OFFICIAL STATEMENT NEW ISSUE - REFUNDING SERIAL BONDS RATING: STANDARD & POOR’S CORP.:AA See “Bond Rating”, herein In the opinion of Fulbright & Jaworski LLP, New York, New York, a member of Norton Rose Fubright, Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, and interest on the Bonds will not be subject to the alternative minimum tax on individuals. In the further opinion of Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). See “TAX MATTERS” herein for a description of the opinion of Bond Counsel and certain other tax consequences. The Bonds will NOT be designated as “qualified tax-exempt obligations” pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986 (the “Code”). MOUNT SINAI UNION FREE SCHOOL DISTRICT, SUFFOLK COUNTY, NEW YORK (the “District”) $4,815,000 SCHOOL DISTRICT REFUNDING (SERIAL) BONDS, 2013 [BOOK-ENTRY-ONLY BONDS] (the “Bonds”) Dated: Date of Delivery Principal Due: January 15, 2014-2024, inclusive Interest Due: January 15, 2014 and semi-annually thereafter on January 15 and July 15 in each year to maturity SEE BOND MATURITY SCHEDULE HEREIN Security and Sources of Payment: The Bonds are general obligations of the District and will contain a pledge of the faith and credit of the District for the payment of the principal thereof and interest thereon and, unless paid from other sources, the Bonds are payable from ad valorem taxes which may be levied upon all the taxable real property within the District, without limitation as to rate or amount, subject to applicable statutory limitations. See “Limitation on Tax Levy – Tax Levy Limit Law” herein. Prior Redemption: The Bonds will not be subject to redemption prior to maturity. Form and Denomination: The Bonds will be issued as registered bonds, and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as the Securities Depository for the Bonds. Individual purchases of the Bonds may be made only in book-entry form in denominations of $5,000 or integral multiples thereof. Bondholders will not receive certificates representing their interests in the Bonds purchased. See “Book-Entry-Only System” under “The Bonds” herein. Payment: Payment of the principal of and interest on the Bonds to the Beneficial Owners of the Bonds will be made by DTC Participants and Indirect Participants in accordance with standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in “street name.” Payment will be the responsibility of the DTC Participant or Indirect Participant and not of DTC or the District, subject to any statutory and regulatory requirements as may be in effect from time to time. See “Book-Entry-Only System” under “The Bonds” herein. Fulbright & Jaworski LLP, a member of Norton Rose Fulbright, has not participated in the preparation of this Official Statement, nor verified the accuracy, completeness or fairness of the information contained herein, and, accordingly, express no opinion with respect thereto. The Bonds are offered when, as and if issued and received by the purchasers and subject to the receipt of the legal opinion as to the validity of the Bonds of Fulbright & Jaworski LLP, New York, New York, a member of Norton Rose Fulbright, Bond Counsel, and certain other conditions. Certain legal matters will be passed on for the Underwriter by its Counsel, Trespasz & Marquardt, LLP, Syracuse, New York. It is anticipated that the Bonds will be available for delivery in New York, New York, or at such place as may be agreed upon with the purchaser(s) on or about August 29 , 2013. August 13, 2013
Transcript
OFFICIAL STATEMENT NEW ISSUE - REFUNDING SERIAL BONDS RATING: STANDARD & POOR’S CORP.:AA See “Bond Rating”, herein In the opinion of Fulbright & Jaworski LLP, New York, New York, a member of Norton Rose Fubright, Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, and interest on the Bonds will not be subject to the alternative minimum tax on individuals. In the further opinion of Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). See “TAX MATTERS” herein for a description of the opinion of Bond Counsel and certain other tax consequences. The Bonds will NOT be designated as “qualified tax-exempt obligations” pursuant to Section 265(b)(3) of the Internal Revenue Code of 1986 (the “Code”).
MOUNT SINAI UNION FREE SCHOOL DISTRICT, SUFFOLK COUNTY, NEW YORK
(the “District”)
$4,815,000 SCHOOL DISTRICT REFUNDING (SERIAL) BONDS, 2013 [BOOK-ENTRY-ONLY BONDS]
(the “Bonds”) Dated: Date of Delivery Principal Due: January 15, 2014-2024, inclusive
Interest Due: January 15, 2014 and semi-annually thereafter on January 15 and July 15 in each year to maturity
SEE BOND MATURITY SCHEDULE HEREIN
Security and Sources of Payment: The Bonds are general obligations of the District and will contain a pledge of the faith and credit of the District for the payment of the principal thereof and interest thereon and, unless paid from other sources, the Bonds are payable from ad valorem taxes which may be levied upon all the taxable real property within the District, without limitation as to rate or amount, subject to applicable statutory limitations. See “Limitation on Tax Levy – Tax Levy Limit Law” herein.
Prior Redemption: The Bonds will not be subject to redemption prior to maturity. Form and Denomination: The Bonds will be issued as registered bonds, and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as the Securities Depository for the Bonds. Individual purchases of the Bonds may be made only in book-entry form in denominations of $5,000 or integral multiples thereof. Bondholders will not receive certificates representing their interests in the Bonds purchased. See “Book-Entry-Only System” under “The Bonds” herein. Payment: Payment of the principal of and interest on the Bonds to the Beneficial Owners of the Bonds will be made by DTC Participants and Indirect Participants in accordance with standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered in “street name.” Payment will be the responsibility of the DTC Participant or Indirect Participant and not of DTC or the District, subject to any statutory and regulatory requirements as may be in effect from time to time. See “Book-Entry-Only System” under “The Bonds” herein. Fulbright & Jaworski LLP, a member of Norton Rose Fulbright, has not participated in the preparation of this Official Statement, nor verified the accuracy, completeness or fairness of the information contained herein, and, accordingly, express no opinion with respect thereto. The Bonds are offered when, as and if issued and received by the purchasers and subject to the receipt of the legal opinion as to the validity of the Bonds of Fulbright & Jaworski LLP, New York, New York, a member of Norton Rose Fulbright, Bond Counsel, and certain other conditions. Certain legal matters will be passed on for the Underwriter by its Counsel, Trespasz & Marquardt, LLP, Syracuse, New York. It is anticipated that the Bonds will be available for delivery in New York, New York, or at such place as may be agreed upon with the purchaser(s) on or about August 29 , 2013.
August 13, 2013
MOUNT SINAI UNION FREE SCHOOL DISTRICT SUFFOLK COUNTY, NEW YORK
$4,815,000 SCHOOL DISTRICT REFUNDING (SERIAL) BONDS, 2013
MATURITIES, RATES AND YIELDS Dated: Date of Delivery Principal Due: January 15, 2014-2024, inclusive
Interest Due: January 15, 2014 and semi-annually thereafter on January 15 and July 15 in each year to maturity
No dealer, broker, salesman or other person has been authorized by the District to give any information or to make any representations, other than those contained in this Official Statement and if given or made, such other information or representations must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained by the District from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. “The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of its responsibilities under the federal securities law, but the Underwriter does not guaranty the accuracy or completeness of such information.” IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKETS. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
Page
THE BONDS .............................................................................................................................................................................. 1
DESCRIPTION OF THE BONDS .................................................................................................................................................... 1
BOOK-ENTRY-ONLY SYSTEM ................................................................................................................................................... 1
AUTHORIZATION AND PURPOSE ................................................................................................................................................ 3
SUMMARY OF BONDS TO BE REFUNDED ................................................................................................................................... 4
REFUNDING FINANCIAL PLAN ................................................................................................................................................... 4
SOURCES AND USES OF BOND PROCEEDS ................................................................................................................................. 5
SECURITY AND SOURCE OF PAYMENT ...................................................................................................................................... 5
REMEDIES UPON DEFAULT ....................................................................................................................................................... 5
THE DISTRICT ......................................................................................................................................................................... 6
DISTRICT ORGANIZATION ......................................................................................................................................................... 6
ENROLLMENT HISTORY ............................................................................................................................................................ 6
CURRENT AND ESTIMATED FUTURE PUBLIC SCHOOL ENROLLMENT ......................................................................................... 6
DISTRICT FACILITIES ................................................................................................................................................................. 7
ECONOMIC AND DEMOGRAPHIC INFORMATION ...................................................................................................... 7
POPULATION TRENDS ............................................................................................................................................................... 7
INCOME DATA .......................................................................................................................................................................... 8
INDEBTEDNESS OF THE DISTRICT ................................................................................................................................... 8
CONSTITUTIONAL AND STATUTORY REQUIREMENTS ................................................................................................................ 8
AUTHORIZED BUT UNISSUED DEBTS ...................................................................................................................................... 12
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FINANCES OF THE DISTRICT ........................................................................................................................................... 12
FUND STRUCTURE AND ACCOUNTS ........................................................................................................................................ 13
BASIS OF ACCOUNTING ........................................................................................................................................................... 13
BUDGET PROCESS ................................................................................................................................................................... 13
Real Property Taxes........................................................................................................................................................... 14
State Aid ............................................................................................................................................................................. 14
RECENT EVENTS AFFECTING STATE AID TO NEW YORK SCHOOL DISTRICTS.......................................................................... 14
EMPLOYEE PENSION SYSTEM ................................................................................................................................................. 15
OTHER POST EMPLOYMENT BENEFITS .................................................................................................................................... 17
TAX INFORMATION ............................................................................................................................................................ 18
REAL PROPERTY TAXES ......................................................................................................................................................... 18
STAR - SCHOOL TAX EXEMPTION .......................................................................................................................................... 19
VALUATIONS, RATES, LEVIES AND COLLECTIONS ................................................................................................................... 19
SELECTED LISTING OF LARGE TAXABLE PROPERTIES ............................................................................................................. 20
RISK FACTORS AND MARKET FACTORS AFFECTING FINANCINGS OF THE STATE AND
MUNICIPALITIES OF THE STATE.................................................................................................................................... 20
ANNUAL AND CONTINUING DISCLOSURE UNDERTAKING .................................................................................... 21
ADDITIONAL INFORMATION ........................................................................................................................................... 24
APPENDIX A: FINANCIAL INFORMATION
APPENDIX B: AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
APPENDIX C: ANNUAL AND CONTINUING DISCLOSURE UNDERTAKING
APPENDIX D: FORM OF OPINION OF FULBRIGHT & JAWORSKI LLP
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OFFICIAL STATEMENT
MOUNT SINAI UNION FREE SCHOOL DISTRICT SUFFOLK COUNTY, NEW YORK
$4,815,000 SCHOOL DISTRICT REFUNDING (SERIAL) BONDS, 2013 BOOK-ENTRY-ONLY BONDS
This Official Statement and the appendices thereto present certain information relating to the Mount Sinai Union Free School District, in the County of Suffolk, in the State of New York (the “District,” “County” and “State,” respectively) in connection with the sale of $4,815,000 School District Refunding (Serial) Bonds, 2013 (the “Bonds”). All quotations from and summaries and explanations of provisions of the Constitution and laws of the State and acts and proceedings of the District contained herein do not purport to be complete and are qualified in their entirety by reference to the official compilations thereof. All references to the Bonds and the acts and the proceedings of the District relating thereto are qualified in their entirety by reference to the definitive form of the Bonds and such proceedings.
