OFFICIAL STATEMENT
RATINGS:
Moody's:
Aa2
Standard & Poor's: AA (stable outlook)
(See IIRatings" herein.)
NEW ISSUE - BOOK·ENTRY ONLY
In the opinion ofBond Counsel, assumingcompliance by the Board with certain covenants setforth in the Authorizing
Resolution herein referred to with respect to certain conditions imposed by Section 103 a/the Internal Revenue Code of
1986, as amended, the interest on the Warrants will be excludab/efrom gross income ofthe recipients thereofforfederal
income tax purposes and will not be an item a/tax preference/or the purpose a/computing the minimum tax imposed by
Section 55 a/the said Code. However, see "Tax Matters" herein/or certain other federal tax consequences to the
recipients ofthe interest income on the Warrants. In the opinion ofBond Counsel, the interest on the Warrants will be
exemptfrom Alabama income taxation.
$51,915,000
HOOVER CITY BOARD OF EDUCATION (ALABAMA)
Special Tax School Warrants
Series 2012
Due: February 15, as ShOWDOU
the iuside cover hereof
Dated: Date of delivery
SEE INSIDE COVER FOR MATURITIES, INTEREST RATES, YIELDS AND CUSIPS
The Warrants will bear interest payable on August 15, 2013, and semiannually thereafter on each February 15 and
August 15, by check or draft mailed to the registered owners ofthe Warrants. The Warrants will mature on February 15
in the years and principal amounts set forth on the inside cover hereof.
The Warrants will be initially issued as fully registered warrants, in book-entry fonn, registered in the name ofCede &
Co., as registered owner and nominee ofThe Depository Trust Company, New Yark, New York ("DTC"), which will act
as securities depository for the Warrants. Individual purchases of beneficial interests in the Warrants will be made
through DTC's Book-Entry System. Purchasers of beneficial interests in the Warrants will not receive certificates
representing their interests in the Warrants. So long as Cede & Co. is the registered owner ofthe Warrants, payments of
principal of and interest on the Warrants will be paid through the facilities ofDTC. Disbursement of such payments to
DTC Participants is the responsibility of DTC and disbursement of such payments to tbe purchasers of beneficial
interests in the Warrants is the responsibility ofDTC Participants. See "THE WARRANTS -- Book-Entry Only System"
herein.
Certain of the Warrants are subject to redemption prior to maturity as set forth herein.
The Warrants will be payable, as to both principal and interest, solely out ofthe proceeds ofthe Special 24 Mill Tax to
which reference is hereinafter made. See "SECURITY AND SOURCE OF PAYMENT" herein.
The Warrants are subject to the approval ofthe legality by Bradley Arant Boult Cummings LLP, Birmingham, Alabama,
Bond Counsel. Certain legal matters will be passed on for the Underwriters by Hand Arendall LLC, Birmingham,
Alabama, counsel to the Underwriters. It is expected that the Warrants in definitive form will be available for delivery
on or about December 27,2012.
The Frazer Lanier Company
Incorporated
Sterne, Agee & Leach, Inc.
Protective Securities
A division of ProEquities, Inc.
Dated December 11, 2012
AMOUNTS, MATURITIES, INTEREST RATES, YIELDS AND CUSIPS
$51,915,000
Special Tax School Warrants
Series 2012
•
Year of
Maturity
(February 15)
Priucipal
Amount
Interest
Rate
Yield'
CUSIP
Number
2018
2019
2020
2021
2022
2023
2024
2025
$4,535,000
4,705,000
6,470,000
6,680,000
6,910,000
7,195,000
7,530,000
7,890,000
4.00%
5.00
4.00
4.00
4.00
5.00
5.00
5.00
1.17%
1.35
1.51
1.77
2.06
2.27'
2.37'
2.43'
439240BC5
439240BD3
439240BE1
439240BF8
439240BG6
439240BH4
439240BJO
439240BK7
Yield to earliest call, August 15, 2022.
HOOVER CITY BOARD OF EDUCATION
MEMBERS
Earl A. Cooper
President
Paulette R. Pearson
Vice President
Donna C. Frazier
Derrick Murphy
Stephen Presley
SUPERINTENDENT
Andy Craig
CHIEF SCHOOL FINANCIAL OFFICER
Cathy M. Antee
BOARD COUNSEL
Bradley Arant Boult Cummings LLP
Birmingham, Alabama
BOND COUNSEL
Bradley Arant Boult Cummings LLP
Birmingham, Alabama
FINANCIAL ADVISOR
First National Banker's Bank Capital Markets
Birmingham, Alabama
UNDERWRITERS
The Frazer Lanier Company Incorporated
Montgomery, Alabama
Sterne, Agee & Leach, Inc.
Birmingham, Alabama
Protective Securities
A division of ProEquities, Inc.
Birmingham, Alabama
UNDERWRITERS' COUNSEL
Hand Arendall LLC
Birmingham, Alabama
{THIS PAGE INTENTIONALLY LEFT BLANK]
TABLE OF CONTENTS
Page
No.
INTRODUCTION
1
THE WARRANTS
2
SOURCES AND USES OF FUNDS
7
SECURITY AND SOURCE OF PAYMENT
7
THE SPECIAL TAX
8
ESTIMATED DEBT SERVICE AND COVERAGE
11
AD VALOREM TAXES
12
OTHER INDEBTEDNESS OF THE BOARD
17
GENERAL INFORMATION CONCERNING THE BOARD
20
MAJOR SOURCES OF BOARD REVENUE
31
GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING
THE CITY, JEFFERSON COUNTY AND SHELBY COUNTy
34
LEGAL INVESTMENT
39
RATINGS
39
TAX MATTERS
40
UNITED STATES BANKRUPTCY CODE
43
AUDIT
44
UNDERWRITING
44
APPROVAL OF LEGAL MATTERS
45
CONTINUING DISCLOSURE REQUIREMENTS
45
MISCELLANEOUS
46
Appendix A
Appendix B
Appendix C
Form of Approving Legal Opinion
Auditors' Financial Statements for Fiscal Year Ended September 30, 2011
Summary of Continuing Disclosure Agreement
[THIS PAGE INTENTIONALLY LEFT BLANK]
OFFICIAL STATEMENT
$51,915,000
HOOVER CITY BOARD OF EDUCATION
Special Tax School Warrants
Series 2012
INTRODUCTION
The overlapping debt information set forth in the Preliminary Official
Statement inadvertently did not take into account the Board's indebtedness; that information
has been revised and is shown on page 19.
This Official Statement is to furnish information in connection with the sale by the
Hoover City Board of Education ("the Board"), in the State of Alabama, ofthe warrants referred to
above ("the Warrants"). Whenever in this Official Statement a contract, indenture, ordinance,
resolution or other document or official act is referred to or summarized, such reference or summary
is qualified by the exact terms of the document or official act so referred to or summarized, each
such document or official act being an item of public record.
The principal office of the Board is located at 2810 Metropolitan Way, Hoover,
Alabama 35243, telephone (205) 439-1000. Inquiries with respect to information contained in this
Official Statement should be directed to The Frazer Lanier Company Incorporated, 300 Water Street,
Montgomery, Alabama 36104, telephone (800) 223-2631, attention: Robert Young.
The Board is the body charged with the management and control of the affairs and
finances of the public schools located in that certain school tax district in Jefferson County and
Shelby County, Alabama, known as Hoover School District ("the District"), being the school tax
district that is under the jurisdiction and control of the Board. The District consists of all the
territory within the corporate limits ofthe City ofHoover, Alabama ("the City"), and the boundaries
of the District are coterminous with the corporate limits of the City.
The Warrants will not constitute general obligations ofthe Board or a charge against
the general credit or taxing powers of the Board, the State of Alabama, Jefferson County, Shelby
County, the City or any political subdivision of the foregoing. The Warrants will be limited
obligations of the Board payable solely from and secured by a pledge and assignment of the
proceeds of a special annual ad valorem tax ("the Special Tax") authorized to be levied without limit
as to time on taxable property in the City. See "SECURITY AND SOURCE OF PAYMENT."
THE WARRANTS
General Provisions and Maturities
The Warrants will be issued as fully registered warrants in the denomination of
$5,000 (or any integral multiple thereof) and will mature and become payable in the following
principal amounts on February 15 in the following years and will bear interest at the following per
annum rates:
Year of
Maturity
Principal
Amount
Interest
Rate
2018
2019
2020
2021
2022
2023
2024
2025
$4,535,000
4,705,000
6,470,000
6,680,000
6,910,000
7,195,000
7,530,000
7,890,000
4.00%
5.00
4.00
4.00
4.00
5.00
5.00
5.00
Place and Manner of Payment
Interest on the Warrants (computed on the basis of a 360-day year of twelve
consecutive 30-day months) will be payable semiannually on each February 15 and August 15,
beginning August 15, 2013. Except as hereinafter described under "Book-Entry Only System," the
principal of the Warrants will be payable at the principal corporate trust office of The Bank ofNew
York Mellon Trust Company, N.A., Birmingham, Alabama ("the Paying Agent"), upon presentation
and surrender ofthe Warrants as the same become due and payable. Interest on the Warrants will be
payable by check or draft mailed by the Paying Agent to the registered holders ofthe Warrants at the
addresses shown on the registry books of the Paying Agent pertaining to the Warrants as ofthe
February I or August I, as the case may be, next preceding any interest payment date. Payment of
such interest will be deemed to have been timely made if such check or draft is mailed on or before
the due date thereof. The resolution of the Board pursuant to which the Warrants are being issued
("the Authorizing Resolution") makes special provision for the payment of overdue interest which
may be paid to a holder other than the registered holder of a Warrant at the time such overdue
interest becomes due and payable.
2
Purpose of Issue
The Warrants are being issued to provide a portion of the funds needed:
(i)
to refund, on an advance basis, those of the Board's Capital Outlay
Warrants, Series 2005, dated December 15,2005, that have stated maturities in 2018
through 2025 ("the Refunded Series 2005 Warrants"), aggregating $55,070,000 in
principal amount; those ofthe said Series 2005 Warrants that have stated maturities
in 2026 and 2027 are herein called "the Unrefunded Series 2005 Warrants"; and
(ii)
for payment of issuance expenses.
The Refunded Series 2005 Warrants will be redeemed and paid on February 15,2015. A portion of
the proceeds of the Warrants will be invested in direct obligations of the United States (or
obligations the payment ofwhich is unconditionally guaranteed by the United States), pursuant to an
escrow trust agreement between the Board and The Bank of New York Mellon Trust Company,
N.A., as trustee (which bank is the paying agent for the said Series 2005 Warrants), so as to produce
funds sufficient to pay the interest on the Refunded Series 2005 Warrants on and prior to February
15,2015, and to redeem the Refunded Series 2005 Warrants on that date. The Board will obtain a
verification report prepared by a certified public accountant confirming the adequacy of the said
funds for these purposes.
Redemption Provisions
Optional Redemption. Those ofthe Warrants having stated maturities in 2023 and
thereafter will be subject to redemption at the option ofthe Board, as a whole or in part and ifin part
then in such maturities as the Board shall select in its discretion and in amounts of $5,000 or any
integral multiple thereof, on August 15,2022, and on any date thereafter, after written notice given
by United States First Class Mail to the holders (at the addresses of such registered holders as such
addresses appear on the registry books ofthe Paying Agent) ofeach ofthe Warrants the principal of
which is, in whole or in part, to be redeemed and prepaid, not less than thirty (30) nor more than
sixty (60) days prior to the date fixed for redemption, at and for a redemption price with respect to
each such Warrant (or portion thereof) redeemed equal to the principal amount thereof redeemed,
plus accrued interest to the date fixed for redemption.
Manner of Redemption. In the event that less than all the Warrants of a single
maturity is redeemed and prepaid, the Paying Agent shall, by lot, select that portion ofthe principal
of the Warrants of such maturity to be redeemed and prepaid. In the event that less than all the
outstanding principal of any Warrant is to be redeemed, the holder thereof shall surrender the
Warrant that is to be prepaid in part to the Paying Agent in exchange, without expense to the holder,
3
for a new Warrant of like tenor except in a principal amount equal to the unredeemed portion ofthe
Warrant. All future interest on the Warrants (or principal portions thereof) so called for redemption
shall cease to accrue after the redemption date.
Book-Entry Only System
Portions of the following information concerning The Depository Trust Company
("DTC") and DTC's book-entry system have been obtained from DTC. The Board, the Paying Agent
and the Underwriters make no representation as to the accuracy of such information.
Initially, DTC will act as Securities Depository for the Warrants. The Warrants
initially will be issued solely in book-entry form to be held under DTC's book-entry system,
registered in the name of Cede & Co. (DTC's partnership nominee). Initially, one fully-registered
certificate for each maturity will be issued for the Warrants, in the aggregate principal amount of
Warrants of such maturity, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning ofthe New York Banking Law, a member ofthe
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 securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among Participants ofsecurities transactions,
such as transfers and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical movement of securities
certificates. Direct participants ("Direct Participants") include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange,
Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and Participants are on file with the Securities
and Exchange Commission. So long as the Warrants are maintained in book-entry form with DTC,
the following procedures will be applicable with respect to the Warrants.
Purchases ofthe Warrants under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Warrants on DTC's records. The ownership interest
ofeach actual purchaser ofeach Warrant ("Beneficial Owner") is in tum to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written confirmation from
DTC of their purchase, but Beneficial Owners are expected to receive written confirmations
providing details ofthe transaction, as well as periodic statements oftheir holdings, from the Direct
or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Warrants are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
4
representing their ownership interests in the Warrants, except in the event that use ofthe book-entry
system for the Warrants is discontinued.
To facilitate subsequent transfers, all Warrants deposited by Participants with DTC
are registered in the name ofDTC's partnership nominee, Cede & Co. The deposit ofWarrants with
DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership.
DTC has no knowledge ofthe actual Beneficial Owners ofthe Warrants; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Warrants are credited, which mayor
may not be the Beneficial Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance ofnotices 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.
As long as the book-entry system is used for the Warrants, redemption notices will be
sent to Cede & Co. If less than all the Warrants of a single maturity are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such maturity
to be redeemed.
As long as the book-entry system is used for the Warrants, principal, premium, ifany,
and interest payments on the Warrants will be made to DTC. DTC's practice is to credit Direct
Participants' accounts, upon receipt of funds and corresponding detail information from the Paying
Agent, on the payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such Participant and not ofDTC, the
Paying Agent or the Board, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and interest to Cede & Co. is the
responsibility of the Board or the Paying Agent, and disbursement of such payments to the
Participants or the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
Neither DTC nor Cede & Co. will consent or vote with respect to the Warrants.
Under its usual procedures, DTC mails an Omnibus Proxy to the Paying Agent 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 Warrants are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
5
DTC may discontinue providing its services as securities depository with respect to
the Warrants at any time by giving reasonable notice to the Board and the Paying Agent. In addition,
the Board may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). Under either of such circumstances, in the event that a successor
securities depository is not obtained, warrant certificates are required to be printed and delivered.
The Board and the Paying Agent will have no responsibility or obligation to any
securities depository, any Participants in the book-entry system, or the Beneficial Owners with
respect to (i) the accuracy of any records maintained by the securities depository or any Participant;
(ii) the payment by the securities depository or by any Participant of any amount due to any
Participant or Beneficial Owner, respectively, in respect of the principal amount or redemption or
purchase price of, or interest on, any Warrants; (iii) the delivery of any notice by the securities
depository or any Participant; (iv) the selection ofthe Beneficial Owners to receive payment in the
event of any partial redemption of the Warrants; or (v) any other action taken by the securities
depository or any Participant.
In the event ofthe discontinuance ofthe book-entry system for the Warrants, warrant
certificates will be printed and delivered and the following provisions ofthe Authorizing Resolution
will apply: (i) principal of the Warrants will be payable upon surrender of the Warrants at the
designated office of the Paying Agent; (ii) Warrants may be transferred or exchanged for other
Warrants of authorized denominations as set forth in the next succeeding two paragraphs; and (iii)
Warrants will be issued in denominations as described above under the heading "THE WARRANTS
- General."
Registration, Transfer and Exchange of Warrants
The Warrants shall be registered as to both principal and interest and may be
transferred only on the registry books ofthe Paying Agent pertaining to the Warrants. No transfer of
a Warrant shall be permitted except upon presentation and surrender ofsuch Warrant at the office of
the Paying Agent with written power to transfer signed by the registered owner thereof in person or
by a duly authorized attorney in form and with guaranty of signatures satisfactory to the Paying
Agent. The holder of one or more ofthe Warrants may, upon request, and upon the surrender to the
Paying Agent of such Warrant, exchange such Warrant for warrants of other authorized
denominations ($5,000 principal amount or any integral multiple thereof) ofthe same maturity and
interest rate and together aggregating the same principal amount as the Warrant so surrendered. Any
registration, transfer or exchange of warrants shall be without expense to the holder thereof except
that the holder shall pay all taxes and other governmental charges, if any, required to be paid in
connection with such transfer, registration or exchange. The holder ofany Warrant will be required
to pay any expenses incurred in connection with the replacement of a mutilated, lost, stolen or
destroyed Warrant.
6
If any Warrant is duly called for redemption (in whole or in part), the Paying Agent
shall not be required to register or transfer such Warrant during the period offorty-five (45) days
next preceding the redemption date.
SOURCES AND USES OF FUNDS
The following are the anticipated sources and uses of funds to accomplish the
purposes for which the Warrants are being issued, exclusive of accrued interest on the Warrants:
SOURCES
Principal amount of the Warrants
$ 51,915,000.00
Net original issue premium
10,084,233.90
Total
$ 61.999.233.90
USES
Escrow to refund the Refunded Series 2005 Warrants
$ 61,447,966.10
Costs of issuance (including underwriting discount)
Total
551.267.80
$ 61.999.233.90
SECURITY AND SOURCE OF PAYMENT
The Warrants will be payable, as to both principal and interest, solely out of the ad
valorem tax ("the Special Tax") hereinafter referred to, the entire proceeds from which, to the extent
necessary for such purpose and after payment of the costs of assessment and collection, will be
pledged for payment of the principal of and interest on the Warrants at the respective maturities of
the said principal and interest. There are no outstanding obligations secured by a pledge of the
proceeds from the Special Tax other than the Warrants and the Outstanding Parity Warrants
hereinafter described. The said pledge of the proceeds from the Special Tax for the benefit of the
Warrants shall be superior to all subsequent pledges of the Special Tax except for pledges made for
the benefit of Parity Warrants hereinafter described.
7
The Alabama statute authorizing the issuance of the Warrants provides that
warrants issued thereunder shall be preferred claims against the special tax out ofwhich they
are made payable, shall be secured by a pledge of the entire net proceeds thereof (after
payment of the costs of assessment and collection) superior to all subsequent pledges made,
and shall have preference over claims for salaries or other operating expenses or any other
purpose.
As is the case with other warrant issues of the Board, the Warrants will be a charge
only on revenues from the Special Tax out of which the same are payable and will not constitute a
charge on the general revenues of the Board. No holder of a Warrant may compel the use of any
funds for the payment of the principal thereof or the interest thereon except funds constituting net
proceeds of the Special Tax pledged for the payment thereof. Neither the City, any County nor
any other municipality will in any manner be liable for payment of the Warrants.
THE SPECIAL TAX
General
The Special Tax is authorized, pursuant to Section 216 of the Constitution of
Alabama of 1901, at special elections held in the City on May 8,1990, on May 12, 1998, and on
April 27, 2010, to be levied for public school purposes annually on all property situated in the City,
at the rate of 24 mills per annum, until and including the tax year for which taxes will become due
and payable on October 1, 2046. The Special Tax is levied by the City and collected by the
Jefferson County Tax Collector and the Shelby County Property Tax Commissioner (on behalfofthe
City) and the entire proceeds ofthe Special Tax, remaining after payment ofthe costs ofassessment
and collection, are paid over to the City and then to the Board as promptly as may be practicable
after the collection thereof.
The Special Tax is collected in advance. Therefore, the Special Tax assessed with
respect to real property for the tax year ending September 30, 2013, became due and payable
October 1,2012, and will be delinquent on January 1,2013.
8
Collection of the Special Tax
The total amounts received by the Board from the Special Tax for each ofthe last five
(5) fiscal years are as follows:
Fiscal Year
Ending
September 30
Total
2008
2009
2010
2011
2012
(I)
$36,261,485
37,020,654
36,936,317
35,748,133
35,906,045 (unaudited)(l)(2)
Except for taxes with respect to motor vehicles, ad valorem taxes are due and payable on October 1 of
each year and delinquent after December 31 (see" AD VALOREM TAXES - Assessment and Collection"
below). The Board projects that receipts ofthe Special Tax, including collections yet-to-be received with
respect to motor vehicles, will amount to $34,380,000 for the 2013 fiscal year.
