PRELIMINARY OFFICIAL STATEMENT DATED APRIL 6, 2018

NEW ISSUE -­ FULL BOOK-­ENTRY RATINGS: Moody’s “A1” Standard & Poor’s: “A+” See “RATINGS” herein. In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications

described herein, under existing law, the interest on the Notes is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax, although Bond Counsel observes that interest on the Notes is included in adjusted current earnings in calculating corporate alternative minimum taxable income for tax years beginning prior to January 1, 2018. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS” herein.

$105,000,000* GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY

2018 Lease Revenue Refunding Notes (Kern High School District Projects)

Dated: Date of Delivery Due: May 1, as set forth herein Authority for Issuance. The 2018 Lease Revenue Refunding Notes captioned above (the “Notes”) are being issued by the Golden

Empire Schools Financing Authority (the “Authority”) under Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53570 of said Code, a resolution of the Board of Directors of the Authority adopted on March 5, 2018, and a Trust Agreement dated as of April 1, 2018 (the “Trust Agreement”), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Purposes. The Notes are being issued by the Authority for the purpose of paying the principal of and interest coming due on outstanding

2017 Lease Revenue Refunding Notes of the Authority at maturity on May 1, 2018. In addition, a portion of the proceeds of the Notes will be applied to pay costs of issuing the Notes. See “THE REFINANCING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS” herein. Security. The Notes are payable from and secured by the revenues pledged therefor under the Trust Agreement, consisting primarily of

lease payments payable by the Kern High School District (the “District”) under a Third Amended and Restated Lease Agreement dated as of April 1, 2014 (the “Lease Agreement”), entered into between the Authority, as lessor, and the District, as lessee. Under the Lease Agreement, the Authority has leased certain property to the District and the District is obligated to budget and appropriate its legally available funds which are sufficient to make lease payments to the Authority (the “Lease Payments”) which correspond in time and amount to interest due on the Notes. Principal of the Notes is payable from the proceeds of Refunding Obligations, as described below. The Lease Payments are general unsecured obligations of the District, payable from any legally available source of funds of the District, subject to abatement under certain circumstances. The Notes also represent general unsecured obligations of the Authority, although the Authority has not pledged or otherwise encumbered its funds in order to provide for the payment of debt service on the Notes. See “THE LEASED PROPERTY” and “SECURITY FOR THE NOTES.” Payments. The Notes are dated the date of delivery. The Notes will bear interest at the rate set forth on the inside cover hereof, payable

on May 1 and November 1 of each year, commencing November 1, 2018, until final maturity. See “THE NOTES.” Redemption.* The Notes are subject to optional redemption prior to maturity as described herein. See “THE NOTES – Optional

Redemption.” Covenant to Refinance the Notes. The Lease Payments are payable in an amount sufficient to provide for payment of interest on the

Notes when due, but not to provide for payment of the principal of the Notes at maturity. In order to provide for the payment of the Notes at maturity, the Authority has covenanted in the Trust Agreement to, no later than February 1, 2021, institute proceedings to issue bonds, notes or other obligations as further defined herein (the “Refunding Obligations”) for the purpose of paying principal of the Notes at maturity. See “SECURITY FOR THE NOTES – Covenant to Issue Refunding Obligations.” Book-­Entry Only. Purchasers of beneficial interests in the Notes will not receive certificates representing their interest. So long as Cede

& Co. is the registered Bond owner, as nominee of DTC, references herein to the Note owners or Owners means Cede & Co., as aforesaid, and not the beneficial owners of the Notes. Payments of principal of and interest on the Notes will be made directly to DTC or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered owner. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of the DTC Participants and the Indirect Participants, as more fully described herein. See “THE NOTES – Book-­Entry Only System” and “APPENDIX E – Book-­Entry Only System” herein. Limited Obligations. The Notes do not constitute an indebtedness of the Authority, the District, the State of California or any political

subdivision or agency thereof within the meaning of any constitutional or statutory provisions. Neither the faith and credit nor the taxing power of the State of California, nor any political corporation or subdivision or agency thereof, nor the faith and credit of the Authority, is pledged to the payment of the principal or purchase price of or interest on the Notes. Risk Factors. There are risks related to investment in the Notes. See “CERTAIN RISK FACTORS” herein for a discussion of some of

the factors that should be considered in evaluating the investment quality of the Notes.

MATURITY SCHEDULE (See inside cover)

This cover page contains information for quick reference only and is not a summary of this issue. Potential purchasers must read the entire Official Statement to obtain information essential to making an informed decision with respect to an investment in the Notes. The Notes are offered when, as and if issued by the Authority and received by the Underwriters, subject to the approval as to their legality by

Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the Authority and the District by Jones Hall, A Professional Law Corporation, San Francisco, California, as Disclosure Counsel and Norton Rose Fulbright US LLP, Los Angeles, California, as Underwriters’ Counsel. It is anticipated that the Notes will be available for delivery to DTC in New York, New York on or about April 26, 2018*.

MORGAN STANLEY The date of this Official Statement is: April __, 2018 *Preliminary;; subject to change.

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the

Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these

securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction .

$105,000,000* GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY

2018 Lease Revenue Refunding Notes (Kern High School District Projects)

MATURITY SCHEDULE*

Maturity (May 1)

Principal Amount

Interest Rate Yield CUSIP(†)

2021* $105,000,000*

*Preliminary;; subject to change † CUSIP Copyright 2018, CUSIP Global Services, and a registered trademark of American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S&P Capital IQ. None of the Authority, the District, the Financial Advisor, or the Underwriters assume any responsibility for the accuracy of these CUSIP data.

GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY

KERN COUNTY, CALIFORNIA

Board of Directors of the Authority

Philip Peters, Chairman J. Bryan Batey, Vice Chairman Joey O’Connell, Secretary Jeff Flores, Member Mike Williams, Member

KERN HIGH SCHOOL DISTRICT

Board of Trustees of the District

Philip Peters, President J. Bryan Batey, Vice President

Joey O’Connell, Clerk Jeff Flores, Clerk Pro Tem Mike Williams, Member

District Administration

Dr. Bryon J. Schaefer, Superintendent

Dr. Scott T. Cole, Deputy Superintendent, Business

SPECIAL SERVICES

Financial Advisor

Dale Scott & Company, Inc. San Francisco, California

Bond Counsel and Disclosure Counsel

Jones Hall, A Professional Law Corporation San Francisco, California

Underwriters’ Counsel

Norton Rose Fulbright US LLP Los Angeles, California

Trustee

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California

i

TABLE OF CONTENTS

Page Page INTRODUCTION .................................................................. 1 THE REFINANCING PLAN .................................................. 5 ESTIMATED SOURCES AND USES OF FUNDS ............... 5 THE LEASED PROPERTY .................................................. 6 THE NOTES ......................................................................... 7 Authority for Issuance ............................................. 7 Description of the Notes ......................................... 7 Optional Redemption .............................................. 7 Book-­Entry Only System ......................................... 8

SECURITY FOR THE NOTES ............................................. 9 Pledge of Revenues to Pay Interest on the Notes ................................................................... 9

Lease Payments ..................................................... 9 Authority Contributions;; General Unsecured Obligation ........................................ 10

Covenant to Issue Refunding Obligations ............ 11 Parity Obligations .................................................. 11 Additional Payments ............................................. 11 Action on Default .................................................. 12 Insurance .............................................................. 12 Abatement of Lease Payments ............................. 12 Substitution and Release of Property ................... 13

CERTAIN RISK FACTORS ................................................ 13 No Assurances Regarding Issuance of Refunding Obligations ....................................... 13

Limited Obligations of the Authority and the District ......................................................... 14

Abatement ............................................................ 15 Economic Conditions in California ........................ 15 Property Taxes ..................................................... 15 Limited Recourse on Default ................................ 17 No Acceleration Upon Default .............................. 17 Loss of Tax Exemption ......................................... 18 Title Insurance Policy ............................................ 18 Earthquake and Other Risks ................................. 19 Limitations on Remedies;; Bankruptcy .................. 19

THE AUTHORITY ............................................................... 20 THE DISTRICT ................................................................... 20 General Information .............................................. 20 Administration ....................................................... 20 Enrollment ............................................................. 21 ADA and LCFF Funding Trends ........................... 21 Employee Relations .............................................. 22 District Insurance Coverage ................................. 22

DISTRICT AND AUTHORITY FINANCIAL INFORMATION .............................................................. 23 Education Funding Generally ............................... 23 Financial Statements and Accounting Practices............................................................ 25

District Budget and Interim Reporting ................... 28

Sources of Revenue ............................................. 32 Pension Plans ....................................................... 33 Other Post-­Employment Benefits ......................... 37 Investment of District Funds ................................. 39 State Funding of Education .................................. 39 Recent State Budgets ........................................... 40 2017-­18 State Budget ........................................... 41 2018-­19 Proposed State Budget .......................... 42 LAO Proposed Budget Overview .......................... 42 Availability of 2017-­18 State Budget and 2018-­19 Proposed Budget ................................ 43

Uncertainty Regarding Future State Budgets ............................................................. 43

Disclaimer Regarding State Budgets .................... 43 Legal Challenges to State Funding of Education .......................................................... 44

TAXATION AND APPROPRIATIONS ................................ 44 Property Tax Collection Procedures ..................... 44 Unitary Taxation of Utility Property ....................... 45 Assessed Valuation and Tax Rate ........................ 45 Top Twenty Property Owners ............................... 47 Tax Levies and Delinquencies .............................. 48 Debt Obligations ................................................... 49

DISTRICT DEBT STRUCTURE ......................................... 51 Short-­Term Borrowing .......................................... 51 Long-­Term Borrowing ........................................... 51

CONSTITUTIONAL AND STATUTORY LIMITATIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS .......................... 52 Constitutionally Required Funding of Education .......................................................... 52

Article XIIIA of the California Constitution ............. 52 Article XIIIB of the California Constitution ............. 53 Unitary Property .................................................... 54 Articles XIIIC and XIIID ......................................... 54 Proposition 98 ....................................................... 55 Proposition 111 ..................................................... 56 Proposition 39 ....................................................... 57 Proposition 1A and Proposition 22 ....................... 57 Proposition 30 and Proposition 55 ........................ 58 Future Initiatives ................................................... 59

CONTINUING DISCLOSURE ............................................ 60 TAX MATTERS .................................................................. 60 CERTAIN LEGAL MATTERS ............................................. 62 NO LITIGATION ................................................................. 62 DISPUTE REGARDING AUTHORITY REVENUES ........... 63 RATINGS ............................................................................ 63 UNDERWRITING ............................................................... 64 PROFESSIONALS INVOLVED IN THE OFFERING .......... 64 EXECUTION ....................................................................... 64

APPENDIX A -­ Summary of Principal Legal Documents APPENDIX B -­ Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17 APPENDIX C -­ Proposed Form of Legal Opinion APPENDIX D -­ General Information About the City of Bakersfield and Kern County APPENDIX E -­ Book-­Entry Only System APPENDIX F -­ Form of Continuing Disclosure Certificate APPENDIX G -­ Kern County Investment Policy and Monthly Report

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized by the Authority or the Underwriters to give any information or to make any representations with respect to the Notes other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized by the Authority or the Underwriters.

No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

Preliminary Official Statement Deemed Final. For purposes of compliance with Rule 15c2-­12 of the United States Securities and Exchange Commission, as amended, and in effect on the date hereof, this Preliminary Official Statement constitutes an official statement of the Authority that has been deemed final by the Authority as of its date except for the omission of no more than the information permitted by Rule 15c2-­12.

Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Notes will, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the District, or any other parties described in this Official Statement, since the date of this Official Statement.

Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Notes referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the Notes.

Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

Document References and Summaries. All references to and summaries of the Trust Agreement or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents.

Stabilization of and Changes to Offering Prices. The Underwriters may overallot or take other steps that stabilize or maintain the market price of the Notes at a level above that which might otherwise prevail in the open market. If commenced, the Underwriters may discontinue such market stabilization at any time. The Underwriters may offer and sell the Notes to certain securities dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriters.

Notes are Exempt from Securities Laws Registration. The issuance and sale of the Notes have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.

Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute “forward-­looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words.

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-­LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-­LOOKING STATEMENTS. THE AUTHORITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-­LOOKING STATEMENTS IF OR WHEN ANY EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

[PAGE INTENTIONALLY LEFT BLANK.]

-­1-­

OFFICIAL STATEMENT

$105,000,000* GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY

2018 LEASE REVENUE REFUNDING NOTES (Kern High School District Projects)

The purpose of this Official Statement, which includes the cover page and Appendices

hereto (this “Official Statement”), is to provide certain information concerning the issuance and sale by the Golden Empire Schools Financing Authority (the “Authority”) of the 2018 Lease Revenue Refunding Notes (Kern High School District Projects) of the Authority (the “Notes”).

INTRODUCTION

This Introduction is not a summary of this Official Statement. It is only a brief description of, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering of Notes to potential investors is made only by means of the entire Official Statement.

The Authority. The Authority is a joint exercise of power authority formed under

California Government Code Sections 6500 et seq. and a Joint Exercise of Powers Agreement dated as of June 6, 1988 between Taft Union High School District and Kern High School District (the “District”). The purposes for which the Authority was formed include financing the acquisition and construction of property for the educational purposes of either or both of its members, including the District. See “THE AUTHORITY” and “DISTRICT AND AUTHORITY FINANCIAL INFORMATION” herein.

The District. The District was created in 1916 and covers an area of approximately

3,500 square miles, which represents 43% of the total area of Kern County (the “County”). The District is the State of California’s (the “State”) largest grade 9 through 12 high school district, as measured by enrollment, and is made up of 18 comprehensive high schools, 5 alternative education campuses, 3 career technical education sites, 4 special education centers, an adult education center and a charter school. Enrollment in the District in fiscal year 2017-­18 is 39,252 students. See “THE DISTRICT” and “DISTRICT AND AUTHORITY FINANCIAL INFORMATION” herein.

Authority for Issuance. The Notes are being issued by the Authority under the

provisions of Articles 10 and 11 of Chapter 3, Part 1, Division 2, Title 5 of the California Government Code, commencing with Section 53570 of said Code (the “Bond Law”), a resolution adopted by the Board of Directors of the Authority on March 5, 2018, and a Trust Agreement dated as of April 1, 2018 (the “Trust Agreement”) between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). See “THE NOTES – Authority for Issuance.”

*Preliminary;; subject to change

-­2-­

Financing Purpose. The Notes are being issued for the purposes of providing for the payment at maturity on May 1, 2018 of the Authority’s $123,845,000 principal amount of 2017 Lease Revenue Refunding Notes (Kern High School District Projects) (the “2017 Notes”), and paying related costs of issuing the Notes. The amount of Note proceeds to be used for said payment will be net of the amount the Authority contributes from its lawfully available funds. See “THE REFINANCING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.”

Description of the Notes. The Notes will be dated their date of delivery (the “Closing Date”) and will be issued as fully registered Notes, without coupons, in the denominations of $5,000 or any integral multiple thereof. Interest on the Notes accrues from the date of delivery and is payable on November 1, 2018, and on each May 1 and November 1 through final maturity. The Notes will mature on May 1, 2021 in the amount identified on the inside cover page of this Official Statement.

The Notes will be issued in fully registered form only, registered in the name of Cede &

Co. as nominee of The Depository Trust Company (“DTC”), and will be available to actual purchasers of the Notes (the “Beneficial Owners”) in the denominations set forth on the cover page hereof, under the book-­entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Notes. See “THE NOTES -­ Book-­Entry-­Only System.” In event that the book-­entry-­only system described below is no longer used with respect to the Notes, the Notes will be registered in accordance with the Note Resolution described herein. See “THE NOTES -­-­ Description of the Notes.”

Optional Redemption.* The Notes are subject to optional redemption prior to maturity

as described herein. See “THE NOTES – Optional Redemption” herein. Security for the Notes

General. The Notes are secured by a pledge of and lien on “Revenues” received by the Authority or the Trustee pursuant to a Third Amended and Restated Lease Agreement dated as of April 1, 2014, as amended (the “Lease Agreement”), between Authority and the District, which obligates the District to pay lease payments which are sufficient, together with other funds provided for that purpose by the Authority, to pay the principal of and interest on the Notes and any Refunding Obligations (as defined herein). Revenues consist of all Lease Payments (defined below) made under the Lease Agreement, together with all other income derived from the investment of amounts under the Indenture. In addition, the Notes constitute general unsecured obligations of the Authority and the Authority has agreed to provide funds to pay a portion of the debt service due with respect to the Notes, which will be credited toward the District’s obligation to pay Lease Payments, although the Authority has not pledged or encumbered any of its funds pursuant to the Trust Agreement. Finally, as described herein, the Authority has covenanted to provide for the payment of principal of the Notes due at maturity with the proceeds of Refunding Obligations. See “SECURITY FOR THE NOTES” herein.

*Preliminary;; subject to change.

-­3-­

Lease Payments. The District is obligated to make lease payments to the

Authority (the “Lease Payments”) for the use and occupancy of certain property leased to it pursuant to the Lease Agreement. See “THE LEASED PROPERTY” herein. During the term of the Notes, Lease Payments are due on the fifth Business Day preceding each Interest Payment Date for the Notes, and are payable in an amount equal to the aggregate amount of interest due on the Notes on each such Interest Payment Date, but does not include the principal amount of the Notes, which is payable solely from Refunding Obligations, as described below under the heading “Covenant to Refinance the Notes.”

The Lease Payments are general unsecured obligations of the District,

payable from any legally available source of funds of the District and are subject to abatement in the event of eminent domain or damage or destruction to all or some of the Leased Property, as described herein. See “APPENDIX A – Summary of Principal Legal Documents – Lease Agreement.” The Authority has assigned to the Trustee its right to receive and collect Lease Payments under the Lease Agreement under an Assignment and Termination Agreement dated as of April 1, 2018, between the Authority and the Trustee (the “Assignment Agreement”) in addition to certain other rights thereunder. See “SECURITY FOR THE NOTES -­ Lease Payments.”

Authority Contributions. The Notes also represent general unsecured

obligations of the Authority, payable from any source of Legally Available Funds (as such term is defined below) of the Authority. The Authority has not pledged its revenues or funds to the payment of the Notes and no assurance can be given as to the adequacy of the Authority’s funds to pay debt service on the Notes. The Authority has in the Lease Agreement covenanted to contribute funds to the payment of a portion of Debt Service (defined herein) on the Notes, which will be credited to the District’s obligation to make Lease Payments. See “SECURITY FOR THE NOTES -­ Authority Contributions;; General Unsecured Obligations” herein. Covenant to Refinance the Notes. The Authority has covenanted in the Trust

Agreement that it will issue Refunding Obligations in an amount sufficient to provide for payment of the principal of the Notes at maturity on May 1, 2021. As defined in the Trust Agreement, “Refunding Obligations” means (a) any bonds, notes or other obligations, including but not limited to certificates of participation and lease revenue bonds, issued by the District or the Authority for the purpose of refunding the Notes on or before the maturity thereof, and (b) any bonds, notes or other obligations, including but not limited to certificates of participation and lease revenue bonds, issued by the District or the Authority to refund any prior issue of Refunding Obligations.

If the Authority has not deposited with the Trustee, on or before February 1, 2021, an

amount of funds sufficient to pay in full the principal of the Notes coming due on May 1, 2021, the Authority is required pursuant to the Trust Agreement to immediately institute proceedings for the issuance of Refunding Obligations in an amount sufficient to provide for such payment. The term of the Lease Agreement terminates only upon the redemption or retirement of all outstanding Authority Debt (as hereinafter defined), which includes the Notes and any issue of Refunding Obligations. See “SECURITY FOR THE NOTES” herein.

-­4-­

Continuing Disclosure. The District, on behalf of the Authority and itself, under a Continuing Disclosure Certificate, has covenanted for the benefit of owners of the Notes to provide certain annual information and notices of the occurrence of certain enumerated events, in order to assist the Underwriters in complying with Securities Exchange Commission Rule 15c2-­12(b)(5). See “CONTINUING DISCLOSURE” and “APPENDIX F -­ Form of Continuing Disclosure Certificate.”

Tax Matters. In the opinion of Bond Counsel, subject, however to certain qualifications

described herein, under existing law, the interest on the Notes is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals, although Bond Counsel observes that interest on the Notes is included in adjusted current earnings in calculating corporate alternative minimum taxable income for tax years beginning prior to January 1, 2018. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS” herein.

Other Information. This Official Statement speaks only as of its date, and the

information contained in this Official Statement is subject to change. Except as required by the Continuing Disclosure Certificate to be executed by the District in the form attached hereto as Appendix F, the District has no obligation to update the information in this Official Statement. Summaries and explanations of the Notes, the Trust Agreement, the Lease Agreement, and the constitutional provisions, statutes and other documents described herein, do not purport to be complete, and reference is hereby made to said documents, constitutional provisions and statutes for the complete provisions thereof.

END OF INTRODUCTION

[Remainder of page intentionally left blank.]

-­5-­

THE REFINANCING PLAN The purposes for which the Authority was formed include financing and refinancing the

acquisition and construction of property for the educational purposes of either or both of its members, including the District. Pursuant to its purposes, the Authority has issued a series of notes from time to time, most recently the 2017 Notes. The 2017 Notes have a maturity date of May 1, 2018 (the “2017 Note Maturity Date”). The Authority intends to contribute $18,000,000* of its available funds to pay the principal of and interest on the 2017 Notes coming due at maturity on the 2017 Note Maturity Date. See “ESTIMATED SOURCES AND USES OF FUNDS” herein. The remaining amount of principal of and interest on the 2017 Notes coming due on the 2017 Note Maturity Date will be paid from the proceeds of the Notes. In addition, a portion of the proceeds of the Notes will be applied to pay the costs of issuing the Notes.

On the Closing Date, the proceeds of the Notes together with the funds contributed by

the Authority in a total amount sufficient to pay principal of and interest on the 2017 Notes on the 2017 Note Maturity Date will be transferred to The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the 2017 Notes (the “2017 Trustee”) and deposited in the Note Repayment Fund established for the 2017 Notes (the “2017 Note Repayment Fund”). On the 2017 Note Maturity Date, the 2017 Trustee will apply such funds to the payment of principal of and interest on the 2017 Notes then coming due and payable.

Funds deposited in the 2017 Note Repayment Fund constitute revenues which have

been pledged to the payment of the 2017 Notes and will not be available for the payment of debt service with respect to the Notes.

ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Notes are shown below.

Sources:

Principal Amount of Notes Authority Contribution* $18,000,000.00

Total Sources: Uses:

2017 Note Repayment Fund Costs of Issuance (1)

Total Uses: (1) Includes the costs and fees of the financial advisor, Bond Counsel, Disclosure Counsel,

Underwriters’ discount, Trustee, rating agencies, printing costs and other miscellaneous costs of issuance.

*Preliminary;; subject to change.

-­6-­

THE LEASED PROPERTY Lease and Lease-­Back Financing Structure. Concurrently with the issuance of a prior

issue of Lease Revenue Notes in 2008, the District and the Authority entered into a First Amended and Restated Site Lease dated as of May 1, 2008 (the “Site Lease”). Under the Site Lease, the District leased to the Authority the real property constituting the Golden Valley High School and the Liberty High School of the District (the “Leased Property”). The term of the Site Lease extends to August 1, 2034. The Site Lease enables the Authority to lease the Leased Property back to the District under the Lease Agreement. The District is authorized to enter into the lease and lease-­back arrangement, including the Site Lease and the Lease Agreement, under the provisions of Section 17456 of the Education Code of the State of California.

The Leased Property. The Leased Property consists of the land and improvements

which constitute the Golden Valley High School and the Liberty High School of the District, which are briefly described as follows:

Golden Valley High School. Golden Valley High School is located at 801 Hosking Avenue, Bakersfield, California. Golden Valley High School was constructed from 2001 through 2003 and placed in service commencing with the 2003-­04 school year. The school consists of 189,520 square feet of building area situated on 50 acres, and includes 78 classrooms with a capacity of 2,076 students. Other school facilities at this site include a library, cafeteria, performing arts theatre, gymnasium, a stadium, administration offices, two industrial tech shops, band and choir rooms, and two art labs. Liberty High School. Liberty High School is located at 925 Jewetta Avenue, Bakersfield, California. Liberty High School was constructed in 1999 and placed in service commencing with the 1999-­00 school year. The school consists of 195,362 square feet of building area situated on 46.2 acres, and includes 78 classrooms with a capacity of 2,076 students. Other school facilities at this site include a library, cafeteria, performing arts theatre, gymnasium, a stadium, an all-­weather track, administration offices, two industrial tech shops, band and choir rooms, and two art labs. Value of Property. Although neither the District nor the Authority have undertaken an

appraisal of the Leased Property, the District and the Authority have certified that the fair value of the land and improvements which constitute the Leased Property is substantially in excess of the aggregate principal amount of the Notes. In the Lease Agreement, the District and the Authority have agreed and determined that the total Lease Payments and Additional Payments do not exceed the fair rental value of the Leased Property. The District maintains casualty insurance with respect to the buildings which constitute the Leased Property in the amount of $250,000,000 per site, per occurrence.

Substitution and Release of Property. Under the Lease Agreement, the District has

the right to substitute other land and improvements for the Leased Property and has the right to release land and improvements from the Lease Agreement, upon satisfaction of certain conditions as set forth in the Lease Agreement. In order to substitute or release property, the District must certify in writing to the Authority and the Trustee that the estimated value and the estimated fair rental value of the property which remains subject to the Lease Agreement is at least equal to the original principal amount of the Notes. See “APPENDIX A – Summary of

-­7-­

Principal Legal Documents – Lease Agreement – Substitution of Property” and “Lease Agreement – Release of Property.”

THE NOTES Authority for Issuance

The Notes are being issued by the Authority under the Bond Law, a resolution adopted

by the Board of Directors of the Authority on March 5, 2018 and the Trust Agreement.

Description of the Notes Form of the Notes. The Notes will be issued in book-­entry form only, and will be initially

issued and registered in the name of Cede & Co. as nominee for DTC. Purchasers will not receive certificates representing their interest in the Notes. The Notes will be issued as fully registered Notes, without coupons, in the denomination of $5,000 each or any integral multiple thereof, but in an amount not to exceed the aggregate principal amount of Notes maturing in the year of maturity of the Note for which the denomination is specified.

Maturity;; Interest. Interest on the Notes accrues from the date of delivery and is

payable on May 1 and November 1, commencing November 1, 2018 (each, an “Interest Payment Date”). The Notes mature on the date and bear interest at the rate set forth on the inside cover page hereof. Interest on the Notes is calculated on the basis of a 360-­day year comprised of twelve 30-­day months.

Each Note will bear interest from the Interest Payment Date next preceding the date of

registration and authentication thereof unless (i) it is registered and authenticated as of an Interest Payment Date, in which event it shall bear interest from such date, or (ii) it is registered and authenticated prior to an Interest Payment Date and after the close of business on the fifteenth day of the month preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is registered and authenticated prior to October 15, 2018, in which event it shall bear interest from its date of issuance;; provided, however, that if at the time of authentication of a Note, interest is in default thereon, such Note shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

Optional Redemption*

Optional Redemption. The Notes are subject to redemption in whole or in part, at the

option of the Authority, on any date on or after ____ 1, 20__, from any available source of funds, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued interest to the date of redemption, without premium. Under the Trust Agreement, the Authority is required to give the Trustee written notice of its intention to redeem Notes, and the manner of selecting such Notes for redemption from among the maturities thereof, at least 40 days prior to the redemption date.

*Preliminary;; subject to change.

-­8-­

Notice of Redemption. The Trustee shall mail notice of redemption of the Notes by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any Notes designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Notes (or all Notes of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Notes within a maturity are called for redemption) Note numbers of the Notes to be redeemed and the maturity or maturities of the Notes to be redeemed, and in the case of Notes to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Notes the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Notes be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption may state that the notice is conditional and it is subject to the right of the Authority to rescind the notice as provided below.

The Authority has the right to rescind any notice of the redemption of Notes by written

notice to the Trustee on or prior to the dated fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Notes then called for redemption, and such cancellation will not constitute an Event of Default. The Authority and the Trustee have no liability to the Note Owners or any other party related to or arising from such rescission of redemption. Any such notice of such rescission of redemption will be mailed in the same manner as the original notice of redemption was sent.

Partial Redemption of Notes. Upon surrender of any Notes redeemed in part only, the

Authority will execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Note or Notes of authorized denominations and of the same series, equal in aggregate principal amount to the unredeemed portion of the Notes surrendered.

Effect of Redemption. Notice of redemption having been given as aforesaid, and

moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on the redemption date designated in such notice, the Notes (or portions thereof) so called for redemption shall become due and payable, interest on the Notes so called for redemption shall cease to accrue, said Notes (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Notes shall have no rights in respect thereof except to receive payment of the redemption price thereof.

Book-­Entry Only System

When executed and delivered, the Notes will be registered in the name of Cede & Co. as

nominee of The Depository Trust Company (“DTC”). Beneficial Owners of the Notes will not receive physical Notes representing their interests in the Notes, but will receive a credit balance on the books of the nominees for such Beneficial Owners. The principal of and interest on the Notes will be paid by the Trustee to DTC, which will in turn remit such principal and interest to its participants for subsequent disbursement to the Beneficial Owners of the Notes as described herein. As long as Cede & Co. is the registered owner of the Notes, principal of and interest on the Notes are payable by wire transfer on the payment date by the Trustee to Cede & Co., as

-­9-­

nominee for DTC, which will in turn remit such amounts to DTC Participants (as defined herein) for subsequent distribution to the Beneficial Owners. As long as Cede & Co. is the registered owner of the Notes, as nominee of DTC, references herein to the registered owners means Cede & Co. as aforesaid and shall not mean the Beneficial Owners of the Notes. See “APPENDIX E -­ Book-­Entry Only System.”

SECURITY FOR THE NOTES

Pledge of Revenues to Pay Interest on the Notes The Notes are secured by a pledge of and lien on all of the Revenues and any other

amounts held in any fund or account established under the Trust Agreement. As defined in the Trust Agreement, the term “Revenues” means (a) all amounts

received by the Authority or the Trustee under the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), prepayments, insurance proceeds, condemnation proceeds, and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Trust Agreement.

The Lease Payments are payable in an amount sufficient to provide sufficient Revenues

for payment of interest on the Notes when due, but not to provide for payment of the principal of the Notes at maturity. The Authority expects to pay the principal of the Notes from the proceeds of an issue of Refunding Obligations and also from Legally Available Funds of the Authority (as such term is defined below). See “-­ Covenant to Issue Refunding Obligations” below.

Lease Payments

General. Under the Lease Agreement, the District agrees to make Lease Payments to

the Authority for the use and occupancy of the Leased Property which correspond in time and amount to payments of “Debt Service” on the Notes and any other Refunding Obligations (collectively defined as “Authority Debt”).

As defined in the Lease Agreement, the term “Debt Service” means the scheduled

amount of interest and amortization of principal payable on Authority Debt during the period of computation, including the principal amount of Authority Debt required to be redeemed during such period by operation of mandatory sinking fund redemption. “Debt Service” does not include the principal amount of the Notes coming due at the maturity thereof (which is payable from the proceeds of Refunding Obligations). Under the Lease Agreement, Debt Service includes the principal amount of any issue of Refunding Obligations which may be issued in the future only if principal and interest on such Refunding Obligations are calculated to come due and payable in approximately equal annual installments over of a term of at least 15 years. Based on this definition, the District is obligated to pay Lease Payments which are sufficient to pay interest coming due and payable on the Notes, but is not obligated to pay any amounts in respect of the principal coming due on the Notes at maturity.

Upon the issuance of the Notes and application of the proceeds to the payment at

maturity on the 2017 Note Maturity Date, the Notes will be the only issue of Authority Debt outstanding, and the amount of Lease Payments due under the Lease Agreement will consist of interest due on the Notes through maturity. Upon the issuance of Refunding Obligations for the

-­10-­

purpose of refunding the Notes, as stated above, the Lease Agreement obligates the District to continue to pay lease payments pursuant to the Lease Agreement in an amount equal to Debt Service due with respect to Authority Debt.

The Lease Payments are general unsecured obligations of the District, payable from any

legally available source of funds of the District, and are subject to abatement, as described below. Under the Lease Agreement, the District will receive a credit for amounts contributed to its obligation to make Lease Payments by the Authority (if any), as described below under “-­Authority Contributions;; General Unsecured Obligation.”

Covenant to Budget and Appropriate Funds. The District covenants in the Lease

Agreement to take such action as may be necessary to include all Lease Payments coming due in each of its annual budgets during the term of the Lease Agreement and to make the necessary appropriation (including any supplemental appropriations) from the general fund of the District for all such Lease Payments coming due and payable during the period covered by each such budget.

Credit for Amounts Contributed by the Authority. Under the Lease Agreement, the

District will receive a credit for a portion of the Lease Payments to the extent the Authority has made contributions to the Lease Payments, as described below. However, the Lease Agreement obligates the District to include the full amount of annual Lease Payments in its annual budgets, without deduction for anticipated contributions by the Authority (as described above).

Deposit with Trustee. All Lease Payments received by the Trustee during the term of

the Notes will be deposited in the Note Repayment Fund which is established and maintained by the Trustee under the Trust Agreement.

Authority Contributions;; General Unsecured Obligation

The Notes are payable from a pledge of Revenues as described above. In addition, the

Notes constitute general unsecured obligations of the Authority payable from any “Legally Available Funds” of the Authority. “Legally Available Funds” is defined in the Lease Agreement as (a) unrestricted funds on deposit in the general fund or any capital improvement fund of the Authority or the District, or (b) any other revenues or funds of the Authority or the District which may lawfully be applied to make such payment. See “DISTRICT AND AUTHORITY FINANCIAL INFORMATION” herein. All amounts paid by the Authority from its Legally Available Funds (the “Authority Contributions”) will be credited towards the obligations of the District to make Lease Payments pursuant to the Lease Agreement.

Pursuant to the Lease Agreement, the Authority and the District have agreed that (a) the

District has the primary obligation to pay each Lease Payment in an amount equal to 32.04%* thereof, from any source of Legally Available Funds of the District, and (b) the Authority has the primary obligation to pay 67.96%* of each payment as its Authority Contribution to Debt Service from any source of Legally Available Funds of the Authority. Notwithstanding such agreement, the District is obligated pursuant to the Lease Agreement to budget and appropriate the full amount of each Lease Payment to the extent not directly paid by the Authority. *Preliminary;; subject to change.

-­11-­

The Trust Agreement does not establish any pledge of or lien upon any funds of the Authority (other than the Revenues as described above) for the payment of the Notes, nor does the Trust Agreement obligate the Authority to segregate or encumber any of its funds (other than the Revenues). The Authority may, however, apply its Legally Available Funds for payment of some or all of the Debt Service due with respect to the Notes, including funds for the payment of principal due at maturity, if it so determines and has funds sufficient for such purpose, or in the event that it is unable or determines not to issue Refunding Obligations.

Covenant to Issue Refunding Obligations

The Authority has covenanted in the Lease Agreement and Trust Agreement that it will

issue Refunding Obligations in an amount sufficient, together with any Legally Available Funds which are contributed for that purpose, to provide for payment of the principal of the Notes on May 1, 2021. If the Authority has not deposited with the Trustee, on or before February 1, 2021, an amount of funds sufficient to pay in full the principal of the Notes coming due on May 1, 2021, the Authority is required pursuant to the Trust Agreement to immediately institute proceedings for the issuance of Refunding Obligations in an amount sufficient to provide for such payment. The Authority and the District further covenant to authorize, execute and deliver any and all documents, including but not limited to any amendment to the Lease Agreement and the Site Lease, as may be required in order to (a) provide Revenues when and as required for payment of the Refunding Obligations, and (b) issue, sell and otherwise provide adequate security for the Refunding Obligations.

