Joe Jolly & Co., Inc.

Transcription

1 OFFICIAL STATEMENT RATINGS: Moody's: Aa1 Standard & Poor's: AA (See "RATINGS" herein.) NEW ISSUE BOOK-ENTRY ONLY In the opinion of Bond Counsel, assuming compliance by the Board with certain covenants set forth in the Authorizing Resolution herein referred to with respect to certain conditions imposed by Section 103 of the Internal Revenue Code of 1986, as amended, the interest on the Warrants will be excludable from gross income of the recipients thereof for federal income tax purposes. However, see "Tax Matters" herein for certain other federal tax consequences to the recipients of the interest income on the Warrants. In the opinion of Bond Counsel, the interest on the Warrants will be exempt from Alabama income taxation. HOMEWOOD CITY BOARD OF EDUCATION (ALABAMA) $33,495,000 Special Tax School Warrants Series 2012 Dated: February 1, 2012 Due: April 1, as shown on the inside cover hereof SEE INSIDE COVER FOR MATURITIES, INTEREST RATES AND PRICES/YIELDS The Warrants will bear interest payable on April 1, 2012, and semiannually thereafter on each April 1 and October 1, by check or draft mailed to the registered owners of the Warrants. The Warrants will mature on April 1 in the years and principal amounts set forth on the following page. Certain of the Warrants are subject to redemption prior to maturity as set forth herein. The Warrants will be initially issued as fully registered warrants, in book-entry form, registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, 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 of the Warrants, payments of principal of and interest on the Warrants will be paid through the facilities of DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the purchasers of beneficial interests in the Warrants is the responsibility of DTC Participants. See "THE WARRANTS -- Book-Entry Only System" herein. The Warrants will be payable, as to both principal and interest, solely out of the Special Tax to which reference is hereinafter made. See "SECURITY AND SOURCE OF PAYMENT" herein. The Warrants are offered when, as, and if received by the Underwriter, subject to prior sale, to withdrawal or modification of the offer without notice, and to the approval of the validity thereof by Bradley Arant Boult Cummings LLP, Birmingham, Alabama, Bond Counsel, and certain other conditions. It is expected that the Warrants will be available for delivery on or about February 2, Dated January 19, 2012 Joe Jolly & Co., Inc.

2 AMOUNTS, MATURITIES, INTEREST RATES AND YIELDS $33,495,000 Special Tax School Warrants Series 2012 Year of Maturity (April 1) Principal Amount Interest Rate Yield 2014 $ 635, %.95% ,295, ,335, ,385, ,440, ,510, ,590, ,675, ,760, ,835, ,930, ,905, ,100, ,165, ,230, ,305, ,380, $4,020, % Term Warrants due April 1, 2027, price 98.00%

3 HOMEWOOD CITY BOARD OF EDUCATION MEMBERS Patti Atkinson President J. Bruce Limbaugh Christopher Hawkins Dr. James E. Williams, Jr. R. Scott Williams SUPERINTENDENT Dr. William T. Cleveland CHIEF SCHOOL FINANCIAL OFFICER Elizabeth Nesmith BOND COUNSEL Bradley Arant Boult Cummings LLP Birmingham, Alabama UNDERWRITER Joe Jolly & Co., Inc. Birmingham, Alabama

4 TABLE OF CONTENTS Page No. INTRODUCTION... 1 THE WARRANTS... 2 SOURCE OF PAYMENT... 7 THE SPECIAL TAX... 9 DEBT SERVICE AND COVERAGE ASSESSMENTS AND AD VALOREM TAX COLLECTIONS OTHER INDEBTEDNESS OF THE BOARD AD VALOREM TAXES AND OVERLAPPING DEBT IN THE CITY GENERAL INFORMATION CONCERNING THE BOARD MAJOR SOURCES OF BOARD REVENUE GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION LEGAL INVESTMENT RATINGS TAX EXEMPTION AUDIT APPROVAL OF LEGAL MATTERS UNDERWRITING CONTINUING DISCLOSURE REQUIREMENTS MISCELLANEOUS Appendix A - Form of Approving Legal Opinion Appendix B - Auditors Report for Fiscal Year Ended September 30, 2010 Appendix C - Summary of Continuing Disclosure Agreement i

5 OFFICIAL STATEMENT $33,495,000 HOMEWOOD CITY BOARD OF EDUCATION Special Tax School Warrants Series 2012 Dated February 1, 2012 INTRODUCTION This Official Statement is to furnish information in connection with the sale and issuance by the Homewood City Board of Education ("the Board"), in the State of Alabama, of the 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 7 Hollywood Boulevard, Homewood, Alabama 35209, telephone (205) , and the mailing address of the Board is Post Office Box 59366, Homewood, Alabama Inquiries with respect to information contained in this Official Statement should be directed to the Board or to Joe Jolly & Co., Inc., th Street North, Birmingham, Alabama 35203, telephone (205) , attention: Terrence Hogan. 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, Alabama ("the County"), known as Homewood 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 of the City of Homewood, 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 of the Board or a charge against the general credit or taxing powers of the Board, the State of Alabama, the County 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." 1

6 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 of April 1 in the following years: Maturity (April 1) Principal Amount Interest Rate Maturity (April 1) Principal Amount Interest Rate 2014 $ 635, % 2024 $1,930, % ,295, ,905, ,335, ,385, ,020, ,440, ,100, ,510, ,165, ,590, ,230, ,675, ,305, ,760, ,380, ,835, 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 April 1 and October 1, beginning April 1, Except as hereinafter described under "Book-Entry Only System," the principal of the Warrants will be payable at the principal corporate trust office of U.S. Bank National Association, Birmingham, Alabama ("the Registrar-Paying Agent"), upon presentation and surrender of the Warrants as the same become due and payable, and interest on the Warrants will be payable by check or draft mailed by the Registrar-Paying Agent to the registered holders of the Warrants at the addresses shown on the registry books of the Registrar-Paying Agent pertaining to the Warrants. 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 will be 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