(2)
Fiscal years 2011 and 2012 reflect a proposed reclassification of $470,266 in receipts; a change in tax
collection and reporting in Shelby County caused certain ad valorem tax receipts for fiscal year 2012 to
be included in fiscal year 2011 results. The audit for fiscal year 2011 shows the receipts ofthe Special
Tax to be $36,218,396. The Board is in discussion with its auditors concerning a possible restatement.
Issuance of Parity Warrants
In the Authorizing Resolution, the Board will reserve the right to issue additional
warrants (,'Parity Warrants") secured by pledge of the Special Tax on a parity of lien with the
Warrants and the Outstanding Parity Warrants hereinafter described. Prior to the issuance of any
such Parity Warrants, the Board must file (in the office of its Secretary, the Superintendent of
Education) a certificate of the Custodian of School Funds (the Chief School Financial Officer)
setting forth the maximum amount payable annually in the then current and all succeeding fiscal
years ofthe Board as the principal ofand interest on the Warrants, the Outstanding Parity Warrants,
if any then outstanding, and the Parity Warrants proposed to be issued, and demonstrating that the
receipts of the Special Tax paid to the Board during the fiscal year immediately preceding the
issuance ofthe said Parity Warrants is not less than 135% ofthe maximum amount payable annually
in any such fiscal year as principal ofand interest on the Warrants, the Outstanding Parity Warrants,
if any then outstanding, and the Parity Warrants proposed to be issued.
9
Except as provided with respect to the issuance of Parity Warrants, the Board has
covenanted and agreed that the Special Tax shall not be pledged to the payment of any other
Warrants of the Board unless such pledge is made subject to and subordinate in all respects to the
pledge for the benefit of the Warrants.
Upon the issuance ofthe Warrants, there will also be outstanding (all payable solely
out of the Special Tax and herein called "the Outstanding Parity Warrants") the following:
(i)
$14,615,000 aggregate principal amount of the Board's Capital
Outlay Warrants, Series 2005, dated December 15,2005 ("the Unrefunded Series
2005 Warrants"), and
(ii)
$117,825,000 aggregate principal amount of the Board's Capital
Outlay Warrants, Series 2010, dated August 1, 2010 ("the Series 2010 Warrants").
10
ESTIMATED DEBT SERVICE AND COVERAGE
The debt service requirements on the Outstanding Parity Warrants and the debt
service requirements on the Warrants are as follows:
Fiscal
Year
Ending
September 30
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
(1)
Outstanding
Parity
Warrants (I)
$ 5,749,425.00
8,494,050.00
8,480,050.00
8,454,675.00
8,442,550.00
5,147,175.00
5,147,175.00
5,147,175.00
5,147,175.00
5,147,175.00
5,147,175.00
5,147,175.00
5,147,175.00
13,773,525.00
10,587,350.00
10,779,087.50
10,654,012.50
10,653,700.00
10,654,775.00
10,651,675.00
10,653,725.00
10,655,137.50
10,655,237.50
10,653,350.00
10,655,393.75
10,651,637.50
10,650,668.75
10,651,637.50
Series 2012 Warrauts
Principal
$4,535,000
4,705,000
6,470,000
6,680,000
6,910,000
7,195,000
7,530,000
7,890,000
Interest
Total
$1,488,206.67
2,349,800.00
2,349,800.00
2,349,800.00
2,349,800.00
2,259,100.00
2,050,775.00
1,803,750.00
1,540,750.00
1,268,950.00
950,875.00
582,750.00
197,250.00
$1,488,206.67
2,349,800.00
2,349,800.00
2,349,800.00
2,349,800.00
6,794,100.00
6,755,775.00
8,273,750.00
8,220,750.00
8,178,950.00
8,145,875.00
8,112,750.00
8,087,250.00
The Uurefunded Series 2005 Warrants and the Series 2010 Warrants.
11
Total
Outstaudiug
and Proposed
Warrants
$ 7,237,631.67
10,843,850.00
10,829,850.00
10,804,475.00
10,792,350.00
11,941,275.00
11,902,950.00
13,420,925.00
13,367,925.00
13,326,125.00
13,293,050.00
13,259,925.00
13,234,425.00
13,773,525.00
10,587,350.00
10,779,087.50
10,654,012.50
10,653,700.00
10,654,775.00
10,651,675.00
10,653,725.00
10,655,137.50
10,655,237.50
10,653,350.00
10,655,393.75
10,651,637.50
10,650,668.75
10,651,637.50
Coverage for the Warrants
Based upon the proceeds from the Special Tax for the fiscal year that ended
September 30,2012, $35,906,045 (unaudited), maximum annual debt service on the Outstanding
Parity Warrants and the Warrants ($13,773,525 being that for the fiscal year ending September 30,
2026) will be covered approximately 2.607 times, and average annual debt service ($11,481,408.80,
in fiscal years 2014 through 2040) will be covered 3.127 times.
AD VALOREM TAXES
General
The levy and collection of ad valorem taxes in Alabama are subject to the provisions
of the Constitution of Alabama of 190I, which limits the ratios at which property may be assessed,
specifies the maximum millage rates that may be levied on property and limits total ad valorem taxes
on any property in any year.
Classification of Taxable Property
For purposes of ad valorem taxation, all taxable property in Alabama is required
under current law to be divided into the following four classes:
Class I
All property of utilities used in their business
Class II
All property not otherwise classified (1)
Class III
All agricultural, forest and single family, owner-occupied residential
property, and historic buildings and sites
Class IV
(1)
-
(1)
Private passenger automobiles and pickup trucks
Under applicable law, railroad property is not considered Class I (utility) property and is instead Class II.
12
Taxable property designated as "Class III" may, upon the request ofthe owner of such property, be
appraised at its "current use value" rather than its "fair and reasonable market value." "Current use
value" was originally defined in a legislative act as the value of such property based on the use being
made of it on October I of the preceding year, without taking into consideration the "prospective
value such property might have if it were put to some other possible use." Amendatory legislation,
effective 1981, extensively revised the formulas and methods to be used in computing the current
use property value of agricultural and forest property. However, the original statutory definition,
though somewhat modified, remains applicable to residential and historical property.
There are exempted from all ad valorem taxes household and kitchen furniture, farm
tractors, farming implements when used exclusively in connection with agricultural property, and
inventories of goods, wares and merchandise.
Assessment Ratios
The following are the assessment ratios now in effect in the City for purposes of state
and local taxation:
Class
Class
Class
Class
I
II
III
IV
30%
20
10
15
Although current law provides in effect that, with respect to ad valorem taxes levied by the City, the
governing body of the City may, subject to the approval of the Legislature and of a majority of the
electorate ofthe City at a special election, and in accordance with criteria established by legislative
act, adjust (by increasing or decreasing) the ratio of assessed value of any class oftaxable property
to its fair and reasonable market value or its current use value (as the case may be), the governing
body ofthe City has not heretofore sought to make any adjustment ofthe assessment ratio applicable
to any class of taxable property in the City and has no present plans for any such adjustment. The
Legislature has no power over the adjustment of assessment ratios pertaining to local taxes except to
approve or disapprove an adjustment proposed by a local taxing authority. The assessment ratio
applicable to each class oftaxable property must in any event be uniform with respect to ad valorem
taxes levied by the City.
Current Ad Valorem Tax Rates
Pursuant to the constitution and laws of the State of Alabama, ad valorem taxes on
property in the City are currently levied at the following rates:
13
Rates in Mills (Dollars per
$1,000 of Assessed Value)
State of Alabama
6.5
Jefferson County
General
Roads, bridges and public buildings
County and district schools
Sewers
Total
5.6
7.2
22.1
-----.:L
35.6
Shelby County
General
Roads, bridges and public buildings
County and district schools
Total
5.0
2.5
22.0
29.5
City of Hoover
General
Special Tax
6.5
24.0
Total
30.5
The total ad valorem tax millage rates for property within the City are as follows:
Jefferson County
Shelby County
72.6 mills
66.5 mills
Existing law provides that the rate of any ad valorem tax levied by the City may be
increased only after the approval of the Alabama Legislature and of a majority of the electorate of
the City at a special election. The constitution limits the total ad valorem taxes (Le., state, county,
municipal, school district, etc.) on any property in anyone year to certain percentages ofthe fair and
reasonable market value of such property. With respect to Class 1 property (Le., the property of
utilities used in their business), the constitutional limitation is 66.66 mills and the current levy in the
Jefferson County portion ofthe City is 72.6 mills, exceeding the limit by approximately 5.94 mills.
The result is that the share of proceeds ofthe tax levied (with respect to Class 1property) by each of
the various taxing authorities and recipients of tax proceeds (Le., state, county, city and schools) is
reduced pro rata by the amount of the excess. The limitations are not exceeded with respect to any
other class of property.
14
Homestead Exemption
The governing body ofthe City is authorized by law to grant a homestead exemption
of not exceeding $4,000 in assessed value against any City ad valorem tax except one "earmarked
for public school purposes." The City Council has not heretofore granted any such homestead
exemption against any of the ad valorem taxes currently levied by the City.
Property Tax Litigation
The levy, assessment and collection of ad valorem taxes in the State of Alabama
have, over the past 40 years, been subject to significant litigation, which has resulted in substantial
changes in Alabama's property tax system affecting ad valorem tax receipts of the various taxing
authorities (including the City). The City has not been a party to any such litigation that relates
solely to ad valorem taxes levied by the City. There can be no assurance, however, that other
litigation concerning the State's property tax system will not be initiated or resolved in such a
manner as to affect adversely the levy or collection of ad valorem taxes by the City.
Assessment and Collection
Ad valorem taxes on taxable properties in that portion of the City in Jefferson
County, except motor vehicles and public utility properties, are assessed by the Jefferson County
Tax Assessor and collected by the Jefferson County Tax Collector. In Shelby County assessment
and collection is conducted by the Property Tax Commissioner. Ad valorem taxes on motor vehicles
in the portion of the City lying within Jefferson County are assessed and collected by the Jefferson
County Director of Revenue; taxes on motor vehicles in the Shelby County portion of the City are
collected by the Shelby County License Director. Ad valorem taxes on public utility properties are
assessed by the State Department of Revenue and collected by the Jefferson County Tax Collector
and the Shelby County Property Tax Commissioner.
Ad valorem taxes are due and payable on October J and delinquent after December
31 in each year (except for taxes with respect to motor vehicles, which have varying due dates), after
which a penalty and interest are required to be charged. If real property taxes are not paid by the
June I following the due date, a tax sale is required to be held.
The Jefferson County Tax Collector and the Shelby County Property Tax
Commissioner have in recent years consistently collected in excess of 98% of ad valorem taxes
(state, county, municipal and school).
15
The current level of property tax collection is dependent on many factors, including
possible taxpayer appeals from increased property assessments. There can be no assurance that the
current level of property tax collection will continue.
Assessed Valuations
The following table shows the estimated assessed values, by category, ofproperties
within the corporate limits of the City for the following years:
Tax
Year
Motor
Vehicles
All Property
Other Than
Motor Vehicles
Total
2008
2009
2010
2011
2012
$129,794,585
122,105,884
120,081,342
112,995,466
154,687,540
$1,431,837,315
1,475,886,243
1,470,277,523
1,441,051,275
1,381,510,872
$1,561,631,900
1,597,992,127
1,590,358,865
1,554,046,741
1,536,198,412
Assessed Valne by Property Classification
The following chart reflects, for the tax year that ended September 30, 2012 (that is,
the year for which taxes became due and payable on October 1,2012, and delinquent on January I,
2013), the appropriate division of net assessed valuation of property in the City by classification:
Assessed Valuation Assessed Valuation
Property Located
Property Located
in Jefferson County in Shelby County
Property Classification
Class I
Utilities
Class II
All Property Not Otherwise
Classified
547,099,437
281,830,740
All Agricultural, Forest and Single
Family Owner Occupied Residential
Property and Historic Building and Sites
378,255,739
273,331,460
Private Passenger Automobiles
And Trucks for Personal Use
92,771,380
61,916,160
Less Exemptions
97,835,284
45,609,360
$958383 172
$577.815240
Class III
Class IV
$ 38,091,900
TOTAL
16
$
6,346,240
Largest Ad Valorem Taxpayers
Listed below are the ten largest ad valorem taxpayers in the City and the total amount
of ad valorem taxes paid by each during the tax year ended September 30, 2012 (the most recent
fiscal year for which definite information is available). The amounts shown below under the heading
"City Ad Valorem Taxes Paid" represent the collections during the fiscal year ended September 30,
2012, from the 6.5 mill general fund municipal tax levied on property within the City's jurisdiction,
excluding taxes levied on motor vehicles. The amounts do not include the 24 mill Special Tax
levied for public school purposes.
Taxpayer
BellSouth Telecommunications
Regions Bank
Hoover Mall Limited LP
AT&T Services
Blue Cross & Blue Shield of Alabama
Hub Properties Trust
Alabama Power Company
Patton Creek Holdings, L.L.C.
GCCFC 2005-GG5 Corporate Parkway, LLC
Ridge Crossings Apartments, LTD.
Assessed
Value
City
Ad Valorem
Taxes Paid"
$60,526,290
30,170,500
27,789,880
17,373,720
15,622,220
15,590,820
13,599,240
8,656,096
7,941,520
7,296,060
$708,952
805,374
847,591
529,898
476,477
475,520
362,751
264,010
242,216
222,529
Reflects amount of6.5 mill general fund ad valorem tax levied by the City.
Source: Jefferson County Tax Collector and Shelby County Property Tax Commissioner.
OTHER INDEBTEDNESS OF THE BOARD
Outstanding Indebtedness
The Board has no presently outstanding long term indebtedness, other than the
Outstanding Parity Warrants, and no present expectation of incurring or issuing long term
indebtedness other than the Warrants.
17
General
Under the general laws of Alabama regulating the borrowing offunds by boards of
education, the Board is authorized to sell tax anticipation warrants for the purpose of paying the
costs of erecting, acquiring, providing, constructing, purchasing, altering, enlarging, improving,
repairing and equipping school buildings, school play grounds and buildings for housing and
repairing school buses, and for the purpose of purchasing school buses, but such warrants may not
be general obligations ofthe Board and must be payable, as to both principal and interest, solely out
of one of the following; (a) the proceeds of any ad valorem tax voted under the constitution for the
purpose of paying such warrants, or for school purposes generally, and paid, apportioned or
allocated to or for the benefit ofthe Board, (b) the proceeds of any ad valorem tax that may be paid,
apportioned or allocated to or for the benefit of the Board, or (c) the proceeds of any privilege,
license or excise tax or taxes that may be paid, apportioned or allocated to or for the benefit of the
Board. The Board is not subject to any limitation on the amount of indebtedness it may incur for the
purposes specified above.
Short Term Loans
The Board is also authorized under Alabama statutes to borrow money for current
fiscal year needs in anticipation ofcurrent revenues for that fiscal year and to pledge for payment of
such loans current revenues for such fiscal year. Such loans outstanding in any fiscal year may not
exceed estimated revenues for such fiscal year (as approved by the State Superintendent of
Education) less current revenues already collected and debt service on warrants due during such
fiscal year. All such loans must be due and payable during the fiscal year in which incurred unless
the State fails to make a final apportionment of school funds during such fiscal year, in which case
such loans may be extended to the close of the fiscal year during which such final apportionment is
made. If current fiscal year funds are insufficient to retire such loans, the unpaid loans become a
first lien on the current revenues of the succeeding fiscal year subject only to the prior lien of
principal and interest due on the Board's warrants. The Board has historically not found it necessary
to borrow money for current fiscal year needs.
18
RATIO OF DIRECT AND OVERLAPPING TAX-SUPPORTED
DEBT TO ASSESSED VALUE PER CAPITA AND DIRECT AND
OVERLAPPING TAX-SUPPORTED GENERAL OBLIGATION DEBT
(AS OF SEPTEMBER 30, 2012, EXCEPT AS OTHERWISE NOTED)
Direct general obligation debt of the City
$
Assessed value of property in City as of September 30, 2012, not including motor vehicles
$ 1,381,510,872
Assessed value of motor vehicles in City as of September 30, 2012
$
Total assessed value as of September 30, 2012
$ 1,536,198,412
101,850,000
154,687,540
2010 population of City
81,619
Ratio of direct general obligation debt to City's 2012 assessed value
6.63%
Per capita general obligation direct debt
$
1,247.87
Jefferson County general obligation warrant debt as of November 9, 2011 (unaudited)
$
200,000,520
Assessed value of Jefferson County real and personal property as of September 30, 2012
$ 8,680,671,686
Assessed value of property located within portion of the City that is in Jefferson County
as of September 30, 2012
$
958,383,172
City's share of Jefferson County overlapping debt (11.04%)
$
22,080,057
Shelby County general obligation debt as of September 30, 2012 (unaudited)
$
58,795,000
Assessed value of Shelby County real and personal property as of September 30,2012
$ 2,937,920,340
Assessed value of property located within portion of the City that is in Shelby County
as of September 30,2012
$
577,815,240
City's share of Shelby County overlapping debt (19.67%)
$
11,564,977
Tax-supported indebtedness of Hoover City Board of Education (including the Warrants)
$
184,355,000
Total overlapping debt (that is, the City's overlapping share of general obligation
warrant indebtedness of the two counties in which it is located and the debt of the Board)
$
218,000,034
City's direct and overlapping debt
$
319,850,034
Ratio of City's direct, general obligation and overlapping debt to City's 2012
assessed value
$
Per capita direct and overlapping debt
NOTE:
20.82%
3,918.82
The information set forth above in bold type includes the Board's indebtedness and reDects
revised calculations.
19
GENERAL INFORMATION CONCERNING THE BOARD
General Powers and Organization
The Board is a quasi-corporation under the laws ofAlabama havingjurisdiction over
all public schools in the City. The Board is composed of five (5) members who are appointed by the
City Council for staggered five-year terms. The members and their current terms ofoffice are as set
forth below:
Name
Date of
Ending of
Current Term
Earl A. Cooper
Paulette R. Pearson
Donna C. Frazier
Derrick Murphy
Stephen Presley
May 2013
May 2014
May 2015
May 2016
May 2017
Present
Business or
Professional Affiliation
Director, Major Accounts, Alabama Power Company
Owner/Presideut, Paulette Pearson Consulting, Inc.
Owner/President, The Asbury Cottage, Inc.
Project Engineer, Birmingham Water Works Board
President, Landscape Workshop, LLC
The Board appoints the Superintendent of Education who serves as the Secretary of
the Board and who is the chief administrator ofthe Board with general supervisory authority over all
the public schools in the City. The present Superintendent is Andy Craig who became
Superintendent in March 2007 (Interim Superintendent from July 2006 to March 2007) and was
Assistant Superintendent from October 2001 to July 2006.
The Board appoints the Chief School Financial Officer who is responsible for
receiving all moneys to which the Board may be entitled by law. The Chief School Financial Officer
pays out such money only upon written order of the Superintendent. The Chief School Financial
Officer has no discretionary power over the disbursement ofschool funds. The present Chief School
Financial Officer is Cathy M. Antee, who has served in this position since May 2007.
The School System
The Board formulates public school policies and, upon the recommendation of the
Superintendent, appoints principals, teachers, clerical and professional assistants to the Board,
prescribes course of study and approves contracts. The Board delegates to the Superintendent of
Education, as its executive officer, and his staff the responsibility for administering the policies of
the Board and the operation of the schools.
20
The Board operates a primary educational system ("the System") with a physical
plant consisting of the following schools:
Schools
Approximate
Number of Pupils
Grades
Hoover High School
Spain Park High School
Berry Middle School
Robert F. Bumpus Middle School
Simmons Middle School
Brock's Gap Intermediate School
Bluff Park Elementary School
Deer Valley Elementary School
Green Valley Elementary School
Greystone Elementary School
Gwin Elementary School
Riverchase Elementary School
Rocky Ridge Elementary School
Shades Mountain Elementary School
South Shades Crest Elementary School
Trace Crossings Elementary School
Crossroads Alternative School
2,640
1,560
1,223
822
892
813
640
794
477
571
570
9-12
9-12
6-8
7-8
6-8
5-6
K-5
K-4
K-5
K-5
K-5
K-5
K-5
K-5
667
564
315
621
519
K-4
K-4
various
•
Enrollment for the three most recent school years, for school year 2012-2013 and
projected enrollment for the next two (2) school years is as follows:
2011-2012
2012-2013
Projected
2013-2014
5,958
6,075
6,128
6,344
6,469
2,992
3,163
3,198
3,354
3,330
3,396
3,935
4,050
4,138
4,207
4.290
4,374
12,817
13,171
13,411
13,689
13,964
14,239
2009-2010
2010-2011
Grades K-5
5,890
Grades 6-8
Grades 9-12
Total
Projected
2014-2015
Of the System's instructional staff of 953 teachers, approximately 72% have a
Master's or more advanced degree. In 2009, the System earned District Accreditation from the
Southern Association of College and Schools.
