially reduced from age 65, or 30 years of credited service and receive either a reduced benefit or stricter return-to-work rules.
Plan 3 under the TRS and SERS programs are defined benefit, defined contribution pension plans whose members joined on or after July 1, 1996, or September 1, 2000, for TRS and SERS, respectively. Members are eligible to retire with full benefits at age 65, or they may retire at age 55 with at least ten service years with a reduced benefit amount, or they may retire at age 55 with at least 30 service years and receive either a reduced benefit or stricter return-to-work rules.
Average final compensation (AFC) of Plan 1 TRS and PERS members is the highest average salary during any two consecutive years. For Plan 2 and Plan 3 TRS and SERS members, it is the highest average salary during any five consecutive years.
The retirement allowance of Plan 1 TRS and PERS members is the AFC multiplied by 2 percent per year of service capped at 60 percent with a cost-of-living adjustment. For Plan 2 TRS and SERS members, it is the AFC multiplied by 2 percent per year of service with provision for a cost-of-living adjustment. For the defined benefit portion of Plan 3 TRS and SERS it is the AFC multiplied by 1 percent per year of service with a cost-of-living adjustment.
The employer contribution rates for PERS, TRS, and SERS (Plans 1, 2, and 3) and the TRS and SERS Plan 2 employee contribution rates are established by the Pension Funding Council based upon the rates set by the Legislature. The employee contribution rate for Plan 1 in PERS and TRS is set by statute at 6 percent and does not vary from year to year. The employer rate is the same for all plans in a system. The methods used to determine the contribution requirements are established under chapters 41.40, 41.32, and 41.35 RCW for PERS, TRS and SERS respectively.
The district contribution represents its full liability under both systems, except that future rates may be adjusted to meet the system needs.
B. Contributions
Employee contribution rates effective September 1, 2011 through August 31, 2012:
Plan 1 TRS 6.00% Plan 1 PERS 6.00% Plan 2 TRS 4.69% Plan 2 SERS 4.09% Plan 3 TRS and SERS 5.00% (minimum), 15.00% (maximum)
For Plan 3 TRS and SERS, rates adjusted based upon age may be chosen. The optional rates range begins at 5 percent and increase to a maximum of 15 percent.
Employer contribution rates effective September 1, 2011 through August 31, 2012:
9/1/11-8/31/12 9/1/11-3/31/12 4/1/12-6/30/12 7/1/12-8/31/12Plan 1 TRS 8.04% Plan 1 PERS 7.25% 7.08% 7.21%Plan 2 TRS 8.04% Plan 2 SERS 7.59% 7.58% 7.58%Plan 3 TRS 8.04% Plan 3 SERS 7.59% 7.58% 7.58%
Under current law the employer must contribute 100 percent of the employer-required contribution. Employer required contributions in dollars (Participant information for all plans is as of August 31):
Plan FY2010 FY2011 FY2012
Plan 1 TRS $ 22,891 $ 15,689 $ 15,655Plan 2 TRS $ 58,784 $ 72,667 $ 77,891Plan 3 TRS $ 452,710 $ 419,660 $ 530,712Plan 1 PERS $ 5,453 $ 5,499 $ 4,214Plan 2 SERS $ 54,437 $ 59,459 $ 85,900Plan 3 SERS $ 111,804 $ 108,228 $ 182,551
Historical trend information showing TRS, PERS and SERS progress in accumulating sufficient assets to pay benefits when due is presented in the state of Washington’s June 30, 2012, comprehensive annual financial report. Refer to this report for detailed trend information. It is available from:
State of WashingtonOffice of Financial Management300 Insurance BuildingPO BOX 43113Olympia, WA 98504-3113
NOTE 6: ANNUAL OTHER POST-EMPLOYMENT BENEFIT COST AND NET OPEB OBLIGATIONS
The State, through the Health Care Authority (HCA), administers an agent multi-employer OtherPost-Employment Benefit plan. The Public Employees Benefits Board (PEBB), created withinthe HCA, is authorized to design benefits and determine the terms and conditions of employeeand retired employee participation and coverage, including establishment of eligibility criteria forboth active and retired employees.
Employers participating in the plan include the State of Washington (which includes generalgovernment agencies and higher education institutions), 57 of the state’s K–12 school districtsand educational service districts (ESDs), and 206 political subdivisions and tribal governments.Additionally, the PEBB plan is available to the retirees of the remaining 247 K–12 schooldistricts and ESDs. The District’s retirees are eligible to participate in the PEBB plan under thisarrangement.