7 Purpose of Issue The Warrants are being issued to (i) provide the funds needed to refund, on a current basis, the Board's Capital Outlay Warrants, Series 2003, dated April 1, 2003, and now outstanding in the aggregate principal amount of $19,805,000 ("the Series 2003 Warrants"), and the Board's Warrant Anticipation Note, dated May 19, 2011, and now outstanding in the principal amount of $10,000,000 ("the Note"), (ii) provide approximately $7,000,000 for the acquisition, construction and equipping of a central office building and various other capital improvements ("the Improvements"), and (iii) pay the expenses related to the issuance of the Warrants. The Series 2003 Warrants will be paid and redeemed on March 1, 2012, and the Note will be paid and cancelled simultaneously with the issuance of the Warrants. Construction of the Improvements is expected to commence on or about April 1, 2012, and take approximately 18 months. Redemption Provisions Optional Redemption. Those of the Warrants having stated maturities in 2022 and thereafter will be subject to redemption at the option of the Board, as a whole or in part and if in 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 October 1, 2021, 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 of the Registrar-Paying Agent) of each of the 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. Mandatory Redemption. Those of the Warrants having a stated maturity in 2027 shall be subject to mandatory redemption in the following principal amounts on April 1 in the following years (with those to be redeemed to be selected by the Registrar-Paying Agent by lot) at a redemption price equal to the principal amount redeemed plus accrued interest to the redemption date: Year Principal Amount 2026 $1,980, ,040,000 (maturity) In the event that the Board shall have partially redeemed Warrants having a stated maturity in 2027 or shall have provided for a partial redemption of such Warrants in such a manner that, under the provisions of the appropriate Authorizing Resolution, the Warrants for the redemption of which provision is made are considered as fully paid, the Board may elect to apply all or any part (but only 3

8 in integral multiples of $5,000) of the principal amount of such Warrants having a stated maturity in 2027 so redeemed or to be redeemed to the reduction of the principal amount of Warrants maturing in 2027 required to be redeemed pursuant to the schedule set forth above on any April 1 coterminous with or subsequent to the date such optional redemption actually occurs. Such election shall be deemed effective only if it is made prior to the Registrar-Paying Agent having given notice of redemption contrary to such election pursuant to the said provisions of the Authorizing Resolution. Manner of Redemption. In the event that less than all the Warrants of a single maturity is redeemed and prepaid, the Registrar-Paying Agent shall, by lot, select that portion of the 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 Registrar-Paying Agent in exchange, without expense to the holder, for a new Warrant of like tenor except in a principal amount equal to the unredeemed portion of the 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 The information in this section concerning The Depository Trust Company ("DTC") and DTC's book-entry system has been obtained from sources the Board and the Underwriter believe to be reliable, but neither the Board nor the Underwriter takes responsibility for the accuracy or completeness thereof. There can be no assurance that DTC will abide by its procedures or that such procedures will not be changed from time to time. The Warrants will be issued as fully-registered Warrants in the name of Cede & Co., as nominee of DTC, as registered owner of the Warrants. Purchasers of such Warrants will not receive physical delivery of Warrant certificates. For purposes of this Official Statement, so long as all of the Warrants are in the custody of DTC, references to Warrantholders or Owners shall mean DTC or its nominee. DTC will act as securities depository for the Warrants. The Warrants will be issued as fully-registered securities in the name of Cede & Co., DTC's partnership nominee ("Cede") or such other nominee as may be requested by an authorized representative of DTC. One fullyregistered Warrant certificate will be issued for each maturity of the Warrants, in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants (the "Direct Participants") deposit with DTC. DTC also facilitates post-trade settlement among Direct 4

9 Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of Warrants, in the denomination of $5,000 principal amount or any integral multiple of $5,000 in excess thereof, 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 of each actual purchaser of each Warrant ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are expected, however, to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Warrants are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Warrants, except in the event that use of the book-entry system for the Warrants is discontinued. To facilitate subsequent transfers, all Warrants deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede, or such other nominee as may be requested by an authorized representative of DTC. The deposit of Warrants with DTC and their registration in the name of Cede or such other DTC nominee does not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Warrants; DTC's records reflect only the identity of the Direct Participants to whose accounts such Warrants are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 5

10 Redemption notices shall be sent to DTC. If less than all of the Warrants are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such Warrants to be redeemed. Neither DTC nor Cede (nor any other DTC nominee) will consent or vote with respect to Warrants unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede'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). Principal, redemption price and interest payments on the Warrants will be made by the Registrar-Paying Agent to Cede or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the Board or the Registrar-Paying Agent, on a payment date in accordance with their respective holdings shown on DTC's records. Payments by Direct and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in 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 Direct and Indirect Participant and not of DTC, the Registrar-Paying Agent or the Board, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest to Cede (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Board or the Registrar-Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. NEITHER THE BOARD NOR THE REGISTRAR-PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH PARTICIPANTS, OR TO THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE WARRANTS, OR TO ANY BENEFICIAL OWNER IN RESPECT OF THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT, THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE WARRANTS, ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO WARRANTHOLDERS UNDER THE AUTHORIZING ORDER, THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF PARTIAL REDEMPTION OF THE WARRANTS WITH RESPECT TO LESS THAN ALL OF THE WARRANTS, OR ANY OTHER ACTION TAKEN BY DTC AS REGISTERED WARRANTHOLDER. For every transfer and exchange of the Warrants, the Beneficial Owner may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto, and any reasonable fees and expenses of the Registrar-Paying Agent and the costs incurred in preparing Warrant certificates. 6

11 DTC may discontinue providing its services as securities depository with respect to the Warrants at any time by giving reasonable notice to the Board. Under such circumstances, in the event that a successor depository is not obtained, Warrant certificates are required to be printed and delivered. Should DTC agree to a request by the Board to discontinue use of the system of bookentry only transfers through DTC (or a successor depository), Warrant certificates will be printed and delivered to DTC. 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 of the Registrar-Paying Agent pertaining to the Warrants. No transfer of a Warrant shall be permitted except upon presentation and surrender of such Warrant at the office of the Registrar-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 Registrar-Paying Agent. The holder of one or more of the Warrants may, upon request, and upon the surrender to the Registrar-Paying Agent of such Warrant, exchange such Warrant for warrants of other authorized denominations ($5,000 principal amount or any integral multiple thereof) of the 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 of any Warrant will be required to pay any expenses incurred in connection with the replacement of a mutilated, lost, stolen or destroyed Warrant. The Registrar-Paying Agent shall not be required to register or transfer any Warrant during the period of fifteen (15) days next preceding any April 1 and October 1; and if any Warrant is duly called for redemption (in whole or in part), the Registrar-Paying Agent shall not be required to register or transfer such Warrant during the period of forty-five (45) days next preceding the redemption date. SOURCE OF PAYMENT General 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 Series 2003 Warrants, provision for the full payment of which will be made simultaneously with the issuance of the Warrants). The said 7