•
Pupils attending the Alternative School are included in the attendance figures (above) for the school
to which they are customarily zoned.
21
The System has consistently maintained a high level of academic excellence as
evidenced by many student, teacher and administrative awards through competition sponsored by
national organizations.
Employees and Employee Relations
The Board employs approximately 1,811 persons full-time, of whom approximately
1,077 work in the instructional program of the schools under the administration of the Board. The
Board's current pupil-to-teacher ratio is approximately 14.4: I.
No employees of the Board are represented by labor unions or similar employee
organizations. The Board does not bargain collectively with any labor union or employee
organization. The Board has never experienced a strike, boycott, or other work stoppage and no
such work stoppage is threatened.
Ofthe Board's 1,811 full-time employees, approximately 765 persons are members of
the Alabama Education Association ("AEA"). AEA represents individual teachers in tenure and
contract disputes with the Board, but does not bargain with the Board on behalf of teachers with
respect to salaries or compensation; however, AEA does actively represent teachers at the State
level, where minimum salaries are determined.
Litigation
The Board is a defendant in several lawsuits, related either to employment or student
matters. It is not possible to predict the likely outcome in each matter but the Board does not
anticipate that the outcome, however adverse, will have a significant impact on the Board's finances
or that it will have a material impact on its ability to make timely payments on its debt.
General Financial Information
The following tables (taken from the Board's audited financial statements) show a
summary of the Board's revenues and expenditures for the last five (5) fiscal years:
22
COMBINED STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES
YEAR ENDED SEPTEMBER 30 (I)
2007 (2)(3)
2008
2009 (4)
2010
2011
Revenues
Siale of Alabama
Federal Govemmenl
Local Revenues
Other Revenues
$ 57,365,398
3,908,415
174,451,467
1,740,232
$ 65,097,385
4,121,720
99,100,595
1,702,286
$ 63,395,490
5,062,930
85,388,694
1,895,213
$ 54,787,560
9,490,289
85,049,609
1,997,138
$ 58,299,626
12,966,084
82,993,731
1,885,147
Total Revenues
237,465,512
170,021,986
155,742,327
151,324,596
156,174,588
56,005,543
50,986,536
52.483.405
117,885,000
46.468,694
38,906,938
56,005,543
50,986,536
52,483,405
164,353,694
38,906,938
293,471,055
221,008,522
208,225,732
315,678,290
195,081,526
77,059,339
22,841,411
15,966,775
15,318,777
88,431,180
25,526,662
18,333,502
16,534,236
82,816,176
23,986,475
17,530,106
15,324,563
83,437,172
23,281,110
16,074,690
15,501,587
82,065,055
22,846,023
16,108,511
16,479,695
2,533,526
15,836,624
15,977,729
4,216,430
2,922,538
3,479,553
15,955,453
5.446,360
2,466,097
5,679,095
15,924,879
6,083,308
2,377,197
766,762
16,350,161
5,087,655
2,324,549
1,356,359
8,490,436
4,807,904
169,750,611
176,629,484
169,810,699
162,878,334
154,478,532
Other Fund Vses
Operating Transfers Out
Olher Uses
56,005,543
50,986,536
52,483,405
46,468,694
114,870,722
38,906,938
Tolal Other Fund Uses
56,005,543
50,986,536
52,483,405
161,339,416
38,906,938
225,756,154
227,616,020
222,294,104
324,217,750
193,385,470
Other Financing Sources
Proceeds from borrowings
Operaling Transfers In
Total Other Financing Sources
Tolal Revenues and Olher
Financing Sources
Expenditures
Instructional Services
Instructional Support
Operation and Maintenance
Auxiliary Services
General Administrative and
Central Support
Capilal Outlay
Debt Service
Other Expenditures
Total Expenditures
Tola1 Expenditures and Olher
Financing Uses
Excess of Revenues and Other
Financing Sources Over (Under)
Expenditures and Other Fund Uses
67,714,901
Fund Balances - beginning of year
82,909,615
149,999,515
143,392,017
129,323,645
120,784,185
$150624516
$ 143,392,017
$ 129323645
$120784185
$122480241
Fund Balances - end of year
(6,607,498)
SEE FOOTNOTES ON THE FOLLOWING PAGE.
23
(14,068,372)
(8,539,460)
1,696,056
(I)
(2)
(3)
(4)
The tables are presented as supplementary information to the Board's audited financial statements as a
summary of revenues, expenditures and changes in fund balances for all governmental funds for the
years presented.
The fund balance as of September 30, 2007, was subsequently restated to $149,999,515 (that is, it was
reduced by $625,000) to correct an error in reporting a receivable from the City of Hoover; the
revenues above are shown as originally reported.
The net increase in endiug fuud balance of approximately $67,700,000, as compared to the previous
year's fund balance, reflects primarily the difference between capital outlay expenditures incurred and
the proceeds from a capital grant by the Jefferson County Commission.
The net decrease in ending fund balance ofapproximately $14,000,000, as compared to the previous
year's fund balauce, was the result ofdebt service expenditures and proratiou ofstate fundiug partially
offset by a reduction in expenditures.
24
The unaudited financial information for the fiscal year that ended September 30,
2012, is as follows:
General
Fund
All Governmental
Fund Types
Revenues
State of Alabama
Federal Government
Local Revenues
Other Revenues
Total Revenues
$ 58,699,008
39,231
32,067,025
241,167
$ 61,801,248
5,764,115
85,522,923
554,899
91,046,431
150,643,185
32,598,689
558,544
50,848,225
596,237
33,157,233
51,444,462
124,203,664
202,087,647
74,762,702
20,238,507
15,573,605
6,882,037
2,152,514
0
0
0
618,090
82,367,625
22,913,696
15,838,377
15,108,566
2,278,254
9,974,868
0
8,424,125
4,382,228
120,227,455
161,287,739
4,015,010
50,848,225
124,242,465
$212,135,964
Other Financing Sources
Operating transfers in
Other
Total Other Financing Sources
Total Revenues and Other
Financing Sources
Expenditures
Instructional Services
Instructional Support Services
Operation and Maintenance
Auxiliary services
Gen. Administrative Services
Capital outlay
Debt Service - principal
Debt service - interest
Other
Total Expenditures
Other Fund Uses
Operating Transfers Out
Total Expenditures and other
Fund Uses
Excess of revenues and other
financing sources over (under)
expenditures and other fund uses
(38,80])
OO,048,317l
Fund balances, beginning of year
$ 10,423,801
$122,481,396
Fund balances, end aryear
$ 10400000
$112433079
25
Pension Plan
The State ofAlabama maintains a retirement system covering public school teachers
and other full-time school employees in the state; as a result, the retirement plans for employees of
the Board are funded under its plan known as the Teachers' Retirement System. Employees are
required to contribute 7.5% of their salary to the system and the Alabama Legislature annually sets
the amount of the Board's contribution. The Board's contributions are set-out in Note 6 to the
audited financial statements attached hereto as Appendix B. Other post-employment benefits
(OPEB) matters are discussed in Note 13 to the audited financial statements attached hereto as
Appendix B.
Accounting
The financial statements of the Board have been prepared in conformity with
generally accepted accounting principles (GAAP) as applied to government units. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles.
The Board uses funds and account groups to report on its financial position and the
result of its operations. Fund accounting is designed to demonstrate legal compliance and to aid
financial management by segregating transactions related to certain government functions or
activities.
A fund is a separate accounting entity with a self-balancing set of accounts. An
account group, on the other hand, is a financial reporting device designed to provide accountability
for certain assets and liabilities that are not recorded in the funds because they do not directly affect
net expendable available financial resources.
Funds are classified into two categories: governmental and fiduciary. Each category,
in tum, is divided into separate "fund types."
General Fund. The Board's General Fund primarily received revenues from the
Education Trust Fund (ETF) and local taxes. Amounts appropriated from the ETF were allocated to
the Board on a formula basis.
Special Revenue Funds. Special Revenue Funds account for the proceeds of
specific revenue sources (other than those derived from expendable trusts, or dedicated for major
capital projects) requiring separate accounting because of legal or regulatory provisions or
administrative action. Special revenue funds consist principally of accounts related to special state
and federal programs, such as preschool programs, vocational education and child nutrition.
26
Debt Service Funds. Debt Service Funds are used to account for tbe accumulation
of resources for and the payment of the Board's general long term debt principal and interest.
Capital Projects Funds. Capital Project Funds are used to account for financial
resources to be used for the acquisition or construction of major capital facilities (other than those
financed by proprietary and trust fund).
Basis ofAccounting. The government-wide and fiduciary fund financial statements
are reported using the economic resources measurement focus and the accrual basis of accounting.
Revenues are recorded when earned and expenses are recorded at tbe time liabilities are incurred,
regardless ofwhen the related cash flow takes place. Nonexchange transactions, in which the Board
gives (or receives) value without directly receiving (or giving) equal value in exchange, include
property taxes, grants, entitlements, and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied. As a general rule, tbe effect of interfund activity has
been eliminated from the government-wide financial statements.
Governmental funds are reported using a current financial resources measurement
focus and the modified accrual basis of accounting. Under this method, revenues are recognized
when 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 Board considers revenues reported in the governmental funds (excluding state and
federal reimbursements) to be available if the revenues are collected within thirty days after yearend. Revenues from state and federal funds are considered available if transactions eligible for
reimbursement have taken place. Expenditures generally are recorded when tbe related fund liability
is incurred. Principal and interest on long-term debt are recorded when due or when amounts have
been accumulated in the debt service fund for payments to be made early in the following year.
When both restricted and unrestricted resources are available for use, it is the Board's
policy to use restricted resources first, then unrestricted resources as they are needed.
The Board of Education reports deferred revenues on its combined balance sheet, if
any. Deferred revenues arise when potential revenue does not meet botb the "measurable" and
"available" criteria for recognition in the current period. Deferred revenues also arise when
resources are received by the Board before it has a legal claim to them, as when grant monies are
received prior to the incurrence of qualifying expenditures. In subsequent period, when both
revenue recognition criteria are met, or when the Board has a legal claim to the resources, tbe
liability for deferred revenue is removed from the combined sheet and revenue is recognized.
27
Budget
On or before September 15 of each fiscal year, the Board is required to prepare and
submit the State Superintendent of Education an annual budget to be adopted by the Board. The
Superintendent of the Board cannot approve any budget for operations of the system for any fiscal
year which shows expenditures in excess of income estimated to be available plus any cash balances
on hand. The Superintendent, with the approval of the Board, has the authority to make changes
within the approved budget provided that a deficit is not incurred as a result of such changes. A
summary of the budget filed by the Board with the State Superintendent of Education and now in
effect is set forth as follows:
28
FISCAL 2012 - 2013 BUDGET
REVENUES
State sources
Federal sources
Local sources
Other sources
$ 62,711,879
6,007,620
77,343,775
397,820
$ 146,461,094
TOTAL REVENUE
EXPENDITURES
$ 85,686,622
21,376,999
16,080,329
17,008,901
2,706,348
6,851,867
8,433,125
3,754,921
Instruction services
Instructional support services
Operation and maintenance
Auxiliary services
General admin. and central support
Capital outlay
Debt service
Other expenditures
$ 161,899,112
TOTAL EXPENDITURES
OTHER FUND SOURCES (USES)
Other Fund Sources
Other Fund Uses
46,071,816
(45.473.586)
$
TOTAL OTHER FUND SOURCES
EXCESS REVENUES AND OTHER SOURCES
OVER (UNDER) EXPENDITURES AND OTHER
FUND USES
598,230
(14,839,788)
BEGINNING FUND BALANCE - OCT 1
$ 109,885,045
ENDING FUND BALANCE - SEPT 30
$ 95,045,257
29
Education Accountability Plan
The general laws of Alabama contain provisions designed to impose financial
accountability on boards of education. The State Board ofEducation, through the State Department
of Education, is directed by the legislation to require, approve and audit budgets, financial
statements and other reports necessary to assess the financial stability of each board of education.
Ifa board is determined to have submitted a fiscally unsound budget, the State Board
must provide assistance to complete a revised budget. If, during the preparation of the revised
budget, the State Superintendent of Education determines that the local board is in an unsound fiscal
position, a person or persons must be appointed by the State Superintendent to advise on the day-today financial operations ofthe Board. If, after a reasonable period oftime, the State Superintendent
determines that the local board is still in an unsound fiscal condition, a request must be filed with the
State Board to take direct control of the fiscal operation of the local board. Upon approval by the
State Board, the State Superintendent must appoint an individual to be the chief financial officer of
the local board to manage its fiscal operation. The State Superintendent has the authority to review
the decisions of the chief financial officer and the local board of education, pursuant to the general
laws of Alabama.
Foundation Program Fuud
In 1995, the Alabama Legislature enacted legislation providing for the establishment
of the Foundation Program Fund which replaced the minimum program fund as the principal state
mechanism for funding local boards ofeducation. In order to participate in the Foundation Program,
a local board must receive the equivalent of ten (10) mills oflocal tax receipts. The Foundation
Program is intended to provide funding for a minimum number of teaching units (which are
calculated according to a formula based primarily on average daily attendance), fringe benefits,
instructional support and other current expenses. The amount received by a local board from the
Foundation Program Fund is determined by calculating the total cost ofthe Foundation Program for
such local board and subtracting the minimum local effort required (that is, the ten mills oflocal tax
receipts referred to above).
In addition, the Foundation Program provides for the distribution of certain state
funds for capital improvements according to a comprehensive, long-range capital plan developed by
each local board.
30
MAJOR SOURCES OF BOARD REVENUE
The following major sources of revenue account for substantially all the Board's
revenue.
13.9 Mill District Tax, Jefferson Connty
The tax, levied in the portion ofthe District that lies in Jefferson County, pursuant to
Section 2 of Amendment No.3 to the Constitution of Alabama, produced revenue for the Board of
$13,335,101 in fiscal year 2011, and $12,954,338 in fiscal year 2012, or approximately 8.5% and
8.6% of total revenue for each fiscal year, respectively. The Board expects the tax will produce
approximately $12,885,585 in fiscal year 2013. This tax is authorized to be levied for each
consecutive tax year until and including the tax year for which taxes become due and payable on
October I, 2021. There are no outstanding pledges of, or contracts with respect to, these tax
proceeds.
6 Mill District Taxes, Shelby County
These taxes, each at the rate of three mills, levied in the portion of the District that
lies in Shelby County, pursuant to Section 2 of Amendment No.3 and Amendment No. 382
(respectively) to the Constitution of Alabama, produced revenue for the Board of $3,199,240 in
fiscal year 20 II, and $3,090,225 in fiscal year 2012, or approximately 2.1 % oftotal revenue for each
fiscal year. The Board expects these taxes will produce approximately $2,683,172 in fiscal year
2013. These taxes are authorized to be levied for each consecutive tax year until and including the
tax year for which taxes become due and payable on October 1,2028. There are no outstanding
pledges of, or contracts with respect to, these tax proceeds.
24 Mill Municipal Tax
The Special Tax produced revenue of $35,748,130 in fiscal year 2011 and
$35,906,045 in fiscal year 2012, or approximately 22.9% and 23.8% of the Board's total revenue
each fiscal year, respectively. This tax is expected to produce $34,380,209 fiscal year 2013. The
Special Tax will be pledged as security for the Warrants and is security for the Outstanding Parity
Warrants.
8.2 Mill Countywide Tax, Jefferson County
The Board received $6,215,852 in fiscal year 2011 and $7,001,460 in fiscal year
2012, or 3.9% and 4.6% of its total revenue for each fiscal year, respectively, from its share of an
8.2 mill countywide school tax in Jefferson County (a 5.4 mill tax, a 2.1 mill tax and a .7 mill tax)
that is authorized to be levied until and including the tax year for which taxes become due and
31
payable on October 1, 2021 (except to the extent that the .7 mill tax is authorized to be levied
without limit as to time). The Board's share of the countywide school tax is expected to be
$6,743,860 in fiscal year 2013. There are no outstanding pledges of, or contracts with respect to,
these tax proceeds.
16 Mill Countywide Tax, Shelby County
The Board received $5,267,813 in fiscal year 2011, from its share of a 16 mill
countywide school tax in Shelby County (two taxes levied at the rate of one mill each, a ten mill tax
and a four mill tax) that is authorized to be levied until and including the tax year for which taxes
become due and payable on October 1, 2040. The Board's share ofthe countywide school tax was
$4,921,274 in fiscal year 2012, or 3.4% of its total revenue, and is expected to be $4,678,586 in
fiscal year 2013. There are no outstanding pledges of, or contracts with respect to, these tax
proceeds.
City Appropriations
Appropriations to the Board are made by the City Council at its discretion. The
Board received $2,000,000 from the City in fiscal year 2011 and fiscal year 2012, and the Board
anticipates receiving $2,000,000 in fiscal year 2013.
Summary of Local Revenues
The following table reflects the Board's local revenue sources and amounts for the
fiscal years indicated:
2012(2)(3)
Tax/Appropriation
2008
2009
2010
2011
13.9 mill district tax
6 mill district tax
24 mill municipal tax
(I)
$13,221,992
3,135,574
36,261,485
$13,407,288
3,246,795
37,020,654
$13,401,230
3,194,012
36,936,317
$13,335,101
3,199,240
35,748,130
$12,954,338
3,090,225
35,906,045
8.2 countywide tax
16 mill countywide
Municipal appropriation
6,050,384
4,973,175
7,500,000
6,323,359
5,317,714
2,000,000
6,543,610
5,218,157
2,000,000
6,215,852
5,267,813
2,000,000
7,001,460
4,921,274
2,000,000
$71,142,610
$67,315,810
$67,293,326
$65,766,136
$65,873,342
Total
ell
(2l
(3)
The Special Tax being pledged for payment ofthe principal of and interest on the Warrants.
Unaudited.
Fiscal years 2011 and 2012 reflect a proposed reclassification of $470,266 in receipts; a change in tax
collection and reporting in Shelby County caused certain ad valorem tax receipts for fiscal year 2012 to
be included in fiscal year 2011 results. The audit for fiscal year 2011 shows the receipts ofthe Special
Tax to be $36,218,396. The Board is in discussion with its auditors concerning a possible restatement.
32
State of Alabama, Education Trust Fund -- Proration of State Funds
The Education Trust Fund is a special fund used as a depository for revenues
traditionally used for educational purposes. The Trust Fund was established in 1927 by an act ofthe
Legislature ofAlabama. The act requires that the proceeds ofthe following major state-wide taxes,
and numerous others (after payment of the costs of collecting and administering the taxes), be
deposited into the Trust Fund: the utilities gross receipts tax, the utilities use tax, the lease tax, the
sales tax, the use tax, the income tax, the cigarette tax and the beer tax. The Legislature ofAlabama
adopts an annual budget for the Trust Fund and monies are distributed to the Board based on average
daily membership.
Section 41-4-90 of the Code of Alabama 1975 provides, in part, that "the governor
shall restrict allotments to prevent an overdraft or deficit in any fiscal year for which appropriations
are made by prorating without discrimination against any department, board, bureau, commission,
agency, office or institution of the state, the available revenues among the various departments,
boards, bureaus, commissions, agencies, offices and institutions of the state." In fiscal year 2011,
the Governor of Alabama reduced monthly allotments from the Trust Fund because then-currentand-projected revenues accruing to the Trust Fund were not sufficient to pay all appropriations made
by the Legislature from the Trust Fund. In that year, the amount withheld from the Board was
$1,284,000, or approximately 0.8% of total revenue. Monthly allotments are not currently being
reduced. State appropriations to the Board in fiscal year 2011 of $58,299,626 were 37.3% of the
Board's total revenue. State appropriations accounted for $61,801,248, or 41.0% ofthe Board's
total revenue for fiscal year 2012.
The following table sets forth the years in which proration has been declared, since
2001, and the applicable percentage rate of proration:
Fiscal Year
Ending
September 30
Percentage
Rate
200i
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
6.20%
4.40
6.50
11.00
9.50
3.00
33
The Board cannot predict, for the current or any subsequent fiscal year, whether State revenues
appropriated to the Board will be subject to proration nor can it predict the extent of proration,
should it occur. The State funds that are subject to proration are not pledged for payment of the
principal of or interest on the Warrants. It is not possible for the Board to determine if proration
may have an adverse impact on the Board's finances.
Federal Programs
The Board receives funds from the federal government under various programs.
Federal funds produced revenuefor the Board of$12,966,084 in fiscal year 20 11 and $5,764,115 for
fiscal year 2012, representing 8.3% and 3.8% ofthe total revenue for each fiscal year, respectively.
The Board expects to receive approximately $6,007,620 from the federal government in the current
fiscal year.