According to state law, the Washington State Treasurer collects a fee from all school districtentities which have employees that are not current active members of the state Health CareAuthority but participate in the state retirement system. The purpose of this fee is to cover theimpact of the subsidized rate of health care benefits for school retirees that elect to purchasetheir health care benefits through the state Health Care Authority. For the fiscal year 2011-12, the District was required to pay the HCA $66.01 per month per full-time equivalent employee tosupport the program, for a total payment of $177,024.64 This assessment to the District is set forth in the State’s operating budget and is subject to change on an annual basis. This amount is not actuarially determined and is not placed in a trust to pay the obligations for post-employment health care benefits.
The District has no control over the benefits offered to retirees, the rates charged to retirees, northe fee paid to the Health Care Authority. The District does not determine its Annual RequiredContribution nor the Net Other Post-Employment Benefit obligation associated with this plan.Accordingly, these amounts are not shown on the financial statements. This is a departure fromGAAP.
NOTE 7: COMMITMENTS UNDER NONCAPITALIZED (OPERATING) LEASES
For the fiscal year ended August 31, 2012, the District had incurred no additional long-termdebt under a non-capitalized operating lease.
NOTE 8: CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS, INCLUDING ENCUMBRANCES, IF APPROPRIATE
In July 2009, the North Mason School District sold Limited General Obligation Bonds to financecapital projects, included in a 4-year Capital Levy approved by voters in April 2009.Additionally, the District has been awarded two energy grants from the Office of Superintendent of Public Instruction.
Construction in progress is composed of:
Project
Project AuthorizationAmount
Expendedas of8/31/2012
AdditionalLocal FundsCommitted
AdditionalState FundsCommitted
Phase II Energy Upgrade
1,441,711 1,113,854 258,307 69,550
District-wide Security
212,866 152,293 60,573 -0-
Hawkins Middle School Gym Remodel
34,189 -0- 34,189 -0-
Total 1,688,766 1,266,147 353,069 69,550
Encumbrances
Encumbrance accounting is employed in governmental funds. Purchase orders, contracts, and other commitments for the expenditure of moneys are recorded in order to reserve a portion of the applicable appropriation. Encumbrances lapse at the end of the fiscal year and may be re-encumbered the following year. Encumbrances in the amount of $7,820 within the General Fund were re-encumbered on September 1, 2012
NOTE 9: REQUIRED DISCLOSURES ABOUT CAPITAL ASSETS
The District’s capital assets are insured in the amount of $48,672,816 for fiscal year 2012. In the opinion of the District’s insurance consultant, the amount is sufficient to adequately fund replacement of the District’s assets
NOTE 10: REQUIRED DISCLOSURES ABOUT LONG-TERM LIABILITIES
Long-Term DebtBonds payable at August 31, 2012, are comprised of the following individual issues:
Issue NameAmount
AuthorizedAnnual
InstallmentsFinal
MaturityInterestRate(s)
Amount Outstanding
2002 Non-Voted Debt $350,000 $35,000 2012 3.63% $ 35,0002004 Non-Voted Debt $1,027,990 $106,409 2017 4.25% $468,4082009 Non-Voted Debt $3,115,000 Various 2013 4.00% $1,640,0002010 Non-Voted Debt $307,000 $37,696 2020 3.75%,
4.85%*$267,979
2011 Non-Voted Debt $467,119 $37,696 2021 2.499% $467,119Total General Obligation Bonds
$5,267,109 $2,878,506
*The interest rate for the 2010 Non-Voted Bond will consist of a fixed rate of 3.75% per annum from the closing date to and including November 30, 2015. Beginning December 1, 2015 to and including December 1, 2020, the interest rate for the bond will consist of a fixed rate of 4.85% per annum. Interest is calculated on a 30/360 basis.