12 pledge of the proceeds from the Special Tax for the benefit of the Warrants will be on a parity of lien with pledges made for the benefit of any Parity Warrants that may be issued under the provisions described below and shall be superior to all subsequent pledges of the Special Tax (other than pledges made for the benefit of Parity Warrants). The Alabama statute authorizing the issuance of the Warrants provides that warrants issued thereunder shall be preferred claims against the proceeds of the special tax out of which 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 (other than parity pledges) and shall have preference over claims for salaries or other operating expenses or any other purpose. Under Alabama law, the Warrants will be a charge only on 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 the proceeds of the Special Tax pledged for the payment thereof. Neither the County nor any municipality therein will in any manner be liable for payment of the Warrants. Issuance of Parity Warrants In the Authorizing Resolution, the Board has reserved the right to issue additional warrants ("Parity Warrants"), without limit as to principal amount, secured by pledge of the Special Tax on a parity of lien with the Warrants. Prior to the issuance of any such Parity Warrants, the Board must file, with the paying agent for the Warrants and in the Board's records, a certificate of the Board's Secretary and of its Chief School Financial Officer setting forth the maximum amount payable annually in the then current and all succeeding fiscal years of the Board as the principal of and interest on the Warrants and the Parity Warrants proposed to be issued, and demonstrating that the amount of the Special Tax so received by the Board during the then preceding fiscal year is not less than 1.5 times (or 150% of) the maximum amount payable annually in any such fiscal year as principal of and interest on the Warrants and the Parity Warrants proposed to be issued. Except as provided with respect to the issuance of Parity Warrants, the Board has covenanted and agreed that the Pledged Tax Proceeds shall not be pledged to the payment of any other warrants of the Board (or any indebtedness or obligation of any nature) unless such pledge is made subject to and subordinate in all respects to the pledge for the benefit of the Warrants. 8

13 THE SPECIAL TAX General The Special Tax was first authorized, pursuant to Amendment No. 56 to the Constitution of Alabama, at a special election held in the City on May 20, 1947, to be levied for public school purposes annually on all property situated in the City, at the rate of five (5) mills per annum. By reason of Amendment No. 373 to the Constitution of Alabama, sometimes known as the "Lid Bill Amendment," and proceedings thereunder taken, including an election held in the City on May 22, 2001, the Special Tax is now being levied at a rate of 14.2 mills on each dollar ($1.42 on each $100) of such assessed valuation. From 1979 until 2001, the Special Tax was levied at the rate of nine (9) mills. The Special Tax is levied by the City and collected by the Jefferson County Tax Collector (under Alabama law, the County Tax Collector collects municipal ad valorem taxes on behalf of municipalities located in the County) and the proceeds of the Special Tax, remaining after payment of the costs of assessment 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 that ended September 30, 2011, became due and payable October 1, 2011, and delinquent on January 1, The Special Tax is authorized to be levied without limit as to time. Collection of the Special Tax The total amounts received by the Board from the Special Tax for each of the last five (5) fiscal years are as follows: Fiscal Year Ending September 30 Amount Board Received 2007 $6,800, ,385, ,545, ,293, ,367,386 (unaudited) 9

14 Disposition of Special Tax Proceeds Pursuant to the Authorizing Resolution, the Board will establish the special debt service fund ("the Debt Service Fund"), which will be held by the Registrar-Paying Agent. During each fiscal year of the Board commencing with the current fiscal year and during each fiscal year thereafter, the Board will set aside in a separate fund all proceeds of the Special Tax as received by the Board until there is on deposit therein an amount equal to all principal and interest that will mature on the Warrants on April 1 of such fiscal year and on October 1 of the then-next preceding fiscal year. The Board will, on or before each March 25 and September 25, transfer from such fund and deposit into the Debt Service Fund such amount as is necessary to pay the principal, if any, and interest that will mature on the then-next succeeding interest payment date. The Board may cause any money on deposit in the Debt Service Fund not then needed for the payment of debt service on the Warrants to be invested or reinvested by the Registrar- Paying Agent in (1) direct obligations of, or obligations the payment of which is guaranteed by, the United States of America ("Federal Securities"); (2) an interest in any trust or fund that invests solely in Federal Securities; (3) a certificate of deposit issued by, or other interest-bearing deposit with, any bank organized under the laws of the United States of America or any state thereof, provided that (a) such bank has capital, surplus and undivided profits of not less than $25,000,000, (b) such deposit is insured by the Federal Deposit Insurance Corporation or (c) such deposit is secured by such bank by pledging Federal Securities having a market value (exclusive of accrued interest) not less than the face amount of such deposit (less the amount of such deposit insured by the Federal Deposit Insurance Corporation); and (4) any investment in which a board of education may be authorized to make under Alabama law. All interest accruing on such investments and any profit realized therefrom shall be deposited in the Debt Service Fund; any losses resulting from liquidation of investments shall be charged to the Debt Service Fund and shall be added to the amount of the next ensuing deposit required. 10

15 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 Par amount $ 33,495, Net original issue premium 2,811, Total $ 36,306, USES Refund Series 2003 Warrants and the Note $ 28,899, Improvements 7,004, Underwriting discount and other costs of issuance 402, Total $ 36,306,

16 DEBT SERVICE AND COVERAGE The total debt service requirements on the Warrants are as follows: Fiscal Year Ending April 1 Principal Interest Total Debt Service 2012 $ 218, $ 218, ,310, ,310, $ 635, ,310, ,945, ,295, ,297, ,592, ,335, ,258, ,593, ,385, ,218, ,603, ,440, ,163, ,603, ,510, ,091, ,601, ,590, ,015, ,605, ,675, , ,611, ,760, , ,612, ,835, , ,617, ,930, , ,620, ,905, , ,498, ,980, , ,497, ,040, , ,498, ,100, , ,497, ,165, , ,499, ,230, , ,496, ,305, , ,498, ,380, , ,499, Coverage for the Warrants Based upon the proceeds from the Special Tax for the fiscal year that ended September 30, 2011, $7,367,386 (unaudited), maximum annual debt service on the Warrants ($2,620,344.73, being that for the fiscal year ending September 30, 2024) will be covered approximately times and the average annual debt service on the Warrants ($2,465,095) will be covered approximately times. 12

17 ASSESSMENTS AND AD VALOREM TAX COLLECTIONS General The Constitution of Alabama limits the ratios at which property may be assessed, specifies the maximum millage rates at which taxes may be levied on property, and limits the total ad valorem taxes on any property in any tax year. Assessments The total assessed valuation of the taxable properties in the City as assessed for taxation during the tax years 2007 through 2011 was as follows: All Property Year Ended Other Than September 30 Motor Vehicles Motor Vehicles Total 2007 $42,779,040 $509,943,104 $552,722, ,317, ,303, ,621, ,144, ,869, ,014, ,957, ,837, ,795, ,719, ,126, ,845,635 District school taxes on real property (which are levied and collected by the County) are due October 1 of the year following the year of their assessment and are delinquent on the succeeding January 1. Taxes on motor vehicles have, since October 1, 1980, been assessed and collected on a staggered basis throughout each tax year. Ad valorem taxes on taxable properties, except public utilities, are assessed by the Jefferson County Tax Assessor and collected by the Jefferson County Tax Collector. Ad valorem taxes on public utility properties are assessed by the State Department of Revenue and collected by the state and the Jefferson County Tax Collector. Adoption of 1978 Amendments At its 1978 Regular Session, the Legislature of Alabama proposed a constitutional amendment and adopted numerous laws contingent upon ratification of the proposed amendment, all of which, taken together, effect substantial changes in ratios of assessment, exemptions and levels of ad valorem taxation in the State. The amendment and, indirectly, the related statutes (together, the 1978 Amendments") were ratified by the electorate of the State at the general election on November 7, Certain salient features of the 1978 Amendments are set out below. 13