GENERAL ECONOMIC AND DEMOGRAPHIC
INFORMATION CONCERNING THE CITY,
JEFFERSON COUNTY AND SHELBY COUNTY
General
The City was incorporated in 1967. Its population was 81,619 according to the 20 I0
federal census; approximately 70% ofthe inhabitants live in Jefferson County and the balance live in
Shelby County. The corporate limits ofthe City encompass approximately 44 square miles, 24.6 of
which lie in Jefferson County, and 19.4 of which are in Shelby County.
Governance
Jefferson County is governed by a Commission composed offive (5) Commissioners
elected from five (5) districts for four-year terms and the terms of all Commissioners run
concurrently. Shelby County is governed by a nine (9) member Commission elected on a district
basis for staggered four-year terms.
The City is organized under the mayor-council form ofgovernment. The Mayor and
City Council are elected at-large for four-year concurrent terms. The Mayor serves as chief
executive officer of the City and is responsible for the daily operations of all departments of the
City.
34
The Mayor of the City is Gary Ivey, whose current term of office expires on
September 30, 2016. The City Council consists of the following members:
Name
Term Expires
John Greene
Trey D. Lott
John Lyda
John T. Natter
Brian Skelton
Gene Smith
Jack Wright, President
September 30, 2016
September 30, 2016
September 30, 2016
September 30, 2016
September 30, 2016
September 30, 2016
September 30, 2016
Miscellaneous Demographic Information
Following is various information with respect to demographic, transportation,
housing, health services, income and agriculture in Jefferson County and Shelby County:
Population
The population has been as follows:
Census
State - Alabama
County - Jefferson
Connty - Sbelby
City - Hoover
1970
1980
1990
2000
2010
3,444,165
3,893,888
4,040,587
4,447,100
4,779,736
644,991
671,324
651,525
662,047
658,446
38,037
66,298
99,358
143,293
195,080
688
19,792
41,089
62,742
81,619
Source: United States Bureau of the Census
35
Vital Statistics
Median
Age
2010
Marriage Rate
per 1,000
2010
Divorce Rate
per 1,000
2010
Birth Rate
per 1,000
2010
Jefferson County
41.6
6.7
0.3
32.0
10.0
Shelby Connty
36.8
4.8
3.5
12.8
3.3
Death Rate
per 1,000
2010
Source: Alabama Department of Public Health, Center of Health Statistics
Unemployment Rates
(Percentage)
2007
2008
2009
United States
4.6
5.8
9.3
9.6
8.9
Alabama
3.4
5.0
9.7
9.5
9.3
Jefferson County
3.3
4.8
9.5
9.4
9.0
Shelby County
2.2
3.3
7.0
6.9
6.3
2010
2011
Source: Alabama Department of Industrial Relations
Annual Average Labor Force Estimates'
Birmingham-Hoover Metropolitan Area"
2007
2008
2009
2010
20ll
Civilian Lahor Foree
535,660
Employment
506,582
Wage & Salary Emp. (1). (2) 531.8
Goods Producing (1)
81.5
Manufacturing (1)
44.1
Service Producing (1)
450.3
Unemployment
16,415
Rate (3)
3.1
530,222
474,221
527.4
78.1
42.3
449.3
23,640
4.5
522,392
481,100
497.7
66.3
36.7
431.3
48,171
9.2
528,139
480,902
489.5
61.8
34.7
427.7
47,237
8.9
530,139
486,344
488.6
61.8
35.0
426.9
43,795
8.3
Employment Status
(I)
(2)
(3)
Estimates adjusted to the 2011 Current Population Survey
Birmingham-Hoover Metropolitan Area includes Bibb, Blount, Chilton, Jefferson, St. Clair, Shelby and Walker
Counties.
Rounded to the nearest thousands.
Place of residence basis.
Place of work basis. Components may not add due to rounding,
Rate computed on unrounded data.
36
Estimated Median Family Income
2007
2008
2009
2010
2011
2012
$59,000
$61,500
$64,000
$64,400
$64,200
$65,000
Alabama
48,700
51,700
53,200
54,100
54,600
55,400
Jefferson County'
55,500
59,100
60,900
61,700
62,000
62,800
Shelby County
55,500
59,100
60,900
61,700
62,000
62,800
United States
Birmingham-Hoover Metropolitan Area.
Source: HUD Office of Economic Affairs, Economic and Market Analysis Division
Per Capita Personal Income
(Dollars)
2005
2006
2007
2008
2009
2010
$35,424
$37,698
$39,461
$40,674
$39,635
$39,937
Alabama
29,838
31,421
32,773
33,928
33,411
33,504
Jefferson County
39,005
41,371
42,303
43,308
41,745
41,844
Shelby County
27,072
41,882
44,279
44,080
42,118
42,273
United States
Source: U.S. Department of Commerce, Bureau of Economic Analysis
Occupancy Characteristics of Alabama Housing Units, 2010
Total
Total
Occupied
Owner
Renter
2,139,970
1,819,441
1,287,432
532,009
307,684
267,675
178,927
88,748
Shelby County
80,970
74,072
59,129
14,943
City of Hoover
35,474
32,478
21,902
10,576
Alabama
Jefferson County
Source: U.s. Department of Commerce
37
Structural Characteristics of Alabama Households, 2010
Total
Family
Households
Non-Family
Honseholds
Mobile Home
or Trailer
1,819,441
1,236,035
583,406
310,721
267,675
173,053
94,622
10,807
Shelby Connty
74,072
53,733
20,339
8,244
City of Hoover
32,478
22,476
10,002
151
Alabama
Jefferson Connty
Source: U.S. Department ofCornmerce, Bureau of the Census
Average Value of Owner-Occupied Housing Units, 2010
Alabama
$111,900
Jefferson County
132,700
Shelby Conuty
189,500
City of Hoover
273,400
Source: U.S. Census Bureau
Transportation
Miles of Road 2010
County
Jefferson
Shelby
Area in
Square
Miles
Motor
Vehicle
Registration
Persons
Per
Vehicle
Vehicle
Per
Road Mile
State
System
County
System
1,113
657,147
1.00
271.6
335
2,084
2,419
3
785
331,061
1.69
294.0
194
932
1,126
2
38
State
Licensed
Total Airports
Mean
Travel Time
(Minutes)
2010
County
Number of
Accidents
2010
Drove Alone-2010
Number
Percent
Number of Number of
Injuries
Fatalities
2010
2010
Jefferson
23.4
239,467
83.9
21,831
4,709
88
Shelby
30.8
82,241
85.4
4,959
932
26
Source: U.S. Bureau of the Census and Alabama Department of Transportation
Health Services
County
Jefferson
Shelby
Physicians
2010
Hospitals
2012
Licensed
Beds
2012
Nursing
Home Beds
2012
3,592
15
4,714
3,950
114,905
110,533
332
2
244
392
27,041
24,104
Medicare Enrollees
2012
2010
Source: Center for Business and Economic Research, The University of Alabama
LEGAL INVESTMENT
Under the provisions of Act No. 2011-631 (now codified as Article 14 ofChapter 13
of Title II ofthe Code of Alabama 1975) ofthe Legislature ofAlabama, the Warrants will be legal
investments for fiduciaries. Said act provides:
The warrants issued pursuant to the provisions of this act shall be
legal investments for executors, administrators, trustees, and other
fiduciaries.
RATINGS
Moody's Investors Service and Standard & Poor's have assigned the municipal bond
ratings set forth on the cover of this Official Statement. Any explanation of the significance ofa
rating may be obtained from the appropriate rating agency. There is no assurance that such rating
will continue for any given period of time or that it will be revised or withdrawn entirely, if, in the
judgment of such rating agency, circumstances so warrant.
39
The ratings are not recommendations to buy, sell or hold the Warrants, and such
ratings may be subject to revision or withdrawal at any time by the rating agencies. A revision or
withdrawal of such rating may have an effect on the market price of the Warrants.
TAX MATTERS
Opinion of Bond Counsel
In the opinion ofBradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond
Counsel, under existing statutes and court decisions and assuming continuing compliance with
certain tax covenants described herein, interest on the Warrants is excluded from gross income for
federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as
amended ("the Code"). Interest on the Warrants is not treated as a preference item in calculating the
alternative minimum tax imposed on individuals and corporations under the Code; such interest,
however, is included in the adjusted current earnings of certain corporations for purposes of
calculating the minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel
has relied on certain representations, certifications offact, and statements ofreasonable expectations
made by the Board and others in connection with the Warrants, and Bond Counsel has assumed
compliance with certain ongoing covenants to comply with applicable requirements ofthe Code to
assure the exclusion of interest on the Warrants from gross income under Section 103 ofthe Code.
Bond Counsel is further of the opinion that the interest income on the Warrants is
exempt from present Alabama income taxation.
Bond Counsel expresses no opmlOn regarding any other federal or state tax
consequences with respect to the Warrants. Bond Counsel renders its opinion under existing statutes
and court decisions as of the issue date and assumes no obligation to update its opinion after the
issue date to reflect any future action, fact or circumstance, or change in law or interpretation, or
otherwise. Bond Counsel expresses no opinion on the effect of any action taken in reliance upon an
opinion of other counsel on the exclusion from gross income for federal income tax purposes of
interest on the Warrants.
Certain Ongoing Federal Tax
Requirements and Covenants
The Code establishes certain significant ongoing requirements that must be met
subsequent to the issuance and delivery of the Warrants in order that interest thereon be and remain
excluded from gross income under Section 103 ofthe Code. These requirements include, but are not
limited to, requirements relating to use and expenditure ofgross proceeds ofthe Warrants, yield and
40
other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain
excess earnings on gross proceeds be rebated to the federal government. Noncompliance with such
requirements may cause interest on the Warrants to become included in gross income for federal
income tax purposes retroactive to their issue date, irrespective of the date on which such
noncompliance occurs or is discovered. The Board has covenanted to comply with certain
applicable requirements of the Code to assure the exclusion of interest on the Warrants from gross
income under Section 103 of the Code.
Certain Collateral Federal
Tax Consequences
The following is a brief discussion of certain collateral federal income tax matters
with respect to the Warrants. It does not purport to deal with all aspects of federal taxation that may
be relevant to a particular owner ofa Warrant. Prospective investors, particularly those who may be
subject to special rules, are advised to consult their own tax advisors regarding the federal tax
consequences of owning and disposing of the Warrants.
Prospective owners of the Warrants should be aware that the ownership of such
obligations may result in collateral federal income tax consequences to various categories of
persons, such as corporations (including S corporations and foreign corporations), financial
institutions, property and casualty and life insurance companies, individual recipients of Social
Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax
credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry
obligations the interest on which is not included in gross income for federal income tax purposes.
Interest on the Warrants may be taken into account in determining the tax liability of foreign
corporations subject to the branch profits tax imposed by Section 884 of the Code.
Original Issue Discount
The initial public offering price to be paid for certain of the Warrants ("the Original
Issue Discount Warrants") is less than the principal amount thereof. Under existing law, the
difference between (i) the amount payable at the maturity ofeach Original Issue Discount Warrants,
and (ii) the initial offering price to the public of such Original Issue Discount Warrants constitutes
original issue discount with respect to such Original Issue Discount Warrants in the hands of any
owner who has purchased such Original Issue Discount Warrants in the initial public offering ofthe
Warrants. Such initial owner is entitled to exclude from gross income (as defined in Section 6I of
the Code) an amount of income with respect to such Original Issue Discount Warrants equal to that
portion ofthe amount of such original issue discount allocable to the period that such Original Issue
Discount Warrants continues to be owned by such owner.
41
In the event ofthe redemption, sale or other taxable disposition ofsuch Original Issue
Discount Warrants prior to stated maturity, however, the amount realized by such owner in excess of
the basis of such Original Issue Discount Warrants in the hands of such owner (adjusted upward by
the portion of the original issue discount allocable to the period for which such Original Issue
Discount Warrants was held by such initial owner) is includable in gross income.
Under existing law, the original issue discount on each Original Issue Discount
Warrants is accrued daily to the stated maturity thereof (in amounts calculated as described below
for each six-month period ending on the date before the semiannual anniversary dates of the
Warrants and ratably within each such six-month period) and the accrued amount is added to an
initial owner's basis for such Original Issue Discount Warrants for purposes of determining the
amount of gain or loss recognized by such owner upon the redemption, sale or other taxable
disposition thereof. The amount (if any) to be added to basis for each accrual period is equal to (a)
the sum ofthe issue price and the amount of original issue discount accrued in prior periods (if any)
multiplied by the yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) less (b) the amounts
payable as current interest during such accrual period on such Warrants.
The federal income tax consequences ofthe purchase, ownership, redemption, sale or
other disposition ofOriginal Issue Discount Warrants which are not purchased in the initial offering
at the initial offering price may be determined according to rules which differ from those described
above. All owners of Original Issue Discount Warrants should consult their own tax advisors with
respect to the determination for federal, state and local income tax purposes of interest accrued upon
redemption, sale or other disposition of such Original Issue Discount Warrants and with respect to
the federal, state, local and foreign tax consequences ofthe purchase, ownership, redemption, sale,
gift or other disposition of such Original Issue Discount Warrants.
Original Issue Premium
The initial public offering price to be paid for certain ofthe Warrants ("the Original
Issue Premium Warrants") is greater than the principal amount thereof. Under existing law, any
owner who has purchased an Original Issue Premium Warrants in the initial public offering of the
Warrants is required to reduce his basis in such Original Issue Premium Warrants by the amount of
premium allocable to periods during which he holds such Original Issue Premium Warrants, and the
amount of premium allocable to each accrual period will be applied to reduce the amount of interest
received by the owner during each such period. All owners of Original Issue Premium Warrants
should consult their own tax advisors with respect to the determination for federal, state and local
income tax purposes of interest accrued upon redemption, sale or other disposition of such Original
Issue Premium Warrants and with respect to the federal, state, local and foreign tax consequences of
the purchase, ownership, redemption, sale, gift or other disposition of such Original Issue Premium
Warrants.
42
Future Legislatiou
Current and future legislative proposals, ifenacted into law, may cause interest on the
Warrauts to be subject, directly or indirectly, to federal income taxation or otherwise prevent
beneficial owners of the Warrants from realizing the full benefit of the current tax status of such
interest. For example, the Obama Administration, in the recently released fiscal year 2013 budget of
the United States Government, proposed limiting to a maximum of28% the tax rate at which certain
taxpayers could reduce their tax liability through certain exclusions and deductions (including the
exclusion from gross income of tax-exempt interest). The introduction or enactmeut of any such
legislative proposals may also affect the market price for, or marketability of, the Warrants.
Prospective purchasers ofthe Warrants should consult their own tax advisors regarding any pending
or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of
future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Bauk Qualification
Sectiou 265 of the Code provides that, as a geueral rule, banks, thrifts, aud other
financial institutions may uot deduct that portion of their interest expense that is allocable to taxexempt obligations acquired after August 7,1986. There is a specific exception in Section 265 for
interest income from a "qualified tax-exempt obligation" which is defined as an obligation (not a
private activity bond) that has been designated by the issuer for purposes ofthe Code as a "qualified
tax-exempt obligation." Under the exception, interest allocable to qualified tax-exempt obligations
is subject to the 20% disallowance rule effective prior to the Tax Reform Act of 1986. Section 265
provides that not more than $10,000,000 ofobligations may be designated by an issuer as "qualified
tax-exempt obligations" during any calendar year and that obligations may not be designated as
"qualified tax-exempt obligations" unless the issuer reasonably anticipates that the amount of
qualified tax-exempt obligations issued by such issuer during such calendar year will not exceed
$10,000,000.
The Warrauts are uot "qualified tax-exempt obligatious" for purposes of
Sectiou 265.
UNITED STATES BANKRUPTCY CODE
The United States Bankruptcy Code permits political subdivisions of a state and
certain state and local public agencies and instrumentalities that are insolvent or are unable to meet
their debts to file petitions for relief in federal bankruptcy courts if authorized by state law.
Alabama law authorizes municipalities, counties and certain public authorities to file petitions under
the Bankruptcy Code. However, there is no legislation currently in effect in Alabama authorizing
boards ofeducation to file such petitions for relief. Such legislation authorizing boards ofeducation
43
to file petitions for relief under the Bankruptcy Code may well be enacted by the Legislature of
Alabama in the future.
Section 922(d) of Chapter 9 of the Bankruptcy Code provides that a bankruptcy
petition does not operate as a stay of application of pledged special revenues to the payment of
indebtedness secured by such revenues. It is not clear whether the pledge of the Special Tax made
by the Board for the benefit of the Warrants, would constitute "special pledged revenues" as that
term is used in Section 922 of Chapter 9 of the Bankruptcy Code and, therefore, it is uncertain
whether or not an automatic stay, under Chapter 9, would prevent the Board from using the said
Special Tax for the payment of principal and interest on the Warrants.
The approving legal opinion of Bond Counsel will contain the customary reservation
that the rights of the holders of the Warrants and the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights
and the exercise ofjudicial discretion in appropriate cases. See "TAX MATTERS" above and the
proposed fonn of approving legal opinion set forth in Appendix A.
AUDIT
A copy of the audited financial statements of the Board for the fiscal year ended
September 30, 2011, prepared by Carr, Riggs & Ingram, L.L.C., Binningham, Alabama, is attached
hereto as Appendix B.
UNDERWRITING
The Series 2012 Warrants are being purchased by The Frazer Lanier Company
Incorporated; Sterne Agee & Leach, Inc., and Protective Securities, a division of ProEquities, Inc.
("the Underwriters"), at a price equal to $61,625,445.90 (which price reflects an underwriting
discount of $373,788 and net original issue premium of $10,084,233.90). The Board has been
advised that the Underwriters intends to offer the Warrants to the public at prices that may be
changed from time to time by the Underwriters without any requirement ofprior notice. The Board
has also been advised that the Underwriters may offer the Warrants to certain dealers and to others at
prices lower than the public offering prices.
44
APPROVAL OF LEGAL MATTERS
Certain legal matters incident to the authorization and issuance of the Warrants are
subject to the approval of Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond
Counsel, whose approving legal opinion will be delivered at the time of delivery of the Warrants.
The proposed form of that opinion is included in this Official Statement as Appendix A. Bond
Counsel has been employed for the purpose of preparing certain documents and supporting
certificates, reviewing the transcript ofproceedings by which the Warrants have been authorized to
be issued and rendering an opinion as to the essential legality and validity of the Warrants in
substantially the form of Appendix A hereto.
CONTINUING DISCLOSURE REQUIREMENTS
The Board has entered into a Continuing Disclosure Agreement for the benefit of
holders of the Warrants wherein the Board has agreed to provide annually certain financial
information and operating data relating to the Board ("the Annual Report") and to provide notices of
the occurrence of certain enumerated events, if material. The Annual Report will be filed by the
Board with the Electronic Municipal Market Access system ("EMMA") established by the
Municipal Securities Rulemaking Board ("MRSB "). The notices of material events will be filed
with the EMMA. The specific nature ofthe information to be contained in the Annual Report or the
notices of material events and other provisions of the Continuing Disclosure Agreement are
summarized in "Appendix C - Summary of Continuing Disclosure Agreement." The Continuing
Disclosure Agreement has been entered into in order to assist the purchasers of the Warrants in
complying with Rule l5c2-12(b)(5) of the Securities and Exchange Commission.
Certain outstanding indebtedness ofthe Board has been secured by various forms of
credit enhancement, including bond insurance. The ratings of the providers of such credit
enhancement have been downgraded at various times in the past several years. Information about
the downgrades was publicly reported. The Board may not have filed a notice in accordance with
Rule 15c2-12 with respect to each such downgrade.
Other than as noted above, the Board is in compliance with the obligations set forth in
the Continuing Disclosure Agreements to which it is a party.
45
MISCELLANEOUS
Any statements made in this Official Statement involving matters of opinion or
estimates whether or not expressly so stated, are intended as such and not as representations of fact.
No representation is made that any of such statements will be realized.
References herein to the Constitution ofthe State ofAlabama and all acts referred to
herein are intended to be only brief outlines of certain provisions ofeach thereof and do not purport
to summarize or describe all provisions thereof.
The distribution of this Official Statement has been approved by the Board.
HOOVER CITY BOARD OF EDUCATION
By
Dated December 11, 2012
46
'-"/s"-/""E"'arccILA"-."'C"o"'o!!:pe"'r
President
_
APPENDIX A
FORM OF APPROVING LEGAL OPINION
[THIS PAGE INTENTIONALLY LEFT BLANK]
Appendix A
Form of Approving Legal Opinion
BRADLEY ARANT BOULT CUMMINGS LLP
One Federal Place
1819 Fifth Avenue North
Birmingham, Alabama 35203-2119
Hoover City Board of Education
Hoover, Alabama
Ladies and Gentlemen:
We have examined certified copies of proceedings of the Hoover City Board of
Education ("the Board") in the State ofAlabama and other documents pertaining to the authorization
and issuance of
$51,915,000
HOOVER CITY BOARD OF EDUCAnON
Special Tax School Warrants
Series 2012
Dated December 27, 2012
("the Warrants"). We have not examined any of the Warrants as executed, but we have been
furnished with a certificate respecting the due execution thereof. The opinions hereinafter expressed
are based upon our examination ofthe proceedings and documents so submitted to us. The Warrants
recite that they are issued pursuant to the provisions of Article 14 of Chapter 13 of Title 16 of the
Code of Alabama 1975.