THE BONDS
Description of the Bonds
The Bonds will be dated the date of delivery, and will mature in the principal amounts on January 15, in each of the years 2014 to 2024, inclusive, in the principal amounts as set forth on the inside cover page hereof.
The Bonds will issued in fully registered form, and, when issued will be registered in the name of Cede & Co. as partnership nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as Securities Depository for the Bonds. The District Clerk will be the fiscal agent for the Bonds while the Bonds are registered in the name of Cede & Co. Individual purchases of the Bonds may be made in book-entry-only-form, in the principal amount of DTC, $5,000 or integral multiples thereof. Purchasers will not receive certificates representing their ownership interest in the Bonds.
Interest on the Bonds will be payable January 15, 2014 and semi-annually thereafter on January 15 and July 15 in each year until maturity. Principal and interest will be paid by the District to which will in turn remit such principal and interest to its Participants, for subsequent distribution to the Beneficial Owners of the Bonds, as described herein. See “Book-Entry-Only System” herein. The Bonds may be transferred in the manner described on the Bonds and as referenced in certain proceedings of the District referred to therein. The record date of the Bonds will be the last business day of the month preceding each interest payment date. The District will act as Paying Agent for the Bonds. The District’s contact information is as follows: Linda Jensen, Assistant Superintendent for Business, Mount Sinai Union Free School District, P.O. Box 397, North Country Road, Mount Sinai, NY 11766, Phone (631) 870-2561 (Ext. 709), Fax (631) 473-0905 and email: [email protected].
Optional Redemption
The Bonds will not be subject to redemption prior to their maturity.
Book-Entry-Only System
DTC, New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds and deposited with DTC for all of the Bonds bearing the same rate of interest. .
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DTC is limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilities the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of the Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found a www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct or Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co., or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping accounts of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them or notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to the Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District on 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 of DTC (nor its nominee) or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to
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Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District, disbursement of such payments to Direct Participants will be the responsibility of DTC), and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District. Under such circumstances, in the event that a successor depository is not obtained, bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. Source: The Depository Trust Company, New York, New York. The information contained in the above section concerning DTC and DTC’s book-entry system has been obtained from sample offering document language supplied by DTC, but the District takes no responsibility for the accuracy thereof. In addition, the District will not have any responsibility or obligation to participants, to indirect participants or to any beneficial owner with respect to: (i) the accuracy of any records maintained by DTC, and participant or any indirect participant; (ii) the payments by DTC or any participant or any indirect participant of any amount with respect to the principal of, or premium, if any, or interest on the bonds or (iii) any notice which is permitted or required to be given to Bondowners. THE DISTRICT WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY PARTICIPANTS, OR ANY INDIRECT PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OR ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF OR INTEREST ON THE BONDS; (III) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO HOLDERS; OR (IV) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (V) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS HOLDER. THE DISTRICT CANNOT AND DOES NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE TO DIRECT PARTICIPANTS OR THAT DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (I) PAYMENTS OF THE PRINCIPAL OF OR INTEREST ON THE BONDS; (II) CONFIRMATION OF THEIR OWNERSHIP INTEREST IN THE BONDS; OR (III) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO. AS NOMINEE, AS REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SO SERVE AND ACT IN THE MANNER DESCRIBED IN THE OFFICIAL STATEMENT.
Certificated Bonds
DTC may discontinue providing its services with respect to the Bonds at any time by giving notice to the District and discharging its responsibilities with respect thereto under applicable law, or the District may terminate its participation in the system of book-entry-only transfers through DTC at any time. In the event that such book-entry-only system is discontinued, and a replacement book-entry securities depository is not appointed, the Bonds will be issued in registered form in denominations of $5,000, or integral multiples thereof. Principal of and interest on the Bonds when due will be payable at the principal corporate trust office of a bank or trust company to be named by the District as the fiscal and paying agent; certificated Bonds may be transferred or exchanged at no cost to the owner of such bonds at any time prior to maturity at the corporate trust office of the fiscal and paying agent for bonds of the same or any other authorized denomination or denominations in the same aggregate principal amount upon the terms set forth in the certificate of the President of the Board of Education authorizing the sale of the Bonds and fixing the details thereof and in accordance with the Local Finance Law.
Authorization and Purpose
The Bonds are being issued pursuant to the Constitution and statutes of the State, including among others, the Local Finance Law, and a refunding bond resolution duly adopted by the Board of Education on June 11, 2013 (the “Refunding Bond Resolution”), authorizing the refunding of all or a part of the $7,700,000 School District Serial Bonds - 2005 (the “Refunded Bonds”). The original amounts which are the amounts to be refunded are set forth below:
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Summary of Bonds to be Refunded
$7,700,000 School District Serial Bonds-2005 Amount to Interest Date of Call CUSIP
Maturity Date be Refunded Rate Redemption Price Numbers
The Refunding Financial Plan will permit the District to realize, as a result of the issuance of the Bonds, cumulative dollar and present-value debt service savings. The net proceeds of the Bonds (after payment of the underwriting fee and other costs of issuance relating to the Bonds), will be used to purchase non–callable, direct obligations of or obligations guaranteed by the United States of America (the “Government Obligations”) which, together with remaining cash proceeds from the sale of the Bonds, will be placed in an irrevocable trust fund (the “Escrow Fund”) to be held by the Bank of New York Mellon (the “Escrow Holder”), a bank located and authorized to do business in the State, pursuant to the terms of an escrow contract by and between the District and the Escrow Holder, dated as of the delivery date of the Bonds (the “Escrow Contract”). The Government Obligations so deposited will mature in amounts which, together with the cash so deposited, will be sufficient to pay the principal of, interest on and applicable redemption premiums, if any, of the Refunded Bonds on the dates of their redemption. The Refunding Plan requires the Escrow Holder, pursuant to the refunding bond resolution of the District and Escrow Contract, to pay the Refunded Bonds at maturity or at the earliest date on which the Refunded Bonds may be called for redemption prior to maturity. The holders of the Refunded Bonds will have a first lien on all investment income from, and maturing principal of the Government Obligations, along with other available monies held in the Escrow Fund. The Escrow Contract shall terminate upon final payments by the Escrow Holder to the paying agents/fiscal agent for the Refunded Bonds amounts from the Escrow Fund adequate for the payment, if full, of the Refunded Bonds, including interest and the redemption premium payable with respect thereto. Under the Refunding Plan, the Refunded Bonds will continue to be general obligations of the District. However, inasmuch as the Government Obligations held in the Escrow Fund will be sufficient to meet all required payments of principal, interest and redemption premium requirements when required in accordance with the Refunding Plan, it is not anticipated that any other source of payment will be required.
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Sources and Uses of Bond Proceeds
Sources: Par Amount of Bonds .............................................................................................................. $4,815,000.00 Premium .................................................................................................................................. 523,846.85 Total .................................................................................................................................... $5,338,846.85 Uses: Escrow Deposit ....................................................................................................................... $5,247,318.46 Allowance for Costs of Issuance and Contingency ................................................................. 91,528.39 Total .................................................................................................................................... $5,338,846.85
Security and Source of Payment The Bonds are general obligations of the District and will contain a pledge of its faith and credit for the payment of the principal of and interest on the Bonds as required by the Constitution and laws of the State (State Constitution, Art. VIII, Section 2; Local Finance Law, Section 100.00). All the taxable real property within the District is subject to the levy of ad valorem taxes to pay the Bonds and interest thereon, without limitation as to rate or amount, except as to certain statutory limitations which may result from the application of Chapter 97 of the Laws of 2011. See “Limitation on Tax Levy – Tax Levy Limit Law” herein.
Remedies Upon Default
Section 3-a of the General Municipal Law (“GML”) provides, subject to exceptions not pertinent, that the rate of interest to be paid by the District upon any judgments or accrued claims against it shall not exceed nine per centum per annum. This provision might be construed to have application to the holders of the Bonds in the event of a default in the payment of the principal of or interest on the Bonds. In accordance with the general rule with respect to municipalities and school districts, judgments against the District may not be enforced by levy and execution against property owned by the District. Section 99-b of the State Finance Law (“SFL”) provides for a covenant between the State and the purchasers and the holders and owners from time to time of the bonds issued by the school districts in the State for school purposes that it will not repeal, revoke or rescind the provisions of Section 99-b of SFL, or amend or modify the same so as to limit, impair or impede the rights and remedies granted thereby. At the Extraordinary Session of the State Legislature held in November, 1975, legislation was enacted which purported to suspend the right to commence or continue an action in any court to collect or enforce certain short-term obligations of the City of New York. The effect of such act was to create a three-year moratorium on actions to enforce the payment of such obligations. On November 19, 1976, the Court of Appeals, the State’s highest court, declared such act to be invalid on the ground that it violates the provisions of the State Constitution requiring a pledge by such City of its faith and credit for the payment of such obligations. As a result of the Court of Appeals decision, the constitutionality of that portion of Title 6-A of Article 2 of the Local Finance Law enacted at the 1975 Extraordinary Session of the State Legislature, authorizing any county, city, town or District with respect to which the State has declared a financial emergency to petition the State Supreme Court to stay the enforcement against such municipality or school district of any claim for payment relating to any contract, debt or obligations of the municipality or school district during the emergency period, is subject to doubt. In any event, no such emergency has been declared with respect to the District.