18 Change of General Classifications and Assessment Ratios The following classifications of taxable property and corresponding ratios of assessed value to fair and reasonable market value were established for all ad valorem taxation (state and local), subject to certain exceptions stated below: Class I - property of utilities used in their business, 30%; Class II - property not otherwise classified (generally, business or commercial property), 20%; Class III - agricultural, forest and single-family owner occupied residential property and historical buildings and sites, 10%; and Class IV - private passenger automobiles and small trucks ("pickups") for personal use, 15%. A comparison of the assessment ratios under prior law with those set forth above will indicate that all property other than utility property is assessed at a lower ratio under the 1978 Amendments. Local Adjustment of Assessment Ratios Any local taxing authority may increase or decrease any assessment ratio subject to approval by the Legislature and by the majority of the electorate of such authority at a special election. In no case may an assessment ratio be less than 5% or more than 35%, nor may any increase or decrease exceed 5%. Legislative (as opposed to constitutional) provisions of the 1978 Amendments further restrict any increase of an assessment ratio (1) to a class of property constituting less than 20% of all taxable property in the taxing authority or (2) in the case of a taxing authority having more than 75% of its property in a single class, to the other classes of property. The 1978 Amendments require that any adjustment of assessment ratios other than those applicable to municipal ad valorem taxation be made by the governing body of a county. Local Adjustment of Millage Rates Any local taxing authority may (subject to the limitations on the total rate of taxation hereinafter stated) increase the rate at which any ad valorem tax is levied above the limit otherwise provided in the Constitution subject to the approval by the Legislature and by the majority of the electorate of such authority at a special election. The 1978 Amendments require that any adjustment of millage other than an adjustment applicable to a municipality be made by the governing body of the County. Any adjustments with respect to the other ad valorem taxes levied for the Board (see 14

19 "Major Sources of Board Revenue" below) would be made by the Jefferson County Commission, except for the Special Tax (which is levied by the City). General Limitations on Ad Valorem Tax Rates The 1978 Amendments provide that all ad valorem taxes payable to the State and to all counties, municipalities and other taxing authorities with respect to any item of taxable property shall not exceed the following percentage of the fair and reasonable market value of such property in any single tax year: 2% in the case of Class I property; 1-1/2% in the case of Class II property; 1% in the case of Class III property; and 1-1/4% in the case of Class IV property. The total (state, county and municipal) millage levy on property situated in the City of Homewood is 75 mills, which is in excess of the limit with respect to Class I property (i.e., the property of utilities). Current Use Valuation Under the 1978 Amendments, Class III property (primarily agricultural, forest and single-family residential property) is permitted to be assessed, on application of the owner, on the basis of its current use value, with no consideration to be taken of prospective value if the property were put to some other possible use. Legislation enacted in 1982 established a procedure for determining the "current use" value of agricultural and timber property for ad valorem tax purposes. There is no agricultural and timber property located in the City. Additional Exemptions A constitutional amendment forming a part of the 1978 Amendments exempts from ad valorem taxation household and kitchen furniture, all farm tractors, all farming implements and all stocks of goods, wares and merchandise. The 1978 Amendments also increased certain exemptions of residences of persons over 65. Act No adopted at the 1982 Second Special Session of the Legislature of Alabama authorizes the several counties in the state to increase the present $2,000 homestead exemption from county taxation to an amount not greater than $4,000 and permits the extension of such exemption to district school taxes. The said Act further provides that no action affecting countywide or district ad valorem taxes levied solely for the support of public schools may be taken except by resolution of the school board that is the recipient of the proceeds of the tax or taxes so affected. The Board understands that the Jefferson County Commission does not intend to increase the homestead exemption pursuant to the provisions of said Act No The Board does not propose to take any action under said Act No that would have the effect of reducing the proceeds of any ad valorem taxes levied in the County solely for the support of the public schools. 15

20 Collections Ad valorem taxes levied with respect to motor vehicles are assessed and collected on a monthly basis at the time of the issuance of motor vehicle license plates, and therefore, the percentage of taxes collected is essentially 100%. The Jefferson County Tax Collector has in recent years consistently collected in excess of 98% of the total ad valorem taxes due in the County. Assessed Value by Property Classification The following chart reflects, for the tax year that ended September 30, 2011 (that is, the year for which taxes became due and payable on October 1, 2011, and delinquent on January 1, 2012), the appropriate division of net assessed valuation of property in the City by classification: Property Classification Assessed Valuation Class I Utilities $ 16,745,240 Class II All Property Not Otherwise Classified 332,375,806 Class III All Agricultural, Forest and Single Family Owner Occupied Residential Property and Historic Building and Sites 157,005,409 Class IV Private Passenger Automobiles and Trucks for Personal Use 36,719,180 Total $ 542,845,635 Largest Ad Valorem Taxpayers The following table indicates the ten (10) largest ad valorem taxpayers in the City for the tax year that ended September 30, 2010: 16

21 Assessed Ad Valorem Taxpayer Value Taxes Paid Brookwood Health Services, Inc. $18,493,380 $586,240 Colonial Realty LTD Partnership 13,776, ,717 SouthTrust Corporate Realty 11,118, ,469 Southern Living Real Estate, Inc. 10,641, ,348 AT&T 9,266, ,012 State Farm Mutual Automobile Insurance Co. 6,856, ,344 Daniel LP 6,546, ,509 Alabama Power Company 6,292, ,484 Brookwood Center Development Corp. 4,209, ,432 BWP Associates LTD 3,655, ,873 OTHER INDEBTEDNESS OF THE BOARD Outstanding Indebtedness The Board has no presently outstanding indebtedness other than the Series 2003 Warrants and the Note, both of which will be refunded simultaneously with the issuance of the Warrants. General Under the general laws of Alabama regulating the borrowing of funds 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, related facilities, school playgrounds and buildings for housing and repairing school buses, and for the purpose of purchasing school buses, but such warrants may not be general obligations of the Board and must be payable, as to both principal and interest, out of one, or more, of the following: (a) the proceeds of any ad valorem tax authorized to be levied for the purpose of paying such warrants, or for school purposes generally, and paid, apportioned, allocated or distributed to or for the benefit of the Board, (b) the proceeds of any privilege, license or excise tax or taxes that may be paid, apportioned, allocated or distributed to or for the benefit of the Board, or (c) any revenues of whatever kind or nature that may be paid, apportioned, allocated or distributed to or for the benefit of the Board by any governmental or taxing authority or public person pursuant to law or contract. The Board is not subject to any limitation on the amount of indebtedness it may incur for the purposes specified above. 17

