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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

Pleasanton ISDPleasanton ISD

The Basics of School Finance The Basics of School Finance

Presented by Omar Garcia, BOSC, Inc.

September 9, 2014

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

Levels of M&O Tax Rate Compressed Tax Rate

PISD’s compressed tax rate is $1.00

“Golden” Pennies (maximum = 6)

PISD has 4….would have to have a TRE to get remaining 2 (M&O tax rate would have to be $1.06)

“Copper” Pennies (max = $1.17 – (Compressed Rate + 6))

PISD has none

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Basic Program (Tier I)Regular Ed Allotment

+ Special Ed Allotments

+ Career & Tech Ed Allotment

+ Bilingual Ed Allotment

+ Compensatory Ed Allotments

+ Gifted &Talented Ed Allotment

+ Transportation Allotment

+ Public Education Grant Allotment

+ High School Allotment

Total Cost of Tier I

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Basic Program (Tier I) Question: Who pays for the Total Cost of this basic program?

Answer: PISD’s compressed rate of $1.00 goes towards paying for that cost

The state will pay for the rest

2014-15, estimated:

PISD’s Tier I cost = $23.1M

PISD’s $1.00 raises $17.6M ($1.76B in prior-yr value x $1.00)

State pays the remaining $5.5M (called Tier I state aid)

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Basic Program (Tier I)2015-16, estimated:

PISD’s Tier I cost = $23.1M

PISD’s $1.00 raises $22.1M ($2.21B in prior-yr value x $1.00)

State only pays $1M

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Basic Program (Tier I)

2016-17, estimated with only a 10% growth in value

PISD’s Tier I cost = $23.1M

PISD’s $1.00 raises $24.3M ($2.43B in prior-yr value x $1.00)

State pays $0

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The “Enrichment” Program (Tier II) The “Golden” Penny Level:

Each of PISD’s 4 pennies is guaranteed to bring in $61.86 per WADA in 2014-15

Guarantee = $61.86 per penny per WADA

PISD raises $40.44 per penny per WADA (using prior-yr value)

State matches with $21.42 per penny per WADA

(State matching is called Tier II state aid)

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The “Enrichment” Program (Tier II) 2015-16, estimated:

Guarantee = $61.86 per penny per WADA

PISD raises $50.81 per penny per WADA

State matches with $11.05 per penny per WADA

2016-17, estimated with only a 10% growth in value

Guarantee = $61.86 per penny per WADA

PISD raises $55.83 per penny per WADA

State matches with $6.03 per penny per WADA

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The “Enrichment” Program (Tier II) The “Copper” Penny Level:

PISD has no pennies at this level but this level works the same way as the golden level, but the guarantee is only $31.95 per penny per WADA

2014-15, estimated:

Guarantee = $31.95 per penny per WADA

PISD raises $40.44 per penny per WADA (using prior-yr value)

No State matching

PISD could only keep $31.95 per penny per WADA and the $8.49 per penny per WADA “excess” would be recaptured

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Facilities Program The state has 2 programs to help districts meet their facilities debt

Existing Debt Allotment (EDA)

Instructional Facilities Allotment (IFA)

Each I&S penny levied is guaranteed to bring in $35 per ADA

PISD no longer qualifies for either program

2014-15, estimated:

Guarantee = $35.00 per penny per ADA

PISD raises $54.19 per penny per ADA (using prior-yr value)

No State Matching and no recapture on I&S

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

Chapter 41 (Recapture) Two levels of recapture

1st level is applied to the district’s compressed tax rate

2nd level is applied to the district’s “copper” pennies

No recapture on the “golden” pennies

1st level begins at $504,000 in wealth per WADA (2014-15)

2nd level begins at $319,500 in wealth per WADA – TEA uses this level to label a district as Chapter 41

PISD’s estimated wealth per WADA (again using prior-yr value) in 2014-15 is $404,449 so therefore PISD will be labeled a Chapter 41 district

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

Chapter 41 (Recapture) Just because a district is labeled Chapter 41 does not necessarily

mean it will have to pay recapture

PISD ‘s wealth per WADA in 2014-15 is below $504,000 so therefore, the 1st level of recapture does not apply

PISD’s wealth per WADA in 2014-15 is above $319,500 but it has no “copper” pennies , so therefore, the 2nd level of recapture does not apply

PISD ‘s wealth per WADA in 2015-16 will be slightly above 504,000 ($508,140) so therefore, the 1st level of recapture will apply

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

Chapter 41 (Recapture) In 2016-17 (estimated using 10% growth factor)

PISD ‘s wealth per WADA will be well above $504,000 ($558,257, estimated) so therefore, the 1st level of recapture will apply

Amount of recapture calculation for 1st level:

Wealth per WADA Allowed = $504,000

PISD’s Wealth per WADA = $558,257

“Excess” Wealth per WADA = $54,257

Percentage “Excess” = 10.8%

Means that for every $1.00 raised at the district’s compressed rate, $.108 will be recaptured (district will keep $.892 of every dollar)