The following is a summary of general obligation long-term debt transactions of the district for the fiscal year ended August 31, 2012:
Long-Term Debt Payable at 9/1/2011 $3,329,538New Issues $467,119Debt Retired $918,151Long-Term Debt Payable at 8/31/2012 $2,878,506
The following is a schedule of annual requirements to amortize long-term debt at August 31, 2011:
Years EndingAugust 31, Principal Interest Total
2013 981,280 98,605 $1,079,885 2014 982,806 59,466 $1,042,272 2015 159,456 36,643 $196,099 2016 179,480 30,872 $210,352 2017 175,079 24,365 $199,444
2022 64,702 1,618 $66,320Total 2,542,803 276,849 $2,794,372
At August 31, 2012 the district had $260,393.34 available in the Debt Service Fund to service the general obligation bonds.
NOTE 11: INTERFUND BALANCES AND TRANSFERS
There was no interfund loan activity.
NOTE 12: ENTITY RISK MANAGEMENT ACTIVITIES
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; and natural disasters.
The North Mason School District is a member of the United Schools Insurance Program. Chapter 48.62 RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing of insurance, and/or joint self-insuring, and/or joint hiring or contracting for risk management services to the same extentthat they may individually purchase insurance, self-insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The pool was formed on September 1, 1985 when 29 school districts in the State of Washington joined together by signing a Joint Purchasing Agreement to pool their self-insured losses and jointly purchase insurance and administrative services. Current membership includes 155 full member school districts.
The pool allows members to jointly purchase insurance coverage and provide related services, such as administration, risk management, claims administration, etc. Sexual abuse and school board liability coverage is on a “claims made basis”. All other coverages are on an “occurrence basis”. The pool provides the following forms of group purchased insurance coverage for its members: property, general liability, automobile liability, school board legal liability, and crime.
Liability insurance is subject to a self insured retention of $100,000. Members are responsible for $1,000 deductible amount for each claim, while the program is responsible for the remaining $100,000 self-insured retention. Insurance carriers cover insured losses over $101,000 to the limits of each policy. Since the program is a cooperative program, there is a joint liability among the participating members towards the sharing of the $100,000 of the self-insured retention. The program also purchases a stop loss policy with an attachment point of $941,250 as an additional layer of protection for its members.
Property insurance is subject to a per0ocurrence deductible of $100,000. Members are responsible for $1,000 deductible for each claim, while the program is responsible for the $100,000 self-insured retention.
Boiler and machinery insurance is subject to a per-occurrence deductible of $10,000. Members are responsible for the deductible amount of each claim.
Each new member now pays the program an admittance fee. This amount covers the member’s share of unrestricted revenues. Members contract to remain in the program for a minimum of one year, and must give notice before August 31 before terminating participation the following September 1. The Interlocal Agreement is renewed automatically each year. Even after termination, a member is still responsible for contributions to the pool for any unresolved, unreported, and in-process claims for the period they were a signatory to the Interlocal Agreement.
The pool is fully funded by its member participants. Claims are filed by members with Canfield, which has been contracted to perform administration, claims adjustment and administration and loss prevention for the program. Fees paid to the third party administrator under this arrangement for the year ended August 31, 2012 was $1,517,756.
A Board of Directors of nine members is selected by the membership from six areas of the state on a staggered term basis and is responsible for conducting the business affairs of the program.The Board of Directors has contracted with Canfield to perform day-to-day administration of the pool. This program has no employees
NOTE 13: PROPERTY TAXES
Property tax revenues are collected as the result of special levies passed by the voters in the District. Taxes are levied on January 1. The taxpayer has the obligation of paying all taxes on April 30 or one-half then and one-half on October 31. Typically, slightly more than half of the collections are made on the April 30 date. The October 31 collection is not available in time to cover liabilities for the fiscal period ended August 31. Therefore, the fall portion of property taxes is not accrued as revenue. Instead, the property taxes due on October 31 are recorded as deferred revenue.
NOTE 14: JOINT VENTURES AND JOINTLY GOVERNED ORGANIZATIONS
The District is a member of the King County Director’s Association (KCDA). KCDA is apurchasing cooperative designed to pool the member districts’ purchasing power. The District’s current equity of $22,365.27 is the accumulation of the annual assignment of KCDA’s operating surplus based upon the percentage derived from KCDA’s total sales to the District compared to all other districts applied against paid administrative fees. The District may withdraw from the joint venture and will receive its equity in ten annual allocations of merchandise or 15 annual payments.
NOTE 15: FUND BALANCE CLASSIFICATION DETAILS
The District’s financial statements include the following amounts presented in the aggregate.