Under the Lease Agreement, the District covenants to make Lease Payments until all

outstanding Authority Debt, including the Notes and any issue of Refunding Obligations, has been redeemed or retired. The District and the Authority expect that the Revenues received from the Lease Payments will be sufficient to pay the principal of and interest on all Refunding Obligations issued by the Authority.

Parity Obligations

In the event the Authority issues any Refunding Obligations for the purpose of refunding

the Notes in part, but not in whole, such Refunding Obligations will be equally and ratably secured by a pledge of and lien on the Revenues on a parity with the Notes which remain outstanding following such refunding.

Additional Payments

Under the Lease Agreement, in addition to the Lease Payments, the District agrees to

pay the following Additional Payments (among others) directly to the respective persons to whom such Additional Payments are due and payable:

• The reasonable fees and expenses of such accountants, consultants,

attorneys and other experts as may be engaged by the District or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Lease, the Trust Agreement or the Refunding Documents.

• The reasonable out-­of-­pocket expenses of the Authority in connection with this Lease or the Authority Debt, including any and all expenses incurred in connection with the authorization, sale and delivery of the Authority Debt or

-­12-­

incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease, the Authority Debt or any of the other documents contemplated hereby or thereby, or incurred in connection with the administration of this Lease.

• All amounts due and owing to the federal government consisting generally of

excess investment earnings arising from the investment of the proceeds of the Authority Debt.

Action on Default

If the District defaults under the Lease Agreement, the Trustee, as assignee of the

Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the District, or may retain the Lease Agreement and hold the District liable for all Lease Payments thereunder on an annual basis.

THE LEASE PAYMENTS MAY NOT BE ACCELERATED UPON A DEFAULT UNDER

THE LEASE AGREEMENT. See “CERTAIN RISK FACTORS – Limited Recourse on Default.” For a description of the events of default and permitted remedies of the Trustee (as

assignee of the Authority) contained in the Lease Agreement and the Trust Agreement, see “APPENDIX A – Summary of Principal Legal Documents – Trust Agreement” and “– Lease Agreement.”

Insurance

The Lease Agreement requires the District to obtain and/or maintain certain public

liability, casualty, fire and extended coverage, rental interruption insurance and title insurance coverage, which may have certain deductibles and may in some cases be maintained as part of or in conjunction with other insurance carried by the District and/or in the form of self-­insurance or budgeted reserve. The Net Proceeds (as defined in the Lease Agreement) of any insurance award resulting from any damage to or destruction of the Leased Property by fire or other casualty shall be applied as set forth in the Lease Agreement. See “APPENDIX A – Summary of Principal Legal Documents -­ Lease Agreement -­ Insurance.” See also “CERTAIN RISK FACTORS -­ Title Insurance Policy.”

Abatement of Lease Payments

The Lease Payments are payable by the District in each Fiscal Year for the District’s

right of use and possession of the Leased Property during such Fiscal Year. The obligation of the District to pay Lease Payments will be subject to abatement during any period in which by reason of damage, destruction or taking by eminent domain or condemnation with respect of any portion of the Leased Property there is substantial interference with the District’s right of use and possession of such portion of the Leased Property.

Termination or Abatement Due to Eminent Domain. If the Leased Property is taken

permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease will cease with respect thereto as of the day possession is taken. If less than all of the Leased Property is taken permanently, or if the Leased Property is taken temporarily, under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect with respect thereto and shall not be terminated

-­13-­

by virtue of such taking, and (b) there will be a partial abatement of Lease Payments in an amount to be determined by the District and the Authority such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property.

Abatement Due to Damage or Destruction. The amount of Lease Payments will be

subject to abatement during any period in which by reason of damage or destruction there is substantial interference with the use and occupancy by the District of the Leased Property or any portion thereof. The amount of such abatement will be determined by the District, such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Leased Property not damaged or destroyed. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement will continue in full force and effect. See “-­Insurance” above.

Substitution and Release of Property

The District has the option at any time and from time to time during the term of the Lease

Agreement to substitute other land, facilities, improvements, equipment or other property for the Leased Property or any portion thereof, and the option to release property from the Lease Agreement, provided that the District must comply with certain conditions precedent to such substitution or release of property specified in the Lease Agreement. See “APPENDIX A – Summary of Principal Legal Documents -­ Lease Agreement.” The District is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such substitution.

CERTAIN RISK FACTORS The following factors, along with the other information in this Official Statement, should

be considered by potential investors in evaluating a purchase of the Notes. However, they do not purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in the Notes. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks.

No Assurances Regarding Issuance of Refunding Obligations

As described above, the Lease Payments have been calculated to be sufficient to pay interest coming due on the Notes, but will not provide for payment of the principal of the Notes at maturity. Payment of the principal of the Notes is dependent on the issuance of Refunding Obligations by the Authority. Although the Authority has covenanted to issue Refunding Obligations under the Trust Agreement as required to pay principal of the Notes at or before the maturity thereof, such issuance is dependent upon a variety of factors over which neither the Authority or the District has control.

Factors which could affect the ability of the Authority to issue Refunding Obligations

include the financial condition of the District at the time the Authority institutes proceedings to issue Refunding Obligations, the presence of conditions prevailing in the bond market which could make it difficult or impossible for the Authority to issue Refunding Obligations, and the difficulty of obtaining municipal bond insurance or other credit enhancement or a liquidity facility for the Refunding Obligations. No assurances can be given that the Authority will be able to

-­14-­

issue Refunding Obligations when and as required to provide for payment of the principal of the Notes at or before maturity.

In the event the Authority is unable to issue Refunding Obligations for any reason, the

Authority remains obligated to pay the Notes from any source of Legally Available Funds of the Authority, although the Authority has not pledged any such funds other than the Revenues. Under the Trust Agreement, the failure to pay the principal of the Notes at maturity constitutes and Event of Default as defined in the Trust Agreement, and the Trustee will have the remedies granted to it under the Trust Agreement. See “APPENDIX A – Summary of Principal Legal Documents – Trust Agreement -­ Events of Default;; Remedies.” However, the District is not obligated to pay the principal of the Notes at maturity under the Lease Agreement.

Limited Obligation of the Authority and the District

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

Although the Lease Agreement does not create a pledge, lien or encumbrance upon the

funds of the District (other than the proceeds of condemnation or insurance), the District is obligated under the Lease Agreement to pay the Lease Payments from any source of Legally Available Funds and the District has covenanted in the Lease Agreement that it will take such action as may be necessary to include all Lease Payments in its annual budgets and to make necessary annual appropriations therefor. The District is currently liable and may become liable on other obligations payable from general revenues, some of which may have a priority over the Lease Payments. The Lease Agreement does not limit the ability of the District to enter into such obligations.

The Trust Agreement does not create a pledge, lien or encumbrance upon the funds of

the Authority (other than the proceeds of condemnation or insurance). However, the Notes are obligations of the Authority, payable from any source of Legally Available Funds of the Authority, and under the Lease Agreement the Authority acknowledges that it has the primary obligation to pay 67.96% of the principal of and interest on the Notes. Such covenant does not relieve the District from its obligations under the Lease Agreement to budget and appropriate the full amount of each Lease Payment and to pay the full amount of each Lease Payment if the Authority fails to pay in full the principal of and interest on the Notes when due. No representations are made herein, and no assurances can be given, as to the financial ability of the Authority to pay debt service on any portion of the Notes. The Trust Agreement does not obligate the Authority to maintain sufficient funds to pay debt service on the Notes.

The District and the Authority have the capacity to enter into other obligations which may

constitute additional charges against their revenues. To the extent that additional obligations are incurred by the District or the Authority, the funds available to make debt service payments on the Notes may be decreased. If the District’s or the Authority’s revenue sources are less than its total obligations, the District or the Authority could choose to fund other activities before making debt service payments and other payments due under the Lease Agreement and the Trust Agreement, respectively.

-­15-­

Abatement In the event of substantial interference with the District’s right to use and the possession

of any portion of the Leased Property by reason of damage to, or destruction or condemnation of, the Leased Property, the District’s obligation to pay Lease Payments will be subject to abatement, although such event will not operate to abate the Authority’s obligations under the Trust Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES – Abatement.” If such portion of the Leased Property, if damaged or destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the District’s rental interruption insurance will be available in lieu of Lease Payments, plus the period for which funds are available from funds and accounts established under the Trust Agreement, or if casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of such portion of the Leased Property, there could be insufficient funds to make payments to Owners in full. Economic Conditions in California

Most public school districts in California, including the District, are dependent on

revenues from the State for a large portion of their operating budgets. The primary source of funding for school districts is a combination of State funds and local property taxes. State funds typically make up the majority of a district’s revenue.

The availability of State funds for public education is a function of constitutional

provisions affecting school district revenues and expenditures, the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process.

The State has, in the past, experienced significant budget shortfalls. Decreases in State

revenues can significantly affect appropriations made by the State to school districts, and the timing of payments to school districts by the State may depend upon the ability of the State to access the credit markets with respect to its own cash flow borrowings. If State monies are not available to meet its obligations in a timely manner, school funding along with certain other services, are given priority under the State Constitution. See “STATE FUNDING OF EDUCATION” herein. The Lease Payments are payable from any Legally Available Funds of the District, and as such, reductions in revenue received by the District from the State could impact the District’s ability to make Lease Payments. See “DISTRICT AND AUTHORITY FINANCIAL INFORMATION – State Funding of Education and Recent State Budgets.” Property Taxes

The Notes are not secured by a levy or pledge of any form of property taxation.

However, the District is obligated to make Lease Payments from any legally available source. One source of funding for the District is its share of local property taxes. See “DISTRICT AND AUTHORITY FINANCIAL INFORMATION.”

Levy and Collection. The District does not have any independent power to levy and

collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease applied to taxable property in the District could reduce the District’s property tax revenues, which constitute a portion of its “Local Revenues”, and accordingly, could have an adverse impact on the ability of the District to make Lease

-­16-­

Payments. Likewise, delinquencies in the payment of property taxes could have an adverse effect on the District’s ability to pay principal and interest with respect to the Notes when due.

Reduction in Inflationary Rate. Article XIIIA of the California Constitution provides that

the full cash value base of real property used in determining assessed value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.” Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2%. The District is unable to predict if any adjustments to the full cash value base of real property within the District, whether an increase or a reduction, will be realized in the future.

Reassessments and Appeals of Assessed Values. There are two types of appeals of

assessed values that could adversely impact the amount of property tax revenues collected in the District:

Proposition 8 Appeals. Most of the appeals that might be filed in the

District would be based on Section 51 of the Revenue and Taxation Code (“Proposition 8”, adopted November 7, 1978), which requires that for each lien date the value of real property must be the lesser of its base year value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value.

Under California law, property owners may apply for a reduction of their

property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-­driven appeals are known as Proposition 8 appeals.

Any reduction in the assessment ultimately granted as a Proposition 8

appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. However, current case law is uncertain as to whether or not property may be adjusted to its prior value at once or if adjustments may only be made subject to the 2% limitation. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIA of the California Constitution."

-­17-­

Base Year Appeals. A second type of assessment appeal is called a base year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the "base year" value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Reductions in assessed value may also be unilaterally applied by the County Assessor

under Proposition 8. The District cannot predict the changes in assessed values that might result from pending or future appeals by taxpayers or by reductions initiated by the County Assessor. Any reduction in aggregate District assessed valuation due to appeals or reassessments, as with any reduction in assessed valuation due to other causes, could adversely affect District revenues derived from local property taxes. No assurance can be given that property tax appeals or reassessments in the future will not significantly reduce the District’s property tax revenues.

Limited Recourse on Default

If the District defaults on its obligations to pay Lease Payments, the Trustee, as assignee of the Authority, may (subject to the restrictions described below) retain the Lease Agreement and hold the District liable for all Lease Payments on an annual basis and will have the right to re-­enter and re-­let the Leased Property. If such re-­letting occurs, the District would be liable for any resulting deficiency in Lease Payments. Alternatively, the Trustee may terminate the Lease Agreement with respect to the Leased Property and proceed against the District to recover damages under the Lease Agreement.

Due to the specialized nature of the Leased Property, no assurance can be given that

the Trustee will be able to re-­let any portion of the Leased Property so as to provide rental income sufficient to make principal and interest payments with respect to the Notes in a timely manner, and the Trustee is not empowered to sell the Leased Property for the benefit of the Owners of the Notes (as defined in the Trust Agreement). In addition, due to the governmental function of the Leased Property, it is not certain whether a court would permit the exercise of the remedies of repossession and re-­letting with respect thereto. Any suit for money damages would be subject to limitations on legal remedies against school districts in the State of California, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Moreover, there can be no assurance that such re-­letting will not adversely affect the exclusion of interest on the Notes from federal or State income taxation.

No Acceleration Upon Default

Whenever any event of default referred to in the Lease Agreement happens and continues, the Trustee, as the assignee of the Authority, is authorized under the terms of the Lease Agreement to exercise any and all remedies available under law or granted under the Lease Agreement. There is no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then due or past due to be immediately due and payable. Neither the Authority nor the Trustee has any right to re-­enter or re-­let the Leased Property except following the occurrence and during the continuation of an event of default under the Lease Agreement. Following an event of default, at the direction of the Trustee, the Authority may elect either to terminate the Lease

-­18-­

Agreement and seek to collect damages from the District or to maintain the Lease Agreement in effect and seek to collect the Lease Payments as they become due. The Lease Agreement further provides that so long as an event of default exists under the Lease Agreement, the Trustee, as assignee of the Authority, may re-­enter the Leased Property for the purpose of taking possession of any portion of the Leased Property and to re-­let the Leased Property and, in addition, at its option, with or without such entry to terminate the Lease Agreement as described therein. See “APPENDIX A –Summary Of Principal Legal Documents –Lease Agreement.”

No assurance can be given that the Trustee will be able to re-­let the Leased Property so

as to provide rental income sufficient to pay principal and interest on the Notes in a timely manner or that such re-­letting will not adversely affect the exclusion of interest with respect thereto from gross income for federal or State income tax purposes. Furthermore, it is unlikely that a court would permit the exercise of the remedies of repossession and re-­letting with respect to the Leased Property, due to the essential public purposes which are served by the Leased Property.

In the event of a default, there is no remedy of acceleration of the total Lease Payments

due over the term of the Lease Agreement and the Trustee is not empowered to sell the Leased Property and use the proceeds of such sale to prepay the Notes or pay debt service with respect thereto. The District will be liable only for Lease Payments on an annual basis and, in the event of a default, the Trustee would be required to seek a separate judgment each year for that year’s defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against school districts in California, including a limitation on enforcement of judgments against funds of a fiscal year other than the fiscal year in which the Lease Payments were due and against funds needed to serve the public welfare and interest.

Loss of Tax Exemption

As discussed under the heading “TAX MATTERS,” certain acts or omissions of the

Authority or the District in violation of its covenants in the Trust Agreement and the Lease Agreement could result in the interest on the Notes being includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Notes. Should such an event of taxability occur, the Notes would not be subject to a special redemption and would remain Outstanding until the maturity thereof on May 1, 2021.

Title Insurance Policy

The Leased Property consists of Golden Valley High School and Liberty High School. A

CLTA Title insurance policy in the amount of $95,300,000 insuring the District’s fee title and sub-­leasehold estate in the Leased Property was obtained by the District in connection with the issuance of the Authority’s 2004 Variable Rate Demand Lease Revenue Bonds (the “Title Policy”), and the Authority and the Trustee were named as insured under such policy. In each refinancing undertaken since that time (see “THE REFINANCING PLAN” herein), the Authority has assigned all right, title and interest in the Title Policy to the trustee for the bonds and notes issued thereafter. Pursuant to the Assignment Agreement, the Authority will similarly assign such interests in the Title Policy to the Trustee for the Notes. In the event that the District’s title to one or both of the Leased Properties is legally challenged, and a court with jurisdiction over the matter were to determine that the District’s title was defective, pursuant to the Trust Agreement, the proceeds of the Title Policy would be applied to either replace the portion of the Leased Property with defective title, or paid to the Trustee to be applied to pay the principal of

-­19-­

the Notes at maturity. Due to the differential between the stated amount of the Title Policy and the principal amount of the Notes, in the event that title to both Leased Properties were challenged and both found defective, the proceeds of the Title Policy available to pay owners of the Notes could be less than the outstanding principal amount of the Notes. The District has not been notified and is not aware of an intent by any party to challenge title to the Leased Properties, which are currently used as high schools by the District, and which have been used as public high schools since they were originally constructed.

Earthquake and Other Risks

The State of California, including the County area, is a seismically active region. There

are several geological faults in the area which have the potential to cause serious earthquakes and damage to the Leased Property. The District is required under the Lease Agreement to maintain earthquake insurance only if available at reasonable cost from reputable insurers and does not presently maintain earthquake insurance. The District has determined that earthquake insurance is not available at reasonable cost and, therefore, it does not currently maintain earthquake insurance on the Leased Property nor does it expect to maintain such insurance during the term of the Notes. Accordingly, if an earthquake were to cause serious damage to the Leased Property, the District would be limited to its general fund, reserves and emergency grants, if any, in seeking to make appropriate repairs. Pending such repairs, the District’s obligation to make Lease Payments would be subject to abatement. The District will not be obligated to repair or restore the Leased Property in the event of an earthquake. The Leased Property is also subject to other types of natural hazards, which may result in damage to the Leased Property, including floods,

The Leased Property consists of Golden Valley High School, constructed between 2001

and 2003, and Liberty High School, constructed in 1999. All building components of these sites were constructed under the standards of the Field Act (California State Building Code, Title 24). The Field Act requires substantially higher construction standards for public schools and hospitals than are required for other types of construction. The Field Act requires that building systems be capable of withstanding seismic forces from the most credible earthquake likely to occur in the vicinity of the building system being constructed.

Limitations on Remedies;; Bankruptcy

The rights of the Owners of the Notes are subject to the limitations on legal remedies against municipalities in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Additionally, enforceability of the rights and remedies of the Owners of the Notes, and enforcement of the District’s obligations under the Lease Agreement, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor’s rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against cities in the State. Bankruptcy proceedings under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the District, or the exercise of powers by the federal or State government, if initiated, could subject the Owners of the Notes to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently

-­20-­

may entail risks of delay, limitation, or modification of their rights. See “CERTAIN RISK FACTORS – Limited Recourse on Default.”

THE AUTHORITY

The Golden Empire Schools Financing Authority is a joint powers agency and public body organized and existing under the laws of the State of California. The members of the Authority are the District and Taft Union High School District. The Authority was formed in 1988 for the primary purpose of financing facilities and equipment for the District and Taft Union High School District. The members of the Board of Trustees of the District serve as the Board of Directors of the Authority. The Authority administrative staff also hold positions as District administrative staff.

THE DISTRICT

General Information

The District was created in 1916 and covers an area of approximately 3,500 square miles, which represents 43% of the total area of the County. The District is the State’s largest grade 9 through 12 high school district, as measured by enrollment, and is made up of 18 comprehensive high schools, 5 alternative education campuses, 3 career technical educations sites, 4 special education centers, an adult education center and a charter school. Enrollment in the District in fiscal year 2017-­18 is 39,252 students. The schools are located in the area of metropolitan Bakersfield, Kern Valley (near Lake Isabella), Shafter and Arvin. Twenty-­four elementary school districts feed into the Kern High School District.

Administration

Governing Board. The governing board of the District is called the Board of Trustees

(the “Board”). The Board includes five members elected by trustee area within the District. The current members of the Board are as follows:

KERN HIGH SCHOOL DISTRICT

Board of Trustees

Name Board Position Term Expires Phillip Peters President November 2018 J. Bryan Batey Vice President November 2018 Joey O’Connell Clerk November 2020 Jeff Flores Clerk Pro Tem November 2020 Mike Williams Member November 2018 District Administration. The Superintendent of the District is responsible for

administrating the affairs of the District in accordance with the policies of the Board. Currently Dr. Byron Schaefer serves as the District Superintendent. Dr. Scott Cole serves as the Deputy Superintendent of Business.

-­21-­

Enrollment The following table shows recent enrollment history (excluding the District’s charter

school) in the District.

KERN HIGH SCHOOL DISTRICT Annual Enrollment

School Year

Enrollment*

Percent Change

2004-­05 33,776 -­-­ 2005-­06 35,394 4.8% 2006-­07 36,083 1.9 2007-­08 37,341 3.5 2008-­09 37,783 1.2 2009-­10 37,928 0.4 2010-­11 37,452 -­1.3 2011-­12 37,505 0.1 2012-­13 37,070 -­1.2 2013-­14 37,100 0.1 2014-­15 37,318 0.6 2015-­16 38,070 2.0 2016-­17 38,705 1.7 2017-­18** 39,252 1.4 2018-­19** 40,138 2.3

*Excludes enrollment at the one charter school that operates within District boundaries. **As reflected in the District’s 2017-­18 Second Interim Report. Source: California Department of Education;; Kern High School District for 2017-­18 and after.

ADA and LCFF Funding Trends

Funding Trends. As described herein, with the implementation of the Local Control Funding Formula (the “LCFF”), commencing in fiscal year 2013-­14, school districts receive base funding based on average daily attendance (“ADA”), and may also be entitled to supplemental funding, concentration grants and funding based on an economic recovery target. The following table sets forth recent LCFF funding per ADA for the District for fiscal year 2013-­14 through 2017-­18 (projected).

KERN HIGH SCHOOL DISTRICT AVERAGE DAILY ATTENDANCE AND LCFF Fiscal Years 2013-­14 through 2017-­18

Fiscal Year ADA

LCFF Phase In Entitlement Per ADA(1)

% Targeted Students Under LCFF

2013-­14 34,253 $8,015 64.28% 2014-­15 34,682 8,701 64.58 2015-­16 35,678 9,622 67.17 2016-­17 36,402 10,114 66.70 2017-­18 36,949 10,403 68.89

(1) District is entitled to supplemental and concentration grant funding under LCFF which

is included in the entitlement per ADA. Source: Kern High School District.

-­22-­

Targeted Student Enrollment. The District has a Target Student unduplicated count of over 68% in fiscal year 2017-­18. Because this percentage is over 55%, the District qualifies for supplemental funding as well as concentration funding under LCFF.

Employee Relations

The District employs approximately 1,850 full-­time equivalent (“FTE”) and part-­time certificated employees and 2,238 FTE classified, management and supervisory employees. The following table identifies bargaining units and the current state of their respective contracts.

KERN HIGH SCHOOL DISTRICT Summary of Labor Organizations

Labor Organization

Type of Employee Represented

Contract Expiration

Kern High School District Faculty Association Certificated June 30, 2019 California School Employees Association-­125 Classified June 30, 2018 Source: Kern High School District.

District Insurance Coverage

The District is a member, with other school districts, in a joint power agency, Self-­Insured Schools of California (“SISC”). SISC arranges for and provides workers compensation and health and welfare insurance for its members. The membership includes school districts in the County and the County Office of Education. SISC is governed by an Executive Board consisting of representatives from member districts. The Executive Board controls the operations of SISC, including selections of management and approval of operating budgets. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

The District obtains its property and liability insurance from the Southern California

Regional Liability Excess Fund (“ReLiEF”), a joint powers authority comprised of public educational agencies and managed by Keenan & Associates. As described herein under the heading “SECURITY FOR THE NOTES – Insurance”, the District has covenanted under the Lease Agreement to maintain public liability and property damage insurance, and casualty, fire and extended coverage and rental interruption in connection with the Leased Property in certain stated amounts and with certain qualified insurers. See “APPENDIX A – Summary of Principal Legal Documents – Insurance.”

-­23-­

DISTRICT AND AUTHORITY FINANCIAL INFORMATION The following selected financial information provides a brief overview of the Authority’s

finances and the District’s finances. This financial information has been extracted from the District’s audited financial statements and, in some cases, from unaudited information provided by the District. The most recent audited financial statements of the District and the Authority with an unqualified auditor’s opinion is included as Appendix B hereto. See “APPENDIX B – Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17.”

Education Funding Generally

School districts in California receive operating income primarily from two sources: the State funded portion which is derived from the State’s general fund, and a locally funded portion, being the district’s share of the one percent general ad valorem tax levy authorized by the California Constitution. As a result, decreases or deferrals in education funding by the State could significantly affect a school district’s revenues and operations.

From 1973-­74 to 2012-­13, California school districts operated under general purpose

revenue limits established by the State Legislature. In general, revenue limits were calculated for each school district by multiplying (1) the ADA for such district by (2) a base revenue limit per unit of ADA. The revenue limit calculations were adjusted annually in accordance with a number of factors designated primarily to provide cost of living increases and to equalize revenues among all California school districts of the same type. Funding of the District's revenue limit was provided by a mix of local property taxes and State apportionments of basic and equalization aid. Generally, the State apportionments amounted to the difference between the District's revenue limit and its local property tax revenues.

The fiscal year 2013-­14 State budget package replaced the previous K-­12 finance

system with a new formula known as the LCFF. Under the LCFF, revenue limits and most state categorical programs were eliminated. School districts instead receive funding based on the demographic profile of the students they serve and gain greater flexibility to use these funds to improve outcomes of students. The LCFF creates funding targets based on student characteristics. For school districts and charter schools, the LCFF funding targets consist of grade span-­specific base grants plus supplemental and concentration grants that reflect student demographic factors. The LCFF includes the following components:

• A base grant for each local education agency per unit of ADA, which varies with

respect to different grade spans. The base grant is $2,375 more than the average revenue limit provided prior to LCFF implementation. The base grants will be adjusted upward each year to reflect cost-­of-­living increases. In addition, grades K-­3 and 9-­12 are subject to adjustments of 10.4% and 2.6%, respectively, to cover the costs of class size reduction in grades K-­3 and the provision of career technical education in grades 9-­12.

• A 20% supplemental grant for English learners, students from low-­income

families and foster youth to reflect increased costs associated with educating those students.

• An additional concentration grant of up to 50% of a local education agency’s

base grant, based on the number of English learners, students from low-­income

-­24-­

families and foster youth served by the local agency that comprise more than 55% of enrollment.

• An economic recovery target to ensure that almost every local education agency

receives at least their pre-­recession funding level, adjusted for inflation, at full implementation of the LCFF.

The LCFF was implemented for fiscal year 2013-­14 and is being phased in gradually.

Beginning in fiscal year 2013-­14, an annual transition adjustment was required to be calculated for each school district, equal to each district’s proportionate share of the appropriations included in the State budget (based on the percentage of each district’s students who are low-­income, English learners, and foster youth (“Targeted Students”)), to close the gap between the prior-­year funding level and the target allocation at full implementation of LCFF. In each year, districts will have the same proportion of their respective funding gaps closed, with dollar amounts varying depending on the size of a district’s funding gap.

Funding levels used in the LCFF “Target Entitlement” calculations for fiscal year 2017-­18

are set forth in the following table. Most school districts and charter schools will receive less than the LCFF Target because LCFF is being phased in. Until the LCFF is fully implemented (currently expected in fiscal year 2018-­19), districts will receive an entitlement known as the LCFF Transition Entitlement.

Fiscal Year 2017-­18 Base Grant* Under LCFF by Grade Span

(Targeted Entitlement)

Grade Span

2016-­17

Base Grant Per ADA

2017-­18 COLA (1.56%)

Grade Span Adjustments (K-­3: 10.4%;; 9-­12: 2.6%)

2017-­18 Base Grant/Adjusted Base Grant Per

ADA K-­3 $7,083 $110 $748 $7,941 4-­6 7,189 112 n/a 7,301 7-­8 7,403 115 n/a 7,518 9-­12 8,578 134 227 8,939

*Does not include supplemental and concentration grant funding entitlements. Source: California Department of Education.

The new legislation included a “hold harmless” provision which provides that a district or

charter school would maintain total revenue limit and categorical funding at least equal to its 2012-­13 level, adjusted for changes in ADA.

The LCFF includes an accountability component. Districts are required to increase or

improve services for English language learners, low income, and foster youth students in proportion to supplemental and concentration grant funding received. All school districts, county offices of education, and charter schools are required to develop and adopt local control and accountability plans, which identify local goals in areas that are priorities for the State, including pupil achievement, parent engagement, and school climate.

County superintendents review and provide support to the districts under their

jurisdiction, and the Superintendent of Public Instruction performs a corresponding role for county offices of education. In addition, the 2013-­14 Budget created the California Collaborative for Education Excellence to advise and assist school districts, county offices of education, and charter schools in achieving the goals identified in their plans. Under the LCFF and related

-­25-­

legislation, the State will continue to measure student achievement through statewide assessments, produce an Academic Performance Index for schools and subgroups of students, determine the contents of the school accountability report card, and establish policies to implement the federal accountability system.

Financial Statements and Accounting Practices

Accounting Practices. The accounting practices of the District and the Authority conform to generally accepted accounting principles in accordance with policies and procedures of the California School Accounting Manual. This manual, according to Section 41010 of the State of California Education Code, is to be followed by all California school districts.

Measurement Focus and Basis of Accounting. The government-­wide financial

statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenues when all eligibility requirements imposed by the provider have been met.

Governmental and fund financial statements are reported using the current financial

resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within one year of the end of the current fiscal period. Expenses generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenses, as well as expenses related to the compensated absences and claims and judgments, are recorded only when payment is due.

Financial Statements. The Authority’s financial results are included in the financial

statements of the District as a component unit whose financial activities are reported in the government-­wide financial statements. The Auditor presents and accountants for the Authority’s revenues, expenditures and change in fund balances in the Debt Service Fund. See “APPENDIX B – Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17 -­ Note 1 -­ Summary of Significant Accounting Policies.”

Independently audited financial reports are prepared annually in conformity with generally

accepted accounting principles for educational institutions. The annual audit report is generally available about six months after the June 30 close of each fiscal year. The following tables contain data abstracted from financial statements prepared by the District’s former auditor, Mayer Hoffman McCann P.C., Bakersfield, California (“Mayer Hoffman McCann”), for fiscal years 2011-­12 through 2014-­15, and by the District’s current independent auditor, Crowe Horwath LLP, Sacramento, California (“Crowe Horwath”) for fiscal year 2015-­16 and fiscal year 2016-­17.

The change in auditors in fiscal year 2015-­16 resulted in the District presenting certain

financial information differently in its audited financial statements. Thus, the information presented in the tables for fiscal years 2011-­12 through 2014-­15 as compared to 2015-­16 and 2016-­17 are categorized differently. Although historical total revenue and expenditure figures are comparatively consistent, the categorical breakdown of revenues and expenditures is different for the revised accounting formats and is not directly comparable.

-­26-­

Mayer Hoffman McCann and Crowe Horwath have not been requested to consent to the use or to the inclusion of their respective reports in this Official Statement, and they have not audited or reviewed this Official Statement. The District is required by law to adopt its audited financial statements after a public meeting to be conducted no later than January 31 following the close of each fiscal year.

The following table sets forth the statement of revenues, expenditures and changes in fund

balances for the District’s general fund for the fiscal years 2011-­12 through 2014-­15. The table on the following page sets forth the statement of revenues, expenditures and changes in fund balances for the District’s general fund for fiscal years 2015-­16 and 2016-­17.

District Audited General Fund Revenues, Expenditures and Changes in Fund

Balances. The following table shows the audited fund balance, revenues and expenses statements for the District’s general fund for fiscal years 2011-­12 through 2014-­15.

KERN HIGH SCHOOL DISTRICT

General Fund -­ Revenues, Expenses and Changes in Fund Balance Fiscal Years 2011-­12 through 2014-­15*

(Dollars in thousands)

2011-­12 Audited

2012-­13 Audited

2013-­14 Audited

2014-­15 Audited

Revenues Revenue Limit Income/LCFF $223,700 $224,346 $275,935 $306,720 Federal Income 27,007 25,021 24,580 23,978 State Income 83,005 85,238 44,674 41,608 Local Income 6,387 4,206 6,843 4,990 Total Revenue 340,099 338,811 352,032 377,296

Expenses Instruction 190,041 198,202 186,911 200,934 Instruction – Related Services 50,011 49,501 45,760 57,972 Pupil Services 35,980 35,114 36,367 39,348 Ancillary Services 7,632 7,668 7,693 8,365 Community Services 55 47 36 38 Enterprise -­-­ -­-­ -­-­ -­-­ General Administration 15,947 17,110 21,059 21,646 Plant Services 47,417 44,892 46,083 51,663 Other Outgo 4,635 2,941 3,220 3,350 Debt service-­ interest -­-­ -­-­ 304 371 Total Expenses 351,718 355,475 347,433 383,687

Other Financing Sources (Uses) (3,945) (3,359) (3,534) (4,039) Net Change in Fund Balances (15,564) (20,023) 1,065 (10,430) Fund Balance – Beg. of Year 126,304 110,740 90,717 91,782 Fund Balance at End of Year $110,740 $90,717 $91,782 $81,352

*See following table for fiscal years 2015-­16 and 2016-­17 Audited Financial Statements, which were prepared by a different accounting firm and which used a different accounting format. Source: Kern High School District Audited Financial Statements.

-­27-­

KERN HIGH SCHOOL DISTRICT General Fund -­ Revenues, Expenses and Changes in Fund Balance

Fiscal Years 2015-­16 and 2016-­17

2015-­16 Audited*

2016-­17 Audited*

Revenues Revenue Limit Income/LCFF $344,648,929 $368,740,101 Federal Sources 20,703,384 24,079,513 State Sources 68,719,693 58,838,733 Local Sources 6,452,518 4,217,913 Total Revenue 440,524,524 455,876,260

Expenditures Certificated Salaries 161,640,178 174,573,045 Classified Salaries 72,763,809 79,715,737 Employee Benefits 99,209,311 102,526,730 Books and Supplies 28,579,392 29,093,326 Contract Services and Operating Expenditures 36,334,551 42,554,970 Other Outgo 3,642,639 4,241,335 Capital Outlay 13,827,108 6,939,911 Debt Service: Principal Retirement -­-­ -­-­ Interest -­-­ 1,134,731 Total Expenditures 415,996,988 440,779,785

Excess (deficiency) of revenues over (under) expenditures 24,527,536

15,096,475

Other financing (uses) sources: Transfers in 2,432,063 2,433,905 Transfers out (7,509,075) (4,509,292) Total other financing (uses) sources (5,077,012) (2,075,387) Net Change in fund balances 19,450,524 13,021,088 Fund balances, beginning of year 81,351,978 100,802,502 Fund balances, end of year $100,802,502 $113,823,590 *Not combined with table presenting prior years audits because fiscal years 2015-­16 and 2016-­17 expenditures are presented in a different format. Source: Kern High School District, Audited Financial Statements.

-­28-­

Authority Audited General Fund Revenues, Expenditures and Changes in Fund Balances. The following table shows statement of revenues, expenses and changes in fund balance for the Authority for fiscal years 2013-­14 through 2016-­17.

GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY Revenues, Expenses and Changes in Fund Asset

Governmental Fund -­ Debt Service Fund Fiscal Year 2013-­14 through 2016-­17

(Dollars in thousands)

2013-­14 Audited

2014-­15 Audited

2015-­16 Audited

2016-­17 Audited

Revenues Other local revenues $13,317 $5,611 $6,626 $5,412 Total Revenue 13,317 5,611 6,626 5,412

Expenses Other outgo 916 684 928 681 Interest 464 373 575 1,691 Total Operating Expenses 1,380 1,057 1,503 2,372

Excess of revenues over expenses 11,937 4,554 5,122 3,039

Other Financing Sources (Uses) Transfers In -­-­ -­-­ 268 3,567

Transfers Out (21,562) (4,582) (48,828) (252) Proceeds of refunding bonds 150,920 151,380 151,875 123,845 Payment to refunding bond escrow agent (131,950) (150,920) (151,380) (151,875)

Total other financing sources and uses (2,592) (4,122) (48,065) (24,715)

Net change in fund balance 9,345 432 (42,942) (21,675)

Fund balance at beginning of year, as restated 140,647 149,992 150,424 107,482

Fund balance at end of year $149,992 $150,424 $107,482 $85,807 Source: Golden Empire Schools Financing Authority, Audited Financial Statements as presented in Annual Financial Report for Kern High School District under the Debt Service Fund. See “APPENDIX B – Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17 -­ Note 1 -­ Summary of Significant Accounting Policies.”