The said proceedings submitted to us show that the Board has reserved the right to
issue additional parity warrants ("Parity Warrants") payable from and secured by a pledge of the
special tax hereinafter referred to, subject to certain limitations and conditions, which pledge will
be on a parity oflien with pledges thereof heretofore made for the benefit oftwo series ofwarrants
described below and with the pledge made for the benefit of the Warrants.
We are of the following opinion: that the Warrants are in due and legal form and
have been authorized, sold and issued in the manner required by the applicable provisions of the
laws ofAlabama; that the Warrants are valid warrants ofthe Board and constitute valid orders on the
treasurer ofthe Board for the payment thereof as provided in the Warrants; that the principal of and
interest on the Warrants are payable solely out of the proceeds of a special ad valorem tax ("the
Special Tax") authorized at special elections held in the City ofHoover ("the City") on May 8, 1990,
on May 12, 1998, and on April 27, 2010, to be levied annually, until and including the tax year of
the City for which taxes become due and payable on October 1,2046, and which is now being levied
at the rate oftwenty-four (24) mills per annum on each dollar ofthe assessed valuation ofthe taxable
property in the City; that the Special Tax has been duly authorized by amendments to the
Constitution of Alabama and proceedings taken thereunder to be levied annually on all taxable
property in the City, as said properties may be assessed for taxation; that the Special Tax and the
proceeds thereof have been irrevocably pledged for payment of the principal of and interest on the
Warrants to the extent necessary to pay the said principal and interest at the respective maturities
thereof; that the said pledge is valid and irrevocable and the Warrants constitute a preferred charge
on the Special Tax; that the said pledge for the benefit ofthe Warrants will take precedence over any
pledge of the Special Tax for the benefit of any other warrants of the Board that may hereafter be
issued, other than Parity Warrants; and that, under existing statutes, the interest on the Warrants is
exempt from Alabama income taxation.
We are further of the opinion that under the Internal Revenue Code of 1986, as
amended ("the Code"), as presently construed and administered, and assuming compliance by the
Board with the covenants set forth in the resolution ofthe Board pursuant to which the Warrants are
being issued with respect to certain requirements offederal tax law, the interest on the Warrants will
be excludable from gross income of the recipients thereof for federal income tax purposes pursuant
to the provisions of Section 103(a) ofthe Code, and the interest on the Warrants will not be an item
oftax preference included in alternative minimum taxable income for the purpose of computing the
minimum tax imposed by Section 55 ofthe Code. We express no opinion with respect to the federal
tax consequences to the recipients of the interest on the Warrants under any provision of the Code
not referred to above.
The documents submitted to us include a certificate of officers ofthe Board that the
Board has no outstanding obligations that are secured by a pledge of the Special Tax except the
Warrants, those ofthe Board's Capital Outlay Warrants, Series 2005, dated December 15, 2005, that
have stated maturities in 2026 and 2027, and the Board's Capital Outlay Warrants, Series 2010,
dated August 1, 2010.
We express no opinion regarding the accuracy, adequacy or completeness of the
Official Statement ofthe Board relating to the Warrants. Further, we express no opinion regarding
tax consequences arising with respect to the Warrants other than as expressly set forth herein.
The rights of the holders of the Warrants and the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting
creditors' rights and the exercise ofjudicial discretion in appropriate cases.
This opinion is given as of the date hereof, and we assume no obligation to revise or
supplement this opinion to reflect any facts or circumstances that may hereafter come to our
attention, or any changes in law that may hereafter occur.
Yours very truly,
APPENDIXB
AUDITED FINANCIAL STATEMENTS
FOR FISCAL YEAR
ENDED SEPTEMBER 30,2011
{THIS PAGE INTENTIONALLYLEFTBLANK]
Hoover City Board of Education
Financial Statements
September 30, 2011
[THIS PAGE INTENTIONALLYLEFTBLANK]
Hoover City Board of Education
Table of Contents
September 30, 2011
Independent Auditors' Report
Management's Discussion Analysis
Page
1
3.1 - 3.4
Basic Financial Statements
Government-wide Financial Statements:
Statement of Net Assets
4
Statement of Activities
5
Fund Financial Statements:
Balance Sheet - Governmental Funds
6
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets
7
Combined Statement of Revenues, Expenditures and Changes in
Fund Balances - Governmental Funds
8
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances - Governmental Funds to the Statement of Activities
9
Index to Financial Statement Notes
Notes to Financial Statements
10
11- 26
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - General Fund
28
Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual- 24 Mill Fund
29
Supplementary Information
Supplementary Schedule of Bond Disclosures
31
Supplementary Schedule of Expenditures of Federal Awards
32
Supplementary Schedule of State Government Appropriations
33
Notes to Supplementary Schedules
34
Other Reports
Summary Schedule of Prior Year Audit Report Findings
35
Independent Auditors' Report on Internal Control Over Financial Reporting and
on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards
37-38
Independent Auditors' Report on Compliance with Requirements That Could
Have a Direct and Material Effect on Each Major Program and on Internal
Control Over Compliance in Accordance with OMB Circular A-133
40 -41
Schedule of Findings and Questioned Costs
43-44
[THIS PAGE INTENTIONALLY LEFTBLANK]
Carr, Riggs & Ingram, LLC
2100 16th Avenue South
Suite 300
Birmingham, Al35205
Independent Auditors' Report
To the Members of the
Hoover City Board of Education
Hoover, Alabama
MaillngAddress:
P.O. Box 55765
Birmingham. Al ,35255
12051933·7822
12051 933·7M41f"j
wWIN.crlcpa~com
We have audited the accompanying financial statements of the governmental activities,
each major fund, and the aggregate remaining fund information of the Hoover City Board of
Education (the "Board"') as of and for the year ended September 30, 2011, which
collectively comprise the Board's basic financial statements as listed in the table of
contents. These financial statements are the responsibility of the Board's management.
Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our
opinions.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, each major fund,
and the aggregate remaining fund information of the Board, as of September 30, 2011, and
the respective changes in financial position thereof, for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated
March 27, 2012, on our consideration of the Board's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements and other matters. The purpose of that report is to describe the
scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial
reporting or on compliance. That· report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be considered in assessing
the results of our audit.
The management's discussion and analysis and budgetary comparison information on
pages 3.1 through 3.4 and 28 through 29 are not a required part of the basic financial
statements but are supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures,
which consist principally of inquiries of management regarding the methods of
measurement and presentation of the required supplementary information. However, we did
not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements
that collectively comprise the Board's basic financial statements. The accompanying
schedule of bond disclosures, schedule of expenditures of federal awards and schedule of
state government appropriations are presented for purposes of additional analysis as
required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations, and are not a required part of the basic
financial statements. These schedules are the responsibility of management and were
derived from and relate directly to the underlying accounting and other records used to
prepare the financial statements. This information has been subjected to the auditing
procedures applied in the audit of the basic financial statements in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the
information is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Birmingham, Alabama
March 27, 2012
Hoover City Board of Education
Management's Discussion and Analysis (M D & A)
September 30, 2011
The management of the Hoover City Board of Education (the Board) has prepared this narrative
overview and analysis of the Board's financial activities to facilitate the users' understanding of
the annual report and draw attention to items of interest.
. Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the Board's basic financial
statements. The basic financial statements consist of the I) government-wide financial
statements, 2) fund financial statements, 3) notes to financial statements, and 4) certain required
supplementary financial information.
Government-wide Financial Statements
The government-wide financial statements are intended to provide an indication of the Board's
finances in a manner similar to the private sector. Accordingly, the government-wide statements,
comprised of the Statement of Net Assets and Statement ofActivities, have been prepared using
the accrual basis of accounting.
The Statement of Net Assets depicts all of the Board's assets and liabilities with the difference
between the two reports as net assets. Over time, changes in net assets may serve as a useful
indicator of whether the Board's financial position is improving or deteriorating.
The Statement of Activities illustrates how the Board's net assets changed during fiscal year
20 II. The statement uses the accrual basis of accounting, which is similar to the accounting
used by private-sector businesses. All of the revenues and expenses are reported regardless of
the timing of when cash is received or paid. The statement identifies the extent to which each
expenditure function draws from general revenues of the Board or is financed through charges
for services and intergovernmental aid such as state and federal appropriations.
Fund Financial Statements
The fund financial statements have been prepared under the modified cash basis of accounting
and their presentation is largely consistent with historical presentations.
A fund is a grouping of related accounts designed to facilitate control over resources that have
been segregated for a specific activity or objective. All of the funds of the Board can be
classified into two categories: governmental and fiduciary funds.
-3.1-
Governmental funds essentially measure and report the same activities and transactions as the
governmental activities in the governmental-wide financial statements. However, unlike the
accrual basis government-wide statements, the governmental funds focus on current, spendable
resources and balances of such spendable resources available at the end of the year.
Fiduciary funds are used to account for assets held by the Board in a trustee capacity or as an
agent for others. These funds are primarily comprised of booster and parent organization activity
funds. However, balances of these funds are not considered material to the financial statements
and therefore have been included in the governmental funds.
Government-wide Financial Analysis
Following is a condensed financial analysis, present in comparative format, of the governmentwide net assets of the Board as of September 30, 2011:
Government Activities
2011
2010
Current and other assets
Noncurrent assets
Capital assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Net assets:
[nvested in capital assets, net of related debt
Unrestricted
Total net assets
-3.2-
Percent Change
$133,225,247
10,829,139
246,244,864
390,299,250
$134,535,373
10,141,606
240.840,766
385517,745
0.98%
- 6.35%
- 2.19%
- 1.23%
13,510,312
187,570,000
201.080,312
13,108,148
187,570,000
200,678,148
-2.98%
60,853,772
128,365,166
$189218938
55,449,674
129,389,923
$184839597
- 8.88%
0.80%
- 2.31%
-0.20%
Following is a condensed schedule of revenues and expenditures from governmental activities
for the year ended September 30, 2011 presented with comparative data for the previous year:
As noted in the above shown condensed presentations, the Board's total assets exceeded total
liabilities at year-end by $184.8 million. This represents a decrease of 2.31 % over the previous
year.
Fund Financial Analysis
The September 30,2011 financial statements reported a combined fund balance of$122,480,241
which is an increase of$I,696,056 from the previous year's fund balance. This net increase was
primarily the result of an increase in the Capital Projects funds to provide for the construction of
a classroom addition. Results of the Board's major funds are discussed below:
General Fund
The fiscal year 20 II financial statements reflected a net decrease in the fund balance of the
General Fund of $193,836.
-3.3-
24 Mill Tax Fund
The Board receives proceeds from a municipal ad valorem tax levied on all taxable property in
the City of Hoover for school purposes at the rate of 24 mills. This fund increased $8.4 million
in 20 II as result of a decrease in funds transferred to the General Fund as an increase in the that
fund offset a portion of what would otherwise been provided from the 24 Mill Tax Fund.
Debt Service Fund
The Debt Service Fund decreased $8.3 million in 2011 as a result of debt service payments.
General Fund Budget Variances
Differences between original and final budget amounts were primarily a result of state and other
appropriations not finalized for inclusion in the original budget.
The actual excess of revenues and other financing sources less than expenditures and other fund
uses was less than the final budget amount by $461,355. The difference was primarily the result
of cost containment strategies implemented throughout the year.
Capital Assets and Debt Administration
Capital Assets
Net capital assets decreased by $5.4 million in 20 II, which is net of $8.3 million in depreciation
expense. Additions to capital assets were primarily related to construction in progress on a high
school classroom addition and various maintenance and technology equipment.
Debt Administration
During the 2011 fiscal year, there was no change in the Board's outstanding warrant liability as
debt service payments for the Series 2005 and Series 2010 were interest only.
Next Year's Budget
As a result of increased enrollment, the formula-based state funding mechanism is expected to
yield an overall increase in revenues next year for Hoover City Schools.
Requests for Additional Information
This financial report is designed to provide the residents of the City, investors, creditors and
other users with a general overview of the Board's finances. Inquiries about this report or
requests for additional information may be directed to Cathy Antee, Hoover City Board of
Education, 2810 Metropolitan Way, Hoover, Alabama 35243.
-3.4-
Hoover City Board of Education
Statement of Net Assets
Governmental
Activities
September 30, 2011
Assets
Current assets
Cash and cash equivalents
Investments
Due from other governments
Prepaid items
Inventories
Total current assets
$
119,393,163
12,414,220
2,225,376
108,881
393,733
134,535,373
Noncurrent assets
Bond discount, issuance cost and deferred charges, net
Capital assets:
Land
Buildings and improvements
Equipment, furniture and vehicles
Textbooks and library books
Construction in progress
Accumulated depreciation
Total capital assets, net of depreciation
10,141,606
18,584,170
277,433,896
19,882,097
8,703,262
565,204
(84,327,863)
240,840,766
Total noncurrent assets
250,982,372
Total assets
385,517,745
See notes to financial statements.
Governmental
Activities
Liabilities
Current liabilities
Accounts payable
Deferred revenue
Salaries and benefits payable
Accrued interest payable
$
Total current liabilities
2,736,591
497,714
8,820,827
1,053,016
13,108,148
Noncurrent liabilities
Warrants payable
187,570,000
Total liabilities
200,678,148
Net assets
Invested in capital assets, net of related debt
Unrestricted
Total net assets
55,449,674
129,389,923
$ 184,839,597
-4-
Hoover City Board of Education
Statement of Activities
September 30, 2011
Functions/Programs
Expenses
Governmental activities
Instructional services
Instructional support
$
Operation and maintenance
Auxiliary services
General administration and central support
Other
Interest and fiscal charges
Total governmental activities
see notes to financial statements.
88,601,603
22,908,451
16,580,496
16,097,989
2,377,334
4,179,625
9,161,735
$ 159,907,233
Operating
Grants and
Contributions
Net (Expenses)
Revenues and Changes
in Net Assets
Capital
Total Governmental
Grants and
Activities
Contributions
4,258,068
$ 42,468,750
$
6,933,298
7,988,109
10,347,364
5,744,219
Charges
for
Services
$
$
11,191,366
$ 66,548,442
$
819,702
$
2,443,528
(41,055,083)
(14,920,342)
(6,233,132)
(3,420,472)
(2,377,334)
(4,179,625)
(6,718,207)
3,263,230
(78,904,195)
General revenues
Taxes:
Property taxes for general purposes
Local sales tax
Miscellaneous taxes
City appropriations
Interest
General contributions to the Board
Insurance loss recoveries
Other
Total general revenues
Change in net assets
Net assets - beginning of year
64,236,402
1,477,581
4,104
2,000,000
806,625
671,470
18,573
5,310,099
74,524,854
(4,379,341 )
189,218,938
$
Net assets - end of year
-5-
184,839,597
Hoover City Board of Education
Balance Sheet - Governmental Funds
September 30, 2011
24 Mill
Tax
General
Assets
Current assets
Cash
Prepaid items
Interfund receivables
Due from government entities
Investments
Inventory
$
20,630,679
108,881
46,275
990,844
$
44,461,520
840,372
195,880
Total assets
$
21,972,559
$
$
2,049,767
8,417,313
$
45,301,892
Liabilities and fund balances
Current liabilities
Accounts payable
Accrued liabilities
Deferred revenues
. Interfund payables
Total current liabilities
1,067,833
11,534,913
Fund balances
Non-spendable: inventory and prepaid items
Restricted for debt service
Committed for encumbrances
Committed for construction projects
Committed for special school purposes
Unassigned
Total fund balances
Total liabilities and fund balances
See notes to financial statements.
304,761
37,050
10,463,674
34,838,218
10,095,835
10,437,646
$
21,972,559
45,301,892
$
45,301,892
Other
Governmental
Funds
Debt
Service
$ 39,365,643 $
14,935,321
Totals
Governmental
Funds
$
119,393,163
108,881
1,316,408
2,225,376
12,414,220
393,733
1,270,133
394,160
10,902
197,853
12,403,318
$ 51,768,961
$
16,808,369
$
135,851,781
$
$
686,824
403,514
497,714
248,575
1,836,627
$
2,736,591
8,820,827
497,714
1,316,408
13,371,540
197,853
502,614
51,768,961
40,405
14,827,932
45,244,494
10,095,835
122,480,241
51,768,961
3,355
4,364,258
10,406,276
51,768,961
$ 51,768,961
14,971,742
$
16,808,369
$
135,851,781
-6-
Hoover City Board of Education
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
Year ended September 30, 2011
$ 122,480,241
Total fund balances - Governmental funds
Amounts reported for governmental activities in the Statement of Net Assets
are different because:
Capital assets used in governmental activities that are not financial resources
consist of:
$ 18,584,170
Land
Buildings and improvements
Equipment, furniture and vehicles
Textbooks and library books
Construction in progress
Accumulated depreciation
Total capital assets, net of depreciation
277,433,896
19,882,097
8,703,262
565,204
(84,327,863)
240,840,766
Debt issuance costs and discounts on debts are reported as current
expenditures in the governmental funds. However, in the
statement of Activities, these items are deferred and amortized
over the life of the debt and are included as deferred charges in
the statement of net assets.
10,141,606
Unamortized discounts and issuance costs
Certain liabilities are not due and payable in the current period and
therefore not reported as liabilities in the funds. These liabilities
at year-end consist of:
Current
Liabilities
$
Warrants payable
Accrued interest payable
Total liabilities
-
Noncurrent
Liabilities
$ 187,570,000
1,053,016
$
1,053,016
Total net assets - governmental activities
See notes to financial statements.
-7-
$ 187,570,000
(188,623,016)
$ 184,839,597
Hoover City Board of Education
Combined Statement of Revenues, Expenditures and Changes in
Fund Balances - Governmental Funds
Year ended September 30, 2011
General
Fund balances beginning of year
24 Mill
Tax
$ 10,631,482 $ 36,905,480
Revenues
State of Alabama
Federal government
Local
Other
Total revenues
Other financing sources
Operating transfers in
Total other financing sources
Total revenues and other financing sources
Expenditures
Instructional services
Instructional support
Operation and maintenance
Auxiliary services
General administration and central support
Capital outlay
Debt service
Other
Total expenditures
Other fund uses
Operating transfers out
Total other fund uses
Total expenditures and other fund uses
Excess of revenues and other sources
over (under) expenditures and other fund uses
Fund balances, end of year
See notes to financial statements.
54,868,666
5,532,348
31,570,807
1,817,077
93,788,898
36,808,177
30,002,601
30,002,601
1,007,664
1,007,664
123,791,499
37,815,841
36,808,177
73,628,074
20,090,285
15,871,326
6,772,596
2,290,497
662,717
119,315,495
330
330
4,669,840
4,669,840
29,419,099
29,419,099
123,985,335
29,419,429
(193,836)
8,396,412
$ 10,437,646 $ 45,301,892
Other
Governmental
Funds
Debt
Service
$ 60,047,149
$
13,200,074
Total
Governmental
Funds
$
120,784,185
3,430,960
7,463,736
14,402,499
68,070
25,365,265
58,299,626
12,996,084
82,993,731
1,885,147
156,174,588
7,896,673
7,896,673
38,906,938
38,906,938
33,261,938
195,081,526
8,436,981
2,755,738
237,185
9,707,099
34,052
1,356,359
4,144,857
26,672,271
82,065,055
22,846,023
16,108,511
16,479,695
2,324,549
1,356,359
8,490,436
4,807,904
154,478,532
4,817,999
4,817,999
38,906,938
38,906,938
8,490,436
31,490,270
193,385,470
(8,278,188)
1,771,668
1,696,056
212,248
212,248
212,248
8,490,436
8,490,436
$ 51,768,961
$
14,971,742
$
122,480,241
-8-
Hoover City Board of Education
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances - Governmental Funds to the Statement of Activities
Year ended September 30, 2011
Net changes in fund balances - total governmental funds
$
1,696,056
Amounts reported for governmental activities in the Statement of
Activities are different because:
Governmental funds report capital outlays as expenditures. However, in the
Statement of Activities, the cost of those assets is allocated over their
estimated useful lives as depreciation expense.
This is the amount by which capital outlay $(2,941,864) was exceeded by
depreciation $(8,326,879) in the current period.
(5,385,015)
The net effect of transactions involving the disposition of capital assets is to
decrease net assets.
(19,083)
Debt issuance costs and discounts on debt are reported in the governmental
funds as expenditures. However, these items are deferred on the Statement
of Net Assets and are amortized over the life of the debt.