General Fund
ASBFund
Capital Projects
FundDebt Service
Fund
Transportation VehicleFund
Nonspendable Fund BalanceInventory and Prepaid Items $149,524 $11,040
Restricted Fund BalanceCarryover of Restricted Revenues $30,726Debt ServiceArbitrage RebateUninsured RisksOther Items $219,319 216,405 $260,393
Committed Fund BalanceMinimum Fund Balance Policy $594,451Other Commitments
Assigned Fund BalanceContingenciesOther Capital ProjectsOther Purposes $30,000Fund Purposes $815,371 $294,882
In addition, the Capital Projects Fund has the following amounts in Restricted Fund Balance, based on the source of the revenues:
Restricted From Bond Proceeds $213,057Restricted from Levy Proceeds $459,222Restricted from State ProceedsRestricted from Federal ProceedsRestricted from Other ProceedsRestricted from Impact Fee ProceedsRestricted from Mitigation Fee ProceedsRestricted from Undistributed Proceeds
The board of directors has established a minimum fund balance policy for the general fund toprovide for financial stability and contingencies within the District. The policy is that the Districtshall maintain a unreserved fund balance within a range of 2.5% to 5% of budgeted General Fund expenditures. Portions of fund balance that are set aside for the purpose of meeting this policy are recorded on the financial statements as a part of Committed fund balance.
NOTE 16: POST-EMPLOYMENT BENEFIT PLANS OTHER THAN PENSION PLANS—BOTH IN SEPARATELY ISSUED PLAN FINANCIAL STATEMENTS AND EMPLOYER STATEMENTS
457 Plan – Deferred Compensation Plan
District employees have the option of participating in a deferred compensation plan as defined in §457 of the Internal Revenue Code that is administered by the state deferred compensation plan, or the District.
403(b) Plan – Tax Sheltered Annuity (TSA)
The district offers a tax deferred annuity plan for its employees. The plan permits participants to defer a portion of their salary until future years under two types of deferrals: elective deferrals (employee contribution) and non-elective contribution (employer matching).
The district complies with IRS regulations that require school districts to have a written plan to include participating investment companies, types of investments, loans, transfers, and various requirements. The plan is administered by the school District. The plan assets are assets of the SD employees, not the school district, and are therefore not reflected on these financial statements.
NOTE 17: TERMINATION BENEFITS
Compensated Absences
Employees earn sick leave at a rate of 12 days per year up to a maximum of one contract year.
Under the provisions of RCW 28A.400.210, sick leave accumulated by District employees is reimbursed at death or retirement at the rate of one day for each four days of accrued leave, limited to 180 accrued days. This chapter also provides for an annual buy out of an amount up
to the maximum annual accumulation of 12 days. For buyout purposes, employees may accumulate such leave to a maximum of 192 days, including the annual accumulation, as of December 31 of each year.
These expenditures are recorded when paid, except termination sick leave that is accrued upon death, retirement, or upon termination provided the employee is at least 55 years of age and has sufficient years of service. Vested sick leave was computed using the termination payment method.
NOTE 18: CONDITIONS AND EVENTS GIVING RISE TO SUBSTANTIAL DOUBT ABOUT THE GOVERNMENT’S ABILITY TO CONTINUE AS A GOING CONCERN
There are no conditions or events that would give rise to substantial doubt about the North Mason School District’s ability to continue as a going concern.
NOTE 19: OTHER DISCLOSURES
There are no other matters to disclose for the North Mason School District.
North Mason School District No. 403
Schedule of Long-Term Liabilities
For the Year Ended August 31, 2012
Beginning Ending Outstanding Debt Amount Amount Outstanding Debt
Description September 1, 2011 Issued/Increased Redeemed/Decreased August 31, 2012
Total Voted Bonds 0.00 0.00 0.00 0.00
Total Non-Voted Notes/Bonds 3,329,537.81 467,119.15 918,149.98 2,878,506.98
Qualified Zone Academy Bonds (QZAB) 0.00 0.00 0.00 0.00
Qualified School Construction Bonds(QSCB) 0.00 0.00 0.00 0.00
Other Long-Term Debt
Capital Leases 0.00 0.00 0.00 0.00
Contracts Payable (GL 603) 0.00 0.00 0.00 0.00
NonCancellable Operating Leases 0.00 0.00 0.00 0.00
Claims & Judgments 0.00 0.00 0.00 0.00
Compensated Absences 517,761.74 0.00 27,339.49 490,422.25
Other Long-Term Liabilities 0.00 0.00 0.00 0.00
Total Other Long-Term Liabilities 517,761.74 0.00 27,339.49 490,422.25
TOTAL LONG-TERM LIABILITIES 3,847,299.55 467,119.15 945,489.47 3,368,929.23
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The Accompanying Notes to the Schedule of Expenditures of Federal Awards are an Integral Part of this Schedule.