District Budget and Interim Reporting

Budgeting and Interim Reporting Procedures. State law requires school districts to maintain a balanced budget in each fiscal year. The State Department of Education imposes a uniform budgeting and accounting format for school districts.

Under current law, a school district governing board must adopt and file with the county

superintendent of schools a tentative budget by July 1 in each fiscal year. The District is under the jurisdiction of the Kern County Superintendent of Schools (the "County Superintendent").

The County Superintendent must review and approve, conditionally approve or

disapprove the budget no later than August 15. The County Superintendent is required to examine the adopted budget for compliance with the standards and criteria adopted by the State Board of Trustees and identify technical corrections necessary to bring the budget into compliance with the established standards. If the budget is disapproved, it is returned to the District with recommendations for revision. The District is then required to revise the budget,

-­29-­

hold a public hearing thereon, adopt the revised budget and file it with the County Superintendent no later than September 8. Pursuant to State law, the County Superintendent has available various remedies by which to impose and enforce a budget that complies with State criteria, depending on the circumstances, if a budget is disapproved. After approval of an adopted budget, the school district's administration may submit budget revisions for governing board approval.

Subsequent to approval, the County Superintendent will monitor each district under its

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

A State law adopted in 1991 ("A.B. 1200") imposed additional financial reporting

requirements on school districts, and established guidelines for emergency State aid apportionments. Under the provisions of A.B. 1200, each school district is required to file interim certifications with the County Superintendent (on December 15, for the period ended October 31, and by mid-­March for the period ended January 31) as to its ability to meet its financial obligations for the remainder of the then-­current fiscal year and, based on current forecasts, for the subsequent fiscal year. The County Superintendent reviews the certification and issues either a positive, negative or qualified certification.

Interim Certifications Regarding Ability to Meet Financial Obligations. Under the

provisions of AB 1200, each school district is required to file interim certifications with the county office of education as to its ability to meet its financial obligations for the remainder of the then-­current fiscal year and, based on current forecasts, for the subsequent two fiscal years. The county office of education reviews the certification and issues the following types of certifications:

• Positive certification -­ the school district that will meet its financial

obligations for the current fiscal year and the subsequent two fiscal years.

• Negative certification -­ the school district will be unable to meet its

financial obligations for the remainder of the fiscal year or the subsequent fiscal year.

• Qualified certification -­ the school district may not meet its financial

obligations for the current fiscal year or the subsequent two fiscal years.

-­30-­

Under California law, any school district and office of education that has a qualified or negative certification in any fiscal year may not issue, in that fiscal year or in the next succeeding fiscal year, certificates of participation, tax anticipation notes, revenue bonds or any other debt instruments that do not require the approval of the voters of the district, unless the applicable county superintendent of schools determines that the district’s repayment of indebtedness is probable.

District’s Budget Approval/Disapproval and Certification History. The District has not

received any qualified or negative certifications of its financial reports in the past five years, nor have any of its budgets been disapproved by the County Superintendent. The District’s most recent interim report, the Second Interim for fiscal year 2017-­18, was certified as positive by the Board.

Copies of the District’s budget, interim reports and certifications may be obtained upon

request from the District Office at Kern High School District, 5801 Sundale Avenue, Bakersfield, California 93309. The District may impose charges for copying, mailing and handling.

[Remainder of page intentionally left blank.]

-­31-­

District’s Fiscal Year 2017-­18 Adopted Budget and Second Interim Projections. The following table shows the District’s general fund revenues and expenses from the District’s 2017-­18 adopted budget and the second interim report.

KERN HIGH SCHOOL DISTRICT

General Fund Revenues and Expenses Fiscal Year 2017-­18 Adopted Budget and Second Interim Projections

Adopted Budget 2017-­18

Second Interim Projections

Revenues LCFF Funding Sources $383,300,000 $383,400,000 Federal revenues 23,491,234 27,494,297 Other state revenues 44,870,949 42,755,296 Other local revenues 3,131,000 3,273,667 Total Revenues 454,793,183 456,923,260 Expenses Certificated Salaries 180,553,599 182,282,958 Classified Salaries 81,314,022 82,530,621 Employee Benefits 111,190,579 107,179,671 Books and Supplies 31,164,912 34,108,154 Services and Other Operating Expenses 40,642,550 46,276,905 Capital Outlay 12,090,103 15,936,408 Other Outgo (Excluding Indirect Costs) 4,530,000 5,592,023 Transfers of Indirect Costs (1,707,000) (1,770,000) Total Expenses 459,778,765 472,136,740 Excess of Revenues Over/(Under) Expenses (4,985,582) (15,213,480)

Other Financing Sources (Uses) Operating Transfers In 491,800 491,800 Operating Transfers Out (6,899,169) (6,047,709) Other Sources (Uses) -­-­ -­-­ Total Other Financing Sources (Uses) (6,407,368) (5,555,909) Net Change in Fund Balance (11,392,950) (20,769,389) Fund Balance, July 1(1)(2) 58,419,706 63,033,985 Fund Balance, June 30 $47,026,756 $42,264,596 (1) Beginning balance set forth in 2017-­18 Budget does not correspond directly with audited ending fund balance because the audit reports the General Fund consolidated with Fund 17 -­ Special Reserve, while the budget and interim reports account for those funds separately. (2) As presented in 2017-­18 Second Interim Report. Source: Kern High School District.

District Reserves. The District’s ending fund balance is the accumulation of surpluses

from prior years. This fund balance is used to meet the State’s minimum required reserve of 2% of expenditures, plus any other allocation or reserve which might be approved as an expenditure by the District in the future. The District maintains an unrestricted reserve that meets or exceeds the State’s minimum requirements.

-­32-­

In connection with legislation adopted in connection with the State’s fiscal year 2014-­15 budget (“SB 858”), the Education Code was amended to provide that, beginning in fiscal year 2015-­16, if a district’s proposed budget includes a local reserve above the minimum recommended level, the governing board must provide the information for review at the annual public hearing on its proposed budget. In addition, SB 858 included a provision, which became effective upon the passage of Proposition 2 at the November 4, 2014 statewide election, which limits the amount of reserves which may be maintained at the school district level. Specifically, the legislation, among other things, enacted Education Code Section 42127.01, which became operative December 15, 2014, and provides that in any fiscal year immediately after a fiscal year in which a transfer is made to the State’s Public School System Stabilization Account (the Proposition 98 reserve), a school district may not adopt a budget that contains a reserve for economic uncertainties in excess of twice the applicable minimum recommended reserve for economic uncertainties established by the State Board (for school districts with ADA over 400,000, the limit is three times the amount). Exemptions can be granted by the County Superintendent under certain circumstances.

Effective January 1, 2018, Senate Bill 751, which was signed by the Governor on

October 11, 2017, amends Section 42127.01 of the Education Code to raise the reserve cap to no more than 10% of a school district’s combined assigned or unassigned ending general fund balance. In addition, the amendment provides that the reserve cap will be effective only if there is a minimum balance of 3% in the Proposition 98 reserve referenced in the preceding paragraph. Basic aid school districts and small districts with 2,500 or fewer ADA are exempted from the reserve cap contained in Education Code Section 42127.01.

The District cannot predict when or how any additional changes to legal provisions governing the reserve cap would impact its reserves and future spending. Sources of Revenue

The District categorizes its general fund revenues into four sources, being LCFF,

Federal Revenues, Other State Revenues and Local Revenues. Each of these revenue sources is described below.

LCFF Sources. District funding is provided by a mix of (1) local property taxes and (2)

State apportionments of funding under the LCFF. Generally, the State apportionments will amount to the difference between the District's LCFF funding entitlement and its local property tax revenues.

Beginning in 1978-­79, Proposition 13 and its implementing legislation provided for each

county to levy (except for levies to support prior voter-­approved indebtedness) and collect all property taxes, and prescribed how levies on county-­wide property values are to be shared with local taxing entities within each county.

The principal component of local revenues is the school district’s property tax revenues,

i.e., the district’s share of the local 1% property tax, received pursuant to Sections 75 and following and Sections 95 and following of the California Revenue and Taxation Code. Education Code Section 42238(h) itemizes the local revenues that are counted towards the base revenue limit before calculating how much the State must provide in equalization aid. Historically, the more local property taxes a district received, the less State equalization aid it is entitled to.

-­33-­

Federal Revenues. The federal government provides funding for several District programs, including special education programs, programs under Every Student Succeeds Act, the Individuals With Disabilities Education Act, and specialized programs such as Drug Free Schools.

Other State Revenues. As discussed above, the District receives State apportionment

of basic and equalization aid in an amount equal to the difference between the District's revenue limit and its property tax revenues. In addition to such apportionment revenue, the District receives other State revenues.

The District receives State aid from the California State Lottery (the "Lottery"), which

was established by a constitutional amendment approved in the November 1984 general election. Lottery revenues must be used for the education of students and cannot be used for non-­instructional purposes such as real property acquisition, facility construction, or the financing of research. Moreover, State Proposition 20 approved in March 2000 requires that 50% of the increase in Lottery revenues over 1997-­98 levels must be restricted for use on instructional material.

For additional discussion of State aid to school districts, see “-­State Funding of

Education;; Recent State Budgets.” Other Local Revenues. In addition to local property taxes, the District receives

additional local revenues from items such as interest earnings and other local sources.

Pension Plans Qualified employees of the District are covered under multiple-­employer defined benefit

pension plans maintained by agencies of the State. Certificated employees are members of the State Teachers’ Retirement System (“STRS”) and classified employees are members of the Public Employees’ Retirement System (“PERS”). Both STRS and PERS are operated on a Statewide basis. The information set forth below regarding the STRS and PERS programs, other than the information provided by the District regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not to be construed as a representation by either the District or the Underwriters.

Implementation of GASB Nos. 68 and 71. Commencing with fiscal year ended June

30, 2015, the District implemented the provisions of GASB Statement Nos. 68 and 71 which require certain new pension disclosures in the notes to its audited financial statements commencing with the audit for fiscal year 2014-­15. Statement No. 68 generally requires the District to recognize its proportionate share of the unfunded pension obligation for STRS and PERS by recognizing a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. As a result of the implementation of GASB Statement Nos. 68 and 71, the District has restated the beginning net position in the government wide Statement of Net Position, effectively decreasing net position as of July 1, 2014 by $286,707. The decrease results from recognizing the net pension liability, net of related deferred outflows of resources. The restatement does not include deferred inflows of resources, as this information was not available. “APPENDIX B – Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17.”

-­34-­

STRS. All full-­time certificated employees participate in STRS, a cost-­sharing, multiple-­employer contributory public employee retirement system. STRS provides retirement, disability and survivor benefits to plan members and beneficiaries under a defined benefit program. Benefit provisions and contribution amounts are established by State statutes, as legislatively amended. The program is funded through a combination of investment earnings and statutorily set contributions from three sources: employees, employers and the State. The District’s employer contributions to STRS for recent fiscal years are set forth in the following table.

KERN HIGH SCHOOL DISTRICT

STRS Contributions Fiscal Years 2010-­11 through 2017-­18†

Fiscal Year Amount 2010-­11 $12,194,000 2011-­12 12,344,000 2012-­13 12,187,000 2013-­14 12,015,000 2014-­15 13,668,000 2015-­16 17,274,534 2016-­17 21,568,709 2017-­18† 24,228,651

† Second interim projection. Source: Kern High School District.

Historically, employee, employer and State contribution rates did not vary annually to

account for funding shortfalls or surpluses in the STRS plan. In recent years, the combination of investment earnings and statutory contributions were not sufficient to pay actuarially required amounts. As a result, the STRS defined benefit program showed an estimated unfunded actuarial liability of approximately $96.7 billion as of June 30, 2016 (the date of the last actuarial valuation). In connection with the State’s adoption of its fiscal year 2014-­15 Budget, the Governor signed into law Assembly Bill 1469 (“AB 1469”), which represents a legislative effort to address the unfunded liabilities of the STRS pension plan. AB 1469 addressed the funding gap by increasing contributions by employees, employers and the State. In particular, employer contribution rates are scheduled to increase through at least fiscal year 2020-­21, from a contribution rate of 8.88% in fiscal year 2013-­14 to 19.1% in fiscal year 2020-­21. Thereafter, employer contribution rates will be determined by the STRS board to reflect the contribution required to eliminate unfunded liabilities by June 30, 2046.

The District’s employer contribution rates for fiscal years 2015-­16, 2016-­17, and 2017-­18

were 10.73%, 12.58% and 14.43%, respectively. Projected employer contribution rates for school districts (including the District) for fiscal year 2018-­19 through fiscal year 2020-­21 are set forth in the following table.

-­35-­

PROJECTED EMPLOYER CONTRIBUTION RATES (STRS) Fiscal Years 2018-­19 through 2020-­21

Fiscal Year Projected Employer Contribution Rate(1)

2018-­19 16.280% 2019-­20 18.130 2020-­21 19.100

(1) Expressed as a percentage of covered payroll. Source: AB 1469

PERS. All full-­time and some part-­time classified employees participate in PERS, an

agent multiple-­employer contributory public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State. PERS provides retirement, disability, and death benefits to plan members and beneficiaries. The District is part of a cost-­sharing pool within PERS known as the “Schools Pool.” Benefit provisions are established by State statutes, as legislatively amended. Contributions to PERS are made by employers and employees. Each fiscal year, the District is required to contribute an amount based on an actuarially determined employer rate. The District’s employer contributions to PERS for recent fiscal years are set forth in the following table.

KERN HIGH SCHOOL DISTRICT PERS Contributions

Fiscal Years 2010-­11 through 2017-­18†

Fiscal Year Amount 2010-­11 $6,854,000 2011-­12 7,113,000 2012-­13 7,570,000 2013-­14 7,632,000 2014-­15 7,951,698 2015-­16 8,551,755 2016-­17 10,938,652 2017-­18† 11,330,938

†Second interim projection. Source: Kern High School District.

Like the STRS program, the PERS program has experienced an unfunded liability in

recent years. The PERS unfunded liability, on a market value of assets basis, was approximately $21.8 billion as of June 30, 2016 (the date of the last actuarial valuation). To address this issue, the PERS board has taken a number of actions. In April 2013, for example, the PERS board approved changes to the PERS amortization and smoothing policy intended to reduce volatility in employer contribution rates. In addition, in April 2016, PERS set new contribution rates, reflecting new demographic assumptions and other changes in actuarial assumptions. The April 2016 rates and underlying assumptions, which were aimed at eliminating the unfunded liability of PERS in approximately 30 years, were implemented for school districts beginning in fiscal year 2016-­17, with the costs spread over 20 years and the increases phased in over the first five years.

-­36-­

On February 13, 2018, the PERS board voted to shorten the period over which PERS will amortize actuarial gains and losses from 30 years to 20 years for new pension liabilities, effective for the June 30, 2019 actuarial valuations. Amortization payments for all unfunded accrued liability bases will be computed to remain a level dollar amount throughout the amortization period, and certain 5-­year ramp-­up and ramp-­down periods will be eliminated. As a result of the shorter amortization period, the contributions required to be made by employers may increase beginning in fiscal year 2020-­21.

The District’s employer contribution rates for fiscal years 2015-­16, 2016-­17 and 2017-­18

were 11.847%, 13.888% and 15.531%, respectively. Projected employer contribution rates for school districts (including the District) for fiscal year 2018-­19 through fiscal year 2020-­21 are set forth in the following table.

PROJECTED EMPLOYER CONTRIBUTION RATES (PERS) Fiscal Years 2018-­19 through 2020-­21(1)

Fiscal Year Projected Employer Contribution Rate(2)

2018-­19 17.700% 2019-­20 20.000 2020-­21 22.700

(1) Rates were estimated by PERS in 2017. The PERS board is expected to approve official employer contribution rates for each fiscal year shown during the immediately preceding fiscal year. (2) Expressed as a percentage of covered payroll. Source: PERS

California Public Employees’ Pension Reform Act of 2013. On September 12, 2012,

the Governor signed into law the California Public Employees’ Pension Reform Act of 2013 (“PEPRA”), which impacted various aspects of public retirement systems in the State, including the STRS and PERS programs. In general, PEPRA (i) increased the retirement age for public employees depending on job function, (ii) capped the annual pension benefit payouts for public employees hired after January 1, 2013, (iii) required public employees hired after January 1, 2013 to pay at least 50% of the costs of their pension benefits (as described in more detail below), (iv) required final compensation for public employees hired after January 1, 2013 to be determined based on the highest average annual pensionable compensation earned over a period of at least 36 consecutive months, and (v) attempted to address other perceived abuses in the public retirement systems in the State. PEPRA applies to all public employee retirement systems in the State, except the retirement systems of the University of California, and charter cities and charter counties whose pension plans are not governed by State law. PEPRA’s provisions went into effect on January 1, 2013 with respect to new State, school, and city and local agency employees hired on or after that date;; existing employees who are members of employee associations, including employee associations of the District, have a five-­year window to negotiate compliance with PEPRA through collective bargaining.

PERS has predicted that the impact of PEPRA on employees and employers, including

the District and other employers in the PERS system, will vary, based on each employer’s current level of benefits. As a result of the implementation of PEPRA, new members must pay at least 50% of the normal costs of the plan, which can fluctuate from year to year. To the extent that the new formulas lower retirement benefits, employer contribution rates could decrease over time as current employees retire and employees subject to the new formulas

-­37-­

make up a larger percentage of the workforce. This change would, in some circumstances, result in a lower retirement benefit for employees than they currently earn.

With respect to the STRS pension program, employees hired after January 1, 2013 will

pay the greater of either (1) 50% of the normal cost of their retirement plan, rounded to the nearest one-­quarter percent, or (2) the contribution rate paid by then-­current members (i.e., employees in the STRS plan as of January 1, 2013). The member contribution rate could be increased from this level through collective bargaining or may be adjusted based on other factors. Employers will pay at least the normal cost rate, after subtracting the member’s contribution.

The District is unable to predict the amount of future contributions it will have to make to

PERS and STRS as a result of the implementation of PEPRA, and as a result of negotiations with its employee associations, or, notwithstanding the adoption of PEPRA, resulting from any legislative changes regarding the PERS and STRS employer contributions that may be adopted in the future.

Additional Information. Additional information regarding the District’s retirement

programs is available in Note 8 and 9 to the District’s audited financial statements attached hereto as APPENDIX B. In addition, both STRS and PERS issue separate comprehensive financial reports that include financial statements and required supplemental information. Copies of such reports may be obtained from STRS and PERS, respectively, as follows: (i) STRS, P.O. Box 15275, Sacramento, California 95851-­0275;; and (ii) PERS, 400 Q Street, Sacramento, California 95811. More information regarding STRS and PERS can also be obtained at their websites, www.calstrs.com and www.calpers.ca.gov, respectively. The references to these Internet websites are shown for reference and convenience only and the information contained on such websites is not incorporated by reference into this Official Statement. The information contained on these websites may not be current and has not been reviewed by the District or the Underwriters for accuracy or completeness.

Other Post-­Employment Benefits

The District provides certain post-­employment healthcare benefits to qualifying

employees. Plan Description. The District Early Retiree Health Benefit Plan (the “Retirement

Plan”) is a single-­employer defined health and welfare plan covering early retirees of the District. Employees of the District hired on or before June 6, 2006, with 10 or more years of consecutive service or employees hired after June 6, 2006 who have 20 years of service with the last 10 years being consecutive, will be eligible for the Retirement Plan at age 55. The District will contribute health and welfare benefits to eligible retirees, their spouses and dependents until the employee becomes eligible for other health and welfare benefits.

On October 2, 2006, the District joined the SISC GASB 45 Trust (the “Trust”) to pre-­fund

the Other Post-­Employment Benefits liability. The Trust is an irrevocable trust under the law of the State and a tax-­exempt governmental trust under Internal Revenue Code Section 115. The Trust funds are divided into individual employer accounts for each participating employer, which may be pooled for investment purposes. The District establishes and amends benefit provisions. The Plan issues a publicly available financial report that includes financial statements and required supplementary information for the Plan.

-­38-­

Funding Policy. The contribution requirements of the District are established and may be amended from time to time by the Board. The required contribution is actuarially determined in accordance with the parameters of GASB 45, with an additional amount to prefund the unfunded actuarial accrued liability (“UAAL”) as determined annually by the District. As of July 1, 2017, the District contributed $6,802,600 to the plan for the current year annual required contribution. As of July 1, 2016, the most recent actuarial valuation date the plan was 81% funded. See “DISTRICT AND AUTHORITY FINANCIAL INFORMATION -­ 2017 Actuarial Report”

Annual OPEB Cost and Net OPEB Obligation. The District’s annual OPEB cost

(expense) is calculated based on the annual required contribution, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years.

A summary of the District’s OPEB obligation, as shown in the District’s audited financial

statements as of June 30, 2017, is as follows:

KERN HIGH SCHOOL DISTRICT Other Post-­Employment Benefit Cost – 2016-­17

Annual required contribution $6,802,600 Interest on net OPEB obligation (890,600) Adjustment to annual required contribution 1,355,000 Annual OPEB cost 7,267,000 Contributions made 6,802,600 Change in OPEB obligation 464,400 Net OPEB obligation, beginning of year (16,963,100) Net OPEB obligation, end of year $(16,498,700)

A history of the District’s annual OPEB cost, the percentage of annual OPEB cost

contributed, and the net OPEB obligation for the years ended June 30, 2015, 2016, and 2017 are as follows:

KERN HIGH SCHOOL DISTRICT Net OPEB Obligation

Year Ended June 30

Annual OPEB Cost

Percentage of Annual OPEB Cost Contributed

Net OPEB Obligation

2015 $8,860,700 100% $(17,401,700) 2016 7,949,400 94.5 (16,963,100) 2017 7,267,000 93.6 (16,498,700)

Source: Kern High School District Audit Report for fiscal year 2016-­17. 2016 Actuarial Report. The most recent actuarial report was prepared by Rael &

Letson, Consultants and Actuaries (the “Actuary”) and is dated December 2016 with respect to unfunded liability as of July 1, 2016. The Actuary identified a UAAL of $19,729,500 and an annual required contribution (“ARC”) of $6,802,600 as of July 1, 2016. The Actuary based its report on active participant and eligible retiree data provided by Self-­Insured Schools of California, assuming a 30 year amortization.

-­39-­

Investment of District Funds In accordance with Government Code Section 53600 et seq., the Kern County Treasurer

manages funds deposited with it by the District. The County is required to invest such funds in accordance with California Government Code Sections 53601 et seq. In addition, counties are required to establish their own investment policies which may impose limitations beyond those required by the Government Code. For further information concerning County investments, access the County’s website: www.kcttc.co.kern.ca.us. Investment information can be found under the link to Financial Services. The information contained in such website has not been reviewed by the District or the Underwriters and is not incorporated in this Official Statement by reference. See “APPENDIX G -­ KERN COUNTY INVESTMENT POLICY AND MONTHLY REPORT.”

State Funding of Education

General. The State requires that from all State revenues there first shall be set apart the moneys to be applied for support of the public school system and public institutions of higher education. Public school districts in California are dependent on revenues from the State for a large portion of their operating budgets. California school districts receive an average of about 55% of their operating revenues from various State sources. The primary source of funding for school districts are revenues under the LCFF, which are a combination of State funds and local property taxes (see “DISTRICT FINANCIAL INFORMATION -­ Education Funding Generally” above). State funds typically make up the majority of a district’s LCFF allocation. School districts also receive substantial funding from the State for various categorical programs.

The availability of State funds for public education is a function of constitutional

provisions affecting school district revenues and expenditures (see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS” below), the condition of the State economy (which affects total revenue available to the State general fund), and the annual State budget process. Decreases in State revenues may significantly affect appropriations made by the legislature to school districts.

The following information concerning the State’s budgets for the current and most recent

preceding years has been compiled from publicly-­available information provided by the State. Neither the District, the Underwriters or the County is responsible for the information relating to the State’s budgets provided in this section. Further information is available from the Public Finance Division of the State Treasurer’s Office.

The Budget Process. The State’s fiscal year begins on July 1 and ends on June 30.

The annual budget is proposed by the Governor by January 10 of each year for the next fiscal year (the “Governor’s Budget”). Under State law, the annual proposed Governor’s Budget cannot provide for projected expenditures in excess of projected revenues and balances available from prior fiscal years. Following the submission of the Governor’s Budget, the Legislature takes up the proposal.

Under the State Constitution, money may be drawn from the State Treasury only through

an appropriation made by law. The primary source of the annual expenditure authorizations is the Budget Act as approved by the Legislature and signed by the Governor. The Budget Act must be approved by a majority vote of each House of the Legislature. The Governor may reduce or eliminate specific line items in the Budget Act or any other appropriations bill without

-­40-­

vetoing the entire bill. Such individual line-­item vetoes are subject to override by a two-­thirds majority vote of each House of the Legislature.

Appropriations also may be included in legislation other than the Budget Act. Bills

containing appropriations (including for K-­14 education) must be approved by a majority vote in each House of the Legislature, unless such appropriations require tax increases, in which case they must be approved by a two-­thirds vote of each House of the Legislature, and be signed by the Governor. Continuing appropriations, available without regard to fiscal year, may also be provided by statute or the State Constitution.

Funds necessary to meet an appropriation need not be in the State Treasury at the time

such appropriation is enacted;; revenues may be appropriated in anticipation of their receipt.

Recent State Budgets Certain information about the State budgeting process and the State Budget is available

through several State of California sources. A convenient source of information is the State’s website, where recent official statements for State bonds are posted. The references to internet websites shown below are shown for reference and convenience only, the information contained within the websites may not be current and has not been reviewed by the District and is not incorporated herein by reference.

• The California State Treasurer Internet home page at www.treasurer.ca.gov,

under the heading “Bond Information”, posts various State of California Official Statements, many of which contain a summary of the current State Budget, past State Budgets, and the impact of those budgets on school districts in the State.

• The California State Treasurer’s Office Internet home page at

www.treasurer.ca.gov, under the heading “Financial Information”, posts the State’s audited financial statements. In addition, the Financial Information section includes the State’s Rule 15c2-­12 filings for State bond issues. The Financial Information section also includes the Overview of the State Economy and Government, State Finances, State Indebtedness, Litigation from the State’s most current Official Statement, which discusses the State budget and its impact on school districts.

• The California Department of Finance’s Internet home page at

www.dof.ca.gov, under the heading “California Budget”, includes the text of proposed and adopted State Budgets.

• The State Legislative Analyst’s Office prepares analyses of the proposed and

adopted State budgets. The analyses are accessible on the Legislative Analyst’s Internet home page at www.lao.ca.gov under the heading “Subject Area – Budget (State)”.

Prior Years’ Budgeting Techniques. Declining revenues and fiscal difficulties which

arose in the State commencing in fiscal year 2008-­09 led the State to undertake a number of budgeting strategies, which had subsequent impacts on local agencies within the State. These techniques included the issuance of IOUs in lieu of warrants (checks), the enactment of statutes

-­41-­

deferring amounts owed to public schools, until a later date in the fiscal year, or even into the following fiscal year (known as statutory deferrals), trigger reductions, which were budget cutting measures which were implemented or could have been implemented if certain State budgeting goals were not met, among others, and the dissolution of local redevelopment agencies in part to make available additional funding for local agencies. Although the fiscal year 2017-­18 State Budget is balanced and projects a balanced budget for the foreseeable future, largely attributable to the additional revenues generated due to the passage of Proposition 55 at the November 8, 2016 statewide election, there can be no certainty that budget-­cutting strategies such as those used in recent years will not be used in the future should the State Budget again be stressed and if projections included in such budget do not materialize.

2013-­14 State Budget: Significant Change in Education Funding. As described

previously herein, the 2013-­14 State Budget and its related implementing legislation enacted significant reforms to the State’s system of K-­12 education finance with the enactment of the LCFF. Significant reforms such as the LCFF and other changes in law may have significant impacts on the District’s finances. 2017-­18 State Budget

On June 27, 2017, the Governor signed the 2017-­18 State budget (the “2017-­18 State

Budget”) into law. The 2017-­18 State Budget calls for the spending of $125.1 billion from the general fund, $54.9 billion from special funds and $3.3 billion from bond funds. The 2017-­18 State Budget includes a funding increase of $3.1 billion for K-­14 education, an expanded tax credit for low-­wage workers and puts an additional $1.8 billion into the State’s budget stabilization reserve, bringing the rainy-­day fund balance to $8.5 billion, or 66% of the constitutional target. Significant features of the 2017-­18 State Budget include:

• total funding of $92.5 billion for K-­12 education programs, including an increase in funding of $1.4 billion to continue the State’s transition to LCFF, bringing the formula to 97% of full implementation;;

• an increase of $877 million in one-­time discretionary grants to provide school districts, charter schools and county offices of education with funds to be used for items such as deferred maintenance, professional development, induction for beginning teachers, instructional materials, technology, and the implementation of new educational standards;;

• an increase in $7 million to support county offices of education, which funding

requires county superintendents of schools to summarize how the county offices of education will support school districts and schools within the county;;

• $1.8 billion to pay down past budgetary borrowing and State employee pension liabilities;;

• a $6 billion supplemental payment to PERS, on top of the actuarially determined annual contribution of $5.2 billion, through a loan from the State’s Surplus Money Investment Fund, which will reduce unfunded liabilities, stabilize the State’s contribution rate and save $11 billion over the next twenty years;;

-­42-­

• $2.8 billion for STRS, which contribution is consistent with the funding strategy of putting STRS on a sustainable path forward and eliminating its current unfunded liability in approximately 30 years;;

• new appropriations of $2.8 billion, distributed evenly between State and local

transportation authorities, to implement the Road Repair and Accountability Act of 2017;;

• $84.9 million to address issues from the State’s recent drought emergency,

including $41.9 million to extend the fire season and expand the State’s firefighting capabilities to reduce the fire risk from climate change, the recent drought and tree mortality;; and

• an increase of $31.5 million to repair and maintain the aging infrastructure of

the State’s park system.

2018-­19 Proposed State Budget

On January 10, 2018, the Governor released the proposed State budget for fiscal year 2018-­19 (the “2018-­19 Proposed Budget”). The 2018-­19 Proposed Budget, despite projecting a one-­time surplus and assuming continued expansion of the State economy, proposes a $3.5 billion deposit in order to fully fund the State’s “Rainy Day Fund” in order to soften the magnitude of any future budget cuts. The 2018-­19 Proposed Budget includes $131.7 billion in general fund spending and reserves of $1.2 billion. The 2018-­19 Proposed Budget revises the Proposition 98 minimum funding guarantee for school districts, community college districts, and other state agencies that provide direct elementary and secondary instructional programs for kindergarten through grade 14 to $78.3 billion, reflecting a year-­to-­year increase of $3.1 billion from fiscal year 2017-­18. This includes an approximately $3 billion investment to fully implement the LCFF two years earlier than originally projected. Ongoing Proposition 98 per-­pupil expenditures in fiscal year 2018-­19 are set at $11,614, an increase of $465 per-­pupil over the revised level for fiscal year 2017-­18. The Governor is required to release a May Revision to the proposed budget by May 14 of each year.

LAO Proposed Budget Overview

On January 12, 2018, the Legislative Analyst’s Office (the “LAO”), a nonpartisan State

office that provides fiscal and policy information and advice to the State Legislature, released its report on the 2018-­19 Proposed State Budget entitled, “The 2018-­19 Budget: Overview of the Governor’s Budget” (the “2018-­19 Proposed Budget Overview”). In the 2018-­19 Proposed Budget Overview, the LAO commends the Governor’s proposed total reserve balance of $15.7 billion, which includes an optional $13.5 billion deposit into the State’s constitutional rainy day fund and $2.2 billion in discretionary reserves. The LAO believes that the State’s emphasis on increasing budget reserves is prudent in light of economic and federal budget uncertainty, enabling the State to weather the next recession with minimal disruption to public programs. This commendation notwithstanding, the LAO urges the State Legislature to deliberate on its optimal level of reserves, as filling the rainy day fund now may constrain its ability to build more reserves or make other budget commitments in future years.

-­43-­

The 2018-­19 Proposed Budget Overview also highlights the Governor’s proposed allocation of funding increases for schools and community colleges. According to the estimates of the Governor’s office, there are sizeable resources available to allocate within the constitutionally required funding guarantee for schools and community colleges, permitting the State to (1) fully fund the implementation of the K-­12 LCFF, (2) increase community college apportionments and implement a new allocation formula, and (3) create a new high school career technical education program. The LAO believes that the proposed education spending is reasonable but notes that the State Legislature may take different, more efficient approaches to achieving the same education financing goals.

Furthermore, the 2018-­19 Proposed Budget apportions some discretionary funds for a

variety of new infrastructure projects. While the LAO considers these infrastructure proposals to have merit, it cautions against prioritizing some of the identified infrastructure projects, which may have alternative financing sources or may bring significant, ongoing costs to the State’s General Fund.

The complete 2018-­19 Proposed Budget Overview is available from the LAO’s website

at www.lao.ca.gov. The District cannot, and does not, take any responsibility for the continued accuracy of such internet address or for the accuracy, completeness or timeliness of information posted on such address, and such information is not incorporated in this Official Statement by such reference.

Availability of 2017-­18 State Budget and 2018-­19 Proposed Budget

The complete 2017-­18 State Budget and the 2018-­19 Proposed Budget are available

from the California Department of Finance website at www.dof.ca.gov. The District can take no responsibility for the continued accuracy of this internet address or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated in this Official Statement by such reference. The information referred to above should not be relied upon in making an investment decision with respect to the Notes.

Uncertainty Regarding Future State Budgets

The District cannot predict what actions will be taken in future years by the State

Legislature and the Governor to address the State’s current or future changing revenues and expenditures. Future State budgets will be affected by national and state economic conditions and other factors over which the District has no control. The District cannot predict what impact any future budget proposals will have on the financial condition of the District. To the extent that the State budget process results in reduced revenues to the District, the District will be required to make adjustments to its budgets.

Disclaimer Regarding State Budgets

The State has not entered into any contractual commitment with the Authority, the

District, the County, or the Owners of the Notes to provide State budget information to the Authority, the District or the owners of the Notes. Although they believe the State sources of information listed above are reliable, neither the Authority, the District nor the Underwriters assume any responsibility for the accuracy of the State Budget information set forth or referred to in this Official Statement or incorporated herein.

-­44-­

Legal Challenges to State Funding of Education The application of Proposition 98 and other statutory regulations has been the subject of

various legal challenges in the past. The District cannot predict if or when there will be changes to education funding or legal challenges which may arise relating thereto.

TAXATION AND APPROPRIATIONS

Property Tax Collection Procedures

In California, property which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The “secured roll” is that part of the assessment roll containing (1) state-­assessed public utilities’ property and (2) property the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising under State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property.

Property taxes on the secured roll are due in two installments, on November 1 and

February 1 of each fiscal year. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is sent to collections on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1-­1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the Leased Property is deeded to the State and then is subject to sale by the county tax collector.

Property taxes are levied for each fiscal year on taxable real and personal property

situated in the taxing jurisdiction as of the preceding January 1, except that supplemental assessment and taxation of property occurs as of the occurrence of a change of ownership or completion of new construction, timely providing increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date.