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

The Cost of a Bus: M&O vs I&S In 2016-17 when recapture is more significant:

Price-tag on bus = $100,000

If paid for with I&S tax rate, cost would be $100,000 (no recapture on I&S side)

If paid for with M&O compressed tax rate, cost would be $112,108 factoring in 10.8% recapture

($112,108 x .892 = $100,000)

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

When Boom Goes to Bust For example, if values were to decline dramatically beginning in tax

year 2015:

School Year Prior-Yr Value Total Revenue

2012-13 $751M $26.6M

2013-14 $1.1B $31.2M

2014-15 $1.8B $28.6M

2015-16 $2.2B $21.0M

2016-17 $1.1B $24.0M

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

My Contact Info Email: ogarcia@boscinc.com

Phone: toll-free 855-243-5917

Cell: 512-565-7005

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© 2011 BOSC, Inc. A subsidiary of BOK Financial Corporation. Broker/Dealer Services and Securities offered by BOSC, Inc., an SEC registered investment adviser, a registered broker/dealer, member FINRA/SIPC. SEC registration does not imply a certain level of skill or training. Insurance offered by BOSC Agency, Inc., an affiliated agency.   Investments and insurance are not insured by FDIC, are not deposits or other obligations of, and are not guaranteed by, any bank or bank affiliate. Investments are subject to risks, including possible loss of principal amount invested.

BOSC, Inc.’s Specialized Texas School District Finance Team

Ryan O’HaraManaging Director, Texas Public Finance

1401 McKinney Street, Suite 1000 │ Houston, Texas 77010E-Mail: rohara@boscinc.comDirect: 713.289.5898 │ Mobile: 713.584.5788│ Fax: 713.354.0258

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Ryan O’HaraManaging Director, Texas Public Finance

1401 McKinney Street, Suite 1000 │ Houston, Texas 77010E-Mail: rohara@boscinc.comDirect: 713.289.5898 │ Mobile: 713.584.5788│ Fax: 713.354.0258

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Alison M. LongInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: alison.long@boscinc.comDirect: 214.576.0881 │ Mobile: 254.744.4555 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Alison M. LongInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: alison.long@boscinc.comDirect: 214.576.0881 │ Mobile: 254.744.4555 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

William J. GumbertHead of Municipal (Tier I) Sales, Trading and UnderwritingManaging Director, Co-Director of Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: bgumbert@boscinc.comDirect: 214.576.0880 │ Mobile: 214.212.3153│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

William J. GumbertHead of Municipal (Tier I) Sales, Trading and UnderwritingManaging Director, Co-Director of Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: bgumbert@boscinc.comDirect: 214.576.0880 │ Mobile: 214.212.3153│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Since the financial operations of Texas school districts are unique and the fiscal challenges/solutions are different from other municipal entities, BOSC, Inc. formed its “Texas School District Finance Team” to provide comprehensive and specialized financial services to Texas public school districts.

Mike JollyInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: mjolly@boscinc.comDirect: 512.868.1980 │ Mobile: 512.751.0479│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Mike JollyInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: mjolly@boscinc.comDirect: 512.868.1980 │ Mobile: 512.751.0479│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Dr. Cathy BryceInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: cbryce@boscinc.comMobile: 214.477.5972│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Dr. Cathy BryceInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: cbryce@boscinc.comMobile: 214.477.5972│ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Joshua M. McLaughlinManaging Director, Co-Director of Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: jmclaughlin@boscinc.comDirect: 214.576.0878 │ Mobile: 972.897.0503 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Joshua M. McLaughlinManaging Director, Co-Director of Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: jmclaughlin@boscinc.comDirect: 214.576.0878 │ Mobile: 972.897.0503 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Omar GarciaInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: ogarcia@boscinc.comDirect: 512.243.5917 │ Mobile: 512.565.7005 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Omar GarciaInvestment Banker, Texas Public Finance

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080E-Mail: ogarcia@boscinc.comDirect: 512.243.5917 │ Mobile: 512.565.7005 │ Fax: 214.576.0890

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Allen Mattson, CFASenior Vice President | Manager, Municipal Underwriting and Trading

333 West Campbell Road, Suite 350 │ Richardson, Texas 750801200 N. Mayfair Road, Suite 303 │ Milwaukee, Wisconsin 53226E-Mail: amattson@bokf.comDirect: 214.576.0872 │ Mobile: 203.556.1808

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC

Allen Mattson, CFASenior Vice President | Manager, Municipal Underwriting and Trading

333 West Campbell Road, Suite 350 │ Richardson, Texas 750801200 N. Mayfair Road, Suite 303 │ Milwaukee, Wisconsin 53226E-Mail: amattson@bokf.comDirect: 214.576.0872 │ Mobile: 203.556.1808

Securities offered by BOSC, Inc., Registered Investment Advisor, a registered Broker/Dealer, Member FINRA/SIPC