22 Short Term Loans The Board is authorized under Alabama statutes to borrow money for current fiscal year needs in anticipation of current 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 not historically found it necessary to borrow money for current fiscal year operating needs. AD VALOREM TAXES AND OVERLAPPING DEBT IN THE CITY State and County Ad Valorem Taxes in the City Total ad valorem taxes in the City are presently 75 mills (equivalent to $7.50 per $100 of assessed valuation), which are distributed as follows: State of Alabama 6.5 mills Jefferson County General 5.6 mills Sewers.7 mill Road and Bridge 5.1 mills Rural Roads 2.1 mills Countywide School (1) 8.2 mills District School (2) 15.1 mills City of Homewood Special Tax 14.2 mills General Fund 13.0 mills Debt Service Fund 4.5 mills Total 75.0 mills (1) Distributed among the several school districts in the County on the basis of average pupil daily attendance; comprised of a 5.4 mill tax, a 2.1 mill tax and a.7 mill tax. (2) Includes a 5.5 mill district tax and the 9.6 mill district tax (both described under "Major Sources of Board Revenue" below). 18

23 Overlapping Debt On the basis of the assessed valuation of property (not including motor vehicles) in the City for the tax year that ended September 30, 2011 ($506,126,455, the direct debt of the Board and the overlapping debt of the Board with the County (with property, not including motor vehicles, having an assessed valuation of $7,894,068,711 for tax year 2011) is as follows: Direct Debt (including the Warrants) Percentage of Board s total indebtedness to assessed valuation in the City, not including motor vehicles 6.618% Per capita Board debt (based upon 2010 population of 25,167 in the City) $ 1, Overlapping Board Debt with Jefferson County General Obligation Indebtedness and City of Homewood General Obligation Indebtedness The Board (including the Warrants) $ 33,495,000 Jefferson County (applicable to City (1) ) 6,903,365 City of Homewood (2) $ 55,740,740 Total $ 96,139,105 (1) Based upon the ratio of assessed valuation in the City to assessed valuation in the County (6.411% for tax year 2011); approximate outstanding general obligation indebtedness as of September 30, 2010, $107,680,000. (2) General obligation warrant indebtedness as of September 30, Percentage of overlapping district-wide debt to assessed valuation % Per capita overlapping debt (based as above) $ 3,

24 GENERAL INFORMATION CONCERNING THE BOARD General Powers and Organization The Board is a quasi-corporation under the laws of Alabama having jurisdiction over all public schools in the City. The Board is composed of five (5) members who are appointed by the City Council on a staggered basis for five-year terms. The Board is composed of the following members whose current terms of office expire in the following years: Date of Present Ending of Business or Name Current Term Professional Affiliation Patti Atkinson May, 2014 Disability determination specialist, Social Security Administration J. Bruce Limbaugh May, 2012 Automobile dealer Christopher Hawkins July, 2016 Attorney, Bradley Arant Boult Cummings LLP Dr. James E. Williams, Jr. June, 2015 Physician, UAB Hospital R. Scott Williams May, 2013 Attorney, Haskell Slaughter Young & Rediker, LLC The Board elects the Superintendent of Education who serves as the Secretary of the Board and who is the chief administrator of the Board with general supervisory authority over all the public schools in the City. The present Superintendent is Dr. William T. Cleveland, who became Superintendent in The Board appoints the Chief School Financial Officer ("CSFO") who also serves as the Treasurer of the Board. The CSFO is responsible for receiving all moneys to which the Board may be entitled by law; the CSFO pays out such money only on written order of the Superintendent, approved by the President of the Board, and has no discretionary power over the disbursement of school funds. The present CSFO is Elizabeth Nesmith, who became CSFO in

25 The School System The Board formulates school policies and, upon the written recommendation of the Superintendent, appoints principals, teachers, clerical and professional assistants of the Board, prescribes the 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 in the operation of the schools. The Board operates a primary educational system ("the System") with a physical plant consisting of the following schools: School Grades Edgewood Elementary School K-5 Hall Kent Elementary School K-5 Shades Cahaba Elementary School K-5 Homewood Middle School 6-8 Homewood High School 9-12 Enrollment for the System for the two (2) most recent school years and for the current year and projected enrollment for school year is as follows: Grades K-5 1,716 1,750 1,752 1,685 Grades Grades , ,010 Of the System's instructional staff of 326 teachers, approximately 70% have a Master s or more advanced degree. All of the System s five (5) schools are accredited by the Southern Association of Colleges and Schools. 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. The Alabama Department of Education compiles information each year on the amount of local tax revenue that is spent annually, per student, by the various boards of education in the state. The Board ranked second in the state for the most recent compilation with an expenditure of $12,411 per student. 21

26 Employees and Employee Relations The Board currently employs approximately 505 full-time persons, of whom approximately 387 work in the instructional program of the schools under the administration of the Board. The Board's current pupil-to-teacher ratio is approximately 12.2:1. 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. Of the Board's 505 full-time employees, approximately 179 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 There is no litigation, pending or threatened, affecting the Board's authority to issue the Warrants or pledge the Special Tax for the payment of the principal and interest thereon, nor is there pending or threatened any litigation, the adverse outcome of which would be likely to have a material adverse fiscal impact on the Board. General Financial Information The following table shows a summary of the Board s revenues and expenditures for the last five (5) fiscal years: 22

27 COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES (unaudited) Revenues State of Alabama $ 13,817,007 $ 15,786,136 $ 13,291,780 $ 12,425,658 $ 14,246,976 Federal Government 1,315,382 1,392,552 1,858,386 3,554,982 3,606,034 Local Revenues 60,298,977 31,518,026 28,434,958 27,741,586 28,817,435 Other Revenues 2,066,373 1,336, , ,092 76,173 Total Revenues 77,497,739 50,033,300 44,467,122 44,675,318 46,746,619 Other Financing Sources Operating Transfers In 12,144,684 10,746,398 4,465,869 3,940,203 13,739,560 Total Other Financing Sources 12,144,684 10,746,398 4,465,869 3,940,203 13,739,560 Total Revenues and Other Financing Sources 89,642,423 60,779,698 48,932,991 48,615,521 60,486,180 Expenditures Instructional Services 24,255,741 27,930,494 26,846,035 26,918,463 27,130,009 Instructional Support Services 5,960,220 6,091,224 6,116,665 5,926,222 6,337,086 Operation and Maintenance 4,664,909 5,158,336 5,318,424 5,499,689 5,469,126 Auxiliary Services: 2,085,117 2,264,145 2,510,730 2,494,382 2,502,533 General Administrative 1,767,792 1,902,237 1,398,716 1,271,039 1,336,379 Capital Outlay 5,434,187 7,566,739 4,549,493 1,843,309 11,543,958 Debt Service 8,296,539 7,771,241 2,882,877 2,882,215 2,868,321 Other 953,326 1,534,445 1,356,303 1,426,899 1,160,435 Total Expenditures 53,417,831 60,218,861 50,979,243 48,262,218 58,347,851 Other Fund Uses Operating Transfers Out 12,144,684 10,746,398 4,465,869 3,940,203 3,476,656 Total Expenditures and Other Fund Uses 65,562,515 70,965,259 55,445,112 52,202,421 61,824,507 Excess of Revenues and Other Financing Sources Over (Under) Expenditures and Other Fund Uses 24,079,908 (10,185,561) (6,512,121) (3,586,900) (1,338,327) Fund Balances, Beginning of year 13,005,782 37,085,690 26,900,129 20,388,008 16,801,108 Adjustment to Prior Year's Ending Fund Balance (25,269) Fund Balances, End of year $ 37,085,690 $ 26,900,129 $ 20,388,008 $ 16,801,108 $ 15,437,511 23