Property taxes on the unsecured roll are due on the lien date and become delinquent, if

unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1-­1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer;; (2) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer;; (3) filing a certificate of delinquency for record in the county recorder’s office, in order to obtain a lien on certain property of the taxpayer;; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the

-­45-­

secured roll is the sale of the Leased Property securing the taxes to the State for the amount of taxes which are delinquent.

Unitary Taxation of Utility Property

Prior to 1987, property of regulated public utilities that is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”) was assessed for local tax purposes by the State Board of Equalization on a geographical basis in basically the same manner as other taxable property in any taxing jurisdiction.

In 1987, the State Legislature enacted Chapter 921 amending Section 98.9 and various

other sections of the Revenue and Taxation Code. The changes call for the establishment in each county of one county-­wide tax rate area with the assessed value of all unitary and operating non-­unitary utility property being assigned to this tax rate area.

The result is a single assessed valuation figure for all utility property owned by each

utility within the county, without any breakdown for individual taxing jurisdictions. All of this property is then subjected to a tax at a rate equal to the sum of the following two rates:

(a) A rate determined by dividing the county’s total ad valorem tax levies for the

secured roll for the prior year, exclusive of levies for debt service, by the county’s total ad valorem secured roll assessed value for the prior year, and

(b) A rate determined by dividing the county’s total ad valorem tax levies for

the secured roll for the prior year for debt service only by the county’s total ad valorem secured roll assessed value for the prior year.

The foregoing process results in the creation of two pools of money, pool 1 being

available for general tax purposes and pool 2 for debt service purposes, each pool being then allocated to the various taxing jurisdictions in the county by a statutory formula for the county as a whole.

See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT

REVENUES AND APPROPRIATIONS – Unitary Property.”

Assessed Valuation and Tax Rate

The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization, as described above. Assessed valuations are reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California Constitution. For a discussion of how properties currently are assessed, see “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS.”

Certain classes of property, such as churches, colleges, not-­for-­profit hospitals, and

charitable institutions, are exempt from property taxation and do not appear on the tax rolls.

-­46-­

The following table sets forth the assessed value in the District for fiscal years 2007-­08 through 2017-­18.

KERN HIGH SCHOOL DISTRICT Assessed Valuations

Fiscal Years 2007-­08 through 2017-­18

Fiscal Year Local Secured Utility Unsecured Total % Change 2007-­08 $44,961,049,824 $713,881,690 $1,632,599,252 $47,307,530,766 -­-­ 2008-­09 46,089,514,392 812,488,585 1,784,897,367 48,686,900,344 2.91 2009-­10 42,488,361,707 863,392,211 1,968,011,134 45,319,765,052 (6.91) 2010-­11 42,823,734,096 838,597,009 2,014,174,535 45,676,505,640 0.78 2011-­12 41,844,142,730 789,696,750 2,203,360,636 44,837,200,116 (1.83) 2012-­13 44,118,502,355 679,495,971 2,242,930,120 47,040,928,446 4.91 2013-­14 45,370,045,616 674,072,670 2,132,510,442 48,176,628,728 2.41 2014-­15 48,274,985,079 638,903,462 2,229,308,398 51,143,196,939 6.15 2015-­16 48,130,601,435 697,653,861 2,405,538,068 51,233,793,364 0.18 2016-­17 49,098,640,543 679,500,444 2,247,878,632 52,026,019,619 1.55 2017-­18 51,665,063,877 595,043,772 2,112,501,283 54,372,608,932 4.51

Source: California Municipal Statistics, Inc. Factors Relating to Increases/Decreases in Assessed Value. As indicated in the

previous table, assessed valuations are subject to change in each year. Increases or decreases in assessed valuation result from a variety of factors including but not limited to general economic conditions, supply and demand for real property in the area, government regulations such as zoning, and natural disasters such as earthquakes, fires, floods and droughts. Notable natural disasters in recent years include drought conditions throughout the State, which ended in 2017 due to record-­level precipitation in late 2016 and early 2017, with the exception of Fresno, Kings, Tulare and Tuolumne counties, where emergency drinking water projects are currently in place to address diminished groundwater supplies.

In addition, wildfires have occurred in recent years in different regions of the State, and

recently Governor Jerry Brown, on October 12, 2017 and on December 4 and 7, 2017, declared states of emergency in Napa, Sonoma and Yuba counties, Los Angeles and Ventura Counties, and San Diego and Santa Barbara Counties. Related flooding and mudslides have also occurred. Although the recent natural disasters do not include territory within the District’s boundaries, the District cannot predict or make any representations regarding the effects that wildfires, flooding, mudslides or any other natural disasters and related conditions have or may have on the value of taxable property within the District, or to what extent the effects said disasters might have had on economic activity in the District or throughout the State.

-­47-­

Top Twenty Property Owners

General. The twenty taxpayers in the District with the greatest combined assessed valuation of taxable property on the fiscal year 2017-­18 tax roll, and the assessed valuations thereof, are shown below.

The more property (by assessed value) which is owned by a single taxpayer in the

District, the greater amount of tax collections are exposed to weaknesses in the taxpayer’s financial situation and ability or willingness to pay property taxes. Each taxpayer listed below is a unique name listed on the tax rolls. The District cannot determine from County assessment records whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the table below.

KERN HIGH SCHOOL DISTRICT Top Twenty Secured Property Taxpayers

Fiscal Year 2017-­18

2017-­18 % of Property Owner Primary Land Use Assessed Valuation Total (1)

1. Chevron USA Inc. Oil & Gas Production $2,969,275,549 5.68% 2. California Resources Oil & Gas Production 1,707,316,245 3.27 3. Oxy USA Inc. Oil & Gas Production 546,594,697 1.05 4. William Bolthouse Farms Inc. Food Processing 375,462,357 0.72 5. Pastoria Energy Facility LLC Power Generation 298,800,000 0.57 6. Elk Hills Power, LLC Power Generation 285,900,000 0.55 7. Grimmway Enterprises Inc. Food Processing 277,046,741 0.53 8. Ross Dress for Less Inc. Warehouse 205,583,420 0.39 9. California Water Service Co. Water Company 171,156,502 0.33 10. Nestle Dreyer's Ice Cream Company Food Processing 161,892,465 0.31 11. Target Corporation Warehouse 156,047,021 0.30 12. Paramount Land Company LLC Agricultural 135,027,262 0.26 13. Valley Plaza Mall LP Shopping Center 132,936,127 0.25 14. MacPherson Oil Co. Oil & Gas Production 129,957,418 0.25 15. Plains LPG Services LP Industrial 127,929,394 0.24 16. Wal Mart Real Estate Business Trust Commercial Stores 102,127,279 0.20 17. Roll Real Estate Development LLC Industrial 99,488,169 0.19 18. National Cement Co. of Calif. Industrial 99,326,249 0.19 19. Ensign United States Drilling (CA) Inc. Industrial 96,618,521 0.18 20. J.G. Boswell Co. Agricultural 91,522,849 0.18 $8,170,008,265 15.63%

(1) 2017-­18 Total Secured Assessed Valuation: $52,260,107,649. Source: California Municipal Statistics, Inc.

Concentration of Ownership;; Oil and Gas Properties. The District derives a portion of its revenues from its share of the one percent levy for general purposes. The top twenty property owners in the District in fiscal year 2017-­18 account for 15.63% of the assessed valuation in the District, with the top two secured taxpayers accounting for approximately 8.95% of the District’s secured assessed valuation. Non-­payment of property taxes by a large owner in the District could reduce the District’s share of local property taxes, although so long as the County participates in the “Teeter Plan” further described below, the District will receive its share of such taxes, notwithstanding delinquencies.

-­48-­

In addition, the County is the largest petroleum producing county in the State, and as identified by the data presented in the foregoing table, a large portion of property ownership in the District is owned by gas and oil producing properties. These properties are taxable as real property;; however, special rules apply to the determination of their assessed value, and is determined by the Special Properties Section of the County Assessor's office. The State Board of Equalization is empowered to prescribe rules and regulations governing local assessors' uniform assessment of certain types of properties, and pursuant to such authority, has adopted Rule 468 with respect to oil and gas producing properties. Rule 468 recognizes the unique nature of oil and gas property interests which require the application of specialized appraisal techniques designed to satisfy the requirements of State law with respect to property taxation. The appraisal methodology takes into account variables such as base year values of the property and mineral reserves, increases and reductions in recoverable amounts, proved reserves, discoveries, construction of improvements and changes in economic conditions, among others. As such, the value of oil and gas producing properties may be subject to more fluctuations in assessed values than other types of property.

Tax Levies and Delinquencies

The Board of Supervisors of the County has adopted the Alternative Method of

Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter Plan, each entity levying property taxes in the County may draw on the amount of uncollected secured taxes credited to its fund, in the same manner as if the amount credited had been collected. The District participates in the Teeter Plan, and thus receives 100% of secured property taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes.

So long as the Teeter Plan remains in effect, the District’s receipt of revenues with

respect to the levy of ad valorem property taxes will not be dependent upon actual collections of the ad valorem property taxes by the County. However, under the statute creating the Teeter Plan, the Board of Supervisors can under certain circumstances terminate the Teeter Plan in part or in its entirety with respect to the entire County and, in addition, the Board of Supervisors can terminate the Teeter Plan with respect to the District if the delinquency rate for all ad valorem property taxes levied within the District in any year exceeds 3%. In the event that the Teeter Plan were terminated, the amount of the levy of ad valorem property taxes in the District would depend upon the collections of the ad valorem property taxes and delinquency rates experienced with respect to the parcels within the District.

-­49-­

Historical secured tax levy collections and delinquencies countywide, with respect to the 1% general fund apportionment, are summarized in the following table.

KERN HIGH SCHOOL DISTRICT

Secured Tax Charges and Delinquencies (1)

Year Secured

Tax Charge(2) Amt. Delinquent

June 30 % Delinquent June 30

2007-­08 $103,098,051 $3,941,526 3.82% 2008-­09 104,866,062 3,263,292 3.11 2009-­10 97,644,344 2,430,413 2.49 2010-­11 99,836,523 2,080,931 2.08 2011-­12 98,571,851 1,453,891 1.47 2012-­13 101,664,215 1,329,798 1.31 2013-­14 100,566,657 1,292,791 1.29 2014-­15 106,960,977 1,381,356 1.29 2015-­16 104,835,670 1,313,336 1.25 2016-­17 106,901,623 1,473,477 1.38

(1) The County utilizes the Teeter Plan for assessment levy and distribution. This method guarantees distribution of 100% of the assessments levied to the taxing entity, with the county retaining all penalties and interest. (2) 1% general fund apportionment. Source: California Municipal Statistics, Inc.

Debt Obligations

Set forth below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and dated March 26, 2018 with respect to debt issued as of April 1, 2018. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

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

[Remainder of page intentionally left blank.]

-­50-­

KERN HIGH SCHOOL DISTRICT Statement of Direct and Overlapping Bonded Debt

Dated as of April 1, 2018 2017-­18 Assessed Valuation: $54,372,608,932 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/18 Kern Community College District School Facilities Improvement District No. 1 63.910% $ 25,707,798 Kern Community College Safety, Repair and Improvement District 64.303 82,922,629 Kern High School District 100.000 258,926,209 Bakersfield City School District 100.000 95,081,619 Beardsley School District 100.000 19,912,057 Fruitvale School District 100.000 25,539,942 Norris School District 100.000 26,747,002 Panama-­Buena Vista Union School District 100.000 64,375,000 Richland School District 100.000 17,912,906 Standard School District 100.000 28,740,000 Other School Districts Various 88,926,649 Buttonwillow Recreation and Park District 100.000 4,426,041 Kern Delta Water District 100.000 390,000 Tehachapi Valley Healthcare District 0.070 42,038 California Statewide Community Development Authority Community Facilities District No. 2015-­02 100.000 10,945,000 Greenfield Union School District Community Facilities District No. 1, 2 and 3 100.000 6,332,172 RNR Community Facilities District No. 92-­1 100.000 106,825,000 Tejon Ranch Public Facilities Authority Community Facilities District 100.000 78,180,000 1915 Act Bonds 100.000 30,748,500 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $972,680,562 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Kern County Certificates of Participation 61.959% $ 61,751,680 Kern County Pension Obligation Bonds 61.959 143,428,465 Kern County Board of Education Certificates of Participation 61.959 23,677,632 Kern Community College District Certificates of Participation 57.793 18,123,885 Kern Community College District Benefit Obligation Bonds 57.793 45,543,774 KERN HIGH SCHOOL DISTRICT GENERAL FUND OBLIGATIONS 100.000 123,845,000 (1) Panama-­Buena Vista Union School District Certificates of Participation 100.000 54,470,000 Other School District General Fund Obligations 100.000 6,980,566 City of Arvin General Fund Obligations 100.000 4,655,000 City of Bakersfield General Fund Obligations 100.000 11,275,000 Tehachapi Valley Recreation and Park District General Fund Obligations 0.154 834 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $493,751,836

OVERLAPPING TAX INCREMENT DEBT (Successor Agencies): Arvin Redevelopment Agency 100.000% $ 7,925,000 Bakersfield Redevelopment Agency 100.000 2,525,000 Shafter Redevelopment Agency 100.000 11,990,000 TOTAL OVERLAPPING TAX INCREMENT DEBT $22,440,000

COMBINED TOTAL DEBT $1,488,872,398 (2)

Ratios to 2016-­17 Assessed Valuation: Direct Debt ($258,926,209) 0.48% Total Gross Direct and Overlapping Tax and Assessment Debt ............................ 1.79% Combined Direct Debt ($382,771,209) ................................. ............................. 0.70% Combined Total Debt ............................................................... ............................. 2.74% Ratios to Redevelopment Successor Agency Incremental Valuation ($1,374,528,096): Overlapping Tax Increment Debt ........................................... 1.63% (1) Excludes the Notes to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-­bonded capital lease obligations. Source: California Municipal Statistics, Inc.

-­51-­

DISTRICT DEBT STRUCTURE

Short-­Term Borrowing Other than proceeds of the Notes described in this Official Statement which will be used

to pay the outstanding 2017 Notes upon maturity, which are secured by a long-­term lease obligation (see “Long-­Term Borrowing – Long-­Term Lease Obligations” below), the District has no short-­term debt outstanding as of this date.

Long-­Term Borrowing

The District has never defaulted on the payment of principal or interest on any of its indebtedness.

General Obligation Bonds. The District has issued general obligation bonds which are

described in the following table. Such general obligation bonds are payable from ad valorem property taxes levied for that purpose on taxable properties within the District.

KERN HIGH SCHOOL DISTRICT

Long Term General Obligation Bonds

Date of Issue (Issue)

Interest Rates

Final Maturity Date

Original Par Amount

Outstanding April 1, 2018

July 13, 2011 (Election 2004, Series D) 5.78% July 1, 2027 $20,151,209 $16,151,209 July 3, 2012 (2012 Refunding Bonds) 2.00-­5.00% August 1, 2033 45,175,000 35,960,000 March 6, 2013 (2013 Refunding Bonds) 2.00-­5.00% August 1, 2030 65,200,000 55,025,000 Nov. 19, 2014 (2014 Refunding Bonds) 3.50-­5.00% August 1, 2036 40,135,000 37,600,000 June 21, 2016 (Election 2004, Series E) 2.00-­4.00% August 1, 2027 28,845,000 26,430,000 May 25, 2017 (Election 2016, Series A) 2.00-­4.00% August 1, 2029 87,700,000 87,700,000 Total -­-­ -­-­ $324,431,209 $258,866,209

The District’s most recent general obligation bond election was held on November 8,

2016, and voters of the District authorized the issuance of up to $280 million in general obligation bonds for school facilities projects. As of this date, the District has $192.3 million of authorized but unissued bonds under its 2016 measure.

Long-­Term Lease Obligations. As previously described herein, on April 27, 2017, the

Golden Empire Schools Financing Authority issued its 2017 Lease Revenue Refunding Notes in the principal amount of $123,845,000, which are secured by payments to be made by the District pursuant to the Lease Agreement. The 2017 Notes mature on May 1, 2018 and are secured by lease payments to be made by the District with respect to interest, and with respect to principal, with the proceeds of refunding obligations which the District and the Authority have covenanted to issue prior to the maturity date of the 2017 Notes on May 1, 2018. The proceeds of the Notes described herein will be used to provide for the payment of the 2017 Notes at maturity.

-­52-­

CONSTITUTIONAL AND STATUTORY LIMITATIONS AFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Constitutionally Required Funding of Education

The State Constitution requires that from all State revenues, there shall be first set apart

the moneys to be applied by the State for the support of the public school system and public institutions of higher education. School districts receive a significant portion of their funding from State appropriations. As a result, decreases and increases in State revenues can significantly affect appropriations made by the State Legislature to school districts.

Article XIIIA of the California Constitution

Basic Property Tax Levy. On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-­thirds of the voters on such indebtedness, and (iii) (as a result of an amendment to Article XIIIA approved by State voters on November 7, 2000) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition (which provided the authority for the issuance of general obligation bonds approved by the District voters in November 2004 and November 2016). Article XIIIA defines full cash value to mean "the county assessor’s valuation of real property as shown on the 1975-­76 tax bill under full cash value, or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership have occurred after the 1975 assessment". This full cash value may be increased at a rate not to exceed 2% per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the "full cash value"

base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

Legislation Implementing Article XIIIA. Legislation has been enacted and amended a

number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-­approved indebtedness). The 1% property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new

construction, change in ownership or from the annual adjustment not to exceed 2% are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

-­53-­

Inflationary Adjustment of Assessed Valuation. As described above, the assessed

value of a property may be increased at a rate not to exceed 2% per year to account for inflation. On December 27, 2001, the Orange County Superior Court, in County of Orange v. Orange County Assessment Appeals Board No. 3, held that where a home’s taxable value did not increase for two years, due to a flat real estate market, the Orange County assessor violated the 2% inflation adjustment provision of Article XIIIA, when the assessor tried to "recapture" the tax value of the property by increasing its assessed value by 4% in a single year. The assessors in most California counties, including the County, use a similar methodology in raising the taxable values of property beyond 2% in a single year. The State Board of Equalization has approved this methodology for increasing assessed values. On appeal, the Appellate Court held that the trial court erred in ruling that assessments are always limited to no more than 2% of the previous year’s assessment. On May 10, 2004 a petition for review was filed with the California Supreme Court. The petition has been denied by the California Supreme Court. As a result of this litigation, the “recapture” provision described above may continue to be employed in determining the full cash value of property for property tax purposes.

Article XIIIB of the California Constitution

Article XIIIB (“Article XIIIB”) of the State Constitution, as subsequently amended by

Propositions 98 and 111, respectively, limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and in population and for transfers in the financial responsibility for providing services and for certain declared emergencies. For fiscal years beginning on or after July 1, 1990, the appropriations limit of each entity of government shall be the appropriations limit for the 1986-­87 fiscal year adjusted for the changes made from that fiscal year under the provisions of Article XIIIB, as amended.

The appropriations of an entity of local government subject to Article XIIIB limitations

include the proceeds of taxes levied by or for that entity and the proceeds of certain state subventions to that entity. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from (a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed the reasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.

Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations

for debt service, (c) appropriations required to comply with certain mandates of the courts or the federal government, (d) appropriations of certain special districts, (e) appropriations for all qualified capital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel and vehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article XIIIB includes a requirement that all revenues received by an entity of

government other than the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be returned by a revision of tax rates or fee schedules within the next two subsequent fiscal years. However, in the event that a school district’s revenues exceed its spending limit, the district may in any fiscal year increase its appropriations limit to equal its spending by borrowing appropriations limit from the State.

-­54-­

Article XIIIB also includes a requirement that 50% of all revenues received by the State in a fiscal year and in the fiscal year immediately following it in excess of the amount permitted to be appropriated during that fiscal year and the fiscal year immediately following it shall be transferred and allocated to the State School Fund under Section 8.5 of Article XVI of the State Constitution. Unitary Property

Some amount of property tax revenue of the District is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the State Constitution, such property is assessed by the State Board of Equalization (“SBE”) as part of a “going concern” rather than as individual pieces of real or personal property. State-­assessed unitary and certain other property is allocated to the counties by SBE, taxed at special county-­wide rates, and the tax revenues distributed to taxing jurisdictions (including the District) according to statutory formulae generally based on the distribution of taxes in the prior year. Articles XIIIC and XIIID

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

According to the “Title and Summary” of Proposition 218 prepared by the California

Attorney General, Proposition 218 limits “the authority of local governments to impose taxes and property-­related assessments, fees and charges.” Among other things, Article XIIIC establishes that every tax is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes), prohibits special purpose government agencies such as school districts from levying general taxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-­thirds vote;; and also provides that the initiative power will not be limited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XIIIC further provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles XIII and XIIIA of the California Constitution and special taxes approved by a two-­thirds vote under Article XIIIA, Section 4.

On November 2, 2010, Proposition 26 was approved by State voters, which amended

Article XIIIC to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege;; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product;; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections , and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof;; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property;; (5) a fine, penalty, or other monetary charge imposed by the judicial

-­55-­

branch of government or a local government, as a result of a violation of law;; (6) a charge imposed as a condition of property development;; and (7) assessments and property-­related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity.

Article XIIID deals with assessments and property-­related fees and charges, and

explicitly provides that nothing in Article XIIIC or XIIID will be construed to affect existing laws relating to the imposition of fees or charges as a condition of property development.

While the provisions of Proposition 218 may have an indirect effect on the District, such

as by limiting or reducing the revenues otherwise available to other local governments whose boundaries encompass property located within the District (thereby causing such local governments to reduce service levels and possibly adversely affecting the value of property within the District), the District does not believe that Proposition 218 will directly impact the revenues available to pay debt service on the Notes. Proposition 98

On November 8, 1988, California voters approved Proposition 98, a combined initiative constitutional amendment and statute called the “Classroom Instructional Improvement and Accountability Act” (the “Accountability Act”). Certain provisions of the Accountability Act have, however, been modified by Proposition 111, discussed below, the provisions of which became effective on July 1, 1990. The Accountability Act changes State funding of public education below the university level and the operation of the State’s appropriations limit. The Accountability Act guarantees State funding for K-­12 school districts and community college districts (hereinafter referred to collectively as “K-­14 school districts”) at a level equal to the greater of (a) the same percentage of general fund revenues as the percentage appropriated to such districts in 1986-­87, and (b) the amount actually appropriated to such districts from the general fund in the previous fiscal year, adjusted for increases in enrollment and changes in the cost of living. The Accountability Act permits the Legislature to suspend this formula for a one-­year period.

The Accountability Act also changes how tax revenues in excess of the State

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

-­56-­

Proposition 111

On June 5, 1990, the voters approved Proposition 111 (Senate Constitutional Amendment No. 1) called the “Traffic Congestion Relief and Spending Limit Act of 1990” (“Proposition 111”) which further modified Article XIIIB and Sections 8 and 8.5 of Article XVI of the State Constitution with respect to appropriations limitations and school funding priority and allocation.

The most significant provisions of Proposition 111 are summarized as follows: Annual Adjustments to Spending Limit. The annual adjustments to the Article XIIIB

spending limit were liberalized to be more closely linked to the rate of economic growth. Instead of being tied to the Consumer Price Index, the “change in the cost of living” is now measured by the change in California per capita personal income. The definition of “change in population” specifies that a portion of the State’s spending limit is to be adjusted to reflect changes in school attendance.

Treatment of Excess Tax Revenues. “Excess” tax revenues with respect to Article

XIIIB are now determined based on a two-­year cycle, so that the State can avoid having to return to taxpayers excess tax revenues in one year if its appropriations in the next fiscal year are under its limit. In addition, the Proposition 98 provision regarding excess tax revenues was modified. After any two-­year period, if there are excess State tax revenues, 50% of the excess are to be transferred to K-­14 school districts with the balance returned to taxpayers;; under prior law, 100% of excess State tax revenues went to K-­14 school districts, but only up to a maximum of 4% of the schools’ minimum funding level. Also, reversing prior law, any excess State tax revenues transferred to K-­14 school districts are not built into the school districts’ base expenditures for calculating their entitlement for State aid in the next year, and the State’s appropriations limit is not to be increased by this amount.

Exclusions from Spending Limit. Two exceptions were added to the calculation of

appropriations which are subject to the Article XIIIB spending limit. First, there are excluded all appropriations for “qualified capital outlay projects” as defined by the Legislature. Second, there are excluded any increases in gasoline taxes above the 1990 level (then nine cents per gallon), sales and use taxes on such increment in gasoline taxes, and increases in receipts from vehicle weight fees above the levels in effect on January 1, 1990. These latter provisions were necessary to make effective the transportation funding package approved by the Legislature and the Governor, which expected to raise over $15 billion in additional taxes from 1990 through 2000 to fund transportation programs.

Recalculation of Appropriations Limit. The Article XIIIB appropriations limit for each

unit of government, including the State, is to be recalculated beginning in fiscal year 1990-­91. It is based on the actual limit for fiscal year 1986-­87, adjusted forward to 1990-­91 as if Proposition 111 had been in effect.

School Funding Guarantee. There is a complex adjustment in the formula enacted in

Proposition 98 which guarantees K-­14 school districts a certain amount of State general fund revenues. Under prior law, K-­14 school districts were guaranteed the greater of (1) 40.9% of State general fund revenues (the “first test”) or (2) the amount appropriated in the prior year adjusted for changes in the cost of living (measured as in Article XIIIB by reference to per capita personal income) and enrollment (the “second test”). Under Proposition 111, schools will receive the greater of (1) the first test, (2) the second test, or (3) a third test, which will replace

-­57-­

the second test in any year when growth in per capita State general fund revenues from the prior year is less than the annual growth in California per capita personal income (the “third test”). Under the third test, schools will receive the amount appropriated in the prior year adjusted for change in enrollment and per capita State general fund revenues, plus an additional small adjustment factor. If the third test is used in any year, the difference between the third test and the second test will become a “credit” to schools which will be paid in future years when State general fund revenue growth exceeds personal income growth.

Proposition 39

On November 7, 2000, California voters approved an amendment (commonly known as

“Proposition 39”) to the California Constitution. This amendment (1) allows school facilities bond measures to be approved by 55% (rather than two-­thirds) of the voters in local elections and permits property taxes to exceed the current 1% limit in order to repay the bonds and (2) changes existing statutory law regarding charter school facilities. As adopted, the constitutional amendments may be changed only with another Statewide vote of the people. The statutory provisions could be changed by a majority vote of both houses of the Legislature and approval by the Governor, but only to further the purposes of the proposition. The local school jurisdictions affected by this proposition are K-­12 school districts, community college districts, including the District, and county offices of education. As noted above, the California Constitution previously limited property taxes to 1% of the value of property. Prior to the approval of Proposition 39, property taxes could only exceed this limit to pay for (1) any local government debts approved by the voters prior to July 1, 1978 or (2) bonds to acquire or improve real property that receive two-­thirds voter approval after July 1, 1978.

The 55% vote requirement authorized by Proposition 39 applies only if the local bond

measure presented to the voters includes: (1) a requirement that the bond funds can be used only for construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities;; (2) a specific list of school projects to be funded and certification that the school board has evaluated safety, class size reduction, and information technology needs in developing the list;; and (3) a requirement that the school board conduct annual, independent financial and performance audits until all bond funds have been spent to ensure that the bond funds have been used only for the projects listed in the measure. Legislation approved in June 2000 places certain limitations on local school bonds to be approved by 55% of the voters. These provisions require that the tax rate levied as the result of any single election be no more than $60 (for a unified school district), $30 (for an elementary school district or high school district), or $25 (for a community college district), per $100,000 of taxable property value. These requirements are not part of this proposition and can be changed with a majority vote of both houses of the State Legislature and approval by the Governor. Proposition 1A and Proposition 22

On November 2, 2004, California voters approved Proposition 1A, which amended the State constitution to significantly reduce the State's authority over major local government revenue sources. Under Proposition 1A, the State cannot (i) reduce local sales tax rates or alter the method of allocating the revenue generated by such taxes, (ii) shift property taxes from local governments to schools or community colleges, (iii) change how property tax revenues are shared among local governments without two-­thirds approval of both houses of the State Legislature or (iv) decrease Vehicle License Fee revenues without providing local governments with equal replacement funding. Under Proposition 1A, beginning, in 2008-­09, the State may shift to schools and community colleges a limited amount of local government property tax

-­58-­

revenue if certain conditions are met, including: (i) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State, and (ii) approval of the shift by the State Legislature with a two-­thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also amended the State Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. This provision does not apply to mandates relating to schools or community colleges or to those mandates relating to employee rights.

Proposition 22, a constitutional initiative entitled the “Local Taxpayer, Public Safety, and

Transportation Protection Act of 2010,” approved on November 2, 2010, superseded many of the provision of Proposition 1A. This initiative amends the State constitution to prohibit the legislature from diverting or shifting revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services. Under this proposition, the State is not allowed to take revenue derived from locally imposed taxes, such as hotel taxes, parcel taxes, utility taxes and sales taxes, and local public transit and transportation funds. Further, in the event that a local governmental agency sues the State alleging a violation of these provisions and wins, then the State must automatically appropriate the funds needed to pay that local government. This Proposition was intended to, among other things, stabilize local government revenue sources by restricting the State’s control over local property taxes. Proposition 22 did not prevent the California State Legislature from dissolving State redevelopment agencies pursuant to AB 1X26, as confirmed by the decision of the California Supreme Court decision in California Redevelopment Association v. Matosantos (2011).

Because Proposition 22 reduces the State’s authority to use or reallocate certain

revenue sources, fees and taxes for State general fund purposes, the State will have to take other actions to balance its budget, such as reducing State spending or increasing State taxes, and school and college districts that receive Proposition 98 or other funding from the State will be more directly dependent upon the State’s general fund.

Proposition 30 and Proposition 55

The Guaranteed Local Public Safety Funding, Initiative Constitutional Amendment, also

known as “Proposition 30”, temporarily increased the State Sales and Use Tax and personal income tax rates on higher incomes. Proposition 30 temporarily imposed an additional tax on all retailers, at the rate of 0.25% of gross receipts from the sale of all tangible personal property sold in the State from January 1, 2013 to December 31, 2016. Proposition 30 also imposed an additional excise tax on the storage, use, or other consumption in the State of tangible personal property purchased from a retailer on and after January 1, 2013 and before January 1, 2017. This excise tax was levied at a rate of 0.25% of the sales price of the property so purchased. For personal income taxes imposed beginning in the taxable year commencing January 1, 2012 and ending December 31, 2018, Proposition 30 increases for such period the marginal personal income tax rate by: (i) 1% for taxable income over $250,000 but less than $300,000 for single filers (over $340,000 but less than $408,000 for head of household filers and over $500,000 but less than $600,000 for joint filers), (ii) 2% for taxable income over $300,000 but less than $500,000 for single filers (over $408,000 but less than $680,000 for head of household filers and over $600,000 but less than $1,000,000 for joint filers), and (iii) 3% for taxable income over $500,000 for single filers (over $680,000 for head of household filers and over $1,000,000 for

-­59-­

joint filers). Proposition 55 (described below) extended said increases to personal income rates through the end of 2030.

The revenues generated from the temporary tax increases will be included in the

calculation of the Proposition 98 minimum funding guarantee for school districts and community college districts. See “Proposition 98” and “Proposition 111” above. From an accounting perspective, the revenues generated from the temporary tax increases will be deposited into the State account created pursuant to Proposition 30 called the Education Protection Account (the “EPA”). Pursuant to Proposition 30, funds in the EPA will be allocated quarterly, with 89% of such funds provided to schools districts and 11% provided to community college districts. The funds will be distributed to school districts and community college districts in the same manner as existing unrestricted per-­student funding, except that no school district will receive less than $200 per unit of ADA and no community college district will receive less than $100 per full time equivalent student. The governing board of each school district and community college district is granted sole authority to determine how the moneys received from the EPA are spent, provided that, the appropriate governing board is required to make these spending determinations in open session at a public meeting and such local governing boards are prohibited from using any funds from the EPA for salaries or benefits of administrators or any other administrative costs.

The California Children’s Education and Health Care Protection Act of 2016, also known

as Proposition 55, was a constitutional amendment initiative that was approved on the November 8, 2016 general election ballot in California. Proposition 55 extends the increases to personal income tax rates for high-­income taxpayers that were approved as part of Proposition 30 through the end of 2030, instead of the scheduled expiration date of December 31, 2018. Sales tax increases approved under Proposition 30 were not extended. Tax revenue received under Proposition 55 is to be allocated 89% to K-­12 schools and 11% to community colleges.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID of the California Constitution and Propositions 111, 98, 22, 26, 30, 39 and 55 were each adopted as measures that qualified for the ballot under the State’s initiative process. From time to time other initiative measures could be adopted further affecting District revenues or the District’s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the District.

-­60-­

CONTINUING DISCLOSURE The District (on behalf of the Authority and itself) will undertake all responsibilities for any

continuing disclosure to Owners of the Notes as described below. The District will execute a Continuing Disclosure Certificate in connection with the

issuance of the Notes in the form attached hereto as Appendix F. The District has covenanted therein, for the benefit of holders and beneficial owners of the Notes to provide certain financial information and operating data relating to the District to the Municipal Securities Rulemaking Board (an “Annual Report”) not later than nine months after the end of the District’s fiscal year (which currently would be March 31), commencing March 31, 2019 with the report for the 2017-­18 Fiscal Year, and to provide notices of the occurrence of certain enumerated events. Such notices will be filed by the District with the Municipal Securities Rulemaking Board (the “MSRB”). The filing of this Official Statement with the Municipal Securities Rulemaking Board will serve as the first Annual Report. The specific nature of the information to be contained in an Annual Report or the notices of enumerated events is set forth in “APPENDIX F – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriters of the Notes in complying with S.E.C. Rule 15c2-­12(b)(5) (the “Rule”).

The District has existing disclosure undertakings that have been made pursuant to the

Rule in connection with the issuance of outstanding general obligation bonds. In addition, the District, on behalf of itself and the Authority, has previously undertaken continuing disclosure pursuant to the Rule with respect to prior bonds and notes of the Authority. A review has been made of the District’s and Authority’s undertakings and filings made in the previous five years. No instances of non-­compliance have been identified.

In order to assist it in complying with its disclosure undertakings for its outstanding

general obligation bonds and the obligations with respect to the Authority, the District has engaged Dale Scott & Company, its Financial Advisor, to serve as its dissemination agent with respect to its each of its disclosure undertakings, including the Continuing Disclosure Certificate to be executed in connection with the Notes.

TAX MATTERS In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,

Bond Counsel, subject, however to the qualifications set forth below, under existing law, the portion of the Lease Payments designated as and comprising interest and received by the Owners of the Notes is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax, although Bond Counsel observes that interest represented by the Notes is included in adjusted current earnings in calculating corporate alternative minimum taxable income for tax years beginning prior to January 1, 2018.

The opinions set forth in the preceding paragraph are subject to the condition that the

District comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) that must be satisfied subsequent to the issuance of the Notes. The District has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest with respect to the Notes in gross income for federal income tax purposes to be retroactive to the date of issuance of the Notes.

-­61-­

If the initial offering price to the public (excluding bond houses and brokers) at which a Note is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which the Note is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded.

Under the Tax Code, original issue discount is treated as interest excluded from federal

gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Note on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-­line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Notes to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Note. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Notes who purchase the Notes after the initial offering of a substantial amount of such maturity. Owners of such The Notes should consult their own tax advisors with respect to the tax consequences of ownership of Notes with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Notes under federal individual alternative minimum taxes.

Under the Tax Code, original issue premium is amortized on an annual basis over the

term of the Note (said term being the shorter of the Note's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Note for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on the Note is amortized each year over the term to maturity of the Note on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-­line interpolations between compounding dates). Amortized Note premium is not deductible for federal income tax purposes. Owners of premium Notes, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Notes.