1 2 3 4 5 6 7 8 9
Federal Agency Name
Pass Through Agency Federal Program Title CFDA
Number Other Identification Number From Direct Awards
From Pass Through Awards
Total Footnote
US Dept of Agriculture WA SPI School Breakfast Program 10.553 N/A $142,445.07 $142,445.07 8US Dept of Agriculture WA SPI
National School Lunch Program - Cash Assistance 10.555 N/A $344,465.83 $344,465.83 8
US Dept of Agriculture WA SPI
National School Lunch Program - Non-Cash Assistance (Commodities) 10.555 N/A $45,562.11 $45,562.11 4, 8
US Dept of Agriculture WA SPI Schools and Roads - Grants to States 10.665 N/A $46,860.98 $46,860.98 8
$0.00 $579,333.99 $579,333.99US Dept of Education OESD 114
Title I - Grants to Local Educational Agencies 84.010 RMSLN-11/23-NM $125.00 $125.00 8
US Dept of Education WA SPI
Title I - Grants to Local Educational Agencies 84.010A 200862 $332,752.22 $332,752.22 9
US Dept of Education WA SPI Special Education Grants to States 84.027A 304003 $434,234.00 $434,234.00 9US Dept of Education WA SPI Special Education Grants to States 84.027A 337452 $14,034.00 $14,034.00US Dept of Education N/A Impact Aid 84.041 N/A $87,402.08 $87,402.08 3, 8US Dept of Education WA SPI
Career and Technical Education - Basic Grants to States 84.048 172470 $13,039.95 $13,039.95 9
US Dept of Education WA SPI Special Education - Preschool Grants 84.173A 364004 $16,432.00 $16,432.00 9
US Dept of Education OESD 114
Special Education - State Personnel Development 84.323A N/A $21,397.56 $21,397.56 9
US Dept of Education WA SPI English Language Acquisition Grants 84.365A 401506 $19,433.00 $19,433.00US Dept of Education OESD 114 Mathematics and Science Partnerships 84.366B OMSP-12-NM $26,042.68 $26,042.68
Expenditures
North Mason School District No. 403SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ending August 31, 2012
Subtotal US Department of Agriculture
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The Accompanying Notes to the Schedule of Expenditures of Federal Awards are an Integral Part of this Schedule.
North Mason School District No. 403SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ending August 31, 20121 2 3 4 5 6 7 8 9
Federal Agency Name
Pass Through Agency Federal Program Title CFDA
Number Other Identification Number From Direct Awards
From Pass Through Awards
Total Footnote
US Dept of Education OESD 114 Improving Teacher Quality State Grants 84.367 MOU IS-12-026 $344.14 $344.14 8US Dept of Education WA SPI Improving Teacher Quality State Grants 84.367 522044 $111,161.06 $111,161.06 9US Dept of Education WA SPI Education Jobs Fund 84.410 960050 $6,754.00 $6,754.00
$87,402.08 $995,749.61 $1,083,151.69US Dept of Health and Human Services DSHS Medical Assistance Program 93.778 N/A $19,465.50 $19,465.50 3
US Dept of Health and Human Services DSHS Medical Assistance Program 93.778 0765-19215 $30,024.18 $30,024.18 3US Dept of Health and Human Services
Center for Advocacy and Personal Development
Block Grants for Prevention & Treatment of Substance Abuse 93.959 N/A $2,500.00 $2,500.00 8
$0.00 $51,989.68 $51,989.68
$87,402.08 $1,627,073.28 $1,714,475.36
Subtotal US Department of Education
Subtotal US Department of Health and Human Services
TOTAL FEDERAL AWARDS EXPENDED
Expenditures
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NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
NOTE 1—BASIS OF ACCOUNTING
The Schedule of Expenditures of Federal Awards is prepared on the same basis of accounting as the North Mason School District's financial statements. The North Mason School District uses the modified accrual basis of accounting. Expenditures represent only the federally funded portions of the program. District records should be consulted to determine amounts expended or matched from non-federal sources.