(687,533)
Amortization expense
Some expenses reported in the Statement of Activities do not require
the use of current financial resources and are not reported as expenditures in
the funds:
Decrease in accrued interest payable
Change in net assets of governmental activities
See notes to financial statements.
-9-
16,234
$
(4,379,341)
Hoover City Board of Education
Index to Financial Statement Notes
Note #
Page #
1
Summary of Significant Accounting Policies
11
2
Reconciliation of Financial Statements
17
3
Stewardship, Compliance and Accountability
18
4
Deposits and Investments
18
5
Capital Assets
19
6
Defined Benefit Pension Plan
20
7
Long-Term Debt
21
8
Interfund Receivables, Payables and Transfers
23
9
Risk Management
24
10
Contingent Liabilities
24
11
Donated Food Program
25
12
Related Party Transactions
25
13
Other Post-Employment Benefits (OPEB)
25
14
Subsequent Event
26
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Hoover City Board of Education (the "Board") have been prepared in
conformity with generally accepted accounting principles (GAAP) as applied to government units. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles. The more significant of the
Board's accounting policies are described below.
A. Reporting Entity
Statements No. 14 and 39 of the Governmental Accounting Standards Board establish standards
for defining and reporting on the financial reporting entity. The definition of the reporting entity is
based primarily on the notion of financial accountability. A primary government is financially
accountable for agencies that make up its legal entity. It is also financially accountable for a legally
separate agency if its officials appoint a voting majority of that agency's governing body and either it
is able to impose its will on that agency or there is a potential for the agency to provide specific
financial benefits to, or to impose specific financial burdens on, the primary government. There are
no material component units which should be included as part of the financial reporting entity of the
Hoover City Board of Education.
The Board is a legally separate agency of the state of Alabama.
B. Basis of Presentation, Basis of Accounting
Government-wide Financial Statements
The Statement of Net Assets and the Statement of Activities display information about the Board.
These statements include the financial activities of the overall government.
Eliminations have been made to minimize the dOUble-counting of internal activities. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Although other governments may report both governmental activities and
business-type activities, the Board has no business-type activities.
The Statement of Activities presents a comparison between direct expenses and program revenues
for each function of the Board's governmental activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. Program revenues include grants and contributions that are restricted to
meeting the operational or capital requirements of a particular program. Revenues that are not
classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements
The fund financial statements provide information about the Board's funds. Separate statements for
each fund category - governmental and fiduciary - are presented. The emphasis of fund financial
statements is on major governmental funds, each displayed in a separate column. All remaining
governmental funds are aggregated and reported as other governmental funds.
- 11 -
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. Basis of Presentation, Basis of Accounting (continued)
Fund Financial Statements (continued)
The Board reports the following major governmental funds:
(1) General Fund -- This is the Board's primary operating fund. It accounts for all financial
resources, except those required to be accounted for in another fund. The Board's General
Fund primarily received revenues from the Education Trust Fund (ETF), appropriated by the
Alabama Legislature, and from local taxes. The State Department of Education allocated
amounts <lppropriated from the ETF to the school board on a formula basis.
(2) 24 Mill Tax Fund -- This is a special revenue fund used to account for resources provided by the
special municipal ad valorem tax levied on all taxable property in the city for school purposes.
The Board is aUthorized to apply the proceeds of the special tax to payment of the principal of
and interest on any of its warrant anticipation notes, its capital outlay warrants or payment of the
costs of operating public schools in the city.
(3) Debt Service Funds -- Debt Service Funds are used to account for the accumulation of
resources for the payment of the Board's general long-term debt principal and interest.
The Board reports the following governmental fund types in the "Other Governmental Funds"
column:
(1) Capital Projects Funds -- Capital Projects Funds are used to account for financial resources to
be used for the acquisition or construction of major capital facilities (other than those financed
by proprietary and trust funds).
(2) Special Revenue Funds -- Special Revenue Funds account for the proceeds of specific revenue
sources (other than those dedicated for major capital projects) requiring separate accounting
because of legal or regulatory provisions or administrative action.
Special revenue funds
consist of the following: Other State Revenues, Federal Vocational, Title I, Title VI, IDEA Part
B, Title III, Title IV, Title II, Federal Preschool, Child Nutrition, Local School Activity Funds, and
Local School Extended Day Programs.
C. Measurement Focus, Basis of Accounting
Government-wide Financial Statements: The government-wide financial statements are reported
using the economic resources measurement focus and the accrual basis of accounting. Revenues
are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless
of when the related cash flows take place. Nonexchange transactions, in which the Board gives (or
receives) value without directly receiving (or giving) equal value in exchange, include property
taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is
recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and
donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
As a general rule, the effect of interfund activity has been eliminated from the government-wide
financial statements.
- 12-
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting (continued)
Governmental Fund Financial Statements: Governmental funds are reported using a current
financial resources rneasurement focus and the modified accrual basis of accounting. Under this
method, revenues are recognized when 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 Board considers revenues reported in the
governmental funds (excluding state and federal reimbursements) to be available if the revenues
are collected within thirty (30) days after year-end. Revenues from state and federal funds are
considered available if transactions eligible for reimbursement have taken place. Expenditures are
generally recorded when the related fund liability is incurred.
Local school activity funds and other funds under the control of school principals use the cash basis
of accounting. However, any differences from the modified accrual basis of accounting are not·
considered to be significant.
D. Cash and Investments
Cash .includes arnounts in demand deposits as well as short-term investments with a maturity date
within three months of the date acquired by the Board.
The State Attorney General has issued a legal opinion that boards of education may not put public
funds at risk by investing in companies not insured by the federal government.
Investments are stated at cost or amortized cost, which approximates market value.
E. Receivables
Receivables are reported as Receivables and Due from other governments in the government-wide
financial statements and Receivables, Interfund receivables, and Due from other governments in
the fund financial statements. Receivables due from other governments include amounts due from
grantors for grants issued for specific programs and local taxes. No allowances are made for
uncollectible amounts because the amounts are considered immaterial.
F. Property Tax Calendar
The Jefferson County Commission and the Shelby County Commission levy property taxes for all
jurisdictions including the school boards and municipalities within the county. Millage rates for
properly taxes are levied at the first regular meeting of the County Commission in February of each
year. Property taxes are assessed for property as of October 1 of the preceding year based on the
millage rates established by the County Commission. Property taxes are due and payable the
following October 1 and are delinquent after December 31.
- 13-
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. Inventories and Prepaid Items
Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method.
The costs of governmental fund type inventories are recorded as expenditures when purchased
except commodities donated by the federal government and purchased food items which are
expensed when consumed. Prepaid items, such as insurance premiums and rent are recorded as
expenditures in governmental funds when paid.
In the government-wide financial statements, inventories and prepaid items are recorded on an
accrual basis using the consumption method. Expenses reflect the amount of materials and
supplies consumed and the amount of prepaid items applicable to the current period.
H. Capital Assets
Purchased or constructed capital assets are reported at cost or estimated historical costs in the
statement of net assets. Donated assets are recorded at their estimated fair value at the date of
donation. The cost of maintenance and repairs that do not add to the value of the asset or
materially extend assets' lives are not capitalized. Capital assets are recorded as expenditures at
the acquisition date in the fund financial statements. The Board has no general infrastructure
assets.
Depreciation of capital assets is recorded in the statement of activities on a straight-line basis over
the estimated useful life of the asset. Capitalization thresholds (the dollar values above which asset
acquisitions are added to the capital asset accounts) and the estimated useful lives of capital assets
reported in the government-wide statements are as follows:
Asset Class
Land improvements
Buildings
Building improvements
Equipment and vehicles
$
Capitalization
Threshold
50,000
50,000
50,000
5,000
Estimated
Useful Life
20 years
50 years
7-30 years
5-20 years
The capitalization threshold for Land, Construction in Progress, and Inexhaustible Land
Improvements is $1 or more. However, these capital assets are not depreciated.
I.
Long-term Obligations
In the government-wide financial statements, the unmatured principal of long-term debt and
compensated absences are reported in the statement of net assets. Interest expense for long-term
debt, including accrued interest payable, is reported in the statement of activities. For warrants
(bonds) issued after October 1, 2002, the related debt issuance costs, premiums, and discounts are
amortized under accrual accounting and the annual amortization of these accruals is included in the
statement of activities. The unamortized portion is reported as an asset on the statement of net
assets.
- 14-
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I.
Long-term Obligations (continued)
In the fund financial statements. bond premiums and the face amount of debt issued during the year
are reported as an other financing source. Debt issuance costs are not deducted from the amount
reported as an other financing source but are reported as debt service expenditures. Any discount
is reported as an other financing use. Expenditures for debt principal, interest and related costs are
reported in the fiscal year payment is made. The balance sheet does not reflect a liability for longterm debt.
J. Compensated Absences
For vacation leave and other compensated absences with similar characteristics, GASB Statement
No. 16 requires the accrual of a liability as the benefits are earned by the employees, if both of
these conditions are met:
a. The employee's right to receive compensation is attributable to services already rendered.
b. It is probable that the employer will compensate the employees for the benefits through paid
time off or some other means, such as cash payments at termination or retirement.
GASB Statement No. 16 also states that an accrual for earned sick leave is made only to the ex1ent
it is probable that the benefits will result in termination payments, rather than be taken as absences
due to illness or other contingencies, such as medical appointments and funerals. Employees earn
non-vesting sick leave at the rate of one day per month worked. Employees may accumulate an
unlimited number of days of sick leave. Employees may use their accrued sick leave as
membership service in determining the total years of creditable service in the teachers' retirement
system, with no additional cost to the Board. Because employees do not receive compensation for
unused sick leave at termination, no liability is recorded on the financial statements.
Certified and non-certified personnel are provided two days of personal leave per year with pay. For
certified personnel, the principal and Superintendent may approve up to three additional days for
which the employee is charged the rate of a substitute teacher's pay. Certified positions are paid at
the Board's substitute rate for up to two days of unused personal leave, or the employee may elect
to convert these days to sick leave. The additional three days automatically convert to sick leave if
not used. Because unused personal leave cannot be carried over to succeeding years, no liability
for unpaid leave is accrued in the financial statements.
Twelve-month employees are allowed at least two weeks of vacation per year with pay. Vacation is
awarded each July 1'" each January 1" employees' unused vacation is capped at the maximum
amount of vacation to which they are entitled. Board policy allows up to 10 days of vacation to be
carried over to be used within the first three months of the succeeding year. Accordingly, at
September 30, 2011 the Board has accrued a liability in the amount of $601 ,032.
- 15-
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K. Net Assets / Fund Equity
Net assets reported on the government-wide financial statements are required to be classified for
accounting and reporting purposes into the following net asset categories:
Invested in Capital Assets, Net of Related Debt - Capital assets, net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition,
construction, or improvement of those assets (any significant unspent proceeds at year-end
related to capital assets are reported as restricted funds).
Restricted - Constraints imposed on net assets by external creditors, grantors, contributors,
laws or regulations of other governments, or law through constitutional provision or enabling
.
legislation.
Unrestricted - Net assets that are not subject to externally imposed stipulations. Unrestricted
net assets may be designated for specific purposes by action of the Board.
In the fund financial statements, governmental funds report aggregate arnounts for five
classifications of fund balances on the constraints imposed on the use of these resources. The
nonspendable fund balance classification includes amounts that cannot be spent because they are
either (a) not in spendable form - prepaid items or inventories; or (b) legally or contractually
required to be maintained intact.
The spendable portion of the fund balance comprises the remaining four classifications: restricted,
committed, assigned, and unassigned.
Restricted fund balance. This classification reflects the constraints imposed on resources either
(a) externally by creditors, grantors, contributors, or laws or regulations of other governments; or
(b) imposed by law through constitutional provisions or enabling legislation.
Committed fund balance. These amounts can only be used for specific purposes pursuant to
constraints imposed by formal resolutions, ordinances, or policies of the Board - the
government's highest level of decision making authority. Those committed amounts cannot be
used for any other purpose unless the Board removes the specified use by taking the same type
of action imposing the commitment. This classification also includes contractual obligations to
the extent that existing resources in the fund have been specifically committed for use in
satisfying those contractual requirements. (Fund balance that is reported as "committed for
special school purposes" includes amounts available for the payment of principal and interest
and the operation of the child nutrition, extended day and other various local school programs.)
Assigned fund balance. The classification reflects the amounts constrained by the Board's
"intent" to be used for specific purposes, but are neither restricted nor committed. The Board
and management have the authority to assign amounts to be used for specific purposes.
Assigned fund balances include all remaining amounts (except negative balances) that are
reported in governmental funds, other than the General Fund, that are not classified as
nonspendable and are neither restricted nor committed. The Board has not presented any of its
fund balance as assigned.
- 16-
Hoover City Board of Education
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Unassigned fund balance. This fund balance is the residual classification for the General Fund.
It is also used to report negative fund balances in other governmental funds.
When both restricted and unrestricted resources are available for use, it is the Board's policy to use
restricted resources first, then committed, assigned, and unassigned - in order as needed.
L. Implementation of New Accounting Policies
For the year ending September 30, 2011, the Board implemented the following statement of
financial accounting standards issued by the Governmental Accounting Standards Board:
GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
GASB Statement No. 54 establishes standards for fund balance classifications that comprise a
hierarchy based primarily on the extent to which a government is bound to observe constraints
imposed upon the use of the resources reported in governmental funds. Additionally, the definitions
of the general fund, special revenue fund type, capital projects fund type, debt service fund type,
and permanent fund type are clarified by the provisions in this Statement. Interpretations of certain
terms within the definition of the special revenue fund type have been provided and, for some
governments, those interpretations may affect the activities they choose to report in those funds.
The capital projects fund type definition also was clarified for better alignment with the needs of
preparers and users. Definitions of other governmental fund types also have been modified for
clarity and consistency.
Additional information about the implementation of GASB Statement No. 54 can be found in section
K. of this note.
NOTE 2 - RECONCILIATION OF FINANCIAL STATEMENTS
The financial statements include summary reconciliations of the fund financial statements to the
government-wide statements after the fund statements.
A. Explanation of certain differences between the Governmental Funds Balance Sheet and the
Statement of Net Assets
The governmental fund balance sheet is followed by a reconciliation between Total fund balance governmental funds and Total net assets - governmental activities as reported in the governmentwide statement of net assets.
B. Explanation of certain differences between the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances and the Statement of Activities
The governmental funds statement of revenues, expenditures and changes in fund balances is
followed by a reconciliation between Total net change in fund balances-governmental funds and
Change in net assets of governmental activities as reported in the government-wide statement of
activities.
- 17 -
Hoover City Board of Education
Notes to Financial Statements
NOTE 3 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgets
Annual budgets are adopted for all governmental funds except the permanent funds. All annual
appropriations lapse at fiscal year end. State law requires Alabama school boards to prepare and
submit to the State Superintendent of Education the annual budget adopted by the local board of
education. In accordance with the regulations of the State Board of Education, the due date for
submission of the budget for the 2010-2011 fiscal year was September 15, 2011. The Board approved
its original 2010-2011 annual budget on September 7,2010 and amended May 9,2011, primarily to
allow for adjustments in amounts resulting from state proration and changes in other funding.
The city superintendent of education or Board cannot approve any budget for operations of the school
system for any fiscal year that shows expenditures in excess of income estimated to be available plus
any balances on hand. The superintendent with the approval of the board has the authority to make
changes within the approved budget provided that a deficit is not incurred by such changes. The
superintendent may approve amendments to program budgets without board approval.
NOTE 4 - DEPOSITS AND INVESTMENTS
Deposits
As of September 30, 2011, all of the Board's bank deposits (including deposits of the individual
schools) were either covered by federal depository insurance or secured by collateral through the
Security for Alabama Funds Enhancement Program (SAFE Program). Under the SAFE program all
public deposits are protected through a collateral pool administered by the Alabama State Treasurer's
office.
Public deposits include the funds of any covered public entity or covered public official placed on
deposit in a qualified depository, including time and demand deposit accounts and certificates of
deposit but excluding bonds, notes, money market mutual funds, repurchase agreements and similar
investment instruments. Covered public entities include the state and its political subdivisions, inclUding
school boards. In the past, the bank pledged collateral directly to each public entity. Under SAFE,
which is mandatory, each qualified public depository (QPD) is required to hold collateral for all of its
public deposits on a pooled basis in a custody account (SAFE Custody Account) established for the
State Treasurer as SAFE administrator. In the unlikely event a public entity should suffer a deposit loss
due to QPD insolvency or default, a claim form would be filed with the State Treasurer, who would use
the SAFE pool collateral or other means to reimburse the loss. The SAFE program is classified as a
category 1 credit risk.
Investments
The following investments were held by the Board at September 30, 2011:
$
$
Certificates of Deposit
Total
12,414,220
12,414,220
Interest Rate Risk. The Board does not have a formal investment policy that limits investment
maturities as a means of managing its exposure to fair value losses arising from increasing interest
rates.
- 18-
Hoover City Board of Education
Notes to Financial Statements
NOTE 4 - DEPOSITS AND INVESTMENTS (CONTINUED)
Credit Risk. State law limits investments in commercial paper, corporate bonds, and mutual bond
funds to the top two ratings issued by nationally recognized statistical rating organizations. The Board
has no investment policy that would further limit its choices.
Interest revenues of $806,625 are included in revenues for 2011.
NOTE 5 - CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2011, was as follows:
Balance
October 1,
2010
Capital assets not being depreciated:
Land and improvements
$
Construction progress
Total capital assets not
being depreciated
Capital assets being depreciated:
Exhaustible land improvements
Building and improvements
Equipment
Textbooks and library books
Total capital assets being
depreciated
Less accumulated depreciation for:
Exhaustible land improvements
Building and improvements
Equipment
Textbooks and library books
Total accumulated depreciation
Total capital assets being
depreciated, net
Total governmental
activities capital assets, net
Balance
September 30,
2011
Retirements
and
Additions
18,386,732
370,911
$
197,438
1,079,974
Reclassifications
$
$
(885,681 )
18,584,170
565,204
18,757,643
1,277,412
(885,681 )
19.149,374
3,129,757
273,339,511
18,729,892
8,408,055
78,947
1,290,298
295,207
885,681
(138,093)
3,129,757
274,304,139
19,882,097
8,703,262
303,607,215
1,664,452
747,588
306,019,255
949,873
56,782,139
12,507,114
5,880,868
76,119,994
156,488
5,742,502
1,573,402
854,487
8,326,879
(119,010)
(119,010)
1,106,361
62,524,641
13,961,506
6,735,355
84,327,863
227,487,221
(6,662,427)
866,598
221,691,392
$ 246,244,864
$ (5,385,015)
$
$
(19,083)
240,840,766
Depreciation expense was charged to governmental functions as follows:
Instructional services
Instructional support
Operation and maintenance
Auxiliary services
General administrative and central sLipport
Total governmental activities depreciation expense
- 19-
$
6,900,795
75,822
496,179
801,964
52,119
$
8,326,879
Hoover City Board of Education
Notes to Financial Statements
NOTE 5 - CAPITAL ASSETS (CONTINUED)
The Board has entered into contracts for the construction or renovation of various facilities as follows:
Hoover High School Expansion
Simmons and Berry Middle School Reroofing
Total
Project
Authorization
$
15,150,000 $
243,136
15,393,136 $
$
Expended
to Date
550,797 $
14,407
565,204 $
Commitment
14,599,203
228,729
14,827,932
NOTE 6 - DEFINED BENEFIT PENSION PLAN
A. Plan Description
The Board contributes to the Teachers' Retirement System of Alabama, a cost-sharing multipleemployer public employee retirement system for the various state-supported educational agencies
and institutions. This plan is administered by the Retirement Systems of Alabama.
Substantially all employees of the Board are members of the Teachers' Retirement System.
Membership is mandatory for covered or eligible employees of the Board. Benefits vest after ten
years of creditable service. Vested employees may retire with full benefits at age 60 or after 25
years of service. Retirement benefits are calculated by two methods with the retiree receiving
payment under the method which yields the highest monthly benefit. The methods are (1) Minimum
Guaranteed, or (2) Formula, of which the Formula method usually produces the highest monthly
benefit. Under this method, retirees are allowed 2.0125% of their average final salary (best three of
the last ten years) for each year of service. Disability retirement benefits are calculated in the same
manner. Pre-retirement death benefits in the amount of the annual salary for the fiscal year
preceding death are provided to plan members.
The Teachers' Retirement System was established as of October 1, 1941, under the provisions of
Act Number 419, Acts of Alabama 1939, for the purpose of providing retirement allowances and
other specified benefits for qualified persons employed by state-supported educational institutions.
The responsibility for general administration and operation of the Teachers' Retirement System is
vested in the Board of Control (currently 14 members). Benefit provisions are established by the
Code of Alabama 1975, Sections16-25-1 through 16-25-113, as amended, and Sections 36-27B-1
through 36-27B-6, as amended.