Current and future legislative proposals, if enacted into law, clarification of the Tax Code

or court decisions may cause interest with respect to the Notes to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the Notes. Prospective purchasers of the Notes should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

California Tax Status. In the further opinion of Bond Counsel, the portion of the Lease

Payments designated as and comprising interest and received by the owners of the Notes is exempt from California personal income taxes.

-­62-­

Form of Opinion. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.

Other Tax Considerations. Owners of the Notes should also be aware that the

ownership or disposition of, or the accrual or receipt of interest on, the Notes may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Notes other than as expressly described above.

Future legislation, if enacted into law, or clarification of the Tax Code may cause interest

on the Notes to be subject to, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Notes from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Tax Code may also affect the market price for, or marketability of, the Notes. Prospective purchasers of the Notes should consult their own tax advisors regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion.

CERTAIN LEGAL MATTERS Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel,

will render an opinion with respect to the validity and enforceability of the Lease Agreement and the Trust Agreement and as to the validity of the Notes. Jones Hall is also serving as Disclosure Counsel to the Authority in connection with the issuance of the Notes.

NO LITIGATION

Aside from the dispute described below under “DISPUTE REGARDING AUTHORITY REVENUES”, no litigation is pending or threatened concerning the validity of the Notes or the agreements related thereto, and a certificate to that effect will be furnished to purchasers at the time of the original delivery of the Notes. The Authority and the District are not aware of any litigation pending or threatened that (i) questions the political existence of the Authority or the District, (ii) contests the District’s ability to budget and appropriate funds to pay the Lease Payments or (iii) contests the Authority’s ability to issue the Notes and provide for the payment thereof.

The Authority and the District may be or may become a party to lawsuits and claims

which are unrelated to the Notes or actions taken with respect to the Notes and which have arisen in the normal course of operating the Authority and the District. The District maintains certain insurance policies which provide coverage under certain circumstances and with respect to certain types of incidents. In the opinion of the District, there currently are no claims or actions pending which could have a material adverse affect on the financial position or operations of the District. Other than as disclosed herein, the Authority and the District cannot predict what types of claims may arise in the future.

-­63-­

DISPUTE REGARDING AUTHORITY REVENUES

As discussed in this Official Statement, a significant portion of the debt service on the Notes is expected to be paid by the Authority from its Legally Available Funds (defined herein under the heading “SECURITY FOR THE NOTES -­ Authority Contributions -­ General Unsecured Obligation”), which include earnings received by the Authority on its current investments, as well as from certain annual revenues it receives from Taft Union High School District (“Taft”) as lease payments under a lease agreement between the Authority and Taft which was originally entered in 1988 (the “Taft Lease”). See “Appendix A – Summary of Principal Legal Documents -­ Trust Agreement -­ Covenants of the Authority -­ Rights Under Taft Lease.”

Although no formal litigation or proceeding has been initiated, the Authority and Taft

have exchanged claims regarding the methodology for computing the amount of lease payments which are due to the Authority under the Taft Lease, which claims could result in future litigation. The Authority and Taft have entered into mediation in an attempt to resolve the dispute. The Authority and the District cannot predict how such dispute will be resolved, and what impact (if any) such resolution might have on the portion of the Legally Available Funds derived from future payments under the Taft Lease. It is possible that the amount of future payments which Taft is obligated to pay to the Authority under the Taft Lease could be reduced. The Authority has, and is expected to continue to have, sufficient Legally Available Funds to enable it to pay its obligations with respect to the Notes, without regard to the outcome of the pending mediation and possible litigation. See “APPENDIX B -­ Audited Financial Statements of the District and the Authority for Fiscal Year 2016-­17, Note 2” for the Authority and District’s pooled cash and investments as of June 30, 2017.

As provided in the Trust Agreement and the Lease Agreement, the District is obligated to

pay interest due on the Notes from its own legally available funds in the event and to the extent the Authority does not have sufficient Legally Available Funds to make such payments when due, and the obligation to pay principal of the Notes at maturity is secured by a covenant of the Authority to issue Refunding Obligations. See “SECURITY FOR THE NOTES – Covenant to Issue Refunding Obligations” herein.

RATINGS Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) have assigned

ratings of “A1” and “A+”, respectively, to the Notes. The District has provided certain additional information and materials to such rating agencies (some of which does not appear in this Official Statement). Such ratings reflect only the views of Moody’s and S&P, and an explanation of the significance of such ratings and outlooks may be obtained only from Moody’s and S&P, respectively. There is no assurance that any credit rating given to the Notes will be maintained for any period of time or that a rating may not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Notes.

-­64-­

UNDERWRITING The District has entered into a Note Purchase Agreement with Morgan Stanley & Co.

LLC, for itself and as representative of Stifel Nicolaus & Company, Incorporated (collectively, the “Underwriters”), under which the Underwriters have agreed, subject to certain conditions, to purchase the Notes from the District at a price of $____________ (being the principal amount of the Notes, plus original issue premium of $______, less an Underwriters’ discount of $____________). The Underwriters are obligated to purchase all of the Notes if any are purchased. The Notes may be offered and sold by the Underwriters to certain dealers and others at prices lower than the public offering prices, and the public offering prices may be changed, from time to time, by the Underwriters.

Morgan Stanley & Co. LLC, one of the Underwriters of the Notes, has entered into a

retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Notes.

PROFESSIONALS INVOLVED IN THE OFFERING The following professionals have performed professional services in connection with the

issuance of the Notes: Dale Scott & Company, Inc. has acted as financial advisor to the Authority and the District;; Jones Hall, A Professional Law Corporation, San Francisco, California, has acted as Bond Counsel and Disclosure Counsel. Norton Rose Fulbright US LLP, Los Angeles, California, is serving as counsel to the Underwriters. The fees of these professionals will be paid contingent on the issuance of the Notes.

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

Authority.

GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY By: Chairman

A-­1

APPENDIX A

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a brief summary of the provisions of the Site Lease, Lease Agreement,

Assignment Agreement and Trust Agreement. Such summary is not intended to be definitive, and reference is made to the documents for the complete terms thereof.

DEFINITIONS Except as otherwise defined in this summary, the terms previously defined in this Official

Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this summary:

“Authority Debt” means, collectively, the Notes and each additional issue of Refunding

Obligations. “Bond Counsel” means (a) Jones Hall, A Professional Law Corporation, or (b) any other

attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-­recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code.

“Business Day” means a day (other than a Saturday or a Sunday) on which banks are

not required or authorized to remain closed in the District in which the corporate trust office of the Trustee is located.

“Closing Date” means the date of delivery of the Notes to the original purchaser of the

Notes. “Costs of Issuance” means all items of expense directly or indirectly payable by or

reimbursable to the District relating to the authorization, issuance, sale and delivery of the Notes.

“Debt Service” means the scheduled amount of interest and amortization of principal

payable on Authority Debt during the period of computation, including the principal amount of Authority Debt required to be redeemed during such period by operation of mandatory sinking fund redemption. “Debt Service” does not include the principal amount of the Notes coming due at the maturity thereof, and includes the principal amount of any issue of Refunding Obligations only if principal and interest on such Refunding Obligations are calculated to come due and payable in approximately equal annual installments over of a term of at least 15 years.

“Federal Securities” means: (a) any direct general obligations of the United States of

America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), for which the full faith and credit of the United States of America are pledged;; and (b) obligations of any agency, department or instrumentality of the United States of America, the timely payment of principal and interest on which are directly or indirectly secured or guaranteed by the full faith and credit of the United States of America.

A-­2

“Interest Payment Date” means (a) with respect to Notes, November 1, 2018, and each May 1 and November 1 thereafter to and including the maturity of the Notes, and (b) with respect to any issue of Refunding Obligations, each date set forth in the related documents authorizing the issuance of such Refunding Obligations, on which interest is scheduled to be paid on such Refunding Obligations.

“Lease Default Event” means any of the events of default under and as defined in the

Lease Agreement. “Lease Payment Date” means, with respect to any Interest Payment Date, the 5th

Business Day preceding such Interest Payment Date. “Lease Payments” means the aggregate amount of all the payments required to be paid

by the District under the Lease Agreement for the lease of the Leased Property thereunder. “Leased Property” means the land described more fully in Appendix A attached to the

Lease Agreement, together with all buildings and facilities at any time situated thereon, consisting generally of Golden Valley High School and Liberty High School. From and after the date of any substitution or release of property under the Lease Agreement, the term “Leased Property” means all buildings, facilities, improvements and equipment which remain subject to the Lease Agreement following such substitution or release.

“Legally Available Funds” means, with respect to any payment required to be made by

the Authority or the District, (a) unrestricted funds on deposit in the general fund or any capital improvement fund of the Authority or the District, or (b) any other revenues or funds of the Authority or the District which may lawfully be applied to make such payment.

“Moody’s” means Moody’s Investors Service, of New York, New York, its successors

and assigns. “Net Proceeds” means amounts derived from any policy of casualty insurance or title

insurance with respect to the Leased Property, or the proceeds of any taking of the Leased Property or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof.

“Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes

and assessments, if any, not then delinquent, or which the District may permit to remain unpaid under the Lease Agreement;; (b) the Site Lease, the Lease Agreement and the Assignment Agreement;; (c) any right or claim of any mechanic, laborer, material man, supplier or vendor not filed or perfected in the manner prescribed by law;; (d) the exceptions disclosed in any policy of title insurance issued with respect to the Leased Property;; and (e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the District certifies in writing will not materially impair the use of the Leased Property for its intended purposes.

“Permitted Investments” means any of the following which at the time of investment are

legal investments under the laws of the State of California for the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely upon any investment directions from the Authority as conclusive certification to the Trustee that the investments described therein are so authorized under the laws of the State of California):

A-­3

(a) Federal Securities;; (b) obligations of any federal agency which represent full faith and credit of the

United States of America, or which are otherwise rated “AAA” by S&P and Moody’s;;

(c) Bank deposit products, trust funds, trust accounts, certificates of deposit

(including those placed by a third party pursuant to an agreement between the Authority and the Trustee), overnight bank deposits, interest bearing deposits, interest bearing money market accounts U.S. dollar denominated deposit accounts federal funds and banker’s acceptances with domestic commercial banks, which (i) may include the Trustee, its parent holding company, if any, and their affiliates, which have a rating on their short term certificates of deposit on the date of purchase of “A” or better by S&P and Moody’s, maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank or (ii) are fully insured by the Federal Deposit Insurance Corporation;;

(d) commercial paper which is rated at the time of purchase in the single

highest classification, “A” or better by S&P and Moody’s, and which matures not more than 270 calendar days after the date of purchase;;

(e) investments in a money market fund, including those of an affiliate of the

Trustee, rated in the highest short-­term rating category by S&P and Moody’s, including such funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services or for which the Trustee or an affiliate of the Trustee serves as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives and retains fees for services provided to the fund, (ii) the Trustee collects fees for services rendered pursuant to this Trust Agreement, which fees are separate from the fees received from such fund, and (iii) services performed for such funds and pursuant to this Trust Agreement may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee;;

(f) investment agreements with financial institutions whose long-­term general

credit rating is A or better from S&P and Moody’s, by the terms of which the Trustee may withdraw funds if either of such ratings falls below “A”;; and

(g) the Local Agency Investment Fund of the State of California, created under

Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.

“Refunding Obligations” means (a) any bonds, notes or other obligations, including but

not limited to certificates of participation and lease revenue bonds, issued by the District or the Authority for the purpose of refunding the Notes on or before the maturity thereof, and (b) any bonds, notes or other obligations, including but not limited to certificates of participation and

A-­4

lease revenue bonds, issued by the District or the Authority to refund any prior issue of Refunding Obligations.

“Rental Period” means the twelve-­month period beginning on May 2 in any year and

continuing to and including May 1 in the succeeding year. “Revenues” means: (a) all amounts received by the Authority or the Trustee under or

with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Lease Payments (including both timely and delinquent payments, any late charges, and whether paid from any source);; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Trust Agreement.

“S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial

Services LLC, its successors and assigns. “Taft” means the Taft Union High School District, its successors and assigns, of Kern

County, California. “Taft Lease” means the Lease Agreement dated as of June 6, 1988, between the

Authority as lessor and Taft as lessee, as amended and supplemented from time to time in accordance with its terms.

“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date

or as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under said Code.

SITE LEASE The District and the Authority have previously entered into the Site Lease under which

the District has leased the Leased Property to the Authority. The Site Lease ends on the date on which all outstanding Authority Debt is redeemed or retired, but not beyond August 1, 2044.

If the District exercises its option under the Lease Agreement to substitute property for

the Leased Property in whole or in part, such substitution will also operate to substitute such property for the Leased Property under the Site Lease. If the District exercises its option under the Lease Agreement to release any portion of the Leased Property from the Lease Agreement, such release will also operate to release such property from the Site Lease. The description of the property which is leased under the Site Lease will conform at all times to the description of the property which is leased under the Lease Agreement.

The Authority agrees, upon the termination of the Site Lease, to quit and surrender the

Leased Property in the same good order and condition as the Leased Property was in at the time of commencement of the term of the Site Lease, reasonable wear and tear excepted, and agrees that all buildings, improvements and structures then existing upon the Leased Property will remain thereon and title thereto will vest thereupon in the District for no additional consideration.

A-­5

LEASE AGREEMENT

Amendment and Restatement of Prior Leases The District and the Authority have previously entered into the Lease Agreement, which

represents an amendment and restatement of certain leases previously entered into between the District and the Authority in connection with the issuance of prior issues of bonds and notes which are being from the proceeds of the Notes. Under the Lease Agreement, the Authority continues to lease the Leased Property back to the District. The Lease Agreement ends on the date on which all outstanding Authority Debt is redeemed or retired.

Obligation to Pay Lease Payments;; Primary Obligation of Authority

In consideration of the lease of the Leased Property from the Authority, and subject to

the abatement provisions described below, the District has agreed to pay the Lease Payments to the Authority as rental for the use and occupancy of the Leased Property during each Rental Period. The Lease Payments are payable on each Lease Payment Date in an amount equal to the aggregate amount of the Debt Service coming due and payable on all outstanding Authority Debt the next succeeding Interest Payment Date. All amounts on deposit in the Note Repayment Fund on any Lease Payment Date, and all amounts on deposit in the respective funds established for payment of current debt service on any outstanding Refunding Obligations, will be credited towards the amount then required to be paid by the District.

Upon the issuance of any issue of long-­term Refunding Obligations having a fixed

schedule of payments, the Authority and the District will enter into an agreement which amends the Lease Agreement for the purpose adding thereto a Lease Payment schedule which reflects the payment of Debt Service on such issue of Refunding Obligations.

The Notes and any Refunding Obligations are obligations of the Authority which are

payable from any source of Legally Available Funds of the Authority. All amounts paid by the Authority in respect of the Notes and any Refunding Obligations from Legally Available Funds of the Authority will be credited towards the Lease Payments which would otherwise be payable by the District. The Authority and the District acknowledge and agree that (a) the District has the primary obligation to pay each Lease Payment in an amount equal to 32.04% thereof, from any source of Legally Available Funds of the District, and (b) the Authority has the primary obligation to pay 67.96% of each payment of Debt Service from any source of Legally Available Funds of the Authority. It is the intention of the District that the portion of the Lease Payments which it has the primary obligation to pay shall be paid from special reserves and from developer fees collected by the District in accordance with the laws of the State of California. Notwithstanding the foregoing, the District is obligated to budget and appropriate the full amount of each Lease Payment and to pay the full amount of each Lease Payment to the extent not directly paid by the Authority.

Source of Payments;; Covenant to Budget and Appropriate

The Lease Payments are payable from any source of Legally Available Funds of the District, subject to the provisions of Lease Agreement relating to abatement as described below. The District covenants to take such action as may be necessary to include the estimated amount of all Lease Payments Additional Payments in each of its final approved budgets for the general fund of the District and to make the necessary appropriations (including any supplemental appropriations) from the general fund of the District for all such Lease Payments

A-­6

and Additional Payments coming due and payable during the period covered by each such budget. Such covenants are deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the District to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the District to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the District.

Abatement of Lease Payments

The Lease Payments are subject to abatement under the Lease Agreement during any period in which due to damage or destruction of the Leased Property in whole or in part, or due to taking in eminent domain proceedings of the Leased Property in whole or in part, there is substantial interference with the District's use and occupancy of all or any portion of the Leased Property. The amount of such abatement will be an amount agreed upon by the District and the Authority such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portions of the Leased Property. In the event of such abatement, the District will have no obligation to pay abated Lease Payments and there is no remedy available to Note owners arising from such abatement.

Title

At all times during the term of the Lease Agreement, the District will hold title to the

Leased Property, subject to the provisions of the Site Lease and other Permitted Encumbrances. Upon the termination of the Lease Agreement, all right, title and interest of the Authority in and to the Leased Property will be transferred to and vested in the District. Upon the payment in full of all Lease Payments, all right, title and interest of the Authority in and to the Leased Property will be transferred to and vested in the District.

Maintenance, Utilities, Taxes and Installation of Personal Property

The District, at its own expense, agrees to maintain or cause to be maintained the

Leased Property in good repair;; the Authority has no responsibility for such maintenance. The District is also obligated to pay all taxes and assessments charged to the Leased Property. The District has the right under the Lease Agreement to install or permit to be installed other items of equipment or other personal property in or upon the Leased Property. All such items will remain the sole property of the District, in which neither the Authority nor the Trustee has any interest, and may be modified or removed by the District at any time provided that the District repairs and restores any and all damage to the Leased Property resulting from the installation, modification or removal of any such items. The District or the Authority may not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to all or any portion of the Leased Property, other than the respective rights of the Authority and the District as provided in the Lease Agreement.

A-­7

Option to Prepay The District has the right, on any Lease Payment Date immediately preceding an

Interest Payment Date on which any Authority Debt is subject to optional redemption, to prepay the principal components of the Lease Payments from any source of legally available funds, in whole or in part. The amount to be prepaid by the District is equal to the principal components of the Lease Payments to be prepaid, together with (a) the interest component of the Lease Payment required to be paid on such Lease Payment Date and (b) a premium equal to the amount of premium (if any) required to be paid upon the corresponding redemption of the Authority Debt.

Substitution of Property

The District has the option at any time to substitute other land, facilities, improvements

or other property (“Substitute Property”) for the Leased Property or portion thereof (“Former Property”), subject to the conditions set forth in the Lease Agreement, including the following:

• No Lease Default Event has occurred and is continuing under and as defined

in the Lease Agreement. • The District must file with the Authority and the Trustee, and cause to be

recorded in the Office of the Kern County Recorder sufficient memorialization of, appropriate documentation which adds thereto a description of such Substitute Property and deletes therefrom the description of such Former Property.

• The District must obtain a CLTA policy of title insurance insuring the District’s

leasehold estate in the Substitute Property, in an amount at least equal to the outstanding principal amount of the Authority Debt then outstanding, and naming the Trustee as an additional insured.

• The District must certify in writing to the Authority and the Trustee that such

Substitute Property serves the educational purposes of the District and constitutes property which the District is permitted to lease under the laws of the State of California.

• The Substitute Property may not cause the District to violate any of its

covenants, representations and warranties made in the Lease Agreement. • The District shall certify in writing to the Authority and the Trustee that the

estimated value and the estimated fair rental value of the Substitute Property are at least equal to the estimated value and the estimated fair rental value, respectively, of the Former Property, and that the useful life of the Substitute Property is at least 15 years from the date of such certification.

Release of Property

The District has the option at any time and from time to time to release any portion of the

Leased Property from the Lease Agreement (the “Released Property”) provided that the District has satisfied all of the following requirements:

A-­8

• No Lease Default Event has occurred and is continuing under and as defined

in the Lease Agreement. • The District must file with the Authority and the Trustee, and caused to be

recorded in the office of the Kern County Recorder sufficient memorialization of, an amendment which removes the Released Property from the Site Lease and the Lease Agreement.

• The District must certify in writing to the Authority and the Trustee that the

value of the property which remains subject to the Lease Agreement following such release is at least equal to the aggregate original principal amount of the outstanding Authority Debt, and the fair rental value of the property which remains subject to the Lease Agreement following such release is at least equal to the Lease Payments thereafter coming due and payable.

• The District has mailed written notice of such release to each rating agency

which then maintains a rating on the outstanding Authority Debt. Upon the satisfaction of all such conditions precedent, the term of the Lease Agreement

will thereupon end as to the Released Property. The District is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the District agree to execute, deliver and cause to be recorded all documents required to discharge the Site Lease, the Lease Agreement and the Assignment Agreement of record against the Released Property.

Insurance

The Lease Agreement requires the District to maintain or cause to be maintained the

following insurance against risk of physical damage to the Leased Property and other risks for the protection of the Note owners, the Authority and the Trustee:

Public Liability and Property Damage Insurance. The District shall maintain or cause to

be maintained throughout the term of the Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the District, a standard comprehensive general insurance policy or policies in protection of the Authority, the District and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Leased Property. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the District shall deem adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the District, and may be maintained in whole or in part in the form of self-­insurance by the District or in the form of the participation by the District in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance shall be applied by the District toward extinguishment or satisfaction of the liability with respect to which such proceeds have been paid.

Casualty Insurance. The District will procure and maintain, or cause to be procured and

maintained throughout the term of the Lease Agreement, from reputable insurers, insurance

A-­9

against loss or damage to any improvements constituting any part of the Leased Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance, and earthquake insurance (but with respect to such earthquake insurance, only if and to the extent available at reasonable cost from reputable insurers). Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in a loss recoverable amount at least equal to the lesser of (a) 100% of the aggregate principal amount of the outstanding Authority Debt, or (b) 100% of the replacement cost of the insured property. Such insurance shall be subject to such deductibles as are deemed reasonable by the District. Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried by the District which provides separate coverage for each insured property, and such insurance may be maintained in whole or in part in the form of self-­insurance by the District or in the form of the participation by the District in a joint powers agency or other program providing pooled insurance. The proceeds of such insurance shall be applied as provided in the Trust Agreement.

Rental Interruption Insurance. The District shall maintain, throughout the Term of the

Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Property as a result of any of the hazards covered in the insurance required by Section 4.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future 24-­month period;; provided, however, that during any period in which the outstanding Authority Debt consists of obligations bearing interest at a variable rate, the amount of such insurance shall be maintained in the amount of $4,775,000. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the District, and may be maintained in whole or in part in the form of the participation by the District in a joint powers agency or other program providing pooled insurance. Such insurance may not be provided in the form of self-­insurance by the District. The proceeds of such insurance, if any, shall be paid to the Trustee and credited towards the payment of Lease Payments which would otherwise be subject to abatement.

Title Insurance. In connection with the issuance of prior obligations which were refunded

from the proceeds of the 2008 Notes, the District obtained CLTA policies of title insurance with respect to various properties of the District, including the Leased Property. Such policies insured the District’s leasehold estate in the Leased Property, subject only to Permitted Encumbrances. Pursuant to the Assignment Agreement, the District will assign all of its rights under such policies to the Trustee for the benefit of the owners of the Notes. Amounts received by the Trustee under any such policies shall be applied as set forth in the Trust Agreement. Upon the issuance of any Refunding Obligations, if and to the extent required by the related Refunding Documents the District shall obtain a CLTA title insurance policy insuring the District’s leasehold estate in the Leased Property, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of such Refunding Obligations.

Amendment of Lease Agreement

The Authority and the District may at any time amend or modify any of the provisions of

the Lease Agreement, but only (a) with the prior written consent of the owners of a majority in aggregate principal amount of the outstanding Authority Debt;; or (b) without the consent of any owners of Authority Debt, but only if such amendment or modification is for any one or more of the following purposes:

A-­10

• to add to the covenants and agreements of the District contained in the Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power therein reserved to or conferred upon the District;;

• to make cure any ambiguity, or to cure, correct or supplement any defective

provision contained therein, or in any other respect whatsoever as the Authority and the District may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments do not materially adversely affect the interests of the owners of any Authority Debt;;

• to amend any provision relating to the Tax Code, to any extent whatsoever

but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on any issue of Authority Debt under the Tax Code, in the opinion of Bond Counsel;;

• to conform to any authorized amendment of the Trust Agreement or the

documents authorizing Refunding Obligations;; • for the purpose of effectuating any substitution of property or release of

property;; or • to conform to the terms and conditions upon which any issue of Refunding

Obligations are issued, including for the purpose of reflecting any policy of bond insurance or any letter of credit or other liquidity facility which is provided for any issue of Refunding Obligations.

Events of Default;; Remedies

Each of the following constitutes an event of default under the Lease Agreement: • Failure by the District to pay any Lease Payment when due and payable. • Failure by the District to pay any Additional Payment when due and payable

and the continuation of such failure for a period of ten days. • Failure by the District to observe and perform any covenant, condition or

agreement on its part to be observed or performed under the Lease Agreement, other than as referred to in the preceding clauses, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the District by the Authority or the Trustee;; provided, however, if in the reasonable opinion of the District the failure stated in the notice can be corrected, but not within such 30-­day period, such failure shall not constitute an Lease Default Event if corrective action is instituted by the District within such 30-­day period and diligently pursued until such failure is corrected.

• Certain events relating to the bankruptcy or insolvency of the District.

A-­11

Upon the occurrence and continuance of any event of default, the Authority has the right to terminate the Lease Agreement and, with or without such termination, re-­enter, take possession of and re-­let the Leased Property. When the Authority does not elect to terminate the Lease Agreement, the District remains liable to pay all Lease Payments as they come due and liable for damages resulting from such event of default. Any amounts collected by the Authority from the reletting of the Leased Property shall be credited towards the District's unpaid Lease Payments. Any net proceeds of re-­leasing or other disposition of the Leased Property are required to be deposited in the Note Repayment Fund and applied to Lease Payments in order of payment date. Under the Assignment Agreement, the Authority assigns all of its rights with respect to remedies in an event of default to the Trustee.

The Trustee has no right to accelerate Lease Payments and, due to the governmental

nature of the Leased Property, it is uncertain whether a court would permit the exercise of the remedies of re-­entry, repossession or re-­letting.

Such rights and remedies as are given to the Authority under the Lease Agreement will

be assigned by the Authority to the Trustee under the Assignment Agreement for the benefit of the Note Owners, and may be assigned by the Authority to the trustee for any issue of Refunding Obligations for the benefit of the owners of the Refunding Obligations, to all of which assignments the District consents.

ASSIGNMENT AGREEMENT In connection with the issuance of the Notes, the Authority will enter into the Assignment

Agreement with the Trustee. Under the Assignment Agreement, the Authority and the Trustee agree to terminate the assignment which was previously made in connection with the issuance of the 2017 Notes, and the Authority irrevocably transfers, assigns and sets over to the Trustee all of the Authority's rights under the Lease Agreement (excepting only the Authority's rights to receive certain payments and certain indemnification rights), including without limitation (a) the right to receive and collect all of the Lease Payments from the District under the Lease Agreement, (b) the right to receive and collect any proceeds of any insurance maintained thereunder, of any condemnation award rendered with respect to the Leased Property, and (c) the right to exercise such rights and remedies conferred on the Authority under the Lease Agreement as may be necessary or convenient (i) to enforce payment of the Lease Payments and any other amounts required to be deposited in the Note Repayment Fund, or (ii) otherwise to protect the interests of the owners of the Authority Debt in the event of a default by the District under the Lease Agreement. All rights assigned by the Authority to the Trustee will be administered by the Trustee for the equal and proportional benefit of the owners of the Notes.

A-­12

TRUST AGREEMENT

Establishment of Funds and Accounts;; Flow of Funds Costs of Issuance Fund. A portion of the proceeds of the Notes will be deposited by the

Trustee in the Costs of Issuance Fund on the Closing Date. The moneys in the Costs of Issuance Fund will be disbursed to pay costs of issuing the Notes and other related financing costs from time to time upon receipt of written requests of the Authority. On July 1, 2018, or upon the earlier written request of the Authority, the Trustee will transfer all amounts remaining in the Costs of Issuance Fund to the Note Repayment Fund, and will thereupon close the Costs of Issuance Fund.

Note Repayment Fund. All Revenues will be promptly deposited by the Trustee upon

receipt thereof in a special fund designated as the “Note Repayment Fund” which the Trustee will establish under the Trust Agreement. The Trustee will apply amounts on deposit in the Note Repayment Fund for the sole purpose of paying the principal of and interest on the Notes and any additional Refunding Obligations when due. Any surplus remaining in the Note Repayment Fund, after payment in full of the principal of and interest on the Notes and any additional Refunding Obligations, after payment of any applicable fees and expenses to the Trustee, shall be withdrawn by the Trustee and remitted to the District.

Investment of Funds

All moneys in any of the funds or accounts held by the Trustee under the Trust

Agreement will be invested by the Trustee solely in Permitted Investments as directed by the Authority in advance of the making of such investments. In the absence of any such direction of the Authority, the Trustee will invest any such moneys in Permitted Investments which constitute money market funds. Obligations purchased as an investment of moneys in any fund will be deemed to be part of such fund or account.

All interest or gain derived from the investment of amounts in any of the funds or

accounts established under the Trust Agreement will be deposited in the Note Repayment Fund. For the purpose of determining the amount in any fund or account established under the Trust Agreement, the value of investments credited to such fund will be calculated at the market value thereof, in accordance with the procedures specified in the Trust Agreement.

Covenants of the Authority

Payment of Notes. The Authority shall punctually pay or cause to be paid the principal

of and interest on all the Notes in strict conformity with the terms of the Notes and of the Trust Agreement, according to the true intent and meaning thereof, but only out of the Revenues and other amounts pledged for such payment as provided in the Trust Agreement.

Accounting Records and Financial Statements. The Trustee shall at all times keep, or

cause to be kept, proper books of record and account, prepared in accordance with industry standards, in which complete and accurate entries are made of all transactions made by it relating to the proceeds of Notes and all funds and accounts established under the Trust Agreement. The Trustee shall make such books of record and account available for inspection by the Authority and the District, during business hours, upon reasonable notice, and under reasonable circumstances.

A-­13

Application of Net Proceeds of Insurance or Eminent Domain. Any Net Proceeds of insurance or condemnation with respect to the Leased Property, including the Net Proceeds of any title insurance policy maintained on the Leased Property, and any Net Proceeds of insurance against accident to or destruction of any structure constituting any part of the Leased Property collected by the District in the event of any such accident or destruction, shall be either (a) applied by the District to replace or repair the Leased Property, or (b) paid to the Trustee and applied to pay principal of the Notes at maturity.

Tax Covenants. The Authority will not take, nor permit nor suffer to be taken by the

Trustee or otherwise, any action with respect to the proceeds of any of the Notes which would cause any of the Notes to be “arbitrage bonds” or “private activity bonds” within the meaning of the Tax Code. The Authority will cause to be calculated annually all excess investment earnings which are required to be rebated to the United States of America under the Tax Code, and will cause all required amounts to be rebated from payments made by the District for that purpose under the Lease Agreement.

Rights under Lease Agreement. The will shall promptly collect all amounts (to the extent

any such amounts are available for collection) due from the District under the Lease Agreement. The Trustee will enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the District under the Lease Agreement.

Rights Under Taft Lease. The Authority will promptly collect all amounts due from Taft

under the Taft Lease and will enforce, and take all steps, actions and proceedings which the Authority determines to be reasonably necessary for the enforcement of all of its rights thereunder and for the enforcement of all of the obligations of Taft thereunder. In order to assure that the Authority receives all amounts from Taft which are payable by Taft under the Taft Lease, the Authority shall take all actions which are required to extend the term of the Taft Lease to the maximum extent possible under the Taft Lease. Nothing in the Trust Agreement creates any pledge of, lien on or security interest in the amounts due from Taft under the Taft Lease, or in any way limits, restricts or in any way affects the right of the Authority to expend such amounts for any lawful purposes of the Authority. Neither the Trustee nor the Note Owners has any claim or interest whatsoever in such amounts.

The Authority covenants that so long as any Authority Debt remains outstanding, the

Authority will not enter into or agree to enter into any amendment of the Taft Lease which would have the effect of reducing the amount which Taft is obligated to pay to the Authority thereunder.

Amendment of Trust Agreement

The Trust Agreement may be modified or amended at any time with the prior written

consents of the Owners of a majority in aggregate principal amount of the Notes then outstanding. No such modification or amendment may (a) extend the maturity of or reduce the interest rate on any Note or otherwise alter or impair the obligation of the Authority to pay the principal, interest or redemption premiums (if any) at the time and place and at the rate and in the currency provided therein of any Note without the express written consent of the Owner of such Note, (b) reduce the percentage of Notes required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee.

A-­14

The Trust Agreement may also be modified or amended at any time without the consent

of such Note Owners, to the extent permitted by law, but only for any one or more of the following purposes:

• To add to the covenants and agreements of the Authority contained in the

Trust Agreement, other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Notes (or any portion thereof), or to surrender any right or power therein reserved to or conferred upon the Authority.

• To cure any ambiguity, inconsistency or omission in the Trust Agreement, or

correct any defective provision in the Trust Agreement, or in any other respect whatsoever as the Authority may deem necessary or desirable, so long as such modification or amendment does not materially adversely affect the interests of the Note Owners in the opinion of Bond Counsel filed with the Trustee.

• To modify, amend or supplement the Trust Agreement in such manner as to

permit the qualification of the Trust Agreement under the Trust Indenture Act of 1939 or any similar federal statute at any time in effect.

• To modify, amend or supplement the Trust Agreement so as to cause interest

on the Notes to remain excludable from gross income under the Tax Code.

Events of Default Events of Default Defined. The following events constitute events of default under the

Trust Agreement: • Failure to pay any installment of the principal of any Notes when due,

whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise.

• Failure to pay any installment of interest on the Notes when due. • Failure by the Authority to observe and perform any of the other covenants,

agreements or conditions on its part contained in the Trust Agreement or in the Notes, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee;; provided, however, if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such 30-­day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within such 30-­day period and thereafter diligently and in good faith cures the failure in a reasonable period of time.

• The commencement by the Authority of a voluntary case under Title 11 of the

United States Code or any substitute or successor statute.

A-­15

• The occurrence and continuation of an event of default under and as defined in the Lease Agreement, as described above.

Remedies. If any Event of Default occurs, then, and in each and every such case during

the continuance of such Event of Default, the Trustee may, and at the written direction of the Owners of a majority in aggregate principal amount of the Notes at the time Outstanding shall, in each case, upon receipt of indemnification satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with such action, enforce any rights of the Trustee under the Trust Agreement or any of the rights of the Trustee as assignee of the Authority’s rights under the Lease Agreement.

Application of Revenues and Other Funds After Default. If an Event of Default occurs

and is continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Trust Agreement shall be applied by the Trustee in the following order of priority:

• to the payment of reasonable fees, charges and expenses of the Trustee

(including reasonable fees and disbursements of its legal counsel including outside counsel and the allocated costs of internal attorneys) incurred in and about the performance of its powers and duties under the Trust Agreement;; and

• to the payment of the principal of and interest then due on the Notes, with

payments credited first towards the payment of interest then due on the Notes and second towards the payment of principal then due on the Notes.

Limitation on Note Owners’ Right to Sue. No Owner of any Note has the right to institute

any suit, action or proceeding at law or in equity, for any remedy under the Trust Agreement, unless:

• such Owner has previously given to the Trustee written notice of the

occurrence of an Event of Default;; • the Owners of a majority in aggregate principal amount of all the Notes then

outstanding have requested the Trustee in writing to exercise its powers under the Trust Agreement;;

• said Owners have tendered to the Trustee indemnity reasonably acceptable

to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request;;

• the Trustee has refused or failed to comply with such request for a period of

60 days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee;; and

• no direction inconsistent with such written request has been given to the

Trustee during such 60-­day period by the Owners of a majority in aggregate principal amount of the Notes then outstanding.