NOTE 2—AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) of 2009
Of the amount shown for this program, $0.00 was paid from ARRA funds.
NOTE 3—PROGRAM COSTS/MATCHING CONTRIBUTIONS
The amounts shown as current year expenses represent only the federal grant portion of theprogram costs. Entire program costs, including the North Mason School District's portion, may be more than shown.
NOTE 4—NONCASH AWARDS
The amount of commodities reported on the schedule is the value of commodities distributed by the North Mason School District during the current year and priced as prescribed by USDA.
NOTE 8—NOT AVAILABLE (N/A)
The North Mason School District was unable to obtain other identification number.
NOTE 9—FEDERAL INDIRECT RATE
The North Mason School District used the federal restricted rate of 5.11 percent for this rogram.
ABOUT THE STATE AUDITOR'S OFFICE The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of Washington and serves four-year terms. Our mission is to work with our audit clients and citizens as an advocate for government accountability. As an elected agency, the State Auditor's Office has the independence necessary to objectively perform audits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws. The State Auditor's Office employees are located around the state to deliver services effectively and efficiently. Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments and fraud, whistleblower and citizen hotline investigations. The results of our work are widely distributed through a variety of reports, which are available on our Web site and through our free, electronic subscription service. We take our role as partners in accountability seriously. We provide training and technical assistance to governments and have an extensive quality assurance program. State Auditor Troy Kelley Chief of Staff Doug Cochran Director of State and Local Audit Chuck Pfeil, CPA Director of Performance Audit Larisa Benson Deputy Director of State and Local Audit Kelly Collins, CPA Deputy Director of State and Local Audit Jan M. Jutte, CPA, CGFM Deputy Director of State and Local Audit Sadie Armijo Deputy Director of Quality Assurance Barb Hinton Local Government Liaison Mike Murphy Public Records Officer Mary Leider Main number (360) 902-0370 Toll-free Citizen Hotline (866) 902-3900 Website www.sao.wa.gov Subscription Service https://www.sao.wa.gov/EN/News/Subscriptions
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Appendix D
Washington State School District Credit Enhancement Program
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WASHINGTON STATE SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM The following information has been furnished by the State of Washington for use in this Official Statement. The issuer of the bonds offered pursuant to this Official Statement (the “Offered Bonds”) makes no representation as to the accuracy or the completeness of such information or as to the absence of material adverse changes in such information subsequent to the date hereof.
Definitions “Act” means the Washington State School District Credit Enhancement Program Act, chapter 39.98 Revised Code of Washington. “Program” means the Washington State School District Credit Enhancement Program established by the Act. “Program Bond” means any voted general obligation bond issued by a school district, holding a certificate issued pursuant to the Act for such a bond. “State” means the State of Washington.
Program Provisions Article VIII, section 1(e) of the Constitution of the State and the Act allow the State to guarantee any voted general obligation bonds issued by a school district. Payment of the principal of and interest on Program Bonds when due is guaranteed by the full faith, credit and taxing power of the State under the provisions of the Act. The Act provides as follows:
The full faith, credit, and taxing power of the State is pledged to guarantee full and timely payment of the principal of and interest on Program Bonds as such payments become due. However, in the event of any acceleration of the due date of the principal by reason of mandatory redemption or acceleration resulting from default, the payments guaranteed shall be made in the amounts and at the times as payments of principal would have been due had there not been any acceleration. The State guarantee does not extend to the payment of any redemption premium.