28 Pension Plan The State of Alabama 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. The Board, therefore, historically has had no responsibility and presently has no outstanding liabilities in this area. 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 turn, 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. 24

29 Debt Service Funds. Debt Service Funds are used to account for the 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). Fiduciary funds are used to account for assets held on behalf of outside parties including other governments, or on behalf of other funds within the government. When these assets are held under the terms of a formal trust agreement, either a nonexpendable trust fund or an expendable trust fund is used. The terms "nonexpendable" and "expendable" refer to whether or not the government is under an obligation to maintain trust principal. Agency funds generally are used to account for assets that the government holds on behalf of other as their agent. Fiduciary funds consist of a Deferred Compensation Fund. Account groups are used to establish accounting control and accountability for the Board s general fixed assets and the unmatured principal of its general long-term debt. These account groups are not funds. They do not reflect available financial resources and related liabilities but are accounting records of the general fixed assets and general long-term debt and certain associated information. Basis of Accounting. The basis of accounting refers to when revenues and expenditures or expenses are recognized in the account and reported in the financial statements. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current asset and current liabilities generally are included in the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The modified accrual basis of accounting is used by all governmental fund types and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Those revenues susceptible to accrual are child nutrition funds, federal grants, and others, dependent upon the circumstances. 25

30 The Board of Education reports deferred revenues on its combined balance sheet, if any. Deferred revenues arise when a potential revenue does not meet both 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, the liability for deferred revenue is removed from the combined sheet and revenue is recognized. Budget On or before August 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 below: 26

31 FISCAL BUDGET FUND BALANCES - OCTOBER 1 $ 13,983,271 REVENUES State sources 15,214,075 Federal sources 1,880,156 Local sources 27,689,485 Other sources 83,000 TOTAL REVENUES $ 44,866,716 EXPENDITURES Instructional services 25,517,968 Instructional support services 6,059,759 Operation and maintenance services 5,086,239 Auxiliary services 2,401,581 General administrative services 1,320,387 Capital outlay 5,280,000 Debt service 2,177,875 Other expenditures 1,084,621 TOTAL EXPENDITURES $ 48,928,430 OTHER FUND SOURCES Net other fund sources (202,000) TOTAL EXPENDITURES AND OTHER FUND USES $ 48,726,430 EXCESS OF REVENUES AND OTHER FINANCING (3,859,714) FUND BALANCES - SEPTEMBER 30 $ 10,123,557 27

32 MAJOR SOURCES OF BOARD REVENUE revenue. The following major sources of revenue account for substantially all the Board s local 5.5 Mill District Tax This tax, levied pursuant to Section 2 of Amendment No. 3 to the Constitution of the State of Alabama, produced revenue for the Board of $2,943,228 in fiscal year 2011, or approximately 6.29% of total revenue. This tax is authorized to be levied for each consecutive tax year until and including the tax year that ends September 30, There are no outstanding pledges of, or contracts with respect to, these tax proceeds other than the Note (which will be paid and retired simultaneously with the issuance of the Warrants). 9.6 Mill District Tax The 9.6 mill school district ad valorem tax is authorized to be levied for each consecutive tax year until and including the tax year that ends September 30, 2020 (for which tax year the tax will become due and payable on October 1, 2020). The tax provided $4,932,065 or approximately 10.55% of the Board s total revenue for the fiscal year that ended September 30, There are no outstanding pledges of, or contracts with respect to, these tax proceeds Mill Municipal Tax The Special Tax produced revenue of $7,367,386 in fiscal year 2011, or approximately 15.76% of the Board s total revenue for that fiscal year. The Special Tax will be pledged as security for the Warrants. 8.2 Mill Countywide Tax The Board received $2,449,362, or about 5.23% of its total revenue for fiscal year 2011, from its share of an 8.2 mill school tax (comprised of 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 that ends September 30, 2021 (except to the extent that the.7 mill tax is authorized to be levied without limit as to time). There are no outstanding pledges of, or contracts with respect to, these tax proceeds. 28

33 City-Levied Sales Tax The City Council, by ordinance, levies a three-cent sales tax (though some transactions are taxed at lower rates), one cent of which is currently allocated wholly for educational purposes and the net receipts are paid to the Board each month. The fiscal year 2011 receipts for the Board were $7,402,581. Summary of Local Revenues The following table reflects the Board's local revenue sources and amounts for the fiscal years indicated: Tax/Appropriation (2) 5.5 mill district tax $ 2,809, $ 2,933, $ 3,015, $ 2,964, $ 2,943, mill district tax 4,682, ,915, ,053, ,966, ,932, mill municipal tax (1) 6,800, ,385, ,545, ,293, ,367, countywide tax 2,220, ,342, ,415, ,510, ,449, Municipal sales tax 7,654, ,735, ,282, ,998, ,402, Total $24,167, $25,312, $25,311, $24,733, $25,094, (1) (2) The Special Tax being pledged for payment of the principal of and interest on the Warrants. Unaudited. Education Accountability Plan The laws of Alabama contain provisions designed to impose financial accountability on boards of education. The State Board of Education, 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. If a board of education 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-to-day financial operations of the Board. If, after a reasonable period of time, 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 laws of Alabama. 29

34 Foundation Program Fund 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 funding mechanism for local boards of education. In order to participate in the Foundation Program, a local board must receive the equivalent of ten (10) mills of local 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 out of the Foundation Program Fund is determined by calculating the total cost of the Foundation Program for such local board, and subtracting the minimum local effort required (that is, the ten (10) mills of local 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. 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 of the Legislature of Alabama. The Act requires that the proceeds of the following major 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 of Alabama adopts an annual budget for the Trust Fund and monies are distributed to the Board based on average daily membership. Section of the Code of Alabama of 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 $371,553, or approximately.79% of total revenue. Monthly allotments are not currently being reduced. State appropriations to the Board in fiscal year 2011 of $14,246,976 were 30% of the Board s total revenue. State appropriations are expected to account for 34% of the Board s total revenue for fiscal year