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THE DISTRICT
Description The District, with a currently estimated population of 13,231, is located on the north shore of Long Island adjacent to Port Jefferson, and is approximately 65 miles east of New York City. The District covers an area of approximately six square miles. Largely suburban-rural in character, the District contains the Mount Sinai Harbor, affording facilities for boating and fishing. Several Brookhaven Township beaches are nearby, including Cedar Beach with extensive frontage of Long Island Sound. Shopping and commercial activity is located mainly along Route 25A, with more extensive commercial activity in Port Jefferson and nearby shopping centers. Farming remains as an important industry with the major crops of peaches and nursery stock. Typical residential construction in the District is in the $350,000-$750,000 class. Zoning regulations are mostly one acre residential minimum. The main highways serving the District are State Route 25A (east-west) and Patchogue-Mount Sinai Road (north-south). Rail transportation to western points is available through the Port Jefferson Branch of the Long Island Rail Road. Police protection is provided by the County of Suffolk. Gas and electric are provided by the LIPA and National Grid, respectively. Fire protection is provided by the Mount Sinai Fire District. Water service is provided by the Suffolk County Water Authority.
District Organization
The Board of Education (the “Board”), which is the policy-making body of the District, consists of seven members with overlapping three-year terms so that as nearly as possible an equal number shall be elected to the Board each year. The President and the Vice President are selected by the Board Members. The administrative officers of the District, whose duty it is to implement the policies of the Board of Education and who are appointed by the Board, include the Superintendent of Schools, the Business Administrator, the School District Clerk and the District Treasurer.
Enrollment History
School Year School Enrollment 2006-07 ............................................... 2,594 2007-08 ................................................ 2,619 2008-09 ................................................ 2,640 2009-10 ................................................ 2,651 2010-11 ................................................ 2,668 2011-12 ................................................ 2,606 2012-13 ................................................ 2,600
Current and Estimated Future Public School Enrollment 2013-14 ................................................ 2,585
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District Facilities Date of Name of School Grades Construction Capacity Mount Sinai Elementary School ................ K-4 1964 1,147 Mount Sinai Middle School ...................... 5-8 1979 1,000 Mount Sinai High School .......................... 9-12 1991 1,000
Employees
Some employees are represented by organized labor as follows: Expiration Date Approx. No. Name of Union of Contract of Members Mount Sinai Teachers’ Association ............................................. 6/30/17 180 Civil Service Employees Association .......................................... 6/30/13a 120 Mount Sinai Administrators’ Association ..................................... 6/30/13a 17 a. In negotiation.
ECONOMIC AND DEMOGRAPHIC INFORMATION
Population Trends The following table sets forth population statistics for the District, the Town of Brookhaven and Suffolk County. Town of Suffolk Year District Brookhaven County 2006 ....................................................... 10,043 486,317 1,507,211 2007 ....................................................... 10,689 488,378 1,511,732 2008 ....................................................... 10,695 489,222 1,513,435 2009 ....................................................... 13,160 490,416 1,518,475 2010 ....................................................... 13,231 486,040 1,493,350 2011 ....................................................... 13,208 487,790 1,498,816
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Income Data Per Capita Money Income 1990 2000 2010 2011* Town of Brookhaven $16,726 $24,191 $ 32,663 $32,491 County of Suffolk 18,481 26,577 35,411 35,049 State of New York 16,501 23,389 30,791 30,679 Median Household Income 1990 2000 2010 2011* Town of Brookhaven $47,074 $62,475 $ 81,654 $82,581 County of Suffolk 49,128 65,288 84,235 84,106 State of New York 32,965 43,393 54,148 55,246 Source: United States Bureau of the Census
*Note: Based on American Community Survey 1-Year Estimates (2011)
Unemployment Rate Statistics
Unemployment statistics are not available for the District as such. The smallest area for which such statistics are available (which includes the District) is the Town of Brookhaven. The information set forth below with respect to such Town, County and State is included for information purposes only. It should not be inferred from the inclusion of such data in this Statement that the District is necessarily representative of the Town, County and State or vice versa. Town of Suffolk New York Brookhaven County State Annual Averages: 2009 ..................................................... 7.2% 7.3% 8.4% 2010 ..................................................... 7.3 7.6 8.6 2011 ..................................................... 7.3 7.3 8.0 2012 ..................................................... 7.7 7.8 8.6 2013 (5 Month) ..................................... 6.9 7.1 8.2 Source: New York State Department of Labor
INDEBTEDNESS OF THE DISTRICT
Constitutional and Statutory Requirements
The State Constitution limits the power of the District (as well as other municipalities and school districts of the State) to issue obligations and contract indebtedness. Such constitutional limitations include the following, in summary form, and are generally applicable to the District and the Bonds: Purpose and Pledge. The District shall not give or loan any money or property to or in aid of any individual or private corporation or private undertaking or give or loan its credit to or in aid of any of the foregoing or any public corporation. The District may contract indebtedness only for a District purpose and shall pledge its faith and credit for the payment of principal of and interest thereon. Payment and Maturity. Except for certain short-term indebtedness contracted in anticipation of taxes, indebtedness shall be paid in annual installments commencing no later than two years after the date such indebtedness shall have been contracted and ending no later than the expiration of the period of probable usefulness of the object or purpose as determined by statute; no installment may be more than fifty per centum in excess of the smallest prior installment, unless the District has authorized the issuance of indebtedness having substantially level or declining annual debt service. The District is required to provide an annual appropriation for the payment of interest due during the year on its indebtedness and for the amounts required in such year for payment of principal of its serial bonds and bond anticipation notes.
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General. The District is further subject to constitutional limitation by the general constitutionally imposed duty on the State Legislature to restrict the power of taxation, assessment, borrowing money, contracting indebtedness and loaning the credit of the District so as to prevent abuses in the exercise of such powers; however, as has been noted under "Security and Source of Payment", the State Legislature is prohibited by a specific constitutional provision from restricting the power of the District to levy taxes on real estate for the payment of interest on or principal of indebtedness theretofore contracted. However, the New Tax Levy Limit Law imposes a statutory limitation on the District’s power to increase its annual tax levy. The amount of such increase is limited by the formulas set forth in the New Levy Limit Law. See “Legal Matters and the New Tax Levy Limit Law” and “New Tax Levy Limit Law,” herein.
Statutory Procedure In general, the State Legislature has authorized the power and procedure for the District to borrow and incur indebtedness through the enactment of the Local Finance Law, subject to the provisions set forth above. The power to spend money generally derives from other law, including specifically the Education Law and the General Municipal Law.
Pursuant to the Local Finance Law, the District authorizes the issuance of bonds by the adoption of a bond resolution approved by at least two-thirds of the members of the Board of Education, the finance board of the District. Customarily, the District Board of Education has delegated to the President of the Board of Education, as chief fiscal officer of the District, the power to authorize and sell bonds and bond anticipation notes in anticipation of the sale of authorized bonds.
The Local Finance Law also provides that where a bond resolution is published with a statutory form of notice, the validity of the bonds authorized thereby, including bond anticipation notes issued in anticipation of the sale thereof, may be contested only if:
(1) such obligations are authorized for a purpose for which the District is not authorized to expend money, or
(2) there has not been substantial compliance with the provisions of law which should have been complied with in the authorization of such obligations
and an action contesting such validity is commenced within twenty days after the date of such publication, or,
(3) such obligations are authorized in violation of the provisions of the State Constitution.
Except on rare occasions the District complies with this estoppel procedure. It is a procedure that is recommended by Bond Counsel, but is not an absolute legal requirement.
Each bond resolution usually authorizes the construction, acquisition or installation of the object or purpose to be financed, sets forth the plan of financing and specifies the maximum maturity of the bonds subject to the legal restrictions (Constitution, Local Finance Law and case law) relating to the period of probable usefulness thereof.
The Board of Education, as the finance board of the District, has the power to enact bond resolutions. In addition, such finance board has the power to authorize the sale and issuance of obligations. However, such finance board may delegate the power to sell the obligations to the President of the Board of Education, the chief fiscal officer of the District, pursuant to the Local Finance Law.
Statutory law in New York permits bond anticipation notes to be renewed each year, provided that annual principal installments are made in reduction of the total amount of such notes outstanding. These installments must commence no later than two years from the date of the first issuance of such notes, and such renewals may not extend more than five years beyond the original date of borrowing. (See “Payment and Maturity” under “Constitutional Requirements” herein).
The Local Finance Law also contains provisions granting the District power to issue certain other short-term general obligation indebtedness, including revenue and tax anticipation notes and budget notes (See “Indebtedness of the District” herein). There is no constitutional limitation on the amount that may be raised by the District by tax on real estate in any fiscal year to pay principal and interest on all indebtedness. However, the New Tax Levy Limit Law, imposes a statutory limitation on the power of the District to increase its annual tax levy. The amount of such increases is limited by the formulas set forth in the New Tax levy Limit Law. See “Increase Procedural Limitation Legislation” herein.
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The following pages set forth certain details with respect to the indebtedness of the District.
Computation of Debt Limit and Calculation of Total Net Indebtedness (As of August 6, 2013)
State Assessed Equalization Full Valuation Rate Valuation 2012-2013 ................................................... $ 15,423,966 .91% $1,694,941,319 Debt Limit - 10% of Full Valuation ............................................................................................... $169,494,132 Inclusions1 Outstanding Bonds ................................................................................................................ $ 13,815,000 Bond Anticipation Notes ........................................................................................................ 0 Total Indebtedness ......................................................................................................................... $ 13,815,000 Less: Estimated State Aid ............................................................................................................. 9,050,0002 Net Indebtedness ............................................................................................................................ $ 4,765,0003 Net Debt Contracting Margin ......................................................................................................... $164,729,132 1. The State Constitution does not provide for the inclusion of tax anticipation or revenue anticipation notes in the computation of the
statutory debt limit of the District. 2. Represents estimate of moneys receivable by the District from the State as an apportionment for debt service for school building
purposes, based on most recent information received by the District from the State Department of Education. The amount shown is not necessarily the amount the District will ultimately receive.