A-­16

Discharge of Trust Agreement The Authority may pay and discharge the indebtedness on any or all of the outstanding

Notes in any one or more of the following ways: • by paying or causing to be paid the principal of and interest on the Notes, as

and when the same become due and payable;; • by irrevocably depositing with the Trustee, in trust, at or before maturity, cash

and/or non-­callable Federal Securities which, together with the investment earnings to be received thereon, are verified by an independent accountant to be sufficient to pay or redeem such Notes when due;; or

• by delivering all of such Notes to the Trustee for cancellation. Upon such payment, and notwithstanding that any Notes have not been surrendered for

payment, the pledge of the Revenues and other funds provided for in the Trust Agreement with respect to such Notes, and all other obligations of the Authority under the Trust Agreement with respect to such Notes, will cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Notes not so surrendered and paid all sums due thereon from amounts set aside for such purpose. Any funds thereafter held by the Trustee, which are not required for said purposes, will be paid over to the Authority.

For purposes of determining whether the amount of moneys or securities which are

deposited with the Trustee under this provision are sufficient to provide for payment of interest on the Notes, it shall be assumed that interest on the Notes following the date of such deposit will accrue at the maximum rate set forth in the Trust Agreement.

B-­1

APPENDIX B

AUDITED FINANCIAL STATEMENTS

OF THE DISTRICT AND THE AUTHORITY FOR FISCAL YEAR 2016-­17

[PAGE INTENTIONALLY LEFT BLANK.]

[PAGE INTENTIONALLY LEFT BLANK.]

C-­1

APPENDIX C

PROPOSED FORM OF LEGAL OPINION

April __, 2018 Golden Empire Schools Financing Authority 5801 Sundale Avenue Bakersfield, California 93309

OPINION: $____________ Golden Empire Schools Financing Authority 2018 Lease Revenue Refunding Notes (Kern High School District Projects)

Members of the Authority:

We have acted as bond counsel to the Golden Empire Schools Financing Authority (the “Authority”) in connection with the issuance by the Authority of its Golden Empire Schools Financing Authority 2018 Lease Revenue Refunding Notes (Kern High School District Projects) in the aggregate principal amount of $____________ (the “Notes”), under a Trust Agreement dated as of April 1, 2018 (the “Trust Agreement”), between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee, and under the provisions of Articles 10 and 11 of Chapter 3, Part 1, Division 2, Title 5 of the California Government Code, commencing with Section 53570 of said Code (the “Bond Law”). The Notes are secured by Revenues as defined in the Trust Agreement, including certain lease payments made by the Kern High School District (the “District”) under a Third Amended and Restated Lease Agreement dated as of April 1, 2014 (the “Lease Agreement”), between the Authority as lessor and the District as lessee.

We have examined the Trust Agreement, the Lease Agreement, the Bond Law and such

certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority and the District contained in the Trust Agreement, the Lease Agreement and in the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation. Based upon our examination, we are of the opinion, under existing law, as follows:

1. The Authority is a joint powers authority duly organized and existing under the laws

of the State of California, with power to enter into the Trust Agreement and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Notes.

2. The Notes constitute legal, valid and binding special obligations of the Authority

enforceable in accordance with their terms and payable solely from the sources provided therefor in the Trust Agreement.

C-­2

3. The Trust Agreement and the Lease Agreement have been duly approved by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms.

4. The Trust Agreement establishes a valid pledge of and lien on the Revenues (as

that term is defined in the Trust Agreement) and other funds pledged thereby for the security of the Notes, in accordance with the terms of the Trust Agreement.

5. The District is a school district duly organized and existing under the laws of the

State of California, with power to enter into the Lease Agreement and to perform the agreements on its part contained therein. The Lease Agreement has been duly approved by the District and constitutes a legal, valid and binding obligation of the District enforceable against the District in accordance with its terms.

6. Interest on the Notes is excluded from gross income for federal income tax

purposes and is not an item of tax preference for purposes of the federal alternative minimum tax, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the District comply with all requirements of the Internal Revenue Code of 1986, as amended, relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Notes. The Authority and the District have covenanted in the Trust Agreement, the Lease Agreement and in other instruments relating to the Notes to comply with each of such requirements, and the Authority and the District have full legal authority to make and comply with such covenants. Failure to comply with certain of such requirements may cause the inclusion of interest on the Notes in gross income for federal income tax purposes to be retroactive to the date of issuance of the Notes. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Notes, or the amount, accrual or receipt of interest on the Notes.

7. Interest on the Notes is exempt from California personal income taxation. The rights of the owners of the Notes and the enforceability of the Notes, the Trust

Agreement and the Lease Agreement may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted, A Professional Law Corporation

D-­1

APPENDIX D

GENERAL INFORMATION ABOUT THE CITY OF BAKERSFIELD AND KERN COUNTY

The following information concerning the County and the City listed above is included

only for the purpose of supplying general information regarding the area of the District. The Notes are not a debt of the County, the City, the State or any of its political subdivisions, and neither Kern County, the City of Bakersfield, the State of California nor any of its political subdivisions is liable therefor. General

The City. The City is located in Kern County, California, at the southern end of the San

Joaquin Valley, approximately 110 miles north of Los Angeles and 290 miles south of San Francisco. The City maintains an incorporated area of approximately 148 square miles, with an additional 170 square miles of land located within the City’s sphere of influence.

The City was incorporated on January 11, 1898, under the general laws of the State.

The City is a charter city with a council/manager form of government. The City Council is comprised of seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected for a four-­year term. The council appoints the City Attorney and the City Manager.

The City is a regional center for industry, government, transportation, agriculture, retail

trade, medical services, and oil field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food products, petroleum refining, and textiles. The City is one of the leading convention centers in the State and is the commercial hub of the County. As the County seat, it is the location of many county, state, and federal offices.

The County. The County is the third largest county in California, covering 8,073 square

miles. Surrounded by three major mountain ranges, the County has three climatic zones: valley, mountain and high desert. Bordered on the west by San Luis Obispo and Santa Barbara Counties, to the east by San Bernardino County and on the north by Kings, Tulare and Inyo Counties, the County measures 120 miles east-­to-­west and 67 miles north-­to-­south.

The County’s economy is heavily linked to agriculture and to petroleum extraction. There

is also a strong aviation, space, and military presence, such as Edwards Air Force Base, the China Lake Naval Air Weapons Station, and the Mojave Air and Space Port.

D-­2

Population The following table lists population estimates for the City, the County and the other major

cities in the County as of January 1 each year for the last five calendar years.

CITY OF BAKERSFIELD KERN COUNTY

Population Estimates Calendar Years 2013 through 2017

2013 2014 2015 2016 2017

Arvin 20,290 20,408 20,511 20,978 21,157 Bakersfield 364,183 369,485 374,642 379,110 383,512 California City 13,421 13,466 14,233 13,992 14,248 Delano 52,422 52,692 52,757 52,999 53,152 Maricopa 1,141 1,142 1,139 1,140 1,140 McFarland 12,731 13,805 14,231 14,658 14,919 Ridgecrest 27,994 27,969 27,953 28,064 28,349 Shafter 16,940 17,199 17,847 18,048 18,868 Taft 8,964 8,939 9,515 9,405 9,492 Tehachapi 13,100 13,023 12,758 12,217 12,280 Wasco 25,871 26,140 26,317 26,471 26,980 Total Unincorporated 306,850 307,654 308,484 309,425 311,015

Total County 863,907 871,922 880,387 886,507 895,112 Source: California Department of Finance, Demographic Research Unit.

D-­3

Industry and Employment The City is included in the Bakersfield Metropolitan Statistical Area (the “MSA”), which

consists of the County. The unemployment rate in the County was 8.6% in December 2017, up from a revised 7.2% in November 2017, and below the year-­ago estimate of 10.2%. This compares with an unadjusted unemployment rate of 4.2% for California and 3.9% for the nation during the same period.

The table below provides information about employment rates and employment by

industry type for the County for calendar years 2012 through 2016. Annual figures are not yet available for calendar year 2017.

BAKERSFIELD MSA (County of Kern)

Annual Average Civilian Labor Force, Employment and Unemployment, Employment by Industry (March 2016 Benchmark)

2012 2013 2014 2015 2016

Civilian Labor Force (1) 393,700 394,200 394,800 393,800 389,100 Employment 341,400 347,900 353,600 353,600 348,900 Unemployment 52,300 46,400 41,200 40,200 40,200 Unemployment Rate 13.3% 11.8% 10.4% 10.2% 10.3% Wage and Salary Employment: (2) Agriculture 54,400 59,600 60,100 59,100 62,300 Mining and Logging 13,300 13,000 13,400 11,900 9,400 Construction 16,700 17,200 18,200 17,000 14,500 Manufacturing 13,500 14,000 14,600 14,200 13,700 Wholesale Trade 8,500 9,100 9,400 9,300 9,000 Retail Trade 27,900 28,900 30,300 31,600 32,600 Transportation, Warehousing, Utilities 9,100 9,500 9,800 10,100 9,500 Information 2,700 2,500 2,400 2,700 2,200 Finance and Insurance 5,500 5,600 5,500 5,300 5,300 Real Estate and Rental and Leasing 3,200 3,300 3,200 3,200 3,100 Professional and Business Services 26,600 26,200 25,900 25,500 26,000 Educational and Health Services 31,500 32,300 32,600 33,500 34,700 Leisure and Hospitality 21,600 22,800 23,700 25,200 25,300 Other Services 7,200 7,500 7,800 7,600 7,700 Federal Government 10,400 10,000 9,600 9,900 10,200 State Government 9,400 8,800 9,200 9,600 9,900 Local Government 39,000 39,600 40,800 42,000 43,100 Total all Industries (3) 300,300 310,000 316,400 317,500 318,300 (1) Labor force data is by place of residence;; includes self-­employed individuals, unpaid family workers, household domestic

workers, and workers on strike. (2) Industry employment is by place of work;; excludes self-­employed individuals, unpaid family workers, household domestic

workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department.

D-­4

Principal Employers

The following table lists the principal employers within the City as of June 30, 2017.

CITY OF BAKERSFIELD PRINCIPAL EMPLOYERS

June 30, 2017

Employer Employees County of Kern 7,274 Kern High School District 4,279 Bakersfield City School District 3,673 Dignity Health 3,398 Adventist Health Bakersfield 2,718 Panama-­Buena Vista Union School District 2,312 Wm Bolthouse Farms 1,802 Kern Medical Center 1,796 Kern County Superintendent of Schools 1,623 City of Bakersfield 1,443

Total 30,318 Source: City of Bakersfield, Comprehensive Annual Financial Report, for Fiscal Year Ended June 30, 2017.

Major Employers

The following table lists the largest manufacturing and non-­manufacturing employers

within the County as of June 30, 2017.

KERN COUNTY Largest Employers June 30, 2017

Employer Employees

Edwards Air Force Base 10,000+ China Lake Naval Air Weapons Center 7,000 County of Kern 6,442 Grimmway 1,000-­4,999 Dignity Health 1,000-­4,999 WM Bolthouse Farms 1,000-­4,999 San Joaquin Community Hospital 1,000-­4,999 Sun World 1,000-­4,999 Chevron 1,000-­4,999 City of Bakersfield 1,000-­4,999

Source: Kern County, Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2017.

D-­5

Agriculture The County is part of the San Joaquin Valley, one of the most agriculturally productive

areas on a per acre basis in the world. The top five commodities for 2016 were grapes, almonds, citrus, pistachios and milk, which make up more than $4.3 billion (60%) of the total value;; with the top twenty commodities making up more than 73% of the total value. The table below lists the value of various agricultural products from 2012 through 2016. Data is not yet available for 2017.

KERN COUNTY

Gross Value of Agricultural Production (Dollars in Thousands)

Agricultural Product 2012 2013 2014 2015 2016 Fruit and Nut Crops $3,650,049 $4,133,389 $4,769,213 $4,670,622 $4,900,990 Field Crops 539,370 522,365 507,302 340,618 304,712 Vegetable Crops 714,490 686,789 648,857 654,165 836,670 Livestock & Poultry 395,078 418,926 443,650 370,376 326,508 Livestock & Poultry Products 732,385 819,880 980,756 652,917 609,513 Nursery Crops 100,824 111,271 93,720 83,265 102,318 Industrial Crops 15,717 14,176 18,498 12,838 9,045 Seed Crops & Other 7,742 5,305 6,591 11,251 9,410 Apiary Products 56,707 57,755 83,737 82,772 88,778

Total $6,212,362 $6,769,856 $7,552,324 $6,878,824 $7,187,944 Source: Kern County Department of Agriculture, 2016 Agricultural Crop Report.

[Remainder of page intentionally left blank]

D-­6

Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax

payments, a number often referred to as “disposable” or “after-­tax” income. Personal income is the aggregate of wages and salaries, other labor-­related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-­occupants of non-­farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.”

The following table summarizes the median household effective buying income for the

City, the County, the State and the United States for the period 2012 through 2016. Median household effective buying income data is not yet available for calendar year 2017.

COUNTY OF KERN Effective Buying Income

As of January 1, 2012 through 2016

2012 2013 2014 2015 2016 City of Bakersfield $42,717 $44,586 $46,143 $48,732 $50,066 Kern County 38,667 40,446 42,189 43,795 44,716 California 47,307 48,340 50,072 53,589 55,681 United States 41,358 43,715 45,448 46,738 48,043 Source: The Nielsen Company (US), Inc.

D-­7

Commercial Activity Total taxable sales during calendar year 2016 in the City were reported to be $5.737 billion,

a 3.04% decrease over the total taxable sales of $5.917 billion reported during calendar year 2015. Annual figures for calendar year 2017 are not available.

CITY OF BAKERSFIELD Taxable Retail Sales

Number of Permits and Valuation of Taxable Transactions Calendar Years 2012 through 2016

(Dollars in Thousands)

Retail Stores Total All Outlets

Number of Permits

Taxable

Transactions

Number of Permits

Taxable

Transactions 2012 5,416 $4,492,248 7,520 $5,954,794 2013 5,712 4,605,514 7,790 6,046,533 2014 6,013 4,769,788 8,096 6,284,932 2015(1) 6,345 4,711,732 9,223 5,917,676 2016 6,348 4,673,367 9,338 5,737,514 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-­time are now tabulated with store retailers. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

Total taxable sales during calendar year 2016 in the County were reported to be $13.885

billion, a 3.27% decrease over the total taxable sales of $14.322 billion reported during calendar year 2015. Annual figures for calendar year 2017 are not available.

KERN COUNTY Taxable Retail Sales

Number of Permits and Valuation of Taxable Transactions Calendar Years 2012 through 2016

(Dollars in Thousands)

Retail Stores Total All Outlets

Number of Permits

Taxable

Transactions

Number of Permits

Taxable

Transactions 2012 10,915 $7,856,031 15,812 $14,666,473 2013 11,242 8,134,147 16,077 15,199,124 2014 11,519 8,589,322 16,336 15,722,694 2015(1) 6,303 8,549,819 18,455 14,322,101 2016 12,097 8,566,623 18,556 13,885,643 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-­time are now tabulated with store retailers. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

D-­8

Construction Activity Construction activity in the City and the County for the past five years for which data is

available is shown in the following tables. CITY OF BAKERSFIELD

Total Building Permit Valuations Calendar Years 2013 through 2017

(Valuations in Thousands)

2013 2014 2015 2016 2017 Permit Valuation New Single-­family $274,203.6 $338,145.2 $360,611.5 $359,121.7 $252,780.6 New Multi-­family 20,195.2 48,578.1 23,571.4 11,824.0 1,869.0 Res. Alterations/Additions 11,533.3 14,497.3 12,662.6 14,445.0 26,707.5 Total Residential 305,932.1 401,220.6 396,845.5 385,390.7 281,357.1

New Commercial 18,984.8 37,682.3 36,895.9 40,325.3 46,872.5 New Industrial 0.0 0.0 0.0 2,380.8 2,943.9 New Other 3,397.7 19,206.3 16,223.4 12,430.8 29,278.1 Com. Alterations/Additions 86,942.8 70,783.3 74,256.1 86,915.8 73,708.9 Total Nonresidential 109,325.3 127,671.9 127,375.4 142,052.7 152,803.4

New Dwelling Units Single Family 1,313 1,340 1,333 1,338 923 Multiple Family 185 326 198 56 6 TOTAL 1,498 1,666 1,531 1,394 929 Source: Construction Industry Research Board, Building Permit Summary.

KERN COUNTY Total Building Permit Valuations Calendar Years 2013 through 2017

(Valuations in Thousands)

2013 2014 2015 2016 2017 Permit Valuation New Single-­family $363,561.4 $444,592.4 $496,973.6 $489,908.4 $398,464.2 New Multi-­family 44,545.8 51,730.1 28,017.3 12,501.0 1,869.0 Res. Alterations/Additions 30,414.3 32,193.6 27,705.0 30,119.6 44,908.3 Total Residential 438,521.4 528,516.1 552,695.9 532,529.0 445,241.5

New Commercial 267,395.0 148,418.5 116,726.1 121,385.2 105,869.2 New Industrial 23,706.3 19,876.5 11,396.1 5,469.5 16,971.2 New Other 1,319,217.8 627,586.8 646,808.6 89,364.6 125,642.4 Com. Alterations/Additions 132,961.5 165,036.0 144,820.5 132,775.7 119,587.6 Total Nonresidential 1,743,280.6 960,917.8 919,751.3 348,995.0 368,070.4

New Dwelling Units Single Family 1,952 2,047 2,184 2,181 1,872 Multiple Family 520 380 270 66 6 TOTAL 2,472 2,427 2,454 2,247 1,878 Source: Construction Industry Research Board, Building Permit Summary.

D-­9

Transportation Systems

Well-­developed surface and air transportation facilities are available to City residents and

business firms. Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak service is available.

State Highway 99, the main north-­south artery serving the most populous communities

along the east side of the Central Valley, runs through the center of the City. State Highway 58 provides east-­west linkage between Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east. Highway 178, heading northeast, is the major route along the Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99 and to Sequoia National Park.

Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and

Trailways. Golden Empire Transit provides local bus transportation. The Meadows Field Airport adjoins the City to the north. Regularly scheduled passenger

and aircargo service is available, as well as charter service and general aviation services. The Meadows Field Airport includes the William M. Thomas Terminal, a 64,800 square foot, state-­of-­the-­art terminal facility completed in November 2005 that is currently equipped with three jet-­boarding bridges, but that may be expanded to accommodate up to nine gates. A second, older terminal has been converted to accommodate international flights to Mexico.

[PAGE INTENTIONALLY LEFT BLANK.]

E-­1

APPENDIX E

BOOK-­ENTRY ONLY SYSTEM

The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Notes, payment of principal, interest and other payments on the Notes to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Notes and other related transactions between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.

Neither the District nor the Trustee take any responsibility for the information contained

in this Section. No assurances can be given that DTC, DTC Participants or Indirect Participants will

distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Notes, (b) Notes representing ownership interest in or other confirmation or ownership interest in the Notes, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Notes, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC.

1. The Depository Trust Company (“DTC”) will act as securities depository for the

securities (in this Appendix, the “Notes”). The Notes 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 Note will be issued for each maturity of the Notes, in the aggregate principal amount of such maturity, and will be deposited with DTC. If, however, the aggregate principal amount of any maturity 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

E-­2

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. The information contained on this Internet site is not incorporated herein by reference.

3. Purchases of Notes under the DTC system must be made by or through Direct

Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“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 Notes 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 Notes representing their ownership interests in Notes, except in the event that use of the book-­entry system for the Notes is discontinued.

4. To facilitate subsequent transfers, all Notes 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 Notes with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes;; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes 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 Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as redemptions, tenders, defaults, and proposed amendments to the Notes. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes 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 the notices be provided directly to them.

6. Redemption notices will be sent to DTC. If less than all of the Notes 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 such other DTC nominee) will consent or vote with

respect to the Notes unless authorized by a Direct Participant in accordance with DTC’s MMI

E-­3

Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and interest payments on the Notes 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 District or Trustee 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 nor its nominee, Trustee, or District, 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 District or Trustee, 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. DTC may discontinue providing its services as securities depository with respect to

the Notes at any time by giving reasonable notice to District or Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Notes are required to be printed and delivered.

10. The District may decide to discontinue use of the system of book-­entry-­only

transfers through DTC (or a successor securities depository). In that event, Note will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-­entry system has

been obtained from sources that District believes to be reliable, but District takes no responsibility for the accuracy thereof.

[PAGE INTENTIONALLY LEFT BLANK.]

F-­1

APPENDIX F

FORM OF CONTINUING DISCLOSURE CERTIFICATE

$___________ GOLDEN EMPIRE SCHOOLS FINANCING AUTHORITY

2018 Lease Revenue Refunding Notes (Kern High School District Projects)

Continuing Disclosure Certificate

This Continuing Disclosure Certificate (this “Disclosure Certificate”) dated ____, 2018 is

executed and delivered by the Kern High School District (the “District”), on behalf of itself and the Golden Empire Schools Financing Authority (the “Authority”) in connection with the issuance of the $__________ aggregate principal amount of Golden Empire Schools Financing Authority 2018 Lease Revenue Refunding Notes (Kern High School District Projects) (the “Notes”). The Notes are being issued under a Trust Agreement dated as of April 1, 2018 (the “Trust Agreement”) between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The District covenants and agrees as follows:

Section 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is

being executed and delivered by the District, on behalf of itself and the Authority, for the benefit of the holders and beneficial owners of the Notes and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-­12(b)(5).

Section 2. Definitions. In addition to the definitions set forth above and in the Trust

Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms have the following meanings:

“Annual Report” means any Annual Report provided by the District under and as

described in Sections 3 and 4. “Annual Report Date” means the date not later than nine months after the end of each

fiscal year of the District. “Dissemination Agent” means initially, Dale Scott & Co., Inc., or any successor

Dissemination Agent designated in writing by the District and which has filed with the District a written acceptance of such designation.

“Listed Events” means any of the events listed in Section 5(a). “MSRB” means the Municipal Securities Rulemaking Board, which has been designated

by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule.

“Official Statement” means the final official statement executed by the District in

connection with the issuance of the Certificates.

F-­2

“Participating Underwriters” means Morgan Stanley & Co. LLC and Stifel, Nicolaus & Company, Incorporated, the original underwriters of the Notes required to comply with the Rule in connection with offering of the Notes.

“Rule” means Rule 15c2-­12(b)(5) adopted by the Securities and Exchange Commission

under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) The District shall, or shall cause the Dissemination Agent to, not later than the

Annual Report Date, commencing not later than March 31, 2019 with the report for the 2017-­18 fiscal year, provide to the MSRB in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4. Not later than 15 Business Days prior to the Annual Report Date, the District shall provide the Annual Report to the Dissemination Agent (if other than the District). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the District) has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4;; provided that the audited financial statements of the District may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the District’s or the Authority’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the District, on behalf of itself and the Authority, hereunder.

(b) If the District does not provide (or cause the Dissemination Agent to provide) an

Annual Report by the Annual Report Date, the District shall provide (or cause the Dissemination Agent to provide) in a timely manner to the MSRB, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A, with a copy to the Trustee and Participating Underwriters.

(c) With respect to each Annual Report, the Dissemination Agent shall:

(i) determine each year prior to the Annual Report Date the then-­applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports;; and

(ii) if the Dissemination Agent is other than the District, file a

report with the District certifying that the Annual Report has been provided under this Disclosure Certificate, and stating the date it was provided.

F-­3

Section 4. Content of Annual Reports. The Annual Report filed hereunder shall contain or incorporate by reference the following:

(a) Audited financial statements of the District and the Authority prepared in

accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) To the extent not contained in the audited financial statements filed on or before

the Annual Report Date, the following information shall be included in the Annual Report:

(i) the District’s most recently adopted budget, or interim report showing budgeted figures, which is available at the time of filing the Annual Report;;

(ii) average daily attendance in the District on an aggregate basis for the

most recently completed fiscal year;; (iii) pension plan contributions of the District for the most recently

completed fiscal year;; (iv) a summary of the outstanding principal amounts of short-­term

borrowings, lease obligations and other long-­term borrowings of the District and the Authority for the most recently completed fiscal year;;

(v) assessed valuation of taxable properties in the District for the most

recently completed fiscal year;; (vi) assessed valuation of properties of the top twenty taxpayers in the

District for the most recently completed fiscal year;; (vii) property tax collection delinquencies for the District for the most

recently completed fiscal year or if not available at the time of the filing of the Annual Report for the prior fiscal year, if such data is available from the County, and

(viii) such further information, if any, as may be necessary to make the

specifically required statements, in the light of the circumstances under which they are made, not misleading.

(c) Any or all of the items listed above may be included by specific reference to other

documents, including official statements of debt issues of the District or the Authority or related public entities, which are available to the public on the MSRB’s internet web site or filed with the Securities and Exchange Commission. The District shall clearly identify each such other document so included by reference.

F-­4

Section 5. Reporting of Significant Events. (a) The District shall give, or cause to be given, notice of the occurrence of any of the

following Listed Events with respect to the Notes:

(1) Principal and interest payment delinquencies.

(2) Non-­payment related defaults, if material.

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

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

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

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

(7) Modifications to rights of security holders, if material.

(8) Certificate calls, if material, and tender offers.

(9) Defeasances.

(10) Release, substitution, or sale of property securing repayment of the securities, if material.

(11) Rating changes.

(12) Bankruptcy, insolvency, receivership or similar event of the District.

(13) 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.

(14) Appointment of a successor or additional Trustee or the change of name of a Trustee, if material.

(b) Whenever the District obtains knowledge of the occurrence of a Listed Event, the

District shall, or shall cause the Dissemination Agent (if not the District) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. Notwithstanding the foregoing, the notice of Listed Event described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Notes under the Trust Agreement.

(c) The District acknowledges that the events described in subparagraphs (a)(2),

(a)(7), (a)(8) (if the event is a certificate call), (a)(10), (a)(13), and (a)(14) of this Section 5 contain the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier

F-­5

"material" with respect to certain notices, determinations or other events affecting the tax status of the Lease Payments relating to the Notes. The District shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the District obtains knowledge of the occurrence of any of these Listed Events, the District will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the District will cause a notice to be filed as set forth in paragraph (b) above.

(d) For purposes of this Disclosure Certificate, any event described in paragraph

(a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District.

Section 6. Identifying Information for Filings with the MSRB. All documents

provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.

Section 7. Termination of Reporting Obligation. The District’s obligations under this

Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Notes. If such termination occurs prior to the final maturity of the Notes, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

Section 8. Dissemination Agent. The District may, from time to time, appoint or

engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days’ written notice to the District and the Trustee.

Section 9. Amendment;; Waiver. Notwithstanding any other provision of this

Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:

(a) if the amendment or waiver relates to the provisions of Sections 3(a),

4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Notes, or type of business conducted;;

(b) the undertakings herein, as proposed to be amended or waived,

would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Notes, after taking into account any amendments or

F-­6

interpretations of the Rule, as well as any change in circumstances;; and

(c) the proposed amendment or waiver either (i) is approved by holders

of the Notes in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Notes.

If the annual financial information or operating data to be provided in the Annual Report

is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

If an amendment is made to the undertaking specifying the accounting principles to be

followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c).

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be

deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

Section 11. Default. If the District fails to comply with any provision of this Disclosure

Certificate, the Participating Underwriters or any holder or beneficial owner of the Notes may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance.

Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in

this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and

F-­7

liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent will have no duty or obligation to review any information provided to it by the District hereunder, and shall not be deemed to be acting in any fiduciary capacity for the District, the Certificate holders or any other party. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Notes.

(b) The Dissemination Agent shall be paid compensation by the District for its services

provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.

Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of

the District, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Notes and shall create no rights in any other person or entity.

Date: ___________, 2018 KERN HIGH SCHOOL DISTRICT, on behalf of itself and the Golden Empire Schools Financing Authority

By:

Assistant Superintendent, Business

ACCEPTANCE OF DUTIES AS DISSEMINATION AGENT: DALE SCOTT & COMPANY INC. By: Authorized Officer

[PAGE INTENTIONALLY LEFT BLANK.]

G-­1

APPENDIX G

KERN COUNTY INVESTMENT POLICY AND MONTHLY REPORT

Page 1 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

OFFICE OF THE TREASURER-TAX COLLECTOR COUNTY OF KERN

TREASURER’S STATEMENT OF INVESTMENT POLICY

Approved By the Board of Supervisors December 5, 2017

SCOPE: The County of Kern’s Investment Policy has been prepared in accordance with California Government Code (CGC) sections 53630 et seq. The complete text of California Government Code Section 53630 is set forth on the Internet at www.leginfo.ca.gov. This policy shall be reviewed annually by the County’s Treasury Oversight Committee and approved by the County Board of Supervisors. The purpose of this policy is to establish cash management and investment guidelines for the County Treasurer, who is responsible for the management and investment of the County Treasurer’s Pool, which consists of pooled monies held on behalf of the County, school districts, community college districts and certain special districts within the County. This policy shall apply to all investments held within the County Treasurer’s Pool and made on behalf of the County and member agencies of the Pool with the exception of certain bond funds for which the Board of Supervisors may specifically authorize other allowable investments, consistent with State law. Also exempt from this policy are retirement funds and other post employment benefit (OPEB) funds managed through an external trust. The Treasurer and Treasurer’s staff are responsible for the full-time, active management of the Pool. All investments and activities of the Treasurer and staff are conducted with the understanding that the Treasurer holds a public trust with the citizens of the County, which cannot be compromised. FIDUCIARY RESPONSIBILITY: CGC Section 27000.3, declares each Treasurer, or governing body authorized to make investment decisions on behalf of local agencies, to be a fiduciary subject to the prudent investor standard as stated in CGC Section 53600.3: “When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall investment strategy, investments may be acquired as authorized by law.”

PORTFOLIO OBJECTIVES: It is the policy of the Treasurer to invest public funds in a manner which will preserve the safety and liquidity of all investments within the County investment pool while obtaining a reasonable return within established investment guidelines. The portfolio should be actively managed in a

Page 2 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

manner that is responsive to the public trust and consistent with State law. Accordingly, the County Treasurer’s Pool will be guided by the following principles, in order of importance:

1. The primary objective of the Treasurer’s investment of public funds is to safeguard investment principal.

2. The secondary objective is to maintain sufficient liquidity to insure that funds are available to meet daily cash flow requirements.

3. The third and last consideration is to achieve a reasonable rate of return or yield consistent with these objectives.

AUTHORIZED INVESTMENTS: Investments shall be restricted to those authorized in the CGC and as further restricted by this policy statement, with the exception of certain bond funds in which the Board of Supervisors has specifically authorized other allowable investments. All investments shall be further governed by the restrictions shown in Schedule I which defines the type of investments authorized, maturity limitations, portfolio diversification (maximum percent of portfolio), credit quality standards, and purchase restrictions that apply. Whenever a maximum allowable percentage of the portfolio is stipulated for any type of security or structural maturity range, the limit or maximum allowable is determined by the portfolio size at the close of the date on which the security is settled. In conjunction with these restrictions, County Treasurer staff shall diversify its investments by security type, issuer and maturity. The purpose of this diversification is to reduce portfolio risk by avoiding an over concentration in any particular maturity sector, asset class or specific issuer. As Agency security holdings are the largest portion of the pool, diversification among the Agency issuers should be considered to the extent practical when making investments. PROHIBITED INVESTMENTS: No investment shall be made that is prohibited by 53601.6 as may be from time to time amended. STAFF AUTHORIZED TO MAKE INVESTMENTS: Only the Treasurer, Assistant Treasurer, Principal Treasury Investment Officer and department Accountants, when acting as the Investment Officer, are authorized to make investments and to order the receipt and delivery of investment securities among custodial security clearance accounts. AUTHORIZED BROKER/DEALERS: The County Treasurer shall maintain an ‘Eligible Broker/Dealer List’. Firms eligible to do business with the County are:

• Primary Broker/Dealers eligible to trade with the New York branch of the Federal Reserve Bank

Page 3 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

• Regional Broker/Dealers meeting the minimum capital requirements of the Securities Exchange Commission

• Introducing Brokers meeting the minimum capital requirements of the Securities

Exchange Commission

• National or State banks, domestic branches of properly licensed foreign banks, credit unions, savings and loan institutions, thrift associations

• Direct Issuers meeting the appropriate credit criteria for the securities being

offered

• Other institutions as authorized by law

All firms with whom the County does business shall comply with the requirements set forth in Schedule IV. County Treasurer staff shall conduct an annual review of each Broker/Dealer’s current financial condition and performance in servicing the County over the prior year. Further, in compliance with CGC Section 27133(c) & (d), no dealer and/or securities firm shall be eligible if they have made a political contribution in excess of the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board or exceeded the limit on honoraria, gifts, and gratuities set by State law, or by the Fair Political Practices Commission, by County Ordinance or Departmental Policy. DUE DILIGENCE: County Treasurer staff shall conduct a thorough review and perform due diligence of all firms seeking to do business with the County prior to conducting transactions with those parties and on a continuing basis. This due diligence may include a periodic review of recent news, financial statements and SEC filings related to each entity. INTERNAL CONTROL: The County Treasurer has established a system of internal control to provide reasonable assurance that the investment objectives are met and to ensure that the assets of the County Treasury Pool are protected from loss, theft or misuse. The concept of reasonable assurance recognizes that the cost of control shall not exceed the benefits likely to be derived and that the valuation of costs and benefits require estimates and judgments by management. The County Treasurer shall develop and maintain written procedures for the operation of the investment program, which are consistent with this policy. These procedures shall include reference to separation of duties, safekeeping, collateralization, wire transfers and banking related activities. Except for declared emergencies, the County Treasurer’s Office shall observe the following procedures on a daily basis:

1. All investment transactions conducted by the County Treasurer’s Office shall be immediately confirmed and entered into the Treasurer’s Portfolio Accounting System.

2. A copy of each day’s investment transactions shall be filed with the County Auditor-Controller.

Page 4 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

3. County investments shall be executed, confirmed, accounted for, and audited by different people.

SECURITY CUSTODY & DELIVERIES: All securities purchased shall be deposited for safekeeping with the Custodial Bank that has contracted to provide the County Treasurer with custodial security clearance services or with a tri-party custodian bank under a written tri-party custody agreement. These third party trust department arrangements provide the County with a perfected interest in, ownership of and control over the securities held by the bank custodian on the County’s behalf, and are intended to protect the County from the bank’s own creditors in the event of a bank default and filing for bankruptcy. Securities are not to be held in investment firm/broker dealer accounts. All security holdings shall be reconciled monthly by the County Treasurer and audited at least quarterly by the County Auditor. All security transactions are to be conducted on a “delivery-versus-payment basis”. All trades will be immediately confirmed with the Broker/Dealer and reconfirmed through the Custodian Bank.

COMPETITIVE PRICING: Investment transactions are to be made at current market prices. Wherever possible, competitive prices should be obtained through obtaining multiple bids or offers. When possible, bids and offers for any investment security shall be taken from a minimum of three security dealers/brokers or banks and awards shall be made to the best bid or offer. The primary source of pricing information and guidance will be that information available through Bloomberg LLP, a world-wide financial news service to which the County subscribes.

LIQUIDITY: The portfolio will maintain a weighted-average maturity of no greater than 2 years. To provide sufficient liquidity to meet daily expenditure requirements, the portfolio will maintain at least 35% of its total book value in securities having a maturity of one (1) year or less. PORTFOLIO EVALUATION: The portfolio is monitored and evaluated daily, monthly, and quarterly by the County Treasurer's Office. Monthly market value pricing is provided by a third party. Earned yield is calculated each month. Benchmarks for earned yield and investment performance will be commensurate with the pool's investment goals, credit limits, and target weighted average maturity and duration.