35 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 % 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 revenue for the Board of $3,606,034 in fiscal year 2011 or approximately 7.71% of total revenue. GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION General The City is located in southeastern Jefferson County and has a total area of approximately 8.3 square miles, about 30 miles north of the geographic center of the State of Alabama. It is bounded on the north and the west by the corporate limits of the City of Birmingham, on the east by the City of Mountain Brook and on the south by the City of Vestavia Hills. It is home to Samford University which is affiliated with the Alabama Baptist Convention. Samford includes a college of arts and sciences, a divinity school as well as schools of business, law, nursing and pharmacy, with an undergraduate enrollment of 2,938 students and graduate and professional enrollment of 1,

36 Brookwood Hospital, with 602 staffed beds, is located in the City and is the largest employer in the City with approximately 2,600 employees. In addition to the public schools operated by the Board, three private schools are located in the City. John Carroll Catholic High School, The Islamic Academy of Alabama and Our Lady of Sorrows Catholic School. County Government Jefferson County is governed by a commission composed of five (5) Commissioners elected from five (5) districts for four-year terms and the terms of all Commissioners run concurrently. City Government The City of Homewood is governed by a City Council consisting of eleven (11) members and its administration is headed by a mayor. The president of the Council and the mayor are elected on an at-large basis for 4-year terms; the other councilmembers are elected from districts for 4-year terms. Population The population has been as follows: Census State - Alabama 3,444,165 3,893,888 4,040,587 4,447,100 4,779,736 County - Jefferson 644, , , , ,446 City - Homewood 21,245 21,412 23,436 25,043 25,167 Source: United States Bureau of the Census 32

37 Miscellaneous Demographic Information Following is various information with respect to demographic, transportation, housing, health services, income and agriculture in Jefferson County: Vital Statistics Median Marriage Rate Divorce Rate Birth Rate Death Rate Age per 1,000 per 1,000 per 1,000 per 1, Source: Alabama Department of Public Health, Center of Health Statistics Unemployment Rates (Percentage) United States Alabama Jefferson County City of Homewood Source: Alabama Department of Industrial Relations 33

38 Annual Average Labor Force Estimates * Birmingham-Hoover Metropolitan Area ** Employment Status Civilian Labor Force 532, , , , , , , , , ,227 Employment 511, , , , , , , , , ,816 Wage & Salary Emp. (1), (2) Goods Producing (1) Manufacturing (1) Service Producing (1) Unemployment 20,428 23,996 24,452 22,973 18,411 17,174 16,609 23,632 47,777 46,411 Rate (3) * ** (1) (2) (3) Estimates adjusted to the 2010 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. Estimated Median Family Income United States $47,700 $59,000 $61,500 $64,000 $64,400 $64,200 Alabama 45,200 48,700 51,700 53,200 54,100 54,600 Jefferson County * 57,400 55,500 59,100 60,900 61,700 62,000 * Birmingham-Hoover Metropolitan Area. Source: HUD Office of Economic Affairs, Economic and Market Analysis Division Per Capita Personal Income (Dollars) United States $33,123 $35,424 $37,698 $39,461 $40,674 $39,635 Alabama 28,370 29,838 31,421 32,773 33,928 33,411 Jefferson County 37,482 39,005 41,371 42,303 43,308 41,745 Source: U.S. Department of Commerce, Bureau of Economic Analysis 34

39 Poverty and Poverty Rates, 2010 Estimated Median Estimate Poverty Rate Household Income Number of Poor % United States $50,046 46,215, Alabama 40, , Jefferson County 41, , Source: State of Alabama, Department of Industrial Relations Occupancy Characteristics of Alabama Housing Units, 2009 Occupied Total Total Owner Renter Alabama 2,139,970 1,819,441 1,287, ,009 Jefferson County 307, , ,927 88,748 City - Homewood 10,559 9,474 5,575 3,717 Source: U.S. Department of Commerce Structural Characteristics of Alabama Housing Units, 2009 Family Non-Family Mobile Home Total Households Households or Trailer Alabama 1,819,441 1,236, , ,721 Jefferson County 267, ,053 94,622 10,807 City of Homewood 9,256 5,402 3, Source: U.S. Department of Commerce, Bureau of the Census 35

40 Average Value of Owner-Occupied Housing Units, 2009 Alabama... $111,900 Jefferson County ,700 City of Homewood ,700 Source: U.S. Census Bureau, American Community Survey Transportation Miles of Road 2009 Area in Motor Persons Vehicle State Square Vehicle Per Per State County Licensed County Miles Registration Vehicle Road Mile System System Total Airports Jefferson 1, , ,084 2,419 3 Mean Travel Time Drove Alone-2009 Number of Number of Number of (Minutes) Number Percent Accidents Injuries Fatalities County Jefferson , ,752 4, Source: U.S. Bureau of the Census and Alabama Department of Transportation Health Services Licensed Nursing Physicians Hospitals Beds Home Beds Medicare Enrollees County Jefferson 3, ,644 3, , ,170 Source: Center for Business and Economic Research, The University of Alabama 36

41 Employers The ten largest employers in the City are as follows: Approximate Number of Employer Products/Services Employees Brookwood Hospital healthcare 2,600 State Farm Mutual Auto Insurance Co. insurance 800 Wells Fargo Bank National Association banking institution 748 Samford University higher education 600 Sterne Agee & Leach, Inc. brokerage firm 600 Wal-Mart Stores, Inc. discount retail store 526 Homewood City Board of Education public schools 505 Southern Progress Corporation publisher of lifestyle magazines and books 400 City of Homewood city government 299 Sam's Club membership warehouse club 180 Source: The Dun & Bradstreet Corporation The twenty largest employers in the County are as follows: Approximate Number of Employer Products/Services Employees University of Alabama at Birmingham education, medical research 18,439 Regions Financial Corp. banking services 6,000 AT&T telecommunications 4,700 St. Vincent's Health System healthcare 4,662 City of Birmingham city government 4,544 Jefferson County Board of Education county public schools 4,500 Baptist Health System, Inc. integrated healthcare system 4,370 Jefferson County Commission county government 3,800 Children's Health System healthcare 3,713 Birmingham City Board of Education city public schools 3,300 Blue Cross and Blue Shield of Alabama employee benefits 3,281 BBVA Compass banking services 3,007 University of Alabama Health Services Foundation healthcare 2,900 Unites States Postal Service postal services 2,800 Brookwood Medical Center healthcare 2,600 American Cast Iron Pipe Co. ductile iron pipes, fire hydrants and valves 2,000 Hoover City Board of Education city board of education 2,000 Alabama Power Company utilities 1,845 U.S. Steel-Fairfield Works steel manufacturer 1,800 Source: Birmingham Area Chamber of Commerce 37