The Retirement Systems of Alabama issues a publicly available financial report that includes
financial statements and required supplementary information for the Teachers' Retirement System
of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, 135
South Union Street, Montgomery, Alabama 36130-2150.
A. Funding Policy
Employees are required to contribute 5 percent of their salary to the Teachers' Retirement System.
The Board is required to contribute the remaining amounts necessary to fund the actuarially
determined contributions to ensure sufficient assets will be available to pay benefits when due.
- 20-
Hoover City Board of Education
Notes to Financial Statements
NOTE 6 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
Each year the Teachers' Retirement System recommends to the Legislature the contribution rate for
the following fiscal year, with the Legislature setting this rate in the annual appropriation bill. The
percentages of the contributions and the amount of contributions made by the Board and the
Board's employees equal the required contributions for each year as follows:
2011
Fiscal year ended September 30,
Total percentage of covered payroll
Contributions:
Percentage contributed by the Board
Percentage contributed by the employees
Contributed by the Board
Contributed by employees
Total contributions
17.51%
12.51%
5.00%
$ 9,975,235 $
3,986,904
$ 13,962,139 $
2010
17.51%
12.51%
5.00%
10,112,428 $
4,042,775
14,155,203 $
2009
17.07%
12.07%
5.00%
9,904,459
4,102,924
14,007,383
NOTE 7 - LONG-TERM DEBT
On August 1, 2010 the Board issued $117,885,000 in 24 Mill Tax special revenue refunding bonds with
interest rates ranging between 4.25% and 5.00%. The Board issued the bonds to provide a portion of
the funds needed to refund (on an advance basis) the Board's Capital Outlay Tax Anticipation
Warrants, Series 2001; Capital Outlay Tax Anticipation Refunding Warrants, Series 2002; and its
Capital Outlay Tax Anticipation Refunding Warrants, Series 2002-A; and for the payment of issuance
expenses. The Board used a portion of the proceeds to purchase U.S. Government securities. These
securities were deposited into an irrevocable trust to provide for the future debt service and redemption
of the refunded bonds in accordance with the escrow trust agreement. As a result, the refunded
warrants are considered defeased, and the Board has removed the liability from its accounts. The
outstanding principal of the defeased warrants was $108,060,000.
As a result of the refunding of the Series 2001, Series 2002 and Series 2002-A Warrants the Board has
recorded deferred charges of $6,810,722 in the Government-Wide Statement of Net Assets. These
charges represent the difference between the reacquisition price and the net carrying amounts of the
refunded warrants. These costs are being amortized over the average remaining life of the refunded
warrants. The unamortized portion of these costs as of September 30, 2011 was $6,199,503
- 21 -
Hoover City Board of Education
Notes to Financial Statements
NOTE 7 - LONG·TERM DEBT (CONTINUED)
As of September 30, 2011, the Board's long·term debt consisted of the following:
Series 2010 Capital Outlay Warrants with a maturity date of February 15, 2040,
interest payable semi-annually at rates ranging from 4.25% to 5%.
$
117,885,000
Series 2005 Capital Outlay Warrant with a maturity date of February 15, 2027,
interest payable semi·annually at rates ranging from 3% to 5%.
Total warrants
$
69,685,000
187,570,000
Following is a schedule of the total debt service on the Board's long-term debt:
Warrants and Notes
Principal
Interest
$
- $ 8,424,125
8,424,125
2,815,000
8,353,750
2,945,000
8,209,750
3,070,000
8,059,375
26,765,000
37,053,250
40,300,000
28,658,088
32,235,000
21,093,926
40,250,000
13,019,126
39,190,000
3,419,339
$ 187,570,000 $ 144,714,854
2012
2013
2014
2015
2016
2017-2021
2022-2026
2027-2031
2032-2036
2036·2040
Total
Interest paid on long-term debt was $8,482,651 for the year ended September 30, 2011.
The Series 2005 and Series 2010 Warrants were issued in December 2005 and August 2010
respectively. The principal and interest payments are payable out of proceeds of a special 24 mill ad
valorem tax levied in the City of Hoover. Total receipts from the special 24 mill ad valorem tax for the
year ended September 30,2011 were $36,218,396.
The following changes occurred in the liabilities for warrants for the year ended September 30, 2011:
Capital outlay warrants
Balance
September 30,
2010
$ 187,570,000
Additions
$
Deletions
$
- 22·
Balance
September 30,
2011
$ 187,570,000
Hoover City Board of Education
Notes to Financial Statements
NOTE 7 - LONG·TERM DEBT (CONTINUED)
For warrants (bonds) and other long-term debt issued after October 1, 2002, the related debt issuance
costs, premiums, and discounts are amortized over the life of the debt in the government-wide
statements.
Issuance
Deferred
Costs
Charges
Total
Discount
Series 2005, Capital Outlay Warrants $
360,073 $ 1,041,621 $
- $ 1,401,694
Amount amortized in prior years
77,836
215,655
293,491
Series 2010, Capital Outlay Warrants
6,810,722
823,198
2,191,080
9,825,000
Amount amortized in prior years
12,173
87,318
4,573
104,064
Unamortized amount - beginning
1,100,862
3,004,873
6,723,404
10,829,139
Current year amortization
43,654
119,977
523,902
687,533
Unamortized amount - ending
1,057,208 $ 2,884,896 $ 6,199,502 $ 10,141,606
$
NOTE 8 -INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
Interfund balances at September 30, 2011 consist of the following:
Due to General fund from:
Child Nutrition Fund
Due to Capital Projects from:
Other Governmental Funds
Due to Other Governmental Funds from:
General Fund
Total
$
46,275
202,300
$
1,067,833
1,316,408
These interfund balances represent temporary loans to cover expenditures incurred prior to
reimbursement from outside sources. These amounts are expected to be repaid within one year.
Interfund transfers for the fiscal year ended September 30, 2011 consist of the following:
General fund to:
Other governmental funds
Special revenue fund
Special revenue fund to:
General fund
Other governmental funds to:
General fund
Other governmental funds
$
3,662,176
1,007,664
29,419,099
$
- 23-
583,502
4,234,497
38,906,938
Hoover City Board of Education
Notes to Financial Statements
NOTE 9 - RISK MANAGEMENT
The Board is exposed to various risks of loss related to torts; theft of, damage to and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The Board carries traditional
insurance coverage for its buildings and contents through the State Insurance Fund (SIF), Alabama
Department of Finance, Division of Risk Management, a public entity risk pool, which operates as a
common risk management and insurance program for state-owned properties and boards of education.
The Board pays an annual premium based on the amount of coverage. The SIF is self insured up to
$3.5 million per occurrence. The Board purchases commercial insurance for claims in excess of $3.5
million. The Board also purchases automobile liability insurance with coverage of $300,000 per
occurrence, errors and omissions insurance with coverage of up to $1,000,000 per occurrence and
properly insurance with coverage of up to $3.5 million per occurrence from the Alabama Risk
Management For Schools Program (ARMS), a public entity risk pool. In addition, the Board has
purchased physical damage coverage for school buses and maintenance vehicles.
The ARMS collects the premiums and purchases commercial insurance for the amount of coverage
requested by pool participants. The Board purchases commercial insurance for fidelity bonds. Settled
claims in the past three years have not exceeded the commercial insurance coverage.
Employee health insurance is provided through the Public Education Employees' Health Insurance
Fund (PEEHIF) administered by the Public Education Employees' Health Insurance Board. PEEHIF
was established to provide a uniform plan of health insurance for current and retired employees of
educational institutions and is self-sustaining. Monthly premiums for employee and dependent
coverage are set annually by the plan's actuary and are based on anticipated claims in the upcoming
year, considering any remaining fund balance on hand available for claims. The Board contributes the
specified amount monthly to the PEEHIF for each employee. The Board contribution is applied against
the employees' premiums for the coverage selected and the employee pays any remaining premium.
The State Board of Adjustments is a state agency with which people can file claims against the Board
to collect reimbursement for damages when all other means have been exhausted. The Board does
not have insurance coverage for job-related injuries. Claims for employee job-related injuries may be
filed with the State Board of Adjustment. The Board of Adjustment determines if a claim is valid and
determines the proper amount of compensation. Payments are made from state appropriated funds at
no cost to the Board.
NOTE 10 - CONTINGENT LIABILITIES
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor
agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the
applicable funds or the general fund. The amount, if any, of expenditures that may be disallowed by
the grantor cannot be determined at this time although the Board expects such amounts, if any to be
immaterial.
The Board is involved in certain litigation in the ordinary course of business. Management does not
anticipate these claims to have a significant adverse impact on the financial position of the Board.
- 24-
Hoover City Board of Education
Notes to Financial Statements
NOTE 11 - DONATED FOOD PROGRAM
The commodities received from the Federal government in connection with the donated food program
are reflected in the .accompanying financial statements. The total assigned value of commodities
donated was $299,170 for 2011. Commodities consumed were approximately $274,001 for 2011.
NOTE 12 - RELATED PARty TRANSACTIONS
The members of the Hoover City Board of Education are appointed by the Hoover City Council. The
total appropriations received from the City for the year ended September 30, 2011 amounted to
$2,000,000.
NOTE 13 - OTHER POST·EMPLOYMENT BENEFITS (OPES)
The Board contributes to the Alabama Retired Education Employees" Health Care Trust (the "Trust"), a
cost-sharing mUltiple-employer defined benefit postemployment healthcare plan. The Trust provides
health care benefits to state and local school system retirees and was established in 2007 under the
Responsibility for general
provisions of Act Number 2007-16 as an irrevocable trust fund.
administration and operations of the Trust is vested with the Public Education Employees' Health
Insurance Board (PEEHIB) members. The Code of Alabama 1975, Section 16-25A-4, provides the
PEEHIB with the authority to amend the benefit provisions in order to provide reasonable assurance of
stability in future years. The Trust issues a publicly available financial report that includes financial
statements and required supplementary information. That report may be obtained at the Public
Educations Employees' Health Insurance Plan website, http://www.rsa-al.gov/PEEHIP/peehip.html
under the Trust Fund Financials tab.
The Public Education Employees' Health Insurance Fund (PEEHIF) was established in 1983 under the
provisions of Act Number 255 to provide a uniform plan of health insurance for current and retired
employees of state educational institutions. The plan is administered by the PEEHIB. Any Trust fund
assets used in paying administrative costs and retiree benefits are transferred to and paid from the
PEEHIF. The PEEHIB periodically reviews the funds available in the PEEHIF and if excess funds are
determined to be available, the PEEHIB authorizes a transfer of funds from the PEEHIF to the Trust.
Retirees are required to contribute monthly as follows:
Fiscal Year
Ending
09/30/2011
Individual Coverage - Non-Medicare Eligible
Individual Coverage - Medicare Eligible
Family Coverage - Non-Medicare Eligible Retired Member and Non-Medicare
Eligible Dependent(s)
Family Coverage - Non-Medicare Eligible Retired Member and Dependent
Medicare Eligible
Family Coverage - Medicare Eligible Retired Member and Non-Medicare
Eligible Dependent(s)
- 25-
$
146.00
10.00
381.00
245.00
245.00
Hoover City Board of Education
Notes to Financial Statements
NOTE 13 - OTHER POST·EMPLOYMENT BENEFITS (OPEB) (CONTINUED)
(continued)
Family Coverage - Medicare Eligible Retired Member and Dependent
Medicare Eligible
Surviving Spouse - Non-Medicare Eligible
Surviving Spouse - Non-Medicare Eligible and Dependent Non-Medicare Eligible
Surviving Spouse - Non-Medicare Eligible and Dependent Medicare Eligible
Surviving Spouse - Medicare Eligible
Surviving Spouse - Medicare Eligible and Dependent Non-Medicare Eligible
Surviving Spouse - Medicare Eligible and Dependent Medicare Eligible
Fiscal Year
Ending
09/30/2011
$
109.00
701.00
890.00
859.00
369.00
558.00
527.00
For employees that retire other than for disability, for each year under 25 years of service, the retiree
pays two percent of the employer premium and for each year over 25 years of service, the retiree
premium is reduced by two percent of the employer premium.
The Board is required to contribute at a rate specified by the State for each active employee. The
Board's share of premiums for retired Board employees health insurance is included as part of the
premium for active employees. The following shows the required contributions in dollars and the
percentage of that amount contributed for Board retirees:
Fiscal Year
Ended
September 30,
2010
2011
Active Health
Insurance
Premiums
Paid by Board
$ 752
752
Amount of
Premium
Attributable
to Retirees
$ 241
199
Percentage of
Active
Employee
Premiums
Attributable
to Retirees
32.08%
26.45%
Total
Amount
Paid
Attributable
to Retirees
$ 5,384,284
4,313,901
Percentage
of Required
Amount
Contributed
100%
100%
Each year the PEEHIB certifies to the Governor and to the Legislature the contribution rates based on
the amount needed to fund coverage for benefits for the following fiscal year and the Legislature sets
the premium rate in the annual appropriation bill.
The Board has accounted for payments made by the federal government for retiree drug subsidy (RDS)
payments in accordance with GASB Technical Bulletin 2006-1. This bulletin requires the RDS to be
recorded as an "on-behalf payment", resulting in offsetting revenues and expenditures. The amount
recognized in the 2011 financial statements for RDS is $525,171.
NOTE 14 - SUBSEQUENT EVENT
On November 30,2011 the Board entered into a construction contract in the amount of $13,586,000 for
additions to be made to Hoover High School. This contract represents the lowest bid that was
received. The Board plans to fund the project from current resources.
- 26-
{THIS PAGE INTENTIONALLY LEFTBLANK]
Required Supplementary Information
Hoover City Board of Education
Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - General Fund
Year ended September 30, 2011
Budgeted Amounts
Final
Original
Budget
Fund balances, beginning of year
Variance
Actual on the
Budgetary Basis'
$ 10,900,000 $ 10,631,482 $
10,631,482
Favorable
(Unfavorable)
$
Revenues
State of Alabama
Federal government
Local and other
Total revenues
55,140,820
5,531,106
30,713,454
91,385,380
54,804,918
5,531,106
30,717,954
91,053,978
54,868,666
5,532,348
32,741,188
93,142,202
63,748
1,242
2,023,234
2,088,224
Other financing sources
Operating transfers in
Total other financing sources
34,219,661
34,219,661
37,681,632
37,681,632
30,649,297
30,649,297
(7,032,335)
(7,032,335)
125,605,041
128,735,610
123,791,499
(4,944,111)
Total revenues and other
financing sources
Expenditures
Instructional services
Instructional support
Operation and maintenance
Auxiliary services
General administration and
central support
Other
Total expenditures
74,767,781
19,963,223
16,633,507
7,334,507
75,904,638
20,240,670
16,633,507
7,337,507
73,628,074
20,090,285
15,871,326
6,772,596
2,276,564
150,385
762,181
564,911
2,552,244
595,885
121,847,147
2,563,536
600,617
123,280,475
2,290,497
662,717
119,315,495
273,039
(62,100)
3,964,980
Other fund uses
Operating transfers out
Total other fund uses
3,757,894
3,757,894
5,187,616
5,187,616
4,669,840
4,669,840
517,776
517,776
125,605,041
128,468,091
123,985,335
4,482,756
267,519
(193,836)
Total expenditures and
other fund uses
Excess of revenues and other
sources over (under) expenditures
and other fund uses
Fund balances, end of year
$ 10,900,000 $ 10,899,001
$
10,437,646
(461,355)
$
(461,355)
• For budgetary purposes, the Board includes its indirect cost allocation along with operating transfers in.
However, in the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental
Funds, this is included in other revenues. Actual cost has been adjusted to reflect the bUdgetary
grouping for the purposes of this budget to actual comparison.
See notes to financial statements.
-28-
Hoover City Board of Education
Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - 24 Mill Fund
Year ended September 30, 2011
Budgeted Amounts
Original & Final
BUdget
Fund balances, beginning of year
$
Revenues
Local
$ 36,905,480
36,238,882
36,808,177
569,295
1,007,664
1,007,664
37,815,841
1,576,959
330
(330)
36,238,882
Expenditures
Other
Other fund uses
Operating transfers out
Total expenditures and
other fund uses
Excess of revenues and other
sources over expenditures and
other fund uses
Fund balances, end of year
$
$
33,090,922
29,419,099
3,671,823
33,090,922
29,419,429
3,671,493
3,147,960
8,396,412
5,248,452
40,053,440
$ 45,301,892
.See notes to financial statements.
-29-
Actual
36,905,480
Other financing sources
Operating transfers in
Total revenues and other
. financing sources
Variance
Favorable
(Unfavorable)
$
5,248,452
{THIS PAGE INTENTIONALLYLEFTBLANK]
Supplementary Information
Hoover City Board of Education
Supplementary Schedule of Bond Disclosures
Continuing Disclosure Information
This supplementary information to the financial statements is intended to constitute, along with the
independent auditors' report, the annual report that the Board is required to provide under various
Continuing Disclosure Agreements in connection with the provisions of Rule 15c 2-12 promulgated
by the Securities and Exchange Commission pursuant to the Securities and Exchange Act of 1934.
1.
The net proceeds of the Special Tax (that is, the ad valorem tax levied by the City of
Hoover at the rate of 24 mills per annum) were $36,218,396 for the fiscal year that ended
September 30, 2011.
2.
Attached hereto is a summary of revenue, expenditures and changes in fund balances for
all governmental funds for the current and the five most recent fiscal years.
3.
The following issues are payable solely out of the proceeds of the Special Tax:
(a)
$69,685,000 aggregate principal amount of the Board's Capital Outlay Warrants,
Series 2005, dated December 15, 2005, and (as of September 30, 2011)
outstanding in the aggregate principal amount of $69,685,000.
(b)
$117,885,000 aggregate principal amount of the Board's Capital Outlay Warrants,
Series 2010, dated August 1, 2010, and (as of September 30, 2011) outstanding in
the aggregate principal amount of $117,885,000.
4.
The average annual debt service on the warrants listed above is $11,363,794.
5.
The maximum annual debt service on the warrants listed above is $13,936,875.
-31-
Hoover City Board of Education
Supplementary Schedule of Bond Disclosures (continued)
Combined Schedule of Revenues, Expenditures and Changes in Fund Balances
Year ended September 30,
Revenues
State of Alabama
2006
2007
2008
2009
2010
57,365,398
3,908,415
174,451,467
1,740,232
$ 65,097,385
4,121,720
99,100,595
1,702,286
$ 63,395,490
5,062,930
85,388,694
1,895,213
$ 54,787,560
9,490,289
85,049,609
1,997,138
2011
Federal government
Local
Other
$ 49,364,874
4,404,548
80,978,263
1,574,223
Total revenues
136,321,908
237,465,512
170,021,986
155,742,327
151,324,596
156,174,588
69,685,000
61,814,072
56,005,543
50,986,536
52,483,405
117,885,000
46,468,694
38,906,938
Total other financing sources
131,499,072
56,005,543
50,986,536
52,483,405
164,353,694
38,906,938
Total revenues and other
financing sources
267,820,980
293,471,055
221,008,522
208,225,732
315,678,290
195,081,526
61,249,992
19,297,866
13,347,246
13,191,750
77,059,339
22,841,411
15,966,775
15,318,777
88,431,180
25,526,662
18,333,502
16,534,236
82,816,176
23,986,475
17,530,106
15,324,563
83,437,172
23,281,110
16,074,690
15,501,587
82,065,055
22,846,023
16,108,511
16,479,695
2,501,224
23,395,838
15,273,529
3,612,660
2,533,526
15,836,624
15,977,729
4,216,430
2,922,538
3,479,553
15,955,453
5,446,360
2,466,097
5,679,095
15,924,879
6,083,308
2,377,197
768,762
16,350,161
5,087,655
2,324,549
1,356,359
8,490,436
4,807,904
151,870,105
169,750,611
176,629,484
169,810,699
162,878,334
154,478,532
61,814,072
1,041,621
56,005,543
50,986,536
52,483,405
46,468,694
114,870,722
38,906,938
62,855,693
56,005,543
50,986,536
52,483,405
161,339,416
38,906,938
214,725,798
225,756,154
227,616,020
222,294,104
324,217,750
193,385,470
Excess of revenues and other
sources over (under) expenditures
and other fund uses
53,095,182
67,714,901
$
$
58,299,626
12,996,084
82,993,731
1,885,147
Other financing sources
Proceeds from borrowings
Operating transfers in
Expenditures
Instructional services
Instructional support
Operation and maintenance
Auxiliary services
General administrative and central
support
Capital outlay
Debt service
Other
Total expenditures
Other fund uses
Operating transfers out
Other uses
Total other fund uses
Total expenditures and other
fund uses
(6,607,498)
(14,068,372)
(8,539,460)
1,696,056
Fund balances, beginning of year
<as restated· see note below)
Fund balances, end of year
29,814,433
82,909,615
149,999,515
143,392,017
129,323,645
120,784,185
$ 82,909,615
$ 150,624,516
$ 143,392,017
$ 129,323,645
$120,784,185
$ 122,480,241
Note: The Board's fund balance as of September 30, 2007 was restated due to a correction of the receivable from the City of Hoover.