MITIGATING MARKET & CREDIT RISKS: Safety of principal is the primary objective of the portfolio. Each investment transaction shall seek to minimize the County’s exposure to market and credit risks by giving careful and ongoing attention to the: (1) credit quality standards issued by Standard & Poor’s, Moody’s and Fitch’s rating services on the credit worthiness of each issuer of securities, (2) limiting the duration of investments to the time frames noted in Schedule I, and (3) by maintaining the diversification and liquidity standards expressed within this policy.

Page 5 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

In the event of a downgrade of a security held in the portfolio, the Principal Treasury Investment Officer shall report the downgrade to the Treasurer within a maximum of 3 days. In the event of a downgrade below the minimum credit ratings authorized by this policy, the security shall be evaluated on a case-by-case basis to determine whether the security shall be sold or held. Every effort will be made to sell such a security without a book loss. In the event of a potential loss upon sale, the Treasurer will evaluate whether to hold or sell the security based on the amount of loss, remaining maturity and any other relevant factors including the issuer’s default risk, headline risk, and short term vs. long term financial metrics. TRADING & EARLY SALE OF SECURITIES: Securities should be purchased with the intent of holding them until maturity. However, in an effort to minimize market risks, credit risks, and increase the return of the portfolio, securities may be sold prior to maturity either at a profit or loss when economic circumstances or a deterioration in credit worthiness of the issuer warrant a sale of the securities to either enhance overall portfolio return or to minimize loss of investment principal. In measuring a profit or loss, the sale proceeds shall be compared to the original cost of the security plus accrued interest earned and/or any accretion or amortization of principal on the security from the date of purchase or the last coupon date, to the date of sale.

PORTFOLIO REPORTS/AUDITING: On a monthly basis, the County Treasurer shall prepare and file with the Board of Supervisors, the County Administrative Officer, and County Auditor-Controller, a report consisting of, but not limited to, the following:

1. Monthly investment transactions, investments detailing each by type, issuer, date of maturity, par value and stating the book vs. current market value together with all other portfolio information required by law.

2. Compliance of investments to the existing County Investment Policy.

3. A statement confirming the ability of the Pool to meet anticipated cash requirements for the Pool for the next six months.

TREASURY OVERSIGHT COMMITTEE:

In accordance with the CGC Section 27131, the Board of Supervisors has established a Treasury Oversight Committee. The Treasury Oversight Committee will render unbiased and objective opinions on matters involving the Treasurer’s investment of public funds. Specifically, the law requires that the Treasury Oversight Committee meet to:

1. Review the Treasurer’s annual Investment Policy Statement and any subsequent changes thereto, prior to its submission to the Board of Supervisors for review and adoption,

2. Review the Treasurer’s investment portfolio reports and the portfolio’s compliance with law and this Investment Policy,

3. Cause an annual audit to be conducted on the Treasurer’s Pooled Investment portfolio.

All meetings of the Oversight Committee are to be open to the public and subject to the Ralph

Page 6 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

M. Brown Act. By law, the Treasury Oversight Committee is not allowed to direct individual investment decisions, nor select individual investment advisors, brokers, or dealers, or impinge on the day-to-day operations of the County Treasury. QUARTERLY DISTRIBUTION OF INVESTMENT EARNINGS: All moneys deposited in this pool by the participants represent an individual interest in all assets and investments in the pool based upon the amount deposited. Portfolio income shall be reconciled daily against cash receipts, and quarterly prior to the distribution of earnings among those entities sharing in pooled fund investment income. Nonetheless, actual portfolio income and/or losses, net of any reserves, will be distributed quarterly using the accrual basis of accounting, in compliance with the CGC Section 53684, among those participants sharing in pooled investment income. Except for specific investments in which the interest income is to be credited directly to the fund from which the investment was made, all investment income is to be distributed pro-rata based upon each participant’s average daily cash balance for the calendar quarter. QUARTERLY APPORTIONMENT OF ADMINISTRATIVE COSTS: Prior to the quarterly apportionment of pooled fund investment income, the County Treasurer is permitted by CGC Section 53684 to deduct from investment income before the distribution thereof, the actual cost of the investments, auditing, depositing, handling and distribution of such income. Accordingly, the Treasurer shall deduct from pooled fund investment earnings the actual cost incurred for banking and investment related services including but not limited to: wire transfers, custodial safekeeping charges, necessary capital outlays, the costs of investment advisory services, credit ratings, the pro-rata annual cost of the salaries including fringe benefits for the personnel in the Treasurer-Tax Collector’s Office engaged in the administration, investment, auditing, cashiering, accounting, reporting, remittance processing and depositing of public funds for investment, together with the related computer and office expenses associated with the performance of these functions. WITHDRAWAL OF FUNDS: The Treasurer's Investment Policy establishes guidelines for unusual or unexpected withdrawal of cash and provides for adequate liquidity to cover day-to-day operations of pool depositors. On occasion, depositors have need of withdrawals that exceed those normally associated with operations. To accommodate such withdrawals, the Treasurer-Tax Collector’s Office has established written notification requirements as set forth below to allow for adjustments to the liquidity position of the Portfolio. The notification required is as follows: Withdrawals of up to $10,000,000 24 hours Withdrawals of $10,000,001 and more 72 hours Notification should be by email to 2servu@co.kern.ca.us. Failure to adhere to these requirements may result in payment being delayed by the Treasurer-Tax Collector’s office. Pursuant to CGC Section 27136, any local agency, public agency, public entity, or public official that has funds on deposit in the county treasury pool and that seeks to withdraw funds for the purpose of investing or depositing those funds outside the county treasury pool is required to first submit a request for the withdrawal to the county Treasurer-Tax Collector before withdrawing funds from the county treasury pool. Prior to approving such a request, the county

Page 7 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

Treasurer-Tax Collector will find that the withdrawal will not adversely affect other depositors in the county treasury pool. Approval of the withdrawal does not constitute approval or endorsement of the investment.

POLICY CRITERIA FOR AGENCIES SEEKING VOLUNTARY ENTRY INTO COUNTY

INVESTMENT POOL: The County Treasurer is not soliciting nor accepting any new agency’s voluntary entry into the County Treasurer’s Pool. ETHICS & CONFLICTS OF INTEREST: Officers and staff members involved in the investment process shall refrain from any personal business activity that compromises the security and integrity of the County’s investment program or impairs their ability to make impartial and prudent investment decisions. The County Treasurer-Tax Collector, Assistant Treasurer-Tax Collector, Principal Treasury Investment Officer and department Accountants are required to file annually the applicable financial disclosure statements as mandated by the Fair Political Practices Commission (FPPC) and/or by County Ordinance. In addition, the Principal Treasury Investment Officer and department Accountants are required to sign and abide by an Ethics Policy instituted by the Treasurer. POLICY ADOPTION & AMENDMENTS: This policy statement will become effective immediately following adoption by the Board of Supervisors, and will remain in force as long as the delegation of authority to the Treasurer to invest is in effect and until subsequently amended in writing by the County Treasurer, reviewed by the Treasury Oversight Committee and approved by the Board of Supervisors.

This Space Intentionally Left Blank

Page 8 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

OFFICE OF THE TREASURER COUNTY OF KERN

STATEMENT OF INVESTMENT POLICY

Schedule I

Authorized Investments

AUTHORIZED INVESTMENTS

MAXIMUM HOLDINGS

PURCHASE RESTRICTIONS MAXIMUM MATURITY

CREDIT QUALITY

(S&P/MOODY'S/ FITCH)

Inactive Accounts aka Money Market Accounts

$50,000,000 per account

Limited to depository’s described in CGC 53630.5

Daily Collateralization requirements per

Govt Code section 53652.

U.S. Treasury Obligations 100% None 5 years Not Applicable

Notes, participation's or obligations issued by an agency of the Federal Government or U.S.

government-sponsored enterprises

75% Maximum per issuer limit of 40%

5 years Not Applicable

Bonds, notes, warrants or certificates of indebtedness

issued by the State of California

10% None 5 years AA by at least 2 of the 3 rating

agencies

Cash substitutes issued by the State of California

25% Applies only to cash substitutes issued by the

State during periods of fiscal emergency

5 years Not Applicable

Bonds, notes, warrants or certificates of indebtedness issued by agencies within

the State of California

10% None 5 years AAA by at least 2 of the 3 rating

agencies

Bonds, notes, warrants or certificates of indebtedness issued by any of the other

49 states

10% None 5 years AAA by at least 2 of the 3 rating

agencies

Bankers Acceptances 30% See Note 1 180 Days Minimum A-1, P-1 or F1

Page 9 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

Commercial paper of U.S. Corps with total assets in

excess of $500 MM

40% total for all Commercial Paper

Max 10% of outstanding paper of any one issuer &

max. See Note 1

270 Days Minimum A-1, P-1 or F1

Asset-backed Commercial Paper

Included in Commercial Paper

Requirements

Issuer must have program-wide credit enhancements

270 Days Minimum A-1, P-1 or F1

Local Agency Investment Fund (LAIF)

Maximum amount permitted by LAIF

LAIF Policies Daily Not Applicable

Negotiable CD's issued by US National or State chartered banks or a

savings association or a federal association, a state or federal credit union, or by a federally licensed or state licensed branch of a

foreign bank

30% See Note 1 5 years Minimum A-1, P-1 or F1 for

CDs issued with a maturity of one year or less. AA for CDs issued

with a maturity of more than one year (must be

rated by 2 of the 3 rating

agencies)

Collateralized Certificates of Deposit/Deposits

10% As stipulated in Article 2, Section 53630 et al of the Calif. Government Code

1 year See Section 53630 et al of the

California Government

Code

Repurchase Agreements with 102% collateral

40% Repurchase Agreements(contracts) must

be on file

180 days Restricted to Primary Dealers

on Eligible Dealer list

Reverse Repurchase Agreements

10% See Schedule II 92 days (See

Schedule III)

Restricted to Primary Dealers

on Eligible Dealer list

Medium Term Notes of corporations organized and operating within the U.S. or

by depository institutions licensed by the U.S. or any state and operating within

the U.S.

30% See Note 1 5 years Minimum rating of AA for maturities

exceeding 1 year.

A for maturities of one year or less. (must be

rated by 2 of the 3 rating

agencies)

Money Market Mutual Funds that meet

requirements of Calif. Gov’t. Code

15% Registered with SEC. No NAV adjustments. No Front-

end loads. No more than 10% per MMF.

Daily AAAm or equivalent by at least 2 of the 3 rating agencies

or advisor requirements

Page 10 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

Shares of beneficial interest issued by a JPA aka Local Government

Investment Pools (LGIPs)

10% None Daily Advisor requirements

Asset-Backed Securities 10% None 5 years AAA by at least 2 of the 3 ratings

agencies

Supranationals 10% International Bank for Reconstruction and

Development (IBRD), International Finance

Corporation (IFC), or Inter-American Development Bank

(IADB) only. Permitted by CGC 53601 (q) and this

policy effective January 1, 2015.

5 years AAA by at least 2 of the 3 rating

agencies

Note 1: Maximum investment per issuer across all investment types will not exceed 6% of the total book value of the Pool as of date of purchase. Note 2: Consistent with the Government Code, rating criteria in this policy do not specify any modifier (+/– or 1/2/3) and it is implied that ratings with a modifier still meet the rating requirements of this policy regardless of modifier. Note 3: While references to ratings of AAA, AA, A are in S&P’s nomenclature, they imply the equivalent ratings by all other rating agencies.

MATURITY STRUCTURE

Maturity Range No less Than No more than 0-366 Days - 0 to 12months 35% n/a 367- 1097 Days - 1 to 3 years n/a 65% 1097-1827 Days - 3 to 5 years n/a 25%

The weighted-average maturity of the portfolio will not exceed 2 years. Some securities purchased by the Pool will be callable securities. Callable securities are subject to redemption prior to the final maturity date. For accounting purposes, premiums will be amortized to the next applicable call date, whereas discounts will be accreted to the final maturity date. Callable securities will not exceed 20% of the portfolio. Some callable securities have coupons that increase at specified periods if the security is not called (step-up notes). Step-up notes will be included in the 20% allocation of callable notes, but will not exceed 10% of the total portfolio.

REPURCHASE AGREEMENTS Repurchase agreements are restricted to primary dealers of the Federal Reserve Bank of New York. All counterparties must sign a PSA Master Repurchase Agreement and for tri-party repurchase agreements a Tri-Party Repurchase Agreement as well before engaging in any repurchase agreement transactions. Collateral for repurchase agreements shall have a market value of at least 102% of the amount invested and must be marked to market by staff or by an independent third-party or custodial bank acting under contract to the County. Collateral for term repurchase agreements should be marked to market on a regular basis. Repurchase agreements are required to be collateralized by securities authorized under Section 53601 et.

Page 11 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

seq. of the California Government Code. Confirmations resulting from securities purchased under repurchase agreements should clearly state (A) the exact and complete nomenclature of the underlying securities purchased; (B) that these securities have been sold to the County under a repurchase agreement; and (C) the stipulated date and amount of the resale by the County back to the seller of the securities.

This Space Intentionally Left Blank

Page 12 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

OFFICE OF THE TREASURER COUNTY OF KERN

STATEMENT OF INVESTMENT POLICY

SCHEDULE II

POLICY STATEMENT ON REVERSE REPURCHASE AGREEMENTS

The Treasurer hereby institutes the following policies as further safeguards governing investments in Reverse Repurchase Agreements. The total of Reverse Repurchase Agreement transactions shall not exceed 10 percent of the base value of the portfolio. The term of such agreements shall not exceed 92 calendar days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using such an agreement and the final maturity date of the same security.

1. All loaned securities subject to Reverse Repurchase Agreements shall be properly flagged and immediately accounted for in the Treasurer’s financial system.

2. Investments purchased from the loaned proceeds of the Reverse Repurchase

Agreement shall have maturities not exceeding the due date for repayment of the Reverse Repurchase Agreement transaction.

3. Only U.S. Treasury Notes and Federal Agency securities owned, fully paid for, and held

in the Treasurer’s portfolio for a minimum of 30 days can be subject to Reverse Repurchase Agreements.

4. Reverse Repurchase Agreements shall only be placed on portfolio securities:

(a) intended to be held to maturity

(b) fully paid for and held in the portfolio for a minimum of 30 days 5. Reverse Repurchase Agreements shall only be made with the authorized primary

dealers of the Federal Reserve.

6. A contractual agreement must be in place prior to entering into a Reverse Repurchase Agreement with any authorized primary dealer.

7. Reverse Repurchase Agreement transactions shall have the approval of the County

Treasurer.

Page 13 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

OFFICE OF THE TREASURER COUNTY OF KERN

STATEMENT OF INVESTMENT POLICY

SCHEDULE III

POLICY CRITERIA FOR COLLATERALIZED CERTIFICATE OF DEPOSITS

1. The issuing bank must provide us with an executed copy of the authorization for deposit of moneys.

2. The money-market yield on the certificate of deposit must be competitive to negotiable CD's offered by banks on the County's pre-approved list in the maturities desired by the County. The County Treasurer’s Office reserves the right to negotiate higher yields based on market conditions at the time.

3. Collateral Requirements – The County will only accept municipal government securities

(“muni bonds”) or U.S. Treasury and Agency securities as collateral. The collateral must be held by a separate custodial bank in an account in the name of Kern County. The County must have a perfected interest in the collateral.

a. For municipal government securities, the following requirements are listed: i. Securities must be issued by governmental agencies located within the State

of California (generally general obligation bonds and revenue bonds only) ii. Securities must be “AAA” rated

iii. Maximum maturity of securities is 5 years iv. Collateral must be priced at 110% of the face value of the CD on a daily basis v. Minimum face value of $5 million per pledged security

b. For U.S. Treasuries and Agency securities, the following requirements are listed: i. Maximum maturity of securities is 5 years ii. Collateral must be priced at 110% of the face value of the CD on a daily basis iii. Minimum face value of $5 million per pledged security

The County Treasury must receive written confirmation that these securities have been pledged in repayment of the time deposit. Additionally, a statement of the collateral shall be provided on a monthly basis from the custodial bank.

4. The County Treasurer must be given a current audited financial statement for the

financial year just ended. The financial reports must both include a statement of financial condition as well as an income statement depicting current and prior year operations.

5. The County Treasurer must receive a certificate of deposit which specifically expresses

the terms governing the transaction, deposit amount, issue date, maturity date, name of depositor, interest rate, interest payment terms (monthly, quarterly, etc.)

6. Deposits will only be made with banks and savings and loans having branch office

locations within Kern County.

Page 14 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

OFFICE OF THE TREASURER

COUNTY OF KERN STATEMENT OF INVESTMENT POLICY

SCHEDULE IV

POLICY CRITERIA FOR SELECTION OF BROKER/DEALERS

1. All financial institutions wishing to be considered for the County of Kern’s Broker/Dealer List must confirm that they are a member of the Financial Industry Regulatory Authority (FINRA), registered with the Securities & Exchange Commission (SEC), and possess all other required licenses.

2. The County Treasurer’s intent is to enter into a long-term relationship. Therefore, the

integrity of the firm and the personnel assigned to our account is of primary importance.

3. The assigned staff members must complete a Brokers Certificate stating in writing their acceptance and understanding of the County Treasurer’s written Investment Policy guidelines. Such Certificate must be renewed annually. This is critical for the establishment of a stable, long-term relationship.

4. It is important that the firm provide related services that will enhance the account

relationship which could include:

(a) An active secondary market for its securities. (b) Internal credit research analysis on the securities offered for sale. (c) Be willing to purchase securities from our portfolio. (d) Be capable of providing market analysis, economic projections, newsletters.

5. The firm must provide the County with annual financial statements. All firms with whom

the County does business must have a stable financial condition.

6. The County Treasury is prohibited from the establishment of a broker/dealer account for the purpose of holding the County’s securities. All securities must be subject to delivery at the County’s Custodial Bank.

7. Without exception, all transactions are to be conducted on a delivery vs. payment (DVP)

basis or for repurchase agreements, on a tri-party basis.

8. The broker/dealer must have been in operation for more than five (5) years.

9. Firms must have adequate financial strength and capital to support the level of trading that is approved. Adequate financial strength will be assessed by a review of the balance sheet and income statement of the dealer.

10. Repurchase Agreement Counterparty Minimum Requirements:

Repurchase agreement counterparties will be limited to (i) primary government securities

Page 15 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

dealers who report daily to the Federal Reserve Bank of New York, or (ii) banks, savings and loan associations or diversified securities broker-dealers subject to regulation of capital standards by any State or federal regulatory agency.

Counterparties must have:

(a) short-term credit ratings of at least A-1/P-1; and (b) a minimum asset and capital size of $25 billion in assets and $350 million in

capital for primary dealers

This Space Intentionally Left Blank

Page 16 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

GLOSSARY OF TERMS ACCRUED INTEREST – Interest that has accumulated but has not yet been received. AGENCY ISSUES – Securities issued by federal agencies, those chartered by the federal government or Government Sponsored Enterprises that are considered to be backed by the federal government. See also Government Sponsored Enterprises. AMORTIZED COST – The original cost of the principal adjusted for the periodic reduction of any discount or premium from the settlement date until a specific future date (also called “Book Value”). BANKERS ACCEPTANCE – Money market instrument created from transactions involving foreign trade. Payment is guaranteed by a shipping manifest and a bank Letter of Credit accepted by the seller’s bank.

BASIS POINT – A unit of measurement equal to 1/100 of 1 percent. As an example, the difference between a security yielding 3.25% and one yielding 3.20% is five basis points. BENCHMARK – An index or security used to compare the performance of a portfolio. BOND – A long-term debt instrument of a government or corporation promising payment of the original investment plus periodic interest payments by a specified future date. BOOK RETURN – The sum of all investment income plus changes in the realized gains or losses of a portfolio for a given period.

BULLET – A colloquial term for a bond that cannot be redeemed, or called, prior to maturity. CALLABLE BOND – A bond in which all or a portion of its outstanding principal may be redeemed prior to maturity by the issuer under specified conditions. COLLATERALIZATION – Process by which a borrower pledges securities, property or other deposits for the purpose of securing the repayment of a loan and/or security. COLLATERALIZED CERTIFICATE OF DEPOSIT – A non-negotiable instrument representing a deposit into a bank. The interest rate and maturity are specified on the receipt. It is collateralized by the bank with securities at a minimum of 110% of the deposit amount.

COMMERCIAL PAPER – An unsecured short-term promissory note of a corporation or special purpose entity issued at a specified rate of return for a specified period of time. COUPON – The stated interest rate on a debt security that an issuer promises to pay. CREDIT QUALITY – An indication of the risk that an issuer of a security will fulfill its obligation.

CREDIT RATING – A standardized assessment, expressed in alphanumeric characters, of a company’s credit quality. CREDIT RISK – The risk to an investor that an issuer will default in the payment of interest

Page 17 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

and/or principal on a security. CUSIP – A unique identifier for a security developed by the Committee on Uniform Security Identification Procedures (CUSIP). The identifier is a nine-digit alphanumeric character string. The first six characters identify the issuer, the following two identify the issue, and the final character is a Check-digit. DERIVATIVES – Securities which derive their value from that of another security or an underlying index, currency or other measure. Floating rate notes (also “floaters”) are not considered derivatives. DISCOUNT INSTRUMENTS – Securities that are sold at a discount to face value. DIVERSIFICATION – The practice or concept of investing in a range of securities by sector, maturity, asset class or credit quality in order to reduce and spread financial risk. DOLLAR WEIGHTED AVERAGE MATURITY – The sum of the cost of each security investment multiplied by the number of days to maturity, divided by the total cost of security investments. EFFECTIVE DURATION – Is a measure of the price volatility of a portfolio that provides an estimate of the projected increase or decrease in the value of that portfolio based upon a decrease or increase in market interest rates. An effective duration of 1.0 means that for every one percent increase in interest rates, the market value of the Portfolio would be expected to decrease by 1.0 percent. EARNINGS APPORTIONMENT – Is the quarterly interest distribution to the Pool Participants. The actual investment costs incurred by the Treasurer are deducted from the interest earnings of the Pool prior to apportionment. GOVERNMENT OBLIGATIONS – Securities issued by the U.S. Treasury and Federal Agencies. U.S. Treasuries are direct obligations of the Federal Government. Agencies are not direct obligations of the Federal Government, but involve federal sponsorship or guarantees. GOVERNMENT SPONSORED ENTERPRISES (GSE’S) – Private, shareholder-owned companies with a relationship with government agencies. These agencies generally are viewed to have an implied guarantee of the U.S. government. These include:

Federal National Mortgage Association (FNMA) Federal Home Loan Bank (FHLB) Federal Farm Credit Bank (FFCB) Federal Home Loan Mortgage Corporation (FHLMC)

LIQUID – A security that is easily converted to cash because there are many interested buyers and sellers to trade large quantities at a reasonable price. ILLIQUID – A security that is difficult to buy or sell or has a wide spread between the bid price and offer price in the secondary market. There are few buyers and sellers willing to trade large quantities at a reasonable price. INTEREST RATE RISK – The risk associated with declines or rises in interest rates which cause an investment in a fixed-income security to increase or decrease in value. It is also

Page 18 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

called “Market Risk”. INVERSE FLOATERS – Floating rate notes which pay interest in inverse relationship to an underlying index. LOCAL AGENCY OBLIGATION – An indebtedness issued by a local agency, department, board, or authority within the State of California. LONG-TERM – The term used to describe a security when the maturity is greater than one year. MARKET VALUE – The value of a security at which the principal could be sold from a willing seller to a willing buyer at the date of pricing. MEDIUM TERM NOTES – These are Corporate Notes and Bank Notes that are debt obligations of banks, corporations, and insurance companies. They are issued at a specific rate of return for a specific period of time. MONEY MARKET MUTUAL FUND – A mutual fund with investments directed in short-term money market instruments only, which can be withdrawn daily without penalty. NEGOTIABLE CERTIFICATE OF DEPOSIT – A Money Market instrument representing a receipt from a bank for a deposit at a specified rate of interest for a specified period of time, that is traded in secondary markets. PAR – The stated maturity value, or face value, of a security. PASS-THROUGH SECURITIES – A debt instrument that reflects an interest in a mortgage pool, consumer receivables pool and equipment lease-backed pool that serves as collateral for a bond. Principal and interest are ‘passed through’ to investors at specified intervals. POOL – The pooled monies of different government agencies administered by the County Treasurer. Each pool member owns a fractional interest in the securities held in the Pool. PORTFOLIO VALUE – The total book value amount of all the securities held in the Treasurer’s Pooled Money Fund. PRIMARY DEALER – A dealer or bank that can buy and sell securities directly with the Federal Reserve Bank of New York. PRIVATE PLACEMENTS – Securities that do not have to be registered with the Securities and Exchange Commission because they are offered to a limited number of sophisticated investors. RANGE NOTES – Notes which pay interest only if the underlying index upon which it is benchmarked, falls within a certain range. REPURCHASE AGREEMENT – A repurchase agreement consists of two simultaneous transactions. One is the purchase of securities by an investor (i.e., the County), the other is the commitment by the seller (i.e. a broker/dealer) to repurchase the securities at the same price, plus interest, at some mutually agreed future date.

Page 19 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

REVERSE REPURCHASE AGREEMENT – The mirror image of Repurchase Agreements. In this instance the County Pool is the seller of securities to an investor (i.e. brokers). SAFEKEEPING – A Custodian Bank’s action to store and protect an investor’s securities by segregating and identifying the securities. SETTLEMENT DATE – The date on which cash and securities are exchanged and the transaction completed. SHORT-TERM – The term used to describe a security when the maturity is one year or less.

SUPRANATIONAL SECURITIES – A supranational organization is formed by a group of countries through an international treaty with specific objectives such as promoting economic development. Supranational organizations also issue debt in the United States. The most commonly recognized supranational debt is issued by the International Bank for Reconstruction and Development (IBRD or World Bank). TOTAL RETURN – The sum of all investment income plus changes in the capital value of a portfolio for a given period. VOLUNTARY PARTICIPANTS – Local agencies that are not required to deposit their funds with the County Treasurer. WEIGHTED AVERAGE MATURITY – The remaining average maturity of all securities held in a portfolio. See Dollar Weighted Average Maturity. WHEN-ISSUED SECURITIES – A security traded before it is actually issued. All Treasury bills, notes and bonds trade in the when-issued market before they are auctioned by the Treasury Department. Agencies and GSE’s also use this method of trading. It serves to establish the initial offering price of the securities.

YIELD – The percentage return that an investor derives from a financial asset. YIELD TO MATURITY – The percentage rate of return paid if the security is held to its maturity date. The calculation is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon interest paid over the life of the security is reinvested at the same rate.

This Space Intentionally Left Blank

Page 20 of 20 TOC Approved 11/15/17 BOS Approved 12/5/17

BROKER/DIRECT ISSUER RECEIPT FOR INVESTMENT POLICY AND

CERTIFICATE OF COMPLIANCE

TO: Jordan Kaufman, Kern County Treasurer-Tax Collector Mary Bedard, Kern County Auditor-Controller-County Clerk 1115 Truxtun Avenue Bakersfield, CA 93301 By signing below, I____________________________ of ________________________ (Name) (Company) hereby certify that:

1) I have reviewed the Investment Policy governing the Kern County Treasurer’s Pooled Cash Portfolio, and that I understand its content. I am not expected to enforce provisions concerning Average Maturity, Category Limits or Issuer Limits. I am expected to offer only those investments that qualify under the County’s credit requirement as directed in the Policy. The responsibility for overall portfolio structure and composition remains with the County.

2) I further certify that I have not made, nor do I intend to make, political contributions to any candidate for any Kern County elective office.

Signed: _________________________________________ Date:_______________________

Total Market Value

Yield to Maturity at Cost

Yield to Maturity at Market

Effective Duration

Weighted Average Years to Maturity

Kern County Treasurer's Pooled CashPortfolio Summary

2/28/2018

*The County Treasurer believes the Treasury Investment Pool contains sufficient cash flow from liquid and maturing securities, bank deposits, and incoming cash to

meet the next six months of expected expenditures.

3,216,806,338$

1.57%

2.21%

1.44

1.50 0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

Mar-17 Jun-17 Sep-17 Dec-17

Yie

ld

Portfolio Yield for the Trailing 4 Quarters

Kern Portolio1 Yr T-BillLAIF

0%

5%

10%

15%

20%

25%

30%

35%

40%

0-6M 6-12M 1-2Y 2-3Y 3-4Y 4-5Y

Maturity Distribution

0%

10%

20%

30%

40%

50%

60%

70%

0-1Y 1-3Y 3-5Y

Maturity Range

Policy Maximum

Policy Minimum

1

Local Agency Investment Fund 11,019,718 11,019,718 11,019,718 1.45% 0.34% $65 Million 1California Asset Management Program 210,790,916 210,790,916 210,790,916 1.52% 6.55% 10% 1

Federally Insured Cash Accounts 551,209 551,209 551,209 1.25% 0.02% $50 Million 1U.S. Treasuries 300,000,000 295,164,976 291,212,188 1.84% 9.05% 100% 1,041

Federal Agencies 1,363,761,000 1,365,626,096 1,344,450,003 1.46% 41.79% 75% 672Municipal Bonds 10,000,000 10,004,600 9,867,900 2.49% 0.31% 10% 1,675Supranationals 105,000,000 105,155,100 103,275,148 1.58% 3.21% 10% 860

Negotiable CDs 375,000,000 375,000,000 374,380,952 1.61% 11.64% 30% 128

Commercial Paper 250,000,000 248,123,174 248,853,410 1.67% 7.74% 40% 82Corporate Notes 568,227,000 575,504,982 564,107,987 1.63% 17.54% 30% 615

Total Securities 3,194,349,844 3,196,940,772 3,158,509,431 1.57% 98.19% 549

Total Cash 58,296,907 58,296,907 58,296,907 1.81%

Total Assets 3,252,646,751 3,255,237,679 3,216,806,338 100.00%

Kern County Treasurer's Pooled CashPortfolio Summary

Sector

2/28/2018

Par Amount Original Cost Market Value Original Yield

% of Total

Assets

Policy Limit

Rating

Days to

Maturity

-5%

5%

15%

25%

35%

45%

Sector Allocations

February 28, 2018

January 31, 2018

8.6%

0.0%

0.7%

2.9%

6.9%

3.9%

3.7%

54.1%

19.1%

0% 20% 40% 60% 80%

NR

A3

A2

A1

Aa3

Aa2

Aa1

AAA

P-1

Moody's Ratings

1.5%

17.6%

11.0%

53.3%

0.8%

10.9%

2.1%

0.7%

0.0%

0.0%

2.1%

0% 20% 40% 60% 80%

A-1+

A-1

AAA

AA+

AA

AA-

A+

A

A-

BBB+

NR

S&P Ratings

2

S&P

Page 1

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Pooled Funds

JPM Short Term Inv Fund8940 97,074.09 97,074.09 0.00197,074.09928989367 0.001Local Agency Investment Fund419 10,922,644.15 10,922,644.15 1.46010,922,644.15539995217 1.460

11,019,718.2411,019,718.2411,019,718.2411,019,718.24Subtotal and Average 1.447

Negotiable CD's

A-1Bank of Montreal15249 25,000,000.00 25,000,000.00 03/27/20181.45009/22/2017 24,995,610.75 P-106371EPM3 1.470A-1Bank of Montreal15303 25,000,000.00 25,000,000.00 09/11/20181.86012/11/2017 24,954,235.50 P-106371EYC5 1.886A-1BNP New York15207 25,000,000.00 25,000,000.00 06/05/20181.55006/29/2017 24,966,143.50 P-105582WYE8 1.572A-1Bank of Tokyo-UFJ NY15250 25,000,000.00 25,000,000.00 06/22/20181.56009/25/2017 24,958,945.50 P-106539RGL5 1.582A-1Credit Agricole NY15296 25,000,000.00 25,000,000.00 03/09/20181.51012/07/2017 25,000,399.75 P-122534HW56 1.531A-1Canadian Imperial Bank NY15205 25,000,000.00 25,000,000.00 06/19/20181.51006/28/2017 24,966,528.75 P-113606BKF2 1.531A-1Canadian Imperial Bank NY15231 25,000,000.00 25,000,000.00 07/30/20181.55008/23/2017 24,958,884.75 P-122536ULH1 1.572A-1Canadian Imperial Bank NY15270 25,000,000.00 25,000,000.00 10/19/20181.70010/27/2017 24,907,945.50 P-113606BPZ3 1.724A-1Credit Suisse New York15253 25,000,000.00 25,000,000.00 08/28/20181.71009/27/2017 24,930,589.00 P-122549LGP4 1.734A-1Credit Suisse New York15272 25,000,000.00 25,000,000.00 08/10/20181.76010/31/2017 25,000,000.00 P-122549LFG5 1.784A-1Bank of Nova Scotia Houston15220 25,000,000.00 25,000,000.00 07/31/20181.55008/03/2017 24,942,103.75 P-106417GXD5 1.572A-1Societe Generale N.A.15248 25,000,000.00 25,000,000.00 06/25/20181.51009/22/2017 24,947,528.00 P-183369YVP8 1.531A-1Standard Chartered BK NY15223 25,000,000.00 25,000,000.00 07/31/20181.59008/02/2017 24,937,985.25 P-185325TUJ2 1.612A-1Toronto Dominion Bank NY15159 25,000,000.00 25,000,000.00 05/08/20181.39005/03/2017 24,975,610.25 P-189113WQ90 1.409A-1Toronto Dominion Bank NY15269 25,000,000.00 25,000,000.00 08/10/20181.63010/27/2017 24,938,441.50 P-189113XKX1 1.653

375,000,000.00374,380,951.75375,000,000.00398,214,285.71Subtotal and Average 1.611

Commercial Paper - Discount

A-1BNP Parabas Finance Inc15273 25,000,000.00 24,783,250.00 05/25/20181.53011/02/2017 24,881,570.75 P-109659KER7 1.585A-1Credit Agricole NY15275 50,000,000.00 49,548,715.28 06/08/20181.58511/15/2017 49,724,583.50 P-122533UF81 1.643A-1Credit Suisse New York15297 50,000,000.00 49,740,000.00 04/06/20181.56012/07/2017 49,915,362.50 P-12254EBD65 1.612A-1ING (US) FUNDING15324 25,000,000.00 24,784,888.89 07/03/20181.76001/08/2018 24,822,048.50 P-14497W1G34 1.825A-1J P Morgan, Securities, Inc15300 50,000,000.00 49,438,541.67 07/27/20181.75012/08/2017 49,557,346.00 P-146640QGT2 1.816A-1Natixis NY15314 50,000,000.00 49,827,777.78 03/23/20181.55001/02/2018 49,952,498.50 P-163873KCP0 1.599

248,123,173.62248,853,409.75250,000,000.00290,000,890.63Subtotal and Average 1.675

Federal Agency Issues - Coupon

AAFederal Farm Credit Bank13951 10,000,000.00 10,070,900.00 03/18/20191.75011/26/2014 9,962,500.00 Aaa3133EDVK5 1.579AAFederal Farm Credit Bank14047 10,000,000.00 10,076,400.00 11/05/20191.80001/06/2015 9,923,600.00 Aaa3133EEHF0 1.635AAFederal Farm Credit Bank14202 10,000,000.00 10,058,900.00 03/12/20181.12504/13/2015 9,999,000.00 Aaa3133EETE0 0.920

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

Report Ver. 7.3.6.1 3

S&P

Page 2

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Federal Agency Issues - Coupon