3. Represents 2.81% of the Debt Limit ($169,494,132).
Details of Short-Term Indebtedness Outstanding
The District has tax anticipation notes outstanding in the amount of $7,000,000 due to mature on June 25, 2014.
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Debt Service Requirements – Outstanding Bonds and Refunding Bonds
Additionally, the District entered into an energy performance lease on April 24, 2012, in the amount of $3,670,000. The District pays a bi-annual payment of $153,660 with the first payment beginning on September 15, 2013 through and including September 15, 2027.
Trend of Outstanding Debt
Fiscal Year Ending June 30: 2009 2010 2011 2012 2013
Debt Outstanding End of Year: Bonds ................................................ $18,850,000 $18,875,000 $16,545,000 $15,405,000 $13,815,000 Bond Anticipation Notes .................. - - - - - Other Notes ................................ - - - - -
Total .................................................... $18,850,000 $18,875,000 $16,545,000 $15,405,000 $13,815,000
Authorized But Unissued Debt
The District has no authorized but unissued debt.
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Calculation of Estimated Overlapping and Underlying Indebtedness Applicable Applicable Overlapping Date of Percentage Total Net Units Report Applicable Indebtedness Indebtedness County of Suffolk ............................................ 05-23-13 4.94% $100,640,891 $64,923,036 Town of Brookhaven ....................................... 01-14-13 2.10 11,050,291 10,208,296 Mount Sinai Fire District ................................. 12-31-12 99.00 -0- -0- Totals ........................................................................... $111,691,182 $75,131,332 Sources: Annual Reports of the respective units for the most recently completed fiscal year on file with the Office of the State
Comptroller or more recently published Official Statements.
Debt Ratios
(As of August 6, 2013)
Amount Per
Capitaa Percentage
Of Full Valueb
Total Direct Debt ........................................................................ $13,815,000 $1,046 0.815% Net Direct Debt .......................................................................... 4,755,000 360 0.281 Total Direct & Applicable Total Overlapping Debt .................. 125,506,182 9,502 7.405 Net Direct & Applicable Net Overlapping Debt ........................ 79,886,332 6,048 4.713
a. The current estimated population of the District is 13,208.
b. The full valuation of taxable real property in the District for 2012-13 is $1,694,941,319.
Authorized But Unissued Debts As of the date of this Official Statement, the District has no authorized but unissued debt.
FINANCES OF THE DISTRICT
Independent Audit Procedures
The financial affairs of the District are subject to periodic compliance review by the Office of the State Comptroller to ascertain whether the District has complied with the requirements of various state and federal statutes. The financial statements of the District are audited each year by an independent public accountant. The last such audit covers the fiscal year ended June 30, 2012. A copy of such report is included herein as Appendix B.
Investment Policy
Pursuant to State law, including Sections 10 and 11 of the GML, the District is generally permitted to deposit moneys in banks or trust companies located and authorized to do business in the State. All such deposits, including special time deposit accounts and certificates of deposit, in excess of the amount insured under the Federal Deposit Insurance Act, are required to be secured in accordance with the provisions of and subject to the limitations of Section 10 of the GML. The District may also temporarily invest moneys in: (1) obligations of the United States of America; (2) obligations guaranteed by agencies of the United States of America where the payment of principal and interest are guaranteed by the United States of America; (3) obligations of the State, (4) with the approval of the Comptroller, in tax anticipation notes or revenue anticipation notes issued by any municipality, school district, or district corporation, other than those notes issued by the District, itself; (5) certificates of participation issued in connection with installment purchase agreements entered into by political
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subdivisions of the State pursuant to Section 109-b(10) of the GML; (6) obligations of a New York public benefit corporation which are made lawful investments for municipalities pursuant to the enabling statute of such public benefit corporation; or (7) in the case of moneys held in certain reserve funds established by the District pursuant to law, in obligations of the District. All of the foregoing investments are required to be payable or redeemable at the option of the owner within such times as the proceeds will be needed to meet expenditures for purposes for which the moneys were provided and, in the case of obligations purchased with the proceeds of bonds or notes, shall be payable or redeemable in any event, at the option of the owner, within two years of the date of purchase. Unless registered or inscribed in the name of the District, such instruments and investments must be purchased through, delivered to and held in custody of a bank or trust company in the State pursuant to a written custodial agreement as provided by Section 10 of the GML. The Board of Education of the District has adopted an investment policy and such policy conforms with applicable laws of the State governing the deposit and investment of public moneys. All deposits and investments of the District are made in accordance with such policy.
Fund Structure and Accounts
The General Fund is the general operating fund for the District and is used to account for substantially all revenues and expenditures of the District. The District also maintains a special aid fund and school lunch fund. In addition, a capital projects fund is used to record capital facility projects, while a trust and agency fund accounts for assets received by the District in a fiduciary capacity.
Basis of Accounting
The District-wide and fiduciary fund financial statements are reported on the accrual basis of accounting using the economic resources measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transaction, in which the District gives or receives value without directly receiving or giving equal value in exchange, include real property taxes, grants and donations. On an accrual basis, revenue from real property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied and the related expenditures are incurred. The fund statements are reported on the modified accrual basis of accounting using the current financial resources measurement focus. Revenues are recognized when measurable and available. The District considers all revenue reported in the governmental funds to be available if the revenues are collected within 180 days after the end of the fiscal year, except for real property taxes, which are considered to be available if they are collected within 60 days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Source: Audited Financials of the District.
Budget Process
The District’s fiscal year begins on July 1 and ends on June 30. Starting in the fall or winter of each year, the District’s financial plan and enrollment projection are reviewed and updated and the first draft of the next year’s proposed budget is developed by the central office staff. During the winter and early spring, the budget is developed and refined in conjunction with school building principals and department supervisors, and by law must be submitted to voter referendum on the third Tuesday of May each year. The District’s budget for fiscal year 2012-2013 was subject to the provisions of Chapter 97 of the Laws of 2011, which imposes a limitation on the amount of real property taxes that a school district may levy in a given year. See “Tax Increase Limitation Legislation,” herein. The 2013-2014 budget was approved by District voters on May 21, 2013 and a summary is included in Appendix A – Financial Information.
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Revenues
The District receives most of its revenue from a real property tax on all non-exempt real property situated within the District and from State aid. A summary of such revenues for the five most recently completed fiscal years may be found in Appendix A. On June 24, 2011, the Chapter 97 of the Laws of 2011 was enacted, which imposes a tax levy limitation upon the municipalities, school districts and fire districts in the State, including the District. See “Tax Increase Limitation Legislation,” herein. Real Property Taxes
See “Tax Information”, herein.
State Aid
The District is dependent in significant part on financial assistance from the State in the form of State aid for both operating and capital purposes. The District received approximately 26.43% of its total General Fund Revenue operating from State aid in Fiscal Year 2012-2013 and expects to receive approximately 27.01% in Fiscal Year 2011-2012. Should the District in the current fiscal year or in future fiscal years fail to receive State aid expected from the State in the amounts and at the times expected, occasioned by a delay in the payment of such monies and not by a reduction in State aid, the District is authorized by the Local Finance Law to provide operating funds by borrowing in anticipation of the receipt of uncollected State aid. (see “Recent Events Affecting State Aid to State School Districts”). The State is not constitutionally obligated to maintain or continue State aid to the District. There can be no assurance that the State appropriation for State aid to school districts will be continued in future years, either pursuant to existing formulas or in any form whatsoever. The availability of such monies and the timeliness of such payment could be affected by a delay in the adoption of the State budget and other circumstances including State fiscal stress. State aid appropriated and apportioned to the District can be paid only if the State has such monies available therefor. State budgetary restrictions, which eliminate or substantially reduce State aid could have a material adverse effect upon the District requiring either a counterbalancing increase in revenues from other sources to the extent available, or a curtailment of expenditures. In addition to the amount of State Aid budgeted by the District, the State is expected to make STAR payments representing tax savings provided by school districts to their taxpayers under the STAR Program (see “STAR - School Tax Exemption”).
Recent Events Affecting State Aid to New York School Districts
State aid to school districts in the State has declined in some recent years. School district fiscal year (2009-2010): Total State aid for the 2009-2010 fiscal year was maintained at the 2008-2009 levels in part due to the use of Federal aid made available as part of the American Reinvestment and Recovery Act of 2009 (“ARRA”). During said fiscal year, the District’s receipt of State aid was delayed as a result of several initiatives adopted by then Governor Paterson in response to the State’s ongoing and worsening fiscal crisis. Despite such delays, the District did receive all of the State aid due to it for the fiscal year ended June 30, 2010. School district fiscal year (2010-2011): The total reduction in State aid for the 2010-2011 fiscal year was approximately $2.1 billion; however, this amount was partially offset by $726 million in Federal aid for education, including funding from ARRA and other federal initiatives. As a result, the net State aid reduction totaled approximately $1.4 billion. School district fiscal year (2011-2012): The total reduction in State aid for the 2011-2012 fiscal year was $1.3 billion or 6.1 percent from the previous year, and all aid was received on time.
School district fiscal year (2012-2013): The State Legislature adopted the State budget on March 30, 2012. The budget includes an increase of $751 million in State aid for school districts.
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The District cannot predict at this time whether there will be any reductions in and/or delays in the receipt of State aid during the District’s 2013-2014 fiscal year. The District believes that it would mitigate the impact of any delays or the reduction in State aid by reducing expenditures, increasing revenues, appropriating other available funds on hand, and/or by any combination of the foregoing. (See also “Market Factors Affecting Financing of the State and School Districts of the State” herein). The following table sets forth State General Fund revenue and State aid revenues during the last five fiscal years and the amount budgeted for the fiscal years ending June 30, 2013.
1. Budgeted revenues include the application of reserves and fund balance.
Expenditures
The major categories of expenditure for the District are General Support, Instruction, Employee Benefits,
Pupil Transportation and Debt Service. A summary of the expenditures for the five most recently completed fiscal years may be found in Appendix A.
Employee Pension System
State Certified employees (teachers and administrators) are members of the State Teachers’ Retirement
System (“TRS”). Payments to the TRS are generally deducted from State aid payments. All non-State Certified employees of the District eligible for pension or retirement benefits are members of the State and Local Employees’ Retirement System (“ERS”). Both the TRS and ERS are non-contributory with respect to the members hired prior to July 27, 1976. All members of the respective systems hired on or after July 27, 1976, contribute 3% of their gross annual salary toward the cost of retirement programs. Chapter 86 of the Laws of 2000 eliminated the 3% contribution for Tier 3 and Tier 4 members with ten years of service credit. On December 10, 2009, the Governor signed into law the creation of a new Tier 5, which is effective for new ERS and TRS employees hired after January 1, 2010. New ERS employees in Tier 5 will now contribute 3% of their salaries and new TRS employees in Tier 5 will contribute 3.5% of their salaries. There is no provision for these contributions to cease for Tier 5 employees after a certain period of service. Additionally, on March 16, 2012, the Governor signed into law the new Tier 6 pension program, effective for new ERS employees hired after April 1, 2012. The Tier 6 legislation provides for increased employee contribution rates of between 3% and 6%, an increase in the retirement age from 62 years to 63 years, a readjustment of the pension multiplier, and a change in the time period for final average salary calculation from three years to five years. Tier 6 employees will vest in the system after ten years of employment and will continue to make employee contributions throughout employment. Historically there has been a state mandate requiring full (100%) funding of the annual actuarially required local governmental contribution out of current budgetary appropriations. With the strong performance of the Retirement System in the 1990s, the locally required annual contribution declined to zero. However, with the subsequent decline in the equity markets, the pension system became underfunded. As a result, required contributions increased substantially to 11% to 15% (percentage dependent on tier) of payroll for employees’ retirement systems, respectively. Wide swings in the contribution rate resulted in budgetary planning problems for many participating local governments. While the District is aware of the potential negative impact on its budget and will take the appropriate steps to budget accordingly for the increase, there can be no assurance that its financial position will not be negatively impacted.
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With regard to the ERS, a pension reform bill has been signed by the Governor into Law as Chapter 49 of the Laws of 2003. Chapter 49 changes the cycle of billing to match budget cycles of the District. Under the previous method, the District was unsure of how much it paid to the system until after its budget was implemented. Under the new system the contribution for a given fiscal year will be based on the value of the pension fund on the prior April 1 instead of the following April 1 so that the District will be able to more accurately include the cost of the contribution into its budget. Chapter 49 requires the District to make a minimum contribution of 4.5% of payroll every year, including years in which the investment performance of the fund would make a lower contribution possible. On July 30, 2004, Governor Pataki signed into law Chapter 260 of the Laws of 2004 (“Chapter 260”). Chapter 260 contains three components which altered the way municipalities and school districts contribute to the State pension system: (1) revision of the payment due date, (2) extension of the period of time for pension debt amortization, and (3) authorization to establish a pension reserve fund. Prior to the effective date of the provisions of Chapter 260, the annual retirement bill sent to municipalities and school districts from the State had reflected pension payments due between April 1 and March 31, consistent with the state fiscal year. Chapter 260 provided for the following changes:
� Contribution Payment Date Change: The law changed the date on which local pension contributions are due to the State. The annual required contribution became due February 1 annually instead of December 15.
� Pension Contributions Reserve Fund: The law creates special authorization to create a new category of reserve fund under the GML. Municipalities and school districts may now establish a retirement contribution reserve fund that can be funded from other available current government resources.
The investment of monies, and assumptions underlying same, of the Retirement Systems covering the District’s employees is not subject to the direction of the District. Thus, it is not possible to predict, control or prepare for future unfunded accrued actuarial liabilities of the Retirement Systems (“UAALs”). The UAAL is the difference between total actuarially accrued liabilities and actuarially calculated assets available for the payment of such benefits. The UAAL is based on assumptions as to retirement age, mortality, projected salary increases attributed to inflation, across-the-board raises and merit raises, increases in retirement benefits, cost-of-living adjustments, valuation of current assets, investment return and other matters. Such UAALs could be substantial in the future, requiring significantly increased contributions from the District which could affect other budgetary matters. Concerned investors should contact the Retirement Systems administrative staff for further information on the latest actuarial valuations of the Retirement Systems. On September 3, 2009, the State Comptroller announced that employer contribution rates for the ERS would increase in 2011. Due to recent market performance, the State Common Retirement Fund (Fund) had a negative 26.3% return for the fiscal year ended March 31, 2009. The average ERS rate is 11.9% (up from 7.4% in 2010). On December 10, 2009, then Governor Paterson signed into law pension reform legislation that will provide (according to a Division of the Budget analysis) more than $35 billion in long-term savings to State taxpayers over the next thirty years. The legislation creates a new Tier 5 pension level, the most significant reform of the State’s pension system in more than a quarter-century. Key components of Tier 5 include:
• Raising the minimum age at which civilian can retire without penalty from 55 to 62 and imposing a penalty of up to 38% for any civilian who retires prior to age 62.
• Requiring employees to continue contributions of 3% of their salaries toward pension costs so long as they accumulate additional pension credits.
• Increasing the minimum years of service required to draw a pension from 5 years to 10 years. • Capping the amount of overtime that can be considered in the calculation of pension benefits for
civilians at $15,000 per year, and for police and firefighters at 15% of non-overtime wages.
Due to significant capital market declines in the recent past, the State’s Retirement System portfolio has experienced negative investment performance and severe downward trends in market earnings. As a result of the foregoing, New York State Comptroller Thomas DiNapoli has announced that the employer contribution rate for the State’s Retirement System in 2011 and subsequent years will be higher than the minimum contribution rate established by Chapter 49. To mitigate the expected increases in the employer contribution rate, legislation has
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been enacted that would permit schools districts to borrow a portion of their required ERS payments from the State’s Retirement System at an interest rate of 5% percent. The new legislation also requires school districts that choose to amortize establish reserve accounts to fund future payment increases that are a result of fluctuations in pension plan performance.
The following chart represents the TRS and ERS contributions for each of the last five completed fiscal
years. Fiscal Year Ending TRS ERS Total 2008 $1,812,235 $252,443 $2,064,678 2009 1,704,272 239,022 1,943,294 2010 1,812,235 252,443 2,064,678 2011 1,985,508 387,463 2,372,971 2012 2,650,812 551,155 3,201,967 2013 (Budgeted) 3,208,830 630,000 3,838,830
Other Post Employment Benefits
School districts and Boards of Cooperative Education Services, unlike other municipal units of the government in the State, have been prohibited from reducing retiree health benefits or increasing health care contributions received or paid by retires below the level of benefits or contributions afforded to or required from active employees. This protection from unilateral reduction of benefits had been extended annually by the State Legislature until recently when legislation was enacted to make permanent these health insurance benefit protections for retirees. Legislative attempts to provide similar protection to retirees of other local units of government in the State have not succeeded as of the date hereof. Nevertheless, many such retirees of all varieties of municipalities in the State do presently receive such benefits. The District provides post-retirement healthcare benefits to various categories of former employees. These costs may be expected to rise substantially in the future. GASB Statement No. 45 (“GASB 45”) of the Government Accounting Standards Board (“GASB”) requires governmental entities, such as the District, to account for the cost of certain non-pension post-employment benefits as it accounts for vested pension benefits. OPEB refers to “other post-employment benefits”, and refers to benefits other than pension benefits. OPEB consists primarily of health care benefits, and may include other benefits such as disability benefits and life insurance. Before GASB 45, OPEB costs were generally accounted for and managed as current expeses in the year paid and were not reported as a liability on governmental financial statements. GASB 45 requires municipalities and school districts to account for OPEB liabilities in the same manner as they already account for pension liabilities, generally adopting the actuarial methodologies used for pensions, with adjustments for the different characteristics of OPEB and the fact that most municipalities and school districts have not set aside any funds against this liability. Unlike GASB Statement No. 27, which covers accounting for pensions, GASB 45 does not require municipalities or school districts to report a net OPEB obligation at the start. Unlike GASB 45, based on actuarial valuation, an annual contribution (“ARC”) will be determined for each municipality or school district. The ARC is the sum of (a) the normal cost for the year (the present value of future benefits being earned by the current employees) plus (b) amortization of the unfunded accrued liability (benefits already earned by current and former employees but not provided for), using an amortization period of not more than 30 years. If a municipality or school district contributes an amount less than the ARC, a net OPEB obligation will result, which is required to be recorded as a liability on its financial statements. GASB 45 does not require that the unfunded liability actually be amortized nor that it be advance funded, only that the municipality or school district account for its unfunded accrued liability and compliance in meeting its ARC.
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As of July 1, 2011, the actuarial accrued liability (“AAL”), the portion of the actuarial present value of the total future benefits based on the employees’ service rendered to the measurement date, is $42.75 million. The actuarial value of the Plan’s assets was $0, resulting in an unfunded actuarial accrued liability (“UAAL”) of $42.75 million. The District’s annual OPEB cost was $3,432,576 million and the ARC was $3.4 million. The District is on a pay-as-you-go funding basis and paid $1.07 million for the fiscal year ending June 30, 2012 resulting in a projected year-end Net OPEB obligation of $8.2 million. The District’s unfunded actuarial accrued OPEB liability could have a material adverse impact upon the District’s finances and could force the District to reduce services, raise taxes or both. There is no authority in the State to establish a reserve fund for the liability at this time. Actuarial valuation will be required every two years for OPEB plans with more than 200 members, every three years if there are less than 200 members. Additional information about GASB 45 and other accounting rules applicable to municipalities and school districts may be obtained from GASB.
TAX INFORMATION
Real Property Taxes
The District derives its power to levy an ad valorem real property tax from the State Constitution;
methods and procedures to levy, collect and enforce this tax are governed by the Real Property Tax Law. Real property assessment rolls used by the District are prepared by the Town of Brookhaven. Assessment valuations are determined by the Town assessor and the State Board of Real Property Services which is responsible for certain utility and railroad property. In addition, the State Board of Real Property Services annually establishes State Equalization Rates for all localities in the State, which are determined by statistical sampling of market sales/assessment studies. The equalization rates are used in the calculation and distribution of certain State aid and are used by many localities in the calculation or debt contracting and real property taxing limitations. The District is not subject to constitutional real property taxing limitations.
The following table sets forth real property taxes as a percentage of the District’s General Fund revenue (excluding other financing sources) for each of the fiscal years 2008 through 2012 inclusive and for the 2012-2013 fiscal year, based upon the District’s adopted budget for such year.
*Budgeted revenues include the application of reserves and fund balance.
Tax Collection Procedure
Property taxes for the District, together with County, Town and Fire District taxes, are collected by the
Town Tax Receiver. Such taxes are due and payable in equal installments on December 1 and May 10, but may be paid without penalty by January 10 and May 31, respectively. Penalties on unpaid taxes are 1% per month from the date such taxes are due and 10% after May 31.
The Town Tax Receiver distributes the collected tax money to the Town, fire and school districts prior to distributing the balance collected to the County. Uncollected amounts are not segregated by the Receiver and any deficiency in tax collection is the County’s liability. The District thereby is assured of full tax collection.
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Tax Increase Limitation Legislation
Although the State Legislature is limited by Article VIII, Section 12 of the State Constitution from imposing limitations on the power to raise taxes to pay “interest on or principal of indebtedness theretofore contracted”, the State Legislature may from time to time impose additional limitations on the ability to issue new indebtedness or to raise taxes therefor. On June 24, 2011, Chapter 97 of the Laws of 2011 was signed into law by the Governor (the “Tax Levy Limit Law” or the “Law”). The Tax Levy Limit Law generally applies to local governments and school districts in the State (with certain exceptions) and imposes additional procedural requirements on the ability of municipalities and school districts to levy certain year-to-year increases in real property taxes. The District is subject to the Tax Levy Limit Law, beginning with the District’s budget for its fiscal year beginning July 1, 2012. Pursuant to the Tax Levy Limit Law, additional procedural requirements are imposed if a District seeks to increase the tax levy by more than the lesser of (i) two percent (2%) or (ii) the annual increase in the consumer price index, over the amount of the District’s prior year’s tax levy (the “Tax Levy Increase Limit”). In the event the District seeks to adopt a budget requiring a tax levy exceeding the Tax Levy Increase Limit, the budget would require the approval by at least 60% of those voting. Moreover, if the budget is defeated twice (or once if the District decides not to resubmit the budget to the voters) the District must adopt a budget with a tax levy no greater than that of the prior year. The Law permits certain exceptions to the Tax Levy Increase Limit. The District may levy taxes exceeding the Tax Levy Increase Limit, if necessary, to support the following expenditures: (i) funds needed to pay judgments arising out of tort actions that exceed five percent of the total tax levied by the District in the prior fiscal year (ii) required pension payments (but only that portion of such payments attributable to the average actuarial contribution rate exceeding two percentage points) and, (iii) voter-approved capital expenditures. Taxes necessary for these expenditures will not be included in the calculation of the Tax Levy Increase Limit. The Law also provides for adjustments to be made to the District’s Tax Levy Increase Limit based upon changes in the assessed value of the taxable real property in the District. Additionally, the District will be permitted to carry forward a certain portion of its unused tax levy capacity from the prior year. Notes or Bonds of the District issued prior to the June 24, 2011 effective date of the Tax Levy Limit Law are payable from real property taxes that can be levied as necessary without regard to any Constitutional or statutory limit. Inasmuch as the Law has no exclusion for principal and interest on notes and bonds, however, levies required to pay principal and interest on notes and bonds which were not issued to finance voter-approved capital expenditures will be included in the calculation of the Tax Levy Increase Limit. In the absence of administrative or judicial guidance, and with a lack of any experience operating under the Law, the effect of the Law on the District’s finances and its ability to continue to levy taxes sufficient to both pay debt service on pre June 24, 2011 and post June 24, 2011 notes and bonds and meet its other governmental responsibilities is uncertain.
STAR - School Tax Exemption
The STAR (School Tax Relief) program provides State-funded exemptions from school property taxes to homeowners for their primary residences. School districts are reimbursed in full by the State for real property taxes exempted pursuant to the STAR program on or before the first business day of January in each year. Approximately 9% of the District’s 2011-2012 school tax levy was exempted by the STAR program and the District has received full reimbursement of such exempt taxes from the State. Based on information furnished to the District, approximately 9% of the District’s 2012-2013 school tax levy is expected to be exempted by the STAR program and the District has received full reimbursement of such exempt taxes from the State. (See “State Aid” herein).
Valuations, Rates, Levies and Collections Tax Rate Fiscal Year State Per $1,000 Ending Assessed Equal. Full Assessed Amount June 30 Valuation Rate Valuation Valuation Tax Levy Uncollected 2009 $16,005,101 .73% $2,192,467,123 $2,055.02 $28,760,672 $-0- 2010 16,076,319 .77 2,087,833,636 2,118.06 34,050,730 -0- 2011 15,823,980 .86 1,839,997,674 2,199.10 34,798,510 -0- 2012 15,551,495 .91 1,708,955,494 2,285.60 36,301,994 -0- 2013 15,423,966 .91 1,694,941,319 2,351.94 34,441,473 -0-
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Selected Listing of Large Taxable Properties 2012-13 Assessment Roll
Name
Type
Assessed Valuation
Long Island Power Authority .................................................... Utility $198,546 Mount Sinai Shopping Center ................................................... Shopping Center 190,000 North Shore Farmland Corporation ......................................... Commercial 59,428 Keyspan. .................................................................................... Utility 50,218 Mount Sinai Associates LLC .................................................... Residential 48,180 PSAC Deb elopement Partners Dept-PT-NY-07106 ................ Commercial 44,000 Verizon New York Inc. ............................................................. Utility 32,641 Dandey Real Estate Corp. ......................................................... Residential 32,300 Chung Wo Properties ................................................................ Commercial 26,600 Total $681,913
1. Represents 4.42% of the total taxable assessed valuation of the District.
LITIGATION
In common with other school districts, the District from time to time receives notices of claim and is party to litigation. In the opinion of the District attorney, unless otherwise set forth herein and apart from matters provided for by applicable insurance coverage, there are no significant claims or actions pending in which the District has not asserted a substantial and adequate defense, nor which, if determined against the District, would have an adverse material effect on the financial condition of the District.
RISK FACTORS
AND
MARKET FACTORS AFFECTING FINANCINGS OF THE STATE AND MUNICIPALITIES OF THE STATE
The financial condition of the District as well as the market price of and the market for the Bonds could be affected by a variety of factors, many of which are beyond the District’s control, including, for example: (i) certain adverse events in the domestic and world economy; (ii) a significant default or other financial crisis occurring in the affairs of the State or its agencies or political subdivisions; and (iii) a seeking by a municipality or large taxable property owner of remedies pursuant to the Federal Bankruptcy Code. These events may affect the acceptability of obligations issued by borrowers within the State or the ability of the District to arrange for additional borrowings. In addition, the market for and the market value of the Bonds could be adversely affected if the District encountered real or perceived difficulty in marketing notes or bonds to pay principal on outstanding notes at maturity. The District, like other issuers, is dependent on the orderly functioning of the municipal debt markets to refinance existing debt coming due, and could be unable to pay its notes at maturity if market access proved unavailable.
The District is dependent in part on financial assistance from the State. If the State should experience difficulty in borrowing funds in anticipation of the receipt of State taxes and revenues in order to pay State aid to municipalities and school districts in the State, the District may be affected by a delay in the receipt of State aid until sufficient State taxes have been received by the State in order to make State aid payments to the District. (See also “State Aid”)
In the State’s Annual Information Statement (the “AIS”), dated May 11, 2012, the State Division of the Budget (“DOB”) indicated that the General Fund ended fiscal year 2012 with a cash balance of $1.79 billion. DOB estimates that the enacted budget for fiscal year 2013, if implemented successfully, is sufficient to eliminate the General Fund budget gap of $3.5 billion in State fiscal year 2013, and will leave budget gaps of approximately $950 million, $3.4 billion and $4.1 billion in State fiscal years 2014, 2015 and 2016, respectively. The AIS and other information about the State’s finances are provided by the State Division of the Budget on its website.
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ANNUAL AND CONTINUING DISCLOSURE UNDERTAKING
In accordance with the requirements of Rule 15c2-12 as the same may be amended or officially interpreted from time to time (the “Rule”) promulgated by the Securities and Exchange Commission (the “Commission”), the District has agreed to provide, at the time of delivery of the Bonds, an executed Annual and Continuing Disclosure Undertaking in substantially the form attached as Appendix C.
On August 1, the District filed a material event notice regarding the status of the ratings of the bond insurers on various bonds issued by the District. Since the fall of 2008, there have been in excess of 25 rating actions on bond insures reported by Moody’s, Standard & Poor’s and Fitch. Due to widespread knowledge of the downgrades to such bond insurers, material event notices were not filed pursuant to every rating action. The underlying credit of the District was not affected by downgrades to the bond insurance companies. Other than as noted above, the District has complied with all previous Undertakings in all material respects pursuant to the Rule.
TAX MATTERS
Tax Exemption
The delivery of the Bonds is subject to the opinion of Bond Counsel to the effect that interest on the Bonds for federal income tax purposes (1) will be excludable from gross income, as defined in Section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the “Code”), pursuant to Section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. The statutes, regulations, rulings, and court decisions on which such opinion is based are subject to change.
Interest on the Bonds owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust (“FASIT”). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed.
In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the District made in a certificate (the “Tax Certificate”) dated the date of delivery of the Bonds pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume continuing compliance by the District with the provisions of the Tax Certificate subsequent to the issuance of the Bonds. The Tax Certificate contains covenants by the District with respect to, among other matters, the use of the proceeds of the Bonds and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage “profits” from the investment of proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Bonds to be includable in the gross income of the owners thereof from the date of the issuance.
Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel’s opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-exempt status of the interest on tax-exempt obligations. If an audit of the Bonds is commenced, under current procedures the IRS is likely to treat the District as the “taxpayer,” and the owners of the Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of its ultimate outcome.
In the opinion of Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes imposed by the State or any political subdivision thereof (including The City of New York).
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Except as described above, Bond Counsel expresses no opinion with respect to any federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.
Existing law may change to reduce or eliminate the benefit to holders of the exclusion of interest thereon from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Bonds. Prospective purchasers of the Bonds should consult with their own tax advisors with respect to any proposed or future changes in tax law.
Tax Accounting Treatment of Discount and Premium on Certain Bonds
The initial public offering price of certain Bonds (the “Discount Bonds”) may be less than the amount payable on such Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount allocable to the holding period of such Discount Bond by the initial purchaser will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Bonds described above under “Tax Exemption.” Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year.
However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income. Owners of Discount Bonds should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Bonds.
The purchase price of certain Bonds (the “Premium Bonds”) paid by an owner may be greater than the amount payable on such Bonds at maturity. An amount equal to the excess of a purchaser’s tax basis in a Premium Bond over the amount payable at maturity constitutes premium to such purchaser. The basis for federal income tax purposes of a Premium Bond in the hands of such purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by a purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Bonds for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Bonds.
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LEGAL MATTERS
The legality of the authorization and issuance of the Bonds will be covered by the unqualified legal opinion of Fulbright & Jaworski LLP, New York, New York, a member of Norton Rose Fulbright, Bond Counsel. Such legal opinion will be delivered in substantially the form attached hereto as “Appendix D”.
RATING The Standard & Poor’s Corporation (“S&P”) 55 Water Street, New York, NY 10041, Telephone: (877) 299-2569 and Fax: (212) 438-5153 has assigned a rating of “AA” to the Bonds. The rating reflects only the view of S&P, and any desired explanation of the significance of such rating should be obtained from S&P. Generally, a rating agency bases its ratings on the information and materials furnished to it and on investigation, studies and assumptions by the rating agency. There is no assurance that a particular rating will apply for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Any downward revision or withdrawal of such rating could have an adverse affect on the market price of the Bonds or the availability of a secondary market for such Bonds. Such rating should not be taken as a recommendation to put or hold the Bonds.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The accuracy of the mathematical computations (a) regarding the adequacy of the maturing principal of and interest earned on the Government Obligations together with the uninvested cash, to pay, when due, the principal of and interest on and redemption premium, if any, with regard to the Refunded Bonds on the applicable payment dates and (b) relating to the determination by Bond Counsel of compliance with the regulations and rulings promulgated under Section 148 of the Code, as amended, will be verified by Causey Demgen & Moore Inc. Such verification of the accuracy of the mathematical computations will be based, in part, upon factual information supplied by the District and the Underwriter (as defined below).
UNDERWRITING
Jefferies LLC, (the "Underwriter=") has agreed, subject to certain conditions, to purchase the Bonds from the District. The Underwriter=s obligations are subject to certain conditions precedent, and the Underwriter will be obligated to purchase all the Bonds if any of the Bonds are delivered at a purchase price of $5,309,624.28 which represents the aggregate par amount of the Bonds, plus an original premium of $523,846,85, less an underwriting discount of $29,222.57. The Bonds may be offered and sold to certain dealers (including dealers depositing such Bonds into unit investment trusts) at prices lower than the public offering prices as set forth on the cover page hereof. The initial public offering prices may be changed from time to time by the Underwriter.
FINANCIAL ADVISOR
Munistat Services, Inc. has acted as the Financial Advisor to the District in connection with the sale of the Bonds.
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ADDITIONAL INFORMATION
Additional information may be obtained from the office of Linda Jensen, the Assistant Superintendent for Business of the Mount Sinai Union Free School District, P.O. Box 397, North Country Road, Mount Sinai, New York 11766, telephone number 631/870-2561, email: [email protected] or from Munistat Services, Inc., 12 Roosevelt Avenue, Port Jefferson Station, New York 11776, telephone number 631/331-8888. Munistat Services, Inc. may place a copy of this Official Statement on its website at www.munistat.com. Unless this Official Statement specifically indicates otherwise, no statement on such website is included by specific reference or constitutes a part of this Official Statement. Munistat Services, Inc. has prepared such website information for convenience, but no decisions should be made in reliance upon that information. Typographical or other errors may have occurred in converting original source documents to digital format, and neither the District nor Munistat Services, Inc. assumes any liability or responsibility for errors or omissions on such website. Further, Munistat Services, Inc. and the District disclaim any duty or obligation either to update or to maintain that information or any responsibility or liability for any damages caused by viruses in the electronic files on the website. Munistat Services, Inc. and the District also assume no liability or responsibility for any errors or omissions or for any updates to dated website information. Any statements in this Official Statement involving matters of opinion or estimates, whether or not expressly stated, are intended as such and not as representations of fact. No representation is made that any of such statements will be, in fact, realized. This Official Statement is not to be construed as a contract or agreement between the District and the original purchasers or owners of any of the Bonds. Except for its review of the descriptions of the terms of the Bonds and its approving legal opinion to be rendered on the Bonds as Bond Counsel to the District, Fulbright & Jaworski LLP, a member of Norton Rose Fulbright, has not participated in the preparation of this Official Statement, nor verified the accuracy, completeness or fairness of the information contained herein, and accordingly, expresses no opinion with respect thereto. The preparation and distribution of this Official Statement has been authorized by a resolution of the District which delegates to the President of the Board of Education the power to sell and issue the Bonds. This Official Statement has been duly executed and delivered by the President of the Board of Education of the District of Mount Sinai, New York.
President of the Board of Education Mount Sinai Union Free School District Mount Sinai, New York August 13, 2013
APPENDIX A
FINANCIAL INFORMATION
Statement of Revenues, Expenditures and Fund BalancesGeneral Fund
Fiscal Year Ending June 30:2008 2009 2010 2011 2012
Revenues: Real Property Taxes $ 27,546,568 $ 28,760,672 $ 29,929,449 $ 30,194,123 $ 30,833,098 Other Tax Items 4,346,513 4,191,383 4,113,294 4,566,385 4,708,070 Charges for Services 270,761 199,287 309,320 275,707 292,195 Use of Money and Property 520,506 248,377 126,089 111,422 65,696 Forfeitures 3,659 2,703 5,469 Sale of Property & Compensation for Loss 2,237 2,441 6,648 4,268 3,441 Miscellaneous 509,794 410,585 441,779 228,457 311,186 State Sources 16,541,902 16,984,571 14,075,078 14,166,003 13,936,599 Federal Sources 2,442,209 737,805 Medicaid Reimbursement 24,717 36,094 21,147 902 8,426
Total Revenues 49,762,998 50,833,410 51,468,672 50,287,775 50,164,180
Total Expenditures 47,008,894 48,608,050 48,618,797 47,917,850 50,737,324
Other Financing Sources (Uses) Interfund Transfers In 294,000 151,253 3,824 Interfund Transfers Out (134,161) (2,512,077) (118,292) (102,413) (90,283)
Total Other Financing Sources (Uses) (134,161) (2,512,077) 175,708 48,840 (86,459)
Net Change In Fund Balances 2,619,943 (286,717) 3,025,583 2,418,765 (659,603)
Other Changes In Fund Balances: Decrease: Prior Period Adjustment (295,682)
Fund Balance Beg. of Fiscal Year 5,956,702 8,280,963 7,994,246 11,019,829 13,438,594
Fund Balance End of Fiscal Year $ 8,280,963 $ 7,994,246 $ 11,019,829 $ 13,438,594 $ 12,778,991
Sources: Audited Annual Financial Reports of the District (2008-2012)Note: This Schedule NOT audited.
A-1 MOUNT SINAI UNION FREE SCHOOL DISTRICT
2011 2012ASSETS:Cash $ 15,586,916 $ 15,510,498Receivables 326,410 Accounts Receivable 39,811 47,594 Due From Other Funds 1,344,781 900,537 Due from State and Federal 720,060 636,483 Due Other Governments 211,478 205,607
Total Assets $ 17,903,046 $ 17,627,129
LIABILITIES:Payables Accounts Payable 792,770 640,191 Accrued Liabilities 712,752 606,623 Due to Other Governments 1,132 48,286 Due to Teachers' Retirement System 2,239,041 2,835,668 Due to Employees' Retirement System 129,949 165,994 Compensated Absences Payable 534,677 466,214 Deferred Revenues 54,131 85,162
Total Liabilities 4,464,452 4,848,138
FUND EQUITY: Fund Balances - Reserved: Reserve for Capital $ 325,757 326,410 Reserve for Workers Compensation 585,900 836,451 Reserve for Employee Benefits Accrued Liability 1,104,323 1,605,813 Unreserved: Designated for Subsequent Year's Expenditures 4,981,130 3,569,276 Undesignated 6,441,484 6,441,041
Total Fund Equity 13,438,594 12,778,991
Total Liabilities and Fund Equity $ 17,903,046 $ 17,627,129
Source: Audited Annual Financial Reports of the District (2011-2012).Note: This Schedule NOT audited.
Balance Sheet - General FundFiscal Year Ended June 30:
A-2 MOUNT SINAI UNION FREE SCHOOL DISTRICT
Budget Summaries
2012-13(a) 2013-14(b)
Expenditures:
General Support $ 31,751,420 $ 31,856,405
Instruction 5,621,570 5,429,950
Pupil Transportation 3,833,110 3,527,200
Community Services 85,675 81,075
Interfund Transfers 150,000 120,000
Employee Benefits 10,601,845 11,247,705
Debt Service 2,585,495 2,892,820
Total $ 54,629,115 $ 55,155,155
Revenues:
Real Property Taxes $ 36,301,994 $ 37,772,807
State Aid 14,440,621 14,900,000
Appropriation of Fund Balance
from Prior Fiscal Year 3,486,500 2,282,348
Miscellaneous Items 400,000 200,000
Total $ 54,629,115 $ 55,155,155
(a) Approved by the voters of the District on 5/19/12.