The revenues in the above schedule are shown as originally reported.
-31a-
Hoover City Board of Education
Supplementary Schedule of Expenditures of Federal Awards
Year anded September 30, 2011
Description
Federal Funds Passed Through State Dept. of Ed.
ED-Vocational Education Basic Grant
Federal
CFDA
Number
84.048
Project Period
From
To
10/1/2010
9130/2011
ED-Tech Prep !=ducation
84.243
10/1/2010
9130/2011
ED-Safe and Drug Free Schools
84.186
10/1/2009
9130/2010
84.027
10/1/2010
9130/2011
ED-Title I
84.01
1011/2010
9130/2011
ED-Handicapped Preschool Grants
84.173
10/1/2010
9130/2011
ED-English Language Acquisition
84.365
10/1/2010
9130/2011
Enhance EDITECH
84.318
1011/2010
9130/2011
Improving Teacher Quality
84.367
10/1/2010
9130/2011
Advanced Placement Fee Program
84.33
10/1/2010
9130/2011
Education TeChnology, Recovery Act
84.386
10/1/2009
9130/2010
Title I Grants to Local Educational Agencies, Recovery Act
84.389
10/1/2009
9130/2010
Special Ed. Grants to States (IDEA, Part B) Recovery Act
84.391
10/1/2009
9/30/2010
Special Ed. Grants to States, Preschool (IDEA, Part B) Recovery Act
84.392
10/1/2009
9130/2010
Education Jobs Fund
84.41
10/1/2010
9130/2011
USDA-Commodities
10.550
10/1/2010
9130/2011
USDA-School Breakfast
10.553
10/1/2009
9130/2010
School Lunch Program
10.555
10/1/2009
9130/2010
Determination
96.001
1011/2010
9130/2011
93.276
10/1/2010
9130/2011
ED~Education
afthe Handicapped (IDEA-B)
USDA~National
HHS~Disability
HHS-Drug-Free Communities Support Program Grants
Total U.S. Department of Health and Human Services
Direct Funding
Federal Funds Passed Through City of Hoover
Total Federal Awards
* Commodities only were received
See notes to supplementary schedules.
$
Total
Grant
Award
84,315
Accrued
(Deferred)
Grant Revenue
September
30,2010
$
Cash
Received
73,601
$
8,098
7,599
Revenue
Recognized
Expenditures
75,848 $
75,848
$
8,098
7,599
8,098
8,098
Accrued
(Deferred)
Grant Revenue
September
30,2011
$
3,247
7,599
2,193,274
2,089,098
1,954,944
1,954,944
658,298
599,661
606,436
606,436
6,775
31,807
31,807
31,290
31,290
(517)
112,152
112,152
112,152
112,152
3,920
3,920
1,120
1,120
(2,800)
288,908
222,198
274,492
274,492
52,294
2,052
2,052
2,052
2,052
2,514,239
2,514,239
2,514,239
11,499,740
10,821,929
10,821,929
299,170
299,170
10,080
10,080
10,080
26,633
26,633
26,633
75,567
75,567
75,567
2,512
2,512
2,512
2,514,239
11,816,657
602,656
299,170
35,493
35,493
35,493
167,996
167,996
167,996
2,003,306
203,489
1,704,136
2,019,242
2,019,242
306
306
306
306
61,170
62,412
61,170
62,412
61,170
62,412
61,170
62,412
$ 13,974,876 $
806,145
$
13,358,789
$
12,996,084
$
12996,084
-32-
(134,154)
(75,155)
219,425
$
144270
Hoover City Board of Education
Supplementary Schedule of State Government Appropriations
Year ended September 30, 2011
Description
Appropriation Period
From
To
Total
Appropriation
Public School Fund
10/1/2010
9/30/2011
2,452,947
At Risk Student Program
10/1/2010
9130/2011
218,317
Exit Exam Failure
10/1/2010
9130/2011
200,311
Teacher of the Year Program
10/1/2010
9/30/2011
333
NBTS Grants
10/1/2010
9130/2011
694,200
English as a Second Language
10/1/2010
9/30/2011
56,100
Tenure.Arbitration
10/1/2010
9/30/2011
11,634
Operations and Maintenance
10/1/2010
9130/2011
500
State-wide Purcbasing
10/1/2010
9/30/2011
85,213
Commodity Rebates
10/1/2010
9/30/2011
45,108
Total state assistance
$
See notes to supplementary schedules.
58,299,626
Cash Received
October 1, 2010September 30,2011
$
Revenue
Recognized
Expenditures
2,452,947
2,452,947
2,452,947
218,317
218,317
218,317
200,311
200,311
200,311
333
333
333
694,200
694,200
694,200
56,100
56,100
56,100
11,634
11,634
11,634
500
500
500
85,213
85,213
85,213
45,108
45,108
45,108
58,299,626
$ 58,299,626 $
58,299,626
-33-
Encumbrances
$
Hoover City Board of Education
Notes to Supplementary Schedules
NOTE 1 - SCOPE OF AUDIT PURSUANT TO OMS CIRCULAR A-133
The Hoover City Board of Education (the "Board"), is an agency of the State of Alabama. All significant
operations of the Board are included in the scope of the Circular A-133.
The U. S. Department of Education has been designated as the Board's cognizant agency for the
"single-audit".
NOTE 2 - FISCAL PERIOD AUDITED
Single audit testing procedures were performed for program transactions occurring during the fiscal
year ended September 30, 2011.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
The Schedule of Expenditures of Federal Awards and the Schedule of State Government
Appropriations has been prepared on the modified accrual basis of accounting. Federal grant
revenues are recorded for financial reporting purposes when the Board has met the qualifications
for the respective grants. Several programs are funded jointly by State appropriations and Federal
funds. Encumbrances for purchase orders and contracts are not recorded as expenditures because
the liability has not been incurred for goods received or services rendered; however, these
encumbrances (if any) are reserved in the fund balances of the governmental funds. The
encumbrances are shown as deductions from the 2011 appropriations of state funds on the
schedule because subsequent expenditures against the encumbrances are made under the
authority of the 2011 appropriations. Costs incurred in programs partially funded by Federal grants
are applied against grant funds to the extent of revenue available when they properly apply to the
grant, except as described below.
B. Accrued and Deferred Reimbursement
Various reimbursement procedures are used for Federal awards received by the Board.
Consequently, timing differences between expenditures and program reimbursements can exist at
the beginning and end of the year. Accrued balances at year-end represent an excess of
expenditures over cash reimbursements received to date. Generally, accrued or deferred balances
caused by differences in the timing of cash reimbursements and expenditures will be reversed in
the remaining grant period.
-34-
Hoover City Board of Education
Summary Schedule of Prior Year Audit Report Findings
The following significant deficiencies were disclosed in the audit of the Hoover Board of Education
for the year ended September 30, 2010:
10-1 Audit procedures were performed at each of the Board's local schools by the Board's
internal auditor. Several deficiencies in internal controls were noted in the reports to each
school including:
a) Items purchased without purchase orders or purchased prior to the preparation of
purchase orders.
b) Teachers failing to remit collected funds to school bookkeepers in a timely manner.
c) Payment of invoices without proof of receipt of the goods or services.
d) Checks not supported by invoice or adequate support.
e) Deposits not made timely.
f)
Checks not properly voided.
g) Various other documentation/procedural deficiencies.
Current Status:
Similar deficiencies are still being noted by the internal auditor (see current finding 11-1).
Management is continuing with efforts to provide ongoing training for school personnel, as
well as timely monitoring and follow-up on internal control findings.
10-2 An audit adjustment was required related to the accounting for construction costs.
Management's response:
This is considered to be an isolated incident. However, the Board will strive to make every
effort to ensure that all costs related to construction projects are properly recorded when
they are incurred.
-35-
[THIS PAGE INTENTIONALLY LEFTBLANK]
Hoover City Board of Education
Independent Auditors' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards
[THIS PAGE INTENTIONALLYLEFTBLANKJ
Carr, Riggs & Ingram, LlC
2100 16th Avenue South
Suite 300
Binilingham, Al35205
Independent Auditors' Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters
Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards
Mailing Address:
p,o, Box 55765
Birmingham, Al35255
12051933·7822
12051933·794411,,1
www.cricpa.com
To the Members of the
Hoover City Board of Education
Hoover, Alabama
We have audited the financial statements of the governmental activities, each major fund,
and the aggregate remaining fund information of the Hoover City Board of Education (the
"Board"), as of and for the year ended September 30, 2011, which collectively comprise the
Board's basic financial statements and have issued our report thereon dated March 27,
2012. We conducted our audit in accordance with auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States..
Internal Control Over Financial Reporting
Management of the Board is responsible for establishing and maintaining effective internal
control over financial reporting. In planning and performing our audit, we considered the
Board's internal control over financial reporting as a basis for designing our auditing
procedures for the purpose of expressing our opinions on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the Board's internal control
over financial reporting. Accordingly, we do not express an opinion on the effectiveness of
the Board's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control such that
there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and was not designed to identify all
deficiencies in internal control over financial reporting that might be deficiencies, significant
deficiencies, or material weaknesses. We did not identify any deficiencies in internal control
over financial reporting that we consider to be material weaknesses, as defined above.
However, we identified certain deficiencies in internal control over financial reporting,
described in the accompanying schedule of findings and questioned costs that we consider
to be significant deficiencies in internal control over financial reporting (11-1). A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Board's financial statements
are free of material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective of
our audit, and accordingly, we do not express such an opinion. The results of our tests
disclosed no instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards.
We noted certain other matters that we reported to management of the Board in a separate
letter dated March 27, 2012.
The Board's response to the findings identified in our audit· is described in the
accompanying schedule of findings and questioned costs. We did not audit the Board's
responses and, accordingly, we express no opinion on them.
This report is intended solely for the information and use of management, City Council,
others within the entity, and federal awarding agencies and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
Birmingham, Alabama
March 27, 2012
Hoover City Board of Education
Independent Auditors' Report on Compliance with
Requirements That Could Have a Direct and Material
Effect on Each Major Program and on Internal
Control Over Compliance in Accordance
with OMB Circular A-133
{THIS PAGE INTENTIONALLY LEFTBLANK]
Carr,RilJgs & Ingram, LLC
2100 16th Avenue South
Suite 300
Birmingham, Al35205
Independent Auditors' Report on Compliance with
Requirements That Could Have a Direct and Material
Effect on Each Major Program and on Internal
Control Over Compliance in Accordance
with OMS Circular A·133
Mailing Address:
P.O. Box 55165
Birmingham, AL35255
12051933·7822
12051933·794411"1
w'ww.cricpa.com
To the Members of the
Hoover City Board of Education
Hoover, Alabama
Compliance
We have audited the compliance of the Hoover City Board of Education (the "Board") with
the types of compliance requirements described in the OMB Circular A-133 Compliance
Supplement that could have a direct and material effect on each of the Board's major
federal programs for the year ended September 30, 2011. The Board's major federal
programs are identified in the summary of auditor's results section of the accompanying
schedule of findings and questioned costs. Compliance with the requirements of laws,
regulations, contracts and grants applicable to each of its major federal programs is the
responsibility of the Board's management. Our responsibility is to express an opinion on the
Board's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally
accepted in the United States of America; the standards applicable to financial audits
contained in Government AUditing Standards, issued by the Comptroller General of the
United States; and OMB Circular A-133. Those standards and OMB Circular A-133 require
that we plan and perform. the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could
have a direct and material effect on a major federal program occurred. An audit includes
examining, on a test basis, evidence about the Board's compliance with those requirements
and performing such other procedures as we considerecj necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion. Our audit does not
provide a legal determination of the Board's compliance with those requirements.
In our opinion, the Board complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on each of its
major federal programs for the year ended September 30, 2011.
Internal Control Over Compliance
The Management of the Board is responsible for establishing and maintaining effective
internal control over compliance with requirements of laws, regulations, contracts and
grants applicable to federal programs. In planning and performing our audit, we considered
the Board's internal control over compliance with the requirements that could have a direct
and material effect on a major federal program to determine the auditing procedures for the
purpose of expressing our opinion on compliance and to test and report on internal control
over compliance in accordance with OMB Circular A-133, but not for the purpose of
expressing an opinion on the effectiveness of internal control over compliance. Accordingly,
we do not express an opinion on the effectiveness of the Board's internal control over
compliance.
A deficiency in internal control over compliance exists when the design or operation of a
control over compliance does not allow management or employees, in the normal course of
performing their assigned functions, to prevent, or detect and correct, noncompliance with a
type of compliance requirement of a federal program on a timely basis. A material
weakness in internal control over compliance is a deficiency, or combination of deficiencies,
in internal control over cornpliance, such that there is a reasonable possibility that material
noncompliance with a type of compliance requirement of a federal program will not be
prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described
in the first paragraph of this section and was not designed to identify all deficiencies in
internal control over compliance that might be deficiencies, significant deficiencies, or
material weaknesses. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses, as defined above.
This report is intended solely for the information and use of the Board's management,
others within the entity, federal awarding agencies, and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
Birmingham, Alabama
March 27, 2012
Hoover City Board of Education
Schedule of Findings and Questioned Costs
Hoover City Board of Education
Schedule of Findings and Questioned Costs
Year ended September 30, 2011
Section I - Summary of Auditors' Results
Financial statements
Type of auditors' report issued:
Unqualified
Internal control over financial reporting:
Material weakness(es) identified?
Significant deficiency(ies) identified?
x no
yes
_x_yes
none reported
Noncompliance material to financial
statements noted?
yes
Federal awards
Internal control over major programs:
Material weakness(es) identified?
Significant deficiency(ies) identified?
yes
yes
Type of auditors' report issued on compliance
for major programs:
Unqualified
Any audit findings disclosed that are required to be
reported in accordance with Section 510 (a)
of OMB Circular A-133?
yes
x
no
x no
_x_ none reported
x no
Identification of major programs:
CFDA Number(s)
84.027
84.173
84.391
84.392
84.010
84.389
84.394
84.410
Dollar threshold used to distinguish
between Type A and Type B program:
Name of Federal Program or Cluster
Special Education-Grants to States (IDEA, Part B)
Special Education-Grants to States
(IDEA, Part B Preschool)
Special Education-Grants to States (IDEA, Part B),
Recovery Act
Special Education-Grants to States (IDEA, Part B
Preschool), Recovery Act
Title I Grants to Local Educational Agencies
Title I Grants to Local Educational Agencies, Recovery Act
State Fiscal Stabilization Fund, Recovery Act
Education Job Fund, Recovery Act
$
300,000
Auditee qualified as low-risk auditee?
_x_yes
-43-
no
Hoover City Board of Education
Schedule of Findings and Questioned Costs (Continued)
Year ended September 30, 2011
Section II • Financial statement findings
The following significant deficiencies were disclosed in the financial statements during the audit
of the Hoover City Board of Education:
11-1
Audit procedures were performed at each of the Board's local schools by the Board's
internal auditor. Several deficiencies in internal controls were noted in the reports to
each school including:
a) Items purchased without purchase orders or purchased prior to the preparation of
purchase orders.
b) Teachers failing to remit collected funds to school bookkeepers in a timely manner.
c) Payment of invoices without proof of receipt of the goods or services.
d) Checks not supported by invoice or adequate support.
e) Deposits not made timely.
f)
Checks not properly voided.
g) Various other documentation/procedural deficiencies.
Management's response:
Management agrees with the finding and plans to continue with efforts to provide
continuing training for school personnel, as well as timely monitoring and follow-up on
internal control findings.
Section III • Federal Award Findings and Questioned Costs
Findings: None
Questioned costs: None
-44-
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APPENDIXC
SUMMARY OF
CONTINUING DISCLOSURE AGREEMENT
[THIS PAGE INTENTIONALLY LEFT BLANK]
AppendixC
SUMMARY OF
CONTINUING DISCLOSURE AGREEMENT
The following is a summary of the Continuing Disclosure Agreement ("the
Agreement") entered into by the Board, for the benefit of the holders of the Warrants, in order to
assist the purchaser ofthe Warrants in complying with the provisions ofRule l5c2-12 ("the Rule"),
promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934. Except where otherwise defined in this Appendix, all capitalized terms have the meaning
assigned in the front portion of this Official Statement.
Annual Report. The Board agrees, in accordance with the provisions ofthe Rule, to
provide or cause to be provided through the Electronic Municipal Market Access ("EMMA") System
established by the Municipal Securities Rulemaking Board or such other system as may be
established by the MSRB (i) in the case of audited financial statements referred to in clause (a)
below, when available, and (ii) in all other cases, within 180 days after the close of each fiscal year of
the Board commencing after September 30, 2012, the following annual financial information and
operating data ("the Annual Report"):
(a)
the audited financial statements of the Board and notes thereto,
prepared in accordance with generally accepted accounting principles;
(b)
unless included in audited financial statements referred to in clause (a)
above and submitted with the balance of the Annual Report, unaudited financial
information with respect to the revenues and expenditures referable to the Board and
such schedules from which can be derived the financial information with respect to
the Board comparable to that set forth in the Official Statement under the headings
"THE SPECIAL TAX" and "GENERAL FINANCIAL INFORMAnON";
(c)
year; and
a statement of the net proceeds of the Special Tax during such fiscal
(d)
a statement of the average annual debt service and maximum annual
debt service with respect to indebtedness of the Board payable from proceeds of the
Special Tax.
The Board reserves the right to modify from time to time the specific types of
information provided or the format of the presentation ofthe Annual Report, to the extent necessary
1
or appropriate in the judgment of the Board; provided that, the Board agrees that any such
modification will be done in a manner consistent with the Rule.
Notice of Material Events. The Board agrees to provide or cause to be provided, in a
timely manner, through the EMMA system (or such other system may succeed to its functions),
notice of the occurrence of any of the following events with respect to the Warrants:
(a)
Warrants;
(b)
delinquency in payment when due ofany principal ofor interest on the
non-payment related defaults, if material;
(c)
difficulties;
unscheduled draws on debt service reserves reflecting financial
(d)
difficulties;
unscheduled draws on credit enhancements reflecting financial
(e)
substitution ofcredit or liquidity providers, or their failure to perform;
(f)
Warrants;
adverse tax opinions or events affecting the tax-exempt status of the
(g)
modifications of the rights of holders of the Warrants;
(h)
calls for redemption, other than scheduled mandatory redemption, of
any ofthe Warrants;
(i)
(j)
Warrants; or
(k)
defeasance of the Warrants or any portion thereof;
release, substitution or sale of property securing repayment of the
any change in any rating on the Warrants;
2
(I)
bankruptcy, insolvency, receivership or similar event ofthe Board or
of any obligated person respecting the Warrants;
(m)
the consummation ofa merger, consolidation, or acquisition involving
the Board or any obligated person respecting the Warrants (each, an "Obligated
Person") or the sale of all or substantially all of the assets of the Obligated Person,
other than in the ordinance course of business, the entry into a definitive agreement
to undertake such an action, or the termination of a definitive agreement related to
any such actions, other than pursuant to its terms, if material; and
(n)
appointment ofa successor or additional trustee or the change ofname
of a trustee, if material.
The Board may from time to time choose to provide notice ofthe occurrence of certain other events,
in addition to those listed above, if, in the judgment of the Board such other event is material with
respect to the Warrants, but the Board does not undertake to commit to provide any such notice ofthe
occurrence of any material event except those events listed above.
Notice of Non-Compliance. The Board agrees to provide or cause to be provided, in
a timely' manner, through EMMA, notice of any failure by it to provide the annual financial
information described in Sections I and 2 hereofon or prior to the dates respectively set forth in said
sections.
Beneficiaries and Enforcement. The Board agrees that its undertaking pursuant to
the Rule set forth in the Agreement is intended to be for the benefit ofthe holders ofthe Warrants and
shall be enforceable by such holders; provided, that the right ofthe holders ofthe Warrants to enforce
the provisions of the Agreement shall be limited to a right to obtain specific enforcement of the
respective obligations ofthe Board hereunder. No failure by the Board to comply with its obligations
under the Agreement shall constitute an event of default under the Authorizing Resolution.
Amendment. The Agreement may be amended without the consent ofany holders of
the Warrants if
(a)
such amendment is 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 the Board;
3
(b)
the agreement, as so amended, would have complied with the
requirements ofthe Rule at the time ofthe execution hereof, after taking into account
any amendments or interpretations of the Rule, as well as any change in
circumstances; and
(c)
the Board receives an opinion of nationally recognized bond counsel
that such amendment does not materially impair the interests of any ofthe holders of
the Warrants.
4