$56,515,000 ALLEN PARK PUBLIC SCHOOLS COUNTY OF WAYNE … · 2007. 10. 22. · Frances Babbage,...

Addendum to

OFFICIAL STATEMENT

dated December 18, 2006

relating to

$56,515,000 ALLEN PARK PUBLIC SCHOOLS

COUNTY OF WAYNE STATE OF MICHIGAN

2007 REFUNDING BONDS (General Obligation - Unlimited Tax)

INTRODUCTION

The above described official statement incorrectly stated the portion of the Prior Bonds that were being refunded by the 2007 Refunding Bonds. The section captioned "PURPOSE AND SECURITY" on page 1 of the official statement is hereby amended and restated in its entirety as follows:

PURPOSE AND SECURITY

The Bonds are being issued for the purpose of refunding a portion of the School District's outstanding 2003 School Building and Site Bonds, dated May 22, 2003, which are due and payable May 1, 2014 through May 1, 2026, inclusive, May 1, 2029 and May 1, 2033 (the "Prior Bonds"), and to pay the costs of issuing the Bonds.

The date of this Addendum is October 18, 2007

NEW ISSUE—Book-Entry-Only RATINGS†*: Moody’s Investors Service: Aaa Standard & Poor’s Ratings Services: AAA FinancialSecurityInsured

In the opinion of Clark Hill PLC, Bond Counsel, under existing law as presently interpreted (i) the Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof, (ii) the interest on the Bonds is excluded from gross income for federal income tax purposes to the extent and subject to the conditions described therein, and (iii) interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. See “TAX MATTERS” herein.

$56,515,000ALLEN PARK PUBLIC SCHOOLS

COUNTY OF WAYNESTATE OF MICHIGAN

2007 REFUNDING BONDS(General Obligation - Unlimited Tax)

Dated:January4,2007 Due:May1asshownbelow

The2007RefundingBonds(GeneralObligation–UnlimitedTax)(the“Bonds”)wereauthorizedbytheBoardofEducationofAllenParkPublicSchools,CountyofWayne,StateofMichigan(the“SchoolDistrict”)byaresolutionadoptedonNovember13,2006(the“Resolution”)forthepurposeofrefundingaportionofapriorbondissueoftheSchoolDistrict.TheBondswillpledgethefullfaithandcreditoftheSchoolDistrictforpaymentoftheprincipalandinterestthereonandwillbepayablefromadvaloremtaxes,whichmaybeleviedonalltaxablepropertyintheSchoolDistrictwithoutlimitationastorateoramount.

TheBondswillbefullyqualifiedasofthedateofdeliveryfortheMichiganSchoolBondQualificationandLoanProgrampursuanttoAct92,PublicActsofMichigan,2005,asamended,enactedpursuanttoArticleIX,Section16oftheMichiganConstitutionof1963.Underthetermsofsaidconstitutionalandstatutoryprovisions,ifforanyreasontheSchoolDistrictwillbeorisunabletopaytheprincipalofandinterestontheBondswhendue,theSchoolDistrictshallborrowandtheStateofMichiganshalllendtoitanamountsufficienttoenabletheSchoolDistricttomakethepayment.See“QUALIFICATIONBYTHESTATEOFMICHIGAN”andAPPENDIXA,“StateQualification,”herein.

TheBondsareissuableonlyasfullyregisteredbondswithoutcouponsand,whenissued,willberegisteredinthenameofCede&Co.,asBondholderandnomineeforTheDepositoryTrustCompany(“DTC”),NewYork,NewYork.DTCwillactassecuritiesdepositoryfortheBonds.PurchasesofbeneficialinterestsintheBondswillbemadeinbook-entry-onlyforminthedenominationof$5,000oranyintegralmultiplethereof.PurchasersofbeneficialinterestsintheBonds(the“BeneficialOwners”)willnotreceivecertificatesrepresentingtheirbeneficialinterestinBondspurchased.SolongasCede&Co.istheBondholder,asnomineeofDTC,referenceshereintotheBondholdersorregisteredownersshallmeanCede&Co.,asaforesaid,andshallnotmeantheBeneficialOwnersoftheBonds.See“THEBONDS—Book-Entry-OnlySystem”herein.

Principalofand interestontheBondswillbepaidbyU.S.Bank,NationalAssociation**,Detroit,Michigan(the“PayingAgent”).So longasDTCor itsnominee,Cede&Co.,istheBondholder,suchpaymentswillbemadedirectlytosuchBondholder.DisbursementofsuchpaymentstoDTC’sDirectParticipantsistheresponsibilityofDTCanddisbursementofsuchpaymentstotheBeneficialOwnersistheresponsibilityofDTC’sDirectParticipantsandIndirectParticipants,asmorefullydescribedherein.InterestwillbepayablesemiannuallyonMay1andNovember1,commencingMay1,2007,totheBondholdersofrecordasoftheapplicablerecorddateshereindescribed.