(b) Approved by the voters of the District on 5/21/13.
A-3 MOUNT SINAI UNION FREE SCHOOL DISTRICT
MOUNT SINAI UNION FREE SCHOOL DISTRICT
APPENDIX B
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
NOTE: SUCH FINANCIAL REPORT AND OPINIONS WERE PREPARED AS OF THE DATE THEREOF AND HAVE NOT BEEN REVIEWED AND/OR UPDATED IN CONNECTION WITH THE PREPARATION AND DISSEMINATION OF THIS OFFICIAL STATEMENT. CONSENT OF THE AUDITORS HAS NOT BEEN REQUESTED OR OBTAINED.
APPENDIX C
ANNUAL AND CONTINUING DISCLOSURE UNDERTAKING
Continuing Disclosure Undertaking
FORM OF ANNUAL AND CONTINUING DISCLOSURE UNDERTAKING
The following is a form of the Annual and Continuing Disclosure Undertaking to be executed and provided by the District at the time of the delivery of the Bonds.
A. Definitions. As used in this Undertaking, the following terms have the meanings ascribed to such terms below:
“Bonds” means the Issuer’s $4,815,000 School District Refunding (Serial) Bonds, 2013, dated August 29, 2013.
“Issuer” means the Mount Sinai Union Free School District, Suffolk County, New York.
“MSRB” means the Municipal Securities Rulemaking Board.
“Rule” means SEC Rule 15c2-12, as amended from time to time.
“SEC” means the United States Securities and Exchange Commission.
“Undertaking” means this Annual and Continuing Disclosure Undertaking.
B. Annual Reports. The Issuer shall electronically file annually with the MSRB, (1) within six months after the end of each fiscal year ending after the date hereof, financial information and operating data with respect to the Issuer of the general type contained in or cross referenced in the Issuer’s final Official
Statement, dated August 6, 2013 under the headings “The District”, “Economic and Demographic
Information”, “Indebtedness of the District”, “Finances of the District”, “Tax Information”, and
“Litigation”, and in Appendices A and B, and (2) if not provided as part such financial information and operating data, audited financial statements of the Issuer, when and if available. If audited financial statements are not available at that time the Town will electronically file unaudited financial statements when available. Any financial statements so to be electronically filed shall be prepared in accordance with the accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and shall be audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided.
If the Issuer changes its fiscal year, it will electronically file with the MSRB notice of the change (and of the date of the new fiscal year end) prior to the next date by which the Issuer otherwise would be required to provide financial information and operating data pursuant to this Undertaking.
The financial information and operating data to be electronically filed pursuant to this Undertaking may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB’s Internet Web site or filed with the SEC.
C. Event Notices. The Issuer shall electronically file with the MSRB notice of any of the following events with respect to the Bonds in a timely manner and not more than ten business days after occurrence of the event:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults, if material;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax- status of the Bonds, or other material events affecting the tax status of the Bonds;
(7) Modifications to rights of holders of the Bonds, if material;
(8) Bond calls, if material, and tender offers;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the Bonds, if material;
(11) Rating changes;
(12) Bankruptcy, insolvency, receivership, or similar event of the Issuer*;
(13) The consummation of a merger, consolidation, or acquisition involving the Issuer or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
_______________________________
* An event of this nature is considered to occur upon the appointment of a receiver, fiscal agent, or similar officer for the Issuer in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Issuer, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Issuer.
The Issuer shall electronically file with the MSRB, in a timely manner, notice of any failure by the Issuer to provide financial information or operating data in accordance with this Undertaking by the time required by this Undertaking.
D. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the MSRB in accordance with this Undertaking shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.
E. Limitations, Disclaimers, and Amendments. The Issuer shall be obligated to observe and perform the covenants specified in this Undertaking for so long as, but only for so long as, the Issuer remain an “obligated person” with respect to the Bonds within the meaning of the Rule.
The provisions of this Undertaking are for the sole benefit of the holders and beneficial owners of the Bonds, and nothing in this Undertaking, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Undertaking and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer’s financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Undertaking or otherwise, except as expressly provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, WHETHER NEGLIGENT OR WITH OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS UNDERTAKING, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE.
No default by the Issuer in observing or performing its obligations under this Undertaking shall constitute a breach of or default on the Bonds.
Nothing in this Undertaking is intended or shall act to disclaim, waive, or otherwise limit the duties of the Issuer under federal and state securities laws.
The provisions of this Undertaking may be amended by the Issuer from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions of this Undertaking, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of the Bonds consent to such amendment or (b) a person that is unaffiliated with the Issuer (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The Issuer may also repeal or amend the provisions of this Undertaking if the SEC amends or repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the Issuer also may amend the provisions of this Undertaking in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the Issuer so amends the provisions of this Undertaking, the Issuer shall include with any amended financial information or operating data next provided in accordance with this Undertaking an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided.
APPENDIX D
FORM OF OPINION OF FULBRIGHT & JAWORSKI LLP
FORM OF OPINION APPENDIX D
August 29, 2013
Mount Sinai Union Free School District Suffolk County State of New York Mount Sinai Union Free School District, Suffolk County, New York
$4,815,000 School District Refunding (Serial) Bonds, 2013 Ladies and Gentlemen:
We have been requested to render our opinion as to the validity of an issue of $4,815,000 School District Refunding (Serial) Bonds, 2013, (the “Obligation”), of Mount Sinai Union Free School District, Suffolk County, New York (the “Obligor”), dated August 29, 2013.
We have examined: (1) the Constitution and statutes of the State of New York; (2) the Internal Revenue Code of 1986 (the “Code”), including particularly Sections 103 and 141 through 150 thereof, and the applicable regulations of the United States Treasury Department promulgated thereunder; (3) a tax certificate (the “Tax Certificate”) executed on behalf of the Obligor which includes, among other things, covenants, relating to compliance with the Code, with the owners of the Obligation that the Obligor will, among other things, (i) take all actions on its part necessary to cause interest on the Obligation not to be includable in the gross income of the owners thereof for Federal income tax purposes, including, without limitation, restricting, to the extent necessary, the yield on investments made with the proceeds of the Obligation and investment earnings thereon, making required payments to the Federal government, if any, and maintaining books and records in a specified manner, where appropriate, and (ii) refrain from taking any action which would cause interest on the Obligation to be includable in the gross income of the owners thereof for Federal income tax purposes, including, without limitation, refraining from spending the proceeds of the Obligation and investment earnings thereon on certain specified purposes; and (4) a certificate executed on behalf of the Obligor which includes, among other things, a statement that compliance with such covenants is not prohibited by, or violative of, any provision of local or special law, regulation or resolution applicable to the Obligor.
We also have examined a certified copy of proceedings of the finance board of the Obligor and other proofs authorizing and relating to the issuance of the Obligation, including the form of the Obligation. In rendering the opinions expressed herein we have assumed (i) the accuracy and truthfulness of all public records, documents and proceedings, including factual information, expectations and statements contained therein, examined by us which have been executed or certified by public officials acting within the scope of their official capacities, and have not verified the accuracy or truthfulness thereof, and (ii) compliance by the Obligor with the covenants contained in the Tax Certificate. We also have assumed the genuineness of the signatures appearing upon such public records, documents and proceedings and the certifications thereof. In our opinion: (a) The Obligation has been authorized and issued in accordance with the Constitution and statutes of the State of New York and constitutes a valid and legally binding general obligation of the Obligor, all the taxable real property within which is subject to the levy of ad valorem taxes to pay the Obligation and interest thereon, without limitation as to rate or amount, except as to certain statutory limitations which may result from the application of Chapter 97 of the Laws of 2011 of the State of New York, provided, however, that the enforceability (but not the validity) of the Obligation: (i) may be limited by any applicable bankruptcy, insolvency or other law now existing or hereafter enacted by said state or the federal government affecting the enforcement of creditors' rights; and (ii) may be subject to the exercise of judicial discretion in certain cases. (b) The Obligor has the power to comply with its covenants with respect to compliance with the Code as such covenants relate to the Obligation; provided, however, that the enforceability (but not the validity) of such covenants may be limited by any applicable bankruptcy, insolvency or other law now existing or hereafter enacted by said State or the Federal government affecting the enforcement of creditors’ rights. (c) Under existing law, interest on the Obligation (1) will be excludable from the gross income, as defined in Section 61 of the Code, of the owners thereof for Federal income tax purposes, pursuant to Section 103 of the Code and existing regulations, published rulings, and court decisions, assuming continuing compliance after the date hereof by the Obligor with the provisions of the Tax Certificate, and (2) will not be included in computing the Federal alternative minimum taxable income of the owners thereof who are individuals. We call to your attention that interest on the Obligation owned by a corporation (other than an “S” corporation or a qualified mutual fund, real estate mortgage investment conduit, real estate investment trust or a financial asset securitization investment trust (FASIT)) will be included in such corporation’s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation. A corporation’s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code is computed. Under existing law, interest on the Obligation is exempt from personal income taxes imposed by the State of New York or any political subdivision thereof (including The City of New York). We express no opinion with respect to any other federal, state or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Obligation. Ownership of tax-exempt obligations such as the Obligation may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.
Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. The scope of our engagement in relation to the issuance of the Obligation has extended solely to the examination of the facts and law incident to rendering the opinion expressed herein. Such opinion is not intended and should not be construed to express or imply any conclusion that the amount of real property subject to taxation within the boundaries of the Obligor, together with other legally available sources of revenue, if any, will be sufficient to enable the Obligor to pay the principal of or interest on the Obligation as the same respectively become due and payable. Reference should be made to the Official Statement prepared by the Obligor in relation to the Obligation for factual information which, in the judgment of the Obligor, could materially affect the ability of the Obligor to pay such principal and interest. While we have participated in the preparation of such Official Statement, we have not verified the accuracy, completeness or fairness of the factual information contained therein and, accordingly, we express no opinion as to whether the Obligor, in connection with the sale of the Obligation, has made any untrue statement of a material fact or omitted to state a material fact necessary in order to make any statements made, in the light of the circumstances under which they were made, not misleading. Very truly yours,