The Act further provides that the State pledges to and agrees with the owners of any Program Bonds that the State will not alter, impair, or limit the rights vested by the Program with respect to the Program Bonds until the Program Bonds, together with applicable interest, are fully paid and discharged. However, an alteration, impairment, or limitation of such rights is not precluded if full provision is made by law for the payment of the Program Bonds. Program Procedures In accordance with applicable law, the County Assessor for each school district with outstanding, unpaid Program Bonds is required to levy property taxes approved by the voters for repayment of the Program Bonds. In accordance with applicable law, the County Treasurer for each school district with outstanding, unpaid Program Bonds is required to collect property taxes approved by the voters for repayment of the Program Bonds. The County Treasurer is required to transfer money sufficient for each scheduled debt service payment to the paying agent on or before any principal or interest payment date for the Program Bonds. A County Treasurer who is unable to transfer to the paying agent funds required to make any scheduled debt service payments on the Program Bonds on or prior to the payment date, due to the lack of adequate funds, is required to immediately provide notice to the State Treasurer and to the paying agent. If sufficient funds are not transferred to the paying agent at the time required to make a scheduled debt service payment on the Program Bonds, the paying agent is required to immediately notify the State Treasurer. Pursuant to the Act, the State legislature is required to appropriate, in each and every biennial appropriations act, such amount as may be required to make timely payment on the Program Bonds. If sufficient money to make any scheduled debt service payment on the Program Bonds has not been transferred to the paying agent in a timely manner, the paying agent is required to make such scheduled debt service payment and the State Treasurer is required to transfer sufficient money to the paying agent for such payment. Each school district is responsible for paying in full the principal of and interest on its Program Bonds. The State Treasurer is required to recover from the school district any funds paid by the State on behalf of that school district under the Program. The State Treasurer will charge interest in connection with the recovery of funds under the Act. In addition to charging interest, the State Treasurer may impose a penalty on a school district for which the State made a payment under the Program, which penalty may not be more than five percent of the amount paid by the State pursuant to its guarantee for each instance in which a payment by the State is made.
A payment by the State Treasurer discharges the obligation of the school district to its Program Bond owners for the payment, but does not retire any Program Bond that has matured. The terms of that Program Bond remain in effect until the State is repaid. Any such payment by the State transfers the rights represented by the general obligation of the school district from the Program Bond owners to the State. If the State has made all or part of a debt service payment on behalf of a school district that has issued Program Bonds, the State Treasurer may (a) direct the school district and the County Treasurer to restructure and revise, to the extent permitted by law, the collection of excess levy taxes for the payment of Program Bonds on which the State Treasurer has made payments under the Act to the extent necessary to obtain repayment to the State Treasurer; and (b) require, to the extent permitted by law, that the proceeds of such taxes be applied to the school district’s obligations to the State if all outstanding obligations of the school district payable from such taxes are fully paid or their payment is fully provided for. Outstanding Certificates of Eligibility and Outstanding Program Bonds As of June 5, 2013, the State has guaranteed the following under the Act (not including the Offered Bonds):
Number of school districts with Certificates of Eligibility ...................................................................... 179 Number of Program Bond issues guaranteed ........................................................................................... 501 Aggregate total principal amount outstanding of Program Bonds issues guaranteed .... $8,533,106,508
Program Contact Person Requests for information regarding the Program may be directed to:
Office of the State Treasurer Attn: Deputy Treasurer
Debt Management Division Legislative Office Building 2nd Floor
P.O. Box 40200 Olympia, WA 98504 0200
Phone: (360) 902 9050 Fax: (360) 902 9045
State of Washington - Financial and Operating Information The State’s most recent audited financial statements and the financial and operating information relating to the State included in the most recent official statement for the State’s general obligation debt are on file with the Municipal Securities Rulemaking Board (the “MSRB”), in an electronic format as prescribed by the MSRB, and are incorporated by this reference in this official statement. State of Washington - Continuing Disclosure The State has undertaken (the “Undertaking”) to provide (1) not later than seven months after the end of each fiscal year in each fiscal year that the Offered Bonds are outstanding, either directly or through a designated agent, to the MSRB, in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB, (a) audited financial statements of the State for such fiscal year prepared (except as noted therein) in accordance with generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board, as such principles may be changed from time to time, except that if the audited financial statements are not available by such date, unaudited financial statements in a format similar to the audited financial statements most recently prepared for the State shall be provided, and the State’s audited financial statements shall be provided when and if they become available; and (b) the historical financial and operating information relating to the State included in most recent official statement for the State’s general obligation debt; and (2) to the MSRB, in a timely manner, notice of its failure to provide the foregoing information on or prior to the date set forth in (1). The Undertaking is subject to amendment or termination under the circumstances and in the manner permitted by SEC Rule 15c2-12. The right to enforce the provisions of the Undertaking shall be limited to a right to obtain specific performance of the State’s obligations thereunder, and any failure by the State to comply with the provisions of the Undertaking shall not be a default with respect to the Offered Bonds. The Undertaking inures to the benefit of the State and the issuer, any underwriter and any holder of the Offered Bonds, and does not inure to the benefit of or create any rights in any other person.
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