42 LEGAL INVESTMENT Under Section 9 of Act No , the Warrants will be legal investments for fiduciaries. Said Section 9 provides: "The warrants issued pursuant to the provisions of this act shall be legal investments for executors, administrators, trustees, and other fiduciaries." RATINGS The Board has furnished to Moody s Investors Service and Standard & Poor's certain information and materials respecting the Warrants and itself, and Moody s and Standard & Poor's have assigned to the Warrants the ratings shown on the cover page. Any explanation of the significance of such ratings may only be obtained from the rating agency. Generally, rating agencies base their ratings on the information and materials furnished to them by the prospective issuer, as well as on investigations, studies and assumptions by the rating agencies. There is no assurance that any such rating will remain in effect for any given period of time or that it may not be lowered or withdrawn entirely by such rating agency if in its judgment circumstances so warrant. Any such downward change in or withdrawal of such ratings may have an adverse effect on the market price of the Warrants. TAX EXEMPTION Pursuant to the provisions of the Internal Revenue Code of 1986, as amended ("the Code"), the exclusion of the interest income on the Warrants from gross income of the recipients thereof for federal income tax purposes is dependent upon the continued compliance by the Board with certain provisions of the Code subsequent to the issuance of the Warrants, including certain requirements relating to the use and expenditure of the proceeds of the Warrants, restrictions on the investment of proceeds earned prior to expenditure, and the requirement that certain earnings be rebated to the United States of America. In the Authorizing Resolution, the Board will make certain covenants ("the Compliance Covenants") to the effect that it will comply with all conditions to and requirements imposed by the Code for the exclusion from gross income of the recipients thereof for federal income tax purposes of the interest income on the Warrants. Failure to comply with the Compliance Covenants may result in the interest income on the Warrants being included in the gross income of the recipients thereof for federal income tax purposes from the date of issuance of the Warrants. Bradley Arant Boult Cummings LLP, Bond Counsel to the Board, is of the opinion that, based upon its examination of the Code and the Authorizing Resolution, and assuming compliance by the Board with the Compliance Covenants, the interest income on the Warrants is excludable from gross income of the recipients thereof for federal income tax purposes and the interest on the Warrants will not be an item of tax preference included in alternative minimum 38

43 taxable income for the purpose of computing the alternative minimum tax imposed by Section 55 of the Code. Bond Counsel will state in its opinion that it expresses no opinion with respect to the federal tax consequences of ownership of the Warrants under any other provision of the Code. Section 265 of the Code provides that, as a general rule, banks, thrifts, and other financial institutions may not deduct that portion of their interest expense that is allocable to taxexempt obligations acquired after August 7, 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 of the 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 Section 265 provides that not more than $10,000,000 of obligations 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 Warrants are not "qualified tax-exempt obligations" for purposes of Section 265. Bond Counsel is of the opinion that the interest income on the Warrants is exempt from present Alabama income taxation. AUDIT A copy of the annual audit of the Board for the fiscal year ended September 30, 2010, prepared by Carr, Riggs & Ingram, LLC, Certified Public Accountants, Birmingham, Alabama, is attached hereto as Appendix B. 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 of proceedings 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. 39

44 UNDERWRITING The Warrants are being purchased by Joe Jolly & Co., Inc. (the "Underwriter"), at a price equal to $36,005, (which price reflects an underwriting discount of $301,455 and net original issue premium of $2,811,796.10) plus accrued interest (if any) from the date of the Warrants to the date of delivery. The Board has been advised that the Underwriter intends to offer the Warrants to the public at prices that may be changed from time to time by the Underwriter without any requirement of prior notice. The Board has also been advised that the Underwriter may offer the Warrants to certain dealers and to others at prices lower than the public offering prices. 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 ("EMMA") system, a website created by the Municipal Securities Rulemaking Board ("MRSB") and approved by the SEC to provide a nationwide central location for municipal bond information and with the state information depository of Alabama ("SID"), if any. The notices of material events will be filed with the Municipal Securities Rulemaking Board on EMMA and with the SID, if any. The specific nature of the 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 B - Summary of Continuing Disclosure Agreement." The Continuing Disclosure Agreement has been entered into in order to assist the purchaser of the Warrants in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission. The Board is in compliance with the disclosure provisions in the Continuing Disclosure Agreements to which it is a party. 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 of the State of Alabama and all acts referred to herein are intended to be only brief outlines of certain provisions of each thereof and do not purport to summarize or describe all provisions thereof. 40

45 The distribution of this Official Statement has been approved by the Board. HOMEWOOD CITY BOARD OF EDUCATION By /s/ Patti Atkinson President Dated January 19,

46 APPENDIX A FORM OF APPROVING LEGAL OPINION

47 Appendix A Form of Approving Legal Opinion BRADLEY ARANT BOULT CUMMINGS LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama Homewood City Board of Education Homewood, Alabama Ladies and Gentlemen: We have examined certified copies of proceedings of the Homewood City Board of Education ("the Board") in the State of Alabama and other documents pertaining to the authorization and issuance of $33,495,000 HOMEWOOD CITY BOARD OF EDUCATION Special Tax School Warrants Series 2012 Dated February 1, 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 of the proceedings and documents so submitted to us. The Warrants recite that they are issued pursuant to the provisions of Act No of the 2011 Regular Session of the Legislature of Alabama. The said proceedings show that the Board has reserved the right to issue additional warrants ("Parity Warrants") payable from and secured by a pledge of the special tax hereinafter referred to, subject to certain limitations and conditions. 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 of Alabama; that the Warrants are valid warrants of the Board and constitute valid orders on the treasurer of the 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 of Homewood on May 20, 1947, and 1

48 on May 22, 2001, to be levied annually, without limit as to time, and which is now being levied at the rate of 14.2 mills per annum on each dollar of the assessed valuation of the taxable property in the said 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 said 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 of the 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 income taxation by the State of Alabama. We are of the further 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 of the Board pursuant to which the Warrants are being issued with respect to certain requirements of federal 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) of the Code, and the interest on the Warrants will not be an item of tax preference included in alternative minimum taxable income for the purpose of computing the minimum tax imposed by Section 55 of the Code. We express no opinion with respect to the federal tax consequences of ownership of the Warrants under any other provision of the Code. The documents submitted to us include a certificate of officers of the Board that the Board has no outstanding obligations that are secured by a pledge of the Special Tax except the Warrants. We express no opinion regarding the accuracy, adequacy, or completeness of the Official Statement of the Board respecting 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 of judicial 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, 2

49 APPENDIX B AUDITORS REPORT FOR FISCAL YEAR ENDED SEPTEMBER 30, 2010

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