AAFederal Farm Credit Bank14385 10,000,000.00 10,002,400.00 06/01/20181.10007/27/2015 9,985,800.00 Aaa3133EEP95 1.091AAFederal Farm Credit Bank14549 10,000,000.00 9,989,741.00 12/14/20181.30012/14/2015 9,943,500.00 Aaa3133EFSJ7 1.335AAFederal Farm Credit Bank14554 10,000,000.00 9,995,800.00 12/14/20181.30012/14/2015 9,943,500.00 Aaa3133EFSJ7 1.314AAFederal Farm Credit Bank14630 10,000,000.00 10,037,800.00 08/04/20201.45002/04/2016 9,773,200.00 Aaa3133EFXV4 1.363AAFederal Farm Credit Bank14718 10,000,000.00 9,986,400.00 04/18/20180.75004/12/2016 9,990,000.00 Aaa3133EF3B1 0.818AAFederal Farm Credit Bank14794 10,000,000.00 9,977,000.00 06/03/20191.06006/03/2016 9,861,300.00 Aaa3133EGCA1 1.138AAFederal Farm Credit Bank14805 15,000,000.00 14,962,950.00 06/03/20191.06006/03/2016 14,791,950.00 Aaa3133EGCA1 1.144AAFederal Farm Credit Bank14930 10,000,000.00 10,000,000.00 10/04/20190.96010/04/2016 9,796,300.00 Aaa3133EGXF7 0.960AAFederal Farm Credit Bank15145 10,000,000.00 10,000,000.00 10/24/20181.20004/24/2017 9,952,400.00 Aaa3133EHGE7 1.200AAFederal Farm Credit Bank15241 10,000,000.00 10,005,800.00 09/01/20211.70009/01/2017 9,712,000.00 Aaa3133EHWM1 1.685AAFederal Farm Credit Bank15255 8,065,000.00 8,019,594.05 08/23/20221.84009/29/2017 7,770,546.85 Aaa3133EHVS9 1.961AAFederal Farm Credit Bank15259 10,000,000.00 9,980,100.00 08/03/20221.90009/29/2017 9,666,100.00 Aaa3133EHTS2 1.943AAFederal Farm Credit Bank15263 10,000,000.00 10,000,000.00 10/13/20201.68010/13/2017 9,805,300.00 Aaa3133EHF57 1.680AAFederal Farm Credit Bank15278 10,000,000.00 9,997,970.00 11/27/20201.90011/28/2017 9,848,000.00 Aaa3133EHW58 1.907AAFederal Farm Credit Bank15316 23,925,000.00 23,742,930.75 11/22/20211.98001/03/2018 23,402,238.75 Aaa3133EHU84 2.185AAFederal Farm Credit Bank15321 20,000,000.00 19,979,200.00 01/10/20201.95001/10/2018 19,877,200.00 Aaa3133EH6L2 2.003AAFederal Farm Credit Bank15336 10,000,000.00 10,000,000.00 01/29/20212.25001/29/2018 9,933,700.00 Aaa3133EJAW9 2.250AAFederal Home Loan Bank13936 8,075,000.00 8,146,625.25 12/14/20181.75011/24/2014 8,057,154.25 Aaa313376BR5 1.524AAFederal Home Loan Bank13968 10,000,000.00 10,113,200.00 12/14/20181.75012/05/2014 9,977,900.00 Aaa313376BR5 1.459AAFederal Home Loan Bank13993 10,000,000.00 10,302,900.00 12/13/20192.37512/15/2014 10,013,600.00 Aaa3130A0JR2 1.739AAFederal Home Loan Bank14182 10,000,000.00 10,122,000.00 03/08/20191.50004/07/2015 9,936,400.00 Aaa3133782M2 1.180AAFederal Home Loan Bank14196 10,000,000.00 10,057,100.00 04/17/20181.12504/10/2015 9,994,400.00 Aaa3130A4Q88 0.933AAFederal Home Loan Bank14197 10,000,000.00 10,057,000.00 04/17/20181.12504/13/2015 9,994,400.00 Aaa3130A4Q88 0.933AAFederal Home Loan Bank14200 10,000,000.00 10,123,500.00 03/09/20181.37504/13/2015 10,000,000.00 Aaa313378A43 0.943AAFederal Home Loan Bank14228 10,000,000.00 10,000,000.00 04/27/20180.87504/27/2015 9,988,200.00 Aaa3130A54F3 0.875AAFederal Home Loan Bank14229 10,000,000.00 10,140,500.00 03/09/20181.37504/21/2015 10,000,000.00 Aaa313378A43 0.880AAFederal Home Loan Bank14246 10,000,000.00 10,000,000.00 04/27/20180.95004/27/2015 9,989,300.00 Aaa3130A4Z54 0.950AAFederal Home Loan Bank14375 10,000,000.00 10,000,000.00 08/03/20181.15008/03/2015 9,972,900.00 Aaa3130A63A3 1.150AAFederal Home Loan Bank14452 10,000,000.00 10,124,000.00 06/14/20191.62509/24/2015 9,928,200.00 Aaa313379EE5 1.283AAFederal Home Loan Bank14578 10,000,000.00 10,000,000.00 12/28/20181.33012/28/2015 9,939,900.00 Aaa3130A6UT2 1.330AAFederal Home Loan Bank14594 10,000,000.00 10,098,100.00 12/14/20181.75012/30/2015 9,977,900.00 Aaa313376BR5 1.410AAFederal Home Loan Bank14608 10,000,000.00 10,140,400.00 12/14/20181.75001/14/2016 9,977,900.00 Aaa313376BR5 1.258AAFederal Home Loan Bank14637 10,000,000.00 10,216,700.00 03/08/20191.87502/02/2016 9,974,700.00 Aaa313378QK0 1.161AAFederal Home Loan Bank14638 10,000,000.00 10,109,000.00 03/08/20191.50002/02/2016 9,936,400.00 Aaa3133782M2 1.141AAFederal Home Loan Bank14810 15,000,000.00 15,214,650.00 06/14/20191.62505/26/2016 14,892,300.00 Aaa313379EE5 1.146AAFederal Home Loan Bank14900 10,000,000.00 9,993,200.00 10/01/20180.87508/26/2016 9,935,700.00 Aaa3130A9AE1 0.908

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

4

S&P

Page 3

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Federal Agency Issues - Coupon

AAFederal Home Loan Bank14903 10,000,000.00 9,947,300.00 08/05/20190.87508/29/2016 9,812,200.00 Aaa3130A8Y72 1.058AAFederal Home Loan Bank14915 10,000,000.00 9,991,300.00 09/26/20191.00009/09/2016 9,811,300.00 Aaa3130A9EP2 1.029AAFederal Home Loan Bank14934 8,965,000.00 9,191,814.50 06/12/20201.75009/30/2016 8,840,745.10 Aaa313383HU8 1.051AAFederal Home Loan Bank14960 10,000,000.00 10,000,000.00 05/15/20201.20011/15/2016 9,717,000.00 Aaa3130A9TJ0 1.200AAFederal Home Loan Bank14971 15,000,000.00 15,000,000.00 02/28/20201.20011/30/2016 14,662,350.00 Aaa3130A9ZV6 1.200AAFederal Home Loan Bank15017 10,000,000.00 9,996,700.00 01/16/20191.25012/13/2016 9,928,000.00 Aaa3130AAE46 1.266AAFederal Home Loan Bank15067 15,000,000.00 15,000,000.00 07/10/20201.83001/10/2017 14,781,750.00 Aaa3130AAGX0 1.830AAFederal Home Loan Bank15085 10,000,000.00 9,993,100.00 02/25/20191.25003/01/2017 9,920,100.00 Aaa3130AAUP1 1.285AAFederal Home Loan Bank15107 15,000,000.00 15,122,100.00 03/13/20201.87503/30/2017 14,860,650.00 Aaa313378J77 1.575AAFederal Home Loan Bank15114 15,000,000.00 15,053,850.00 10/05/20201.75004/05/2017 14,749,350.00 Aaa3130AB3E4 1.644AAFederal Home Loan Bank15129 10,000,000.00 10,046,500.00 10/05/20201.75004/13/2017 9,832,900.00 Aaa3130AB3E4 1.612AAFederal Home Loan Bank15141 20,000,000.00 20,092,000.00 07/20/20201.65004/20/2017 19,667,200.00 Aaa3130AB6A9 1.505AAFederal Home Loan Bank15167 10,000,000.00 10,000,000.00 05/24/20191.40005/25/2017 9,907,500.00 Aaa3130ABDX1 1.400AAFederal Home Loan Bank15193 10,000,000.00 10,059,200.00 06/11/20211.87506/22/2017 9,790,200.00 Aaa313379RB7 1.720AAFederal Home Loan Bank15203 15,000,000.00 15,075,450.00 06/12/20201.75006/29/2017 14,792,100.00 Aaa313383HU8 1.575AAFederal Home Loan Bank15243 10,000,000.00 9,817,000.00 07/14/20211.12509/14/2017 9,558,300.00 Aaa3130A8QS5 1.619AAFederal Home Loan Bank15291 10,000,000.00 9,947,300.00 06/12/20201.75012/06/2017 9,861,400.00 Aaa313383HU8 1.966AAFederal Home Loan Bank15293 10,000,000.00 10,068,400.00 06/11/20212.25012/07/2017 9,921,100.00 Aaa3130A1W95 2.901AAFederal Home Loan Bank15298 5,000,000.00 4,992,300.00 06/12/20201.87512/08/2017 4,948,050.00 Aaa313383MB4 1.938AAFederal Home Loan Bank15329 15,000,000.00 14,980,500.00 01/29/20212.25001/29/2018 14,877,450.00 Aaa3130ADG48 2.295AAFederal Home Loan Bank15335 10,000,000.00 10,000,000.00 01/29/20212.20001/29/2018 9,921,100.00 Aaa3130ADC26 2.200AAFederal Home Loan Mort Corp14470 10,000,000.00 10,213,000.00 05/30/20191.75010/01/2015 9,947,700.00 Aaa3137EADG1 1.154AAFederal Home Loan Mort Corp14621 10,938,000.00 12,107,053.44 12/14/20185.00001/26/2016 11,187,605.16 Aaa3134A4ZZ0 1.216AAFederal Home Loan Mort Corp14710 10,000,000.00 10,000,000.00 12/30/20191.37504/08/2016 9,840,400.00 Aaa3134G8W21 1.375AAFederal Home Loan Mort Corp14719 10,000,000.00 10,000,000.00 10/28/20191.20004/28/2016 9,829,900.00 Aaa3134G8YF0 1.200AAFederal Home Loan Mort Corp14720 10,000,000.00 10,000,000.00 10/28/20191.20004/28/2016 9,829,900.00 Aaa3134G8YF0 1.200AAFederal Home Loan Mort Corp14730 10,000,000.00 10,000,000.00 10/18/20191.22504/18/2016 9,837,100.00 Aaa3134G9BG1 1.225AAFederal Home Loan Mort Corp14750 15,000,000.00 15,000,000.00 02/10/20201.32005/10/2016 14,727,300.00 Aaa3134G9DC8 1.320AAFederal Home Loan Mort Corp14792 15,000,000.00 15,000,000.00 05/26/20201.45005/26/2016 14,710,200.00 Aaa3134G9PR2 1.450AAFederal Home Loan Mort Corp14809 10,000,000.00 9,999,500.00 04/15/20191.12505/24/2016 9,886,900.00 Aaa3137EADZ9 1.101AAFederal Home Loan Mort Corp14832 10,000,000.00 10,000,000.00 03/22/20191.25006/22/2016 9,908,800.00 Aaa3134G9SB4 1.250AAFederal Home Loan Mort Corp14899 10,000,000.00 10,000,000.00 02/25/20201.25008/25/2016 9,800,100.00 Aaa3134GABZ6 1.250AAFederal Home Loan Mort Corp14922 10,000,000.00 9,974,500.00 07/19/20190.87509/27/2016 9,819,500.00 Aaa3137EAEB1 0.967AAFederal Home Loan Mort Corp14923 5,000,000.00 5,059,700.00 08/23/20191.40009/27/2016 4,932,700.00 Aaa3134G3A83 0.982AAFederal Home Loan Mort Corp14947 6,737,000.00 6,830,374.82 05/08/20201.55010/21/2016 6,625,435.28 Aaa3134G43Q9 1.150AAFederal Home Loan Mort Corp14959 15,000,000.00 15,000,000.00 02/10/20201.18011/10/2016 14,687,700.00 Aaa3134GAVB7 1.180

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

5

S&P

Page 4

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Federal Agency Issues - Coupon

AAFederal Home Loan Mort Corp15018 10,000,000.00 9,938,800.00 05/01/20201.37512/13/2016 9,799,200.00 Aaa3137EADR7 1.561AAFederal Home Loan Mort Corp15099 20,000,000.00 20,000,000.00 03/29/20211.85003/29/2017 19,584,400.00 Aaa3134GBEK4 1.850AAFederal Home Loan Mort Corp15117 15,000,000.00 14,925,450.00 05/01/20201.37504/05/2017 14,698,800.00 Aaa3137EADR7 1.541AAFederal Home Loan Mort Corp15147 15,000,000.00 15,000,000.00 09/09/20191.50004/25/2017 14,825,100.00 Aaa3134GA7A6 1.500AAFederal Home Loan Mort Corp15149 20,000,000.00 20,000,000.00 07/26/20191.50004/26/2017 19,816,800.00 Aaa3134GBGG1 1.691AAFederal Home Loan Mort Corp15153 10,000,000.00 10,000,000.00 07/27/20201.70004/27/2017 9,818,700.00 Aaa3134GBHQ8 1.434AAFederal Home Loan Mort Corp15158 20,000,000.00 20,000,000.00 05/03/20221.91005/03/2017 19,433,000.00 Aaa3134GBJM5 1.910AAFederal Home Loan Mort Corp15198 25,000,000.00 25,042,000.00 07/26/20211.75006/27/2017 24,336,000.00 Aaa3134G9S24 1.707AAFederal National Mortgage Assn13911 10,000,000.00 10,207,000.00 09/18/20181.87510/29/2014 9,994,600.00 Aaa3135G0YM9 1.327AAFederal National Mortgage Assn13921 10,000,000.00 10,048,600.00 11/27/20181.62511/04/2014 9,968,500.00 Aaa3135G0YT4 1.501AAFederal National Mortgage Assn13952 10,000,000.00 10,074,400.00 11/27/20181.62511/26/2014 9,968,500.00 Aaa3135G0YT4 1.433AAFederal National Mortgage Assn13992 10,000,000.00 10,064,800.00 11/27/20181.62512/12/2014 9,968,500.00 Aaa3135G0YT4 1.456AAFederal National Mortgage Assn13998 10,000,000.00 9,900,000.00 05/21/20180.87512/15/2014 9,983,300.00 Aaa3135G0WJ8 1.173AAFederal National Mortgage Assn14010 10,000,000.00 10,090,570.00 11/27/20181.62512/18/2014 9,968,500.00 Aaa3135G0YT4 1.388AAFederal National Mortgage Assn14451 10,000,000.00 10,168,400.00 11/27/20181.62509/24/2015 9,968,500.00 Aaa3135G0YT4 1.084AAFederal National Mortgage Assn14497 10,000,000.00 9,985,100.00 12/14/20181.12511/03/2015 9,927,200.00 Aaa3135G0G72 1.174AAFederal National Mortgage Assn14506 10,000,000.00 10,105,100.00 06/20/20191.75011/09/2015 9,946,300.00 Aaa3135G0ZE6 1.450AAFederal National Mortgage Assn14534 10,000,000.00 9,948,800.00 12/14/20181.12512/03/2015 9,927,200.00 Aaa3135G0G72 1.298AAFederal National Mortgage Assn14583 10,000,000.00 10,044,600.00 11/26/20191.75012/24/2015 9,913,500.00 Aaa3135G0ZY2 1.632AAFederal National Mortgage Assn14818 10,000,000.00 10,000,000.00 06/13/20191.40006/13/2016 9,900,200.00 Aaa3135G0K85 1.400AAFederal National Mortgage Assn14893 10,000,000.00 10,000,000.00 07/26/20191.12508/12/2016 9,847,500.00 Aaa3136G3P25 1.125AAFederal National Mortgage Assn14902 10,000,000.00 10,017,200.00 02/26/20191.00008/29/2016 9,891,800.00 Aaa3135G0J53 0.930AAFederal National Mortgage Assn14924 10,000,000.00 10,165,800.00 06/22/20201.50009/27/2016 9,818,100.00 Aaa3135G0D75 1.046AAFederal National Mortgage Assn14929 12,440,000.00 12,440,000.00 09/06/20191.12509/29/2016 12,237,228.00 Aaa3136G34L6 1.125AAFederal National Mortgage Assn14946 5,000,000.00 5,067,900.00 06/22/20201.50010/21/2016 4,909,050.00 Aaa3135G0D75 1.121AAFederal National Mortgage Assn14954 10,000,000.00 10,125,500.00 06/22/20201.50010/27/2016 9,818,100.00 Aaa3135G0D75 1.148AAFederal National Mortgage Assn14974 10,000,000.00 10,093,400.00 06/22/20201.50011/10/2016 9,818,100.00 Aaa3135G0D75 1.235AAFederal National Mortgage Assn14977 9,500,000.00 9,500,000.00 05/22/20201.25011/22/2016 9,272,855.00 Aaa3136G4GN7 1.250AAFederal National Mortgage Assn14978 10,000,000.00 10,000,000.00 11/30/20201.43011/30/2016 9,732,400.00 Aaa3136G4GS6 1.430AAFederal National Mortgage Assn14985 20,000,000.00 20,000,000.00 05/26/20211.80011/30/2016 19,474,000.00 Aaa3136G4HN6 1.800AAFederal National Mortgage Assn14986 15,000,000.00 15,000,000.00 06/01/20211.75012/01/2016 14,547,000.00 Aaa3136G4HP1 1.750AAFederal National Mortgage Assn15000 10,000,000.00 9,967,000.00 11/25/20191.40012/02/2016 9,838,900.00 Aaa3136G4GU1 1.514AAFederal National Mortgage Assn15001 10,000,000.00 9,949,100.00 08/02/20191.26012/02/2016 9,854,600.00 Aaa3136G3K53 1.460AAFederal National Mortgage Assn15008 10,000,000.00 9,979,400.00 06/22/20201.50012/08/2016 9,818,100.00 Aaa3135G0D75 1.560AAFederal National Mortgage Assn15011 10,000,000.00 9,727,200.00 08/17/20211.25012/09/2016 9,576,800.00 Aaa3135G0N82 1.862AAFederal National Mortgage Assn15034 10,000,000.00 9,922,500.00 08/02/20191.26012/21/2016 9,853,600.00 Aaa3136G3J97 1.569

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

6

S&P

Page 5

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Federal Agency Issues - Coupon

AAFederal National Mortgage Assn15047 10,000,000.00 10,000,000.00 06/29/20201.70012/29/2016 9,835,500.00 Aaa3136G4JN4 1.699AAFederal National Mortgage Assn15052 10,000,000.00 10,000,000.00 06/29/20211.91012/29/2016 9,760,800.00 Aaa3136G4JP9 1.910AAFederal National Mortgage Assn15191 15,000,000.00 15,117,000.00 01/05/20222.00006/22/2017 14,660,250.00 Aaa3135G0S38 1.820AAFederal National Mortgage Assn15277 10,000,000.00 9,903,500.00 07/30/20201.50011/21/2017 9,795,800.00 Aaa3135G0T60 1.869AAFederal National Mortgage Assn15304 10,000,000.00 9,901,300.00 10/05/20222.00012/12/2017 9,688,900.00 Aaa3135G0T78 2.217AATennessee Valley Authority13426 10,000,000.00 10,160,400.00 10/15/20181.75011/20/2013 9,984,900.00 Aaa880591EQ1 1.410AATennessee Valley Authority13950 5,111,000.00 5,187,358.34 10/15/20181.75011/26/2014 5,103,282.39 Aaa880591EQ1 1.354

1,323,169,882.151,301,041,740.781,318,756,000.001,323,169,882.15Subtotal and Average 1.457

Federal Agency Issues - Discount

AAFinancing Corp14048 10,000,000.00 9,279,600.00 06/06/201901/07/2015 9,721,200.00 Aaa31771EAU5 1.725AAFederal National Mortgage Assn14502 10,000,000.00 9,258,900.00 10/09/201911/05/2015 9,623,500.00 Aaa313586RC5 1.998AAFederal National Mortgage Assn14791 15,005,000.00 14,297,514.25 10/09/20191.37105/19/2016 14,440,061.75 Aaa313586RC5 1.450AAFederal National Mortgage Assn14879 10,000,000.00 9,620,200.00 10/09/20191.15707/14/2016 9,623,500.00 Aaa313586RC5 1.217

42,456,214.2543,408,261.7545,005,000.0044,856,864.25Subtotal and Average 1.577

Medium Term Notes 30/360

AAAustralia & New Zealand NY14370 10,000,000.00 9,976,800.00 05/15/20181.45007/20/2015 9,984,300.00 Aa05253JAC5 1.534AAApple14134 10,000,000.00 9,905,900.00 02/07/20201.55003/04/2015 9,820,000.00 Aa037833AX8 1.750AAApple14235 10,000,000.00 9,971,600.00 05/03/20181.00004/27/2015 9,982,200.00 Aa037833AJ9 1.096AAApple14255 10,000,000.00 9,968,800.00 05/03/20181.00005/04/2015 9,982,200.00 Aa037833AJ9 1.106AAApple14258 10,000,000.00 9,963,000.00 05/03/20181.00005/04/2015 9,982,200.00 Aa037833AJ9 1.126AAApple14910 20,290,000.00 20,251,651.90 08/02/20191.10009/06/2016 19,925,591.60 Aa037833CB4 1.166AAApple14916 10,000,000.00 10,005,650.00 08/02/20191.10009/12/2016 9,820,400.00 Aa037833CB4 1.080AAApple14956 10,000,000.00 10,489,200.00 05/06/20212.85010/31/2016 10,014,500.00 Aa037833AR1 1.719AAApple15028 10,000,000.00 10,253,500.00 05/06/20212.85012/16/2016 10,014,500.00 Aa037833AR1 2.240AAApple15109 10,000,000.00 10,115,000.00 05/06/20192.10003/31/2017 9,963,500.00 Aa037833AQ3 1.540AAApple15197 10,000,000.00 10,070,200.00 05/06/20202.00006/27/2017 9,887,600.00 Aa037833BD1 1.747AAApple15288 10,000,000.00 10,021,000.00 02/23/20212.25012/05/2017 9,851,800.00 Aa037833BS8 2.182AABerkshire Hathaway13960 5,000,000.00 5,067,350.00 08/14/20192.10012/02/2014 4,973,200.00 Aa084670BL1 1.800AABerkshire Hathaway14066 10,000,000.00 11,320,600.00 05/15/20185.40001/21/2015 10,062,300.00 Aa084664BE0 1.317AAColgate-Palmolive14082 10,000,000.00 9,929,300.00 05/01/20180.90001/26/2015 9,978,800.00 Aa19416QEB2 1.121AAColgate-Palmolive14360 10,000,000.00 10,039,800.00 03/15/20191.75007/14/2015 9,950,400.00 Aa19416QEF3 1.638AACommonwealth Bnk Australia NY14098 10,000,000.00 10,328,400.00 09/20/20182.50002/04/2015 10,002,900.00 Aa20271RAD2 1.565AAChevron Corp14425 10,000,000.00 10,064,500.00 06/24/20181.71809/01/2015 9,986,800.00 Aa166764AE0 1.483

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

7

S&P

Page 6

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Medium Term Notes 30/360

AAChevron Corp15111 10,277,000.00 10,381,517.09 11/17/20202.41904/03/2017 10,184,918.08 Aa166764AY6 2.125AAChevron Corp15134 5,000,000.00 4,995,000.00 05/16/20191.56104/18/2017 4,952,950.00 Aa166764BH2 1.610

AGeneral Electric Cos-MTN14973 10,000,000.00 10,978,600.00 09/16/20204.37511/15/2016 10,302,900.00 A36962G4R2 1.962AGeneral Electric Cos-MTN15097 10,000,000.00 10,985,300.00 08/07/20196.00003/21/2017 10,450,900.00 A36962G4D3 2.179AIBM14680 10,000,000.00 10,048,200.00 05/17/20191.80003/16/2016 9,913,400.00 A459200JE2 1.642AIBM14812 10,000,000.00 10,175,800.00 02/12/20191.95005/27/2016 9,954,300.00 A459200HT1 1.287AIBM15135 5,000,000.00 5,027,500.00 05/17/20191.80004/18/2017 4,956,700.00 A459200JE2 1.530AJ.P. Morgan & Co,, Inc.14949 10,000,000.00 10,051,100.00 09/23/20191.65010/24/2016 9,856,400.00 Aa48125LRG9 1.470

AACoca Cola14224 10,000,000.00 10,186,200.00 11/01/20181.65004/22/2015 9,965,700.00 Aa191216BF6 1.110AACoca Cola14359 10,000,000.00 9,994,900.00 04/01/20181.15007/14/2015 9,991,500.00 Aa191216BA7 1.169AACoca Cola14494 10,000,000.00 9,955,100.00 10/27/20201.87511/03/2015 9,807,600.00 Aa191216BT6 1.970AACoca Cola15031 7,070,000.00 7,028,569.80 05/30/20191.37512/20/2016 6,982,968.30 Aa191216BV1 1.620AACoca Cola15144 16,063,000.00 15,823,821.93 09/01/20211.55004/24/2017 15,415,179.21 Aa191216BY5 1.908AACoca Cola15200 10,000,000.00 10,051,900.00 05/25/20222.20006/29/2017 9,706,881.00 Aa191216CF5 2.088

AAAMicrosoft Corp14225 10,000,000.00 10,191,000.00 12/06/20181.62504/23/2015 9,962,300.00 Aaa594918AV6 1.085AAAMicrosoft Corp14236 10,000,000.00 10,171,200.00 12/06/20181.62504/27/2015 9,962,300.00 Aaa594918AV6 1.139AAAMicrosoft Corp15124 10,000,000.00 10,051,500.00 02/06/20201.85004/11/2017 9,892,900.00 Aaa594918BV5 1.662AAAMicrosoft Corp15235 11,474,000.00 11,390,010.32 08/08/20191.10008/28/2017 11,271,024.94 Aaa594918BN3 1.483

AANovartis15187 10,000,000.00 10,125,400.00 05/17/20222.40006/21/2017 9,784,037.00 Aa66989HAM0 2.129AANovartis15201 16,980,000.00 17,112,444.00 05/17/20222.40006/30/2017 16,613,294.83 Aa66989HAM0 2.230AAToyota Motors Credit Corp14611 10,000,000.00 10,098,100.00 07/18/20192.12501/20/2016 9,940,700.00 Aa89236TBP9 1.834AAToyota Motors Credit Corp14625 10,000,000.00 10,034,600.00 07/13/20181.55001/29/2016 9,980,500.00 Aa89236TCP8 1.406AAToyota Motors Credit Corp14689 10,359,000.00 10,433,791.98 02/19/20191.70003/28/2016 10,279,857.24 Aa89236TCU7 1.444AAToyota Motors Credit Corp14723 10,000,000.00 10,015,600.00 04/06/20181.20004/13/2016 9,992,700.00 Aa89236TCX1 1.120AAToyota Motors Credit Corp14765 10,000,000.00 10,102,300.00 02/19/20191.70004/29/2016 9,923,600.00 Aa89236TCU7 1.327AAToyota Motors Credit Corp15301 10,196,000.00 10,789,101.32 01/11/20214.25012/11/2017 10,607,612.52 Aa89233P4S2 2.285AAToyota Motors Credit Corp15338 12,972,000.00 12,915,571.80 03/12/20202.15002/05/2018 12,844,485.24 Aa89236TCF0 2.363AAUS Bank14857 10,770,000.00 11,030,310.90 10/28/20192.12506/28/2016 10,678,455.00 A90331HML4 1.380AAUS Bank14858 10,000,000.00 10,239,800.00 10/28/20192.12506/28/2016 9,915,000.00 A90331HML4 1.386AAUS Bank14918 8,000,000.00 8,178,160.00 10/28/20192.12509/20/2016 7,932,000.00 A90331HML4 1.390AAUS Bank15131 10,000,000.00 10,062,600.00 01/24/20202.00004/17/2017 9,865,900.00 A90331HNB5 1.767AAUS Bank15192 10,750,000.00 10,800,095.00 01/24/20202.00006/22/2017 10,605,842.50 A90331HNB5 1.815AAUS Bank15333 7,500,000.00 7,499,625.00 01/23/20232.85001/25/2018 7,391,550.00 A90331HNL3 2.851AAUS Bank15334 10,000,000.00 9,998,100.00 01/23/20232.85001/25/2018 9,855,400.00 A90331HNL3 2.854AAWells Fargo Bank14814 10,000,000.00 10,037,400.00 05/24/20191.75006/02/2016 9,895,000.00 Aa94988J5D5 1.621AAWells Fargo Bank14833 10,000,000.00 10,097,800.00 05/24/20191.75006/22/2016 9,895,000.00 Aa94988J5D5 1.407

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

8

S&P

Page 7

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

Medium Term Notes 30/360

AAWells Fargo Bank14891 11,826,000.00 12,005,755.20 05/24/20191.75008/08/2016 11,701,827.00 Aa94988J5D5 1.195AAWal-Mart Stores14605 8,700,000.00 8,698,956.00 04/11/20181.12501/13/2016 8,691,213.00 Aa931142DF7 1.130

575,504,982.24564,107,987.46568,227,000.00585,145,266.18Subtotal and Average 1.630

StoneCastle - FICA

StoneCastle13942 551,209.02 551,209.02 1.250551,209.02104791305790 1.250

551,209.02551,209.02551,209.02550,699.82Subtotal and Average 1.250

CAMP

AAACAMP14800 210,790,916.27 210,790,916.27 1.520210,790,916.27CAMP 1.520

210,790,916.27210,790,916.27210,790,916.27126,614,420.48Subtotal and Average 1.520

Treasury Securities - Coupon

AAU S Treasury Note14210 10,000,000.00 9,915,625.00 04/30/20180.62504/13/2015 9,985,500.00 Aaa912828UZ1 0.906AAU S Treasury Note14230 10,000,000.00 9,932,945.00 04/30/20180.62504/21/2015 9,985,500.00 Aaa912828UZ1 0.850AAU S Treasury Note15090 10,000,000.00 9,957,812.50 06/30/20201.62503/13/2017 9,836,700.00 Aaa912828XH8 1.757AAU S Treasury Note15204 20,000,000.00 19,587,500.00 10/31/20211.25006/29/2017 19,106,094.00 Aaa912828T67 1.746AAU S Treasury Note15233 10,000,000.00 9,847,656.25 02/28/20211.12508/25/2017 9,620,300.00 Aaa912828P87 1.572AAU S Treasury Note15247 20,000,000.00 20,234,375.00 08/31/20212.00009/21/2017 19,651,600.00 Aaa912828D72 1.691AAU S Treasury Note15257 10,000,000.00 9,790,625.00 10/31/20211.25009/29/2017 9,553,047.00 Aaa912828T67 1.783AAU S Treasury Note15261 10,000,000.00 9,866,406.25 05/31/20211.37510/05/2017 9,655,500.00 Aaa912828R77 1.754AAU S Treasury Note15262 10,000,000.00 9,761,328.13 07/31/20211.12510/05/2017 9,550,000.00 Aaa912828S76 1.774AAU S Treasury Note15274 10,000,000.00 9,981,640.63 06/30/20201.62511/07/2017 9,836,700.00 Aaa912828XH8 1.696AAU S Treasury Note15284 10,000,000.00 9,833,593.75 01/31/20211.37511/30/2017 9,703,900.00 Aaa912828N89 1.919AAU S Treasury Note15285 20,000,000.00 19,495,312.50 02/28/20211.12511/30/2017 19,240,600.00 Aaa912828P87 1.930AAU S Treasury Note15287 20,000,000.00 19,752,343.75 08/31/20201.37512/04/2017 19,522,600.00 Aaa912828L32 1.841AAU S Treasury Note15290 20,000,000.00 19,453,125.00 02/28/20211.12512/06/2017 19,240,600.00 Aaa912828P87 2.003AAU S Treasury Note15307 20,000,000.00 19,739,062.50 08/31/20201.37512/14/2017 19,522,600.00 Aaa912828L32 1.871AAU S Treasury Note15308 15,000,000.00 14,793,750.00 08/31/20201.37512/19/2017 14,641,950.00 Aaa912828L32 1.900AAU S Treasury Note15311 10,000,000.00 9,683,203.13 10/31/20211.25012/20/2017 9,553,047.00 Aaa912828T67 2.108AAU S Treasury Note15312 15,000,000.00 14,658,984.38 05/31/20211.37512/20/2017 14,483,250.00 Aaa912828R77 2.062AAU S Treasury Note15318 10,000,000.00 9,767,968.75 05/31/20211.37501/04/2018 9,655,500.00 Aaa912828R77 2.085AAU S Treasury Note15319 10,000,000.00 9,665,625.00 07/31/20211.12501/04/2018 9,550,000.00 Aaa912828S76 2.101AAU S Treasury Note15326 20,000,000.00 19,752,343.75 07/31/20201.62501/22/2018 19,659,400.00 Aaa912828XM7 2.131AAU S Treasury Note15339 10,000,000.00 9,693,750.00 05/31/20221.75002/02/2018 9,657,800.00 Aaa912828XR6 2.501

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

9

S&P

Page 8

Par Value Book ValueMaturity

DateStated

RateMarket Value

February 28, 2018Portfolio Details - Investments

AverageBalanceIssuer

Portfolio ManagementTreasurer's Pooled Cash

YTM365Moody'sCUSIP Investment #

PurchaseDate

295,164,976.27291,212,188.00300,000,000.00294,818,770.91Subtotal and Average 1.837

Municipal Bonds

AACalifornia State Controller15323 10,000,000.00 10,004,600.00 10/01/20222.50001/08/2018 9,867,900.00 Aa13063DDF2 2.489

10,004,600.009,867,900.0010,000,000.0010,004,600.00Subtotal and Average 2.489

Supranationals

AAAINTER AMERICAN DEV BANK14633 10,000,000.00 10,148,500.00 10/15/20191.75002/03/2016 9,907,200.00 Aaa4581X0CH9 1.337AAAINTER AMERICAN DEV BANK14933 5,000,000.00 5,131,100.00 06/16/20201.87509/30/2016 4,943,550.00 Aaa4581X0CP1 1.151AAAINTER AMERICAN DEV BANK15126 20,000,000.00 19,952,600.00 05/12/20201.62504/12/2017 19,690,000.00 Aaa4581X0CX4 1.704AAAInternational Bank for Reconst14056 10,000,000.00 10,000,000.00 01/16/20191.35001/16/2015 9,929,700.00 Aaa45905URH9 1.350AAAInternational Bank for Reconst14804 10,000,000.00 10,017,300.00 07/26/20191.25005/25/2016 9,855,900.00 Aaa459058EV1 1.194AAAInternational Bank for Reconst14951 10,000,000.00 9,920,600.00 12/01/20201.20010/27/2016 9,643,700.00 Aaa45905UXS8 1.400AAAInternational Bank for Reconst15036 10,000,000.00 10,000,000.00 06/22/20211.87012/22/2016 9,744,400.00 Aaa45905UB86 1.870AAAInternational Bank for Reconst15045 10,000,000.00 10,000,000.00 09/28/20212.00012/28/2016 9,760,498.00 Aaa45905UC36 2.000AAAInternational Bank for Reconst15138 10,000,000.00 10,000,000.00 10/19/20201.77004/19/2017 9,815,200.00 Aaa45905UF74 1.770AAAInternational Bank for Reconst15239 10,000,000.00 9,985,000.00 03/09/20211.62508/30/2017 9,985,000.00 Aaa459058EW98 1.669

105,155,100.00103,275,148.00105,000,000.00105,155,100.00Subtotal and Average 1.578

3,228,374,063.89 3,194,349,843.53 1.5713,158,509,431.02 3,196,940,772.06Total and Average

Portfolio KERNCP

Run Date: 03/15/2018 - 13:38 PM (PRF_PM2) 7.3.0

10