ThescheduledpaymentoftheprincipalofandinterestontheBondswhenduewillbeguaranteedunderaninsurancepolicy(see“BONDINSURANCE”and APPENDIX G, “Specimen of Municipal Bond Insurance Policy,” herein) to be issued concurrently with the delivery of the Bonds by Financial SecurityAssuranceInc.

(BaseCUSIP§:018033)

Maturity AmountInterest

Rate Price CUSIP§ Maturity AmountInterest

Rate Price CUSIP§2007 $505,000 4.000% 100.169% FD7 2015 $2,780,000 5.000% 109.086% FM72008 120,000 4.000 100.676 FE5 2016 2,795,000 5.000 109.589 FN52009 125,000 4.000 101.147 FF2 2017 2,845,000 5.000 109.414 FP02010 130,000 4.000 101.489 FG0 2018 2,855,000 5.000 109.157 FQ82011 135,000 4.000 101.865 FH8 2019 2,865,000 4.000 99.226 FR62012 140,000 4.000 102.064 FJ4 2024 2,785,000 4.125 97.514 FW52013 145,000 4.000 102.127 FK1 2025 2,765,000 4.250 98.492 FX32014 2,800,000 4.000 102.163 FL9

$11,290,0004.250%TermBondsdueMay1,2023–Price100.000%-CUSIP§FV7$10,880,0004.250%TermBondsdueMay1,2029–Price97.320%-CUSIP§GB0$10,555,0004.250%TermBondsdueMay1,2033–Price96.760%-CUSIP§GF1

TheBondsmaturingMay1,2023,May1,2029andMay1,2033(the“TermBonds”)aresubjecttomandatoryredemptionontheredemptiondatesandintheprincipalamountssetforthhereinataredemptionpriceequaltotheprincipalamountthereofwithoutpremium.See“THEBONDS–MandatoryRedemptionofTermBonds”herein.

THEBONDSMATURINGONORAFTERMAY 1, 2017ARESUBJECTTOOPTIONALREDEMPTIONBEGINNINGNOVEMBER1, 2016, INTHEMANNERANDATTHETIMESDESCRIBEDHEREIN.See“THEBONDS—OptionalRedemption”herein.

TheBondswillbeofferedwhen,asandifissuedbytheSchoolDistrictandacceptedbytheUnderwriterssubjecttotheapprovinglegalopinionofClarkHillPLC,Birmingham,Michigan,BondCounsel.CertainlegalmatterswillbepasseduponfortheUnderwritersbyThrunLawFirm,P.C.,EastLansing,Michigan.ItisexpectedthattheBondswillbeavailablefordeliverythroughDTConoraboutJanuary4,2007.

Thiscoverpagecontainscertaininformationforquickreferenceonly.Itisnotasummaryofthisissue.InvestorsmustreadtheentireOfficialStatementtoobtaininformationessentialtothemakingofaninformedinvestmentdecision.

UBS Investment Bank LaSalle Financial Services, Inc.ThedateofthisOfficialStatementisDecember13,2006

† Foranexplanationoftheratings,see“RATINGS”herein.* Asofdateofdelivery.§ Copyright2006,AmericanBankersAssociation.CUSIPdatahereinisprovidedbyStandard&Poor’sCUSIPServiceBureau,adivisionofTheMcGraw-HillCompanies,

Inc.TheSchoolDistrictshallnotberesponsiblefortheselectionofCUSIPnumbers,noranyrepresentationmadeastotheircorrectnessontheBondsorasindicatedabove.

** AsofthedateofthisOfficialStatement,LaSalleBankN.A.,Troy,MichiganhasagreedtoserveasPayingAgentfortheBonds.LaSalleBankN.A.hasagreedtosellandtransferitsmunicipalcorporatetrustandpayingagentbusinesstoU.S.BankNationalAssociation,effectiveonDecember15,2006,andinconnectionwithsuchbusinesstransfer,U.S.BankNationalAssociation,Detroit,MichiganwillbecomethesuccessorPayingAgentfortheBondsandperformandberesponsibleforthedutiesthereofunderthePayingAgencyAgreementinplaceofLaSalleBankN.A.

No dealer, broker, salesperson or other person has been authorized to give any information or to make any representation other than as contained in this Official Statement in connection with the offer made hereby and, if given or made, such other information or representation must not be relied upon as having been authorized by the School District or the Underwriters. This Official Statement and the information contained herein are subject to completion and amendment. These securities may not be sold nor may an offer to buy these securities be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Information herein has been obtained from the School District, The Depository Trust Company and other sources believed to be reliable. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters does not guarantee the accuracy or completeness of such information (except for information under the section captioned "UNDERWRITING," which was obtained from the Underwriters).

Other than with respect to information concerning Financial Security Assurance Inc. ("Financial Security") contained under the caption "BOND INSURANCE" and APPENDIX G, "Specimen of Municipal Bond Insurance Policy" herein, none of the information in this Official Statement has been supplied or verified by Financial Security and Financial Security makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Bonds; or (iii) the tax exempt status of the interest on the Bonds.

Upon issuance, the Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other governmental entity or agency will have passed upon the adequacy of this Official Statement, or, except for the School District and the Department of Treasury of the State of Michigan, approved the Bonds for sale.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE SCHOOL DISTRICT'S FINANCIAL RECORDS AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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Allen Park Public Schools 9601 Vine

Allen Park, Michigan 48101-1309 (313) 827-2150

(313) 827-2151 FAX

BOARD OF EDUCATION

Frank Liberati, President Guy DesJardins, Vice President of Operations

Michael Lash, Vice President of Human Resources Margaret Marten, Vice President of Teaching and Learning Richard Moynihan, Vice President of Extracurricular Issues

Gordon Miller, Secretary Frances Babbage, Treasurer

ADMINISTRATIVE STAFF

Dr. John J. Sturock, Superintendent of Schools Deborah Lee, Director of Finance

BOND COUNSEL

Clark Hill PLC Birmingham, Michigan

FINANCIAL ADVISOR

H.J. Umbaugh & Associates, Certified Public Accountants, LLP Lansing, Michigan

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TABLE OF CONTENTS Page INTRODUCTION ........................................................................................................................................ 1 PURPOSE AND SECURITY....................................................................................................................... 1 PLAN OF REFUNDING .............................................................................................................................. 1 ESTIMATED SOURCES AND USES OF FUNDS .................................................................................... 2 THE BONDS

Description and Form of the Bonds......................................................................................................... 3 Book-Entry-Only System......................................................................................................................... 3 Transfer Outside Book-Entry-Only System ............................................................................................ 5 Optional Redemption............................................................................................................................... 5 Mandatory Redemption of Term Bonds.................................................................................................. 6 Notice of Redemption and Manner of Selection ..................................................................................... 6

QUALIFICATION BY THE STATE OF MICHIGAN................................................................................ 7 TAX PROCEDURES ................................................................................................................................... 7 LEVY AND COLLECTION OF TAXES FOR PAYMENT OF THE BONDS AND BONDHOLDERS'

REMEDIES ............................................................................................................................................. 8 SOURCES OF SCHOOL OPERATING REVENUE .................................................................................. 9 LITIGATION.............................................................................................................................................. 10 TAX MATTERS

State ....................................................................................................................................................... 10 Federal ................................................................................................................................................... 10 Original Issue Premium ......................................................................................................................... 11 Original Issue Discount ......................................................................................................................... 11 Future Developments............................................................................................................................. 11

APPROVAL OF LEGAL PROCEEDINGS............................................................................................... 12 BOND INSURANCE

Bond Insurance Policy........................................................................................................................... 12 Financial Security Assurance Inc. ......................................................................................................... 12

RATINGS ................................................................................................................................................... 13 UNDERWRITING...................................................................................................................................... 13 FINANCIAL ADVISOR'S OBLIGATION ................................................................................................ 14 CONTINUING DISCLOSURE .................................................................................................................. 14 OTHER MATTERS ................................................................................................................................... 15 APPENDIX A: State Qualification APPENDIX B: General Financial, Economic and School Information APPENDIX C: General Fund Budget Summary APPENDIX D: Audited Financial Statements and Notes to Financial Statements of the School District

for the Year Ended June 30, 2006 APPENDIX E: Draft Legal Opinion of Bond Counsel APPENDIX F: Form of Continuing Disclosure Agreement APPENDIX G: Specimen of Municipal Bond Insurance Policy

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OFFICIAL STATEMENT

relating to



2007 REFUNDING BONDS (General Obligation - Unlimited Tax)

INTRODUCTION

The purpose of this Official Statement, which includes the cover page and Appendices, is to furnish information in connection with the issuance and sale by Allen Park Public Schools, County of Wayne, State of Michigan (the "School District") of its 2007 Refunding Bonds (General Obligation - Unlimited Tax) (the "Bonds") in the amount of $56,515,000.

PURPOSE AND SECURITY

The Bonds are being issued for the purpose of refunding a portion of the School District's outstanding 2003 School Building and Site Bonds, dated May 22, 2003, which are due and payable May 1, 2015 through May 1, 2026, inclusive, May 1, 2029 and May 1, 2033 (the "Prior Bonds"), and to pay the costs of issuing the Bonds.

The Bonds, as authorized for issuance by a resolution of the Board of Education adopted on November 13, 2006 (the "Resolution"), are a full faith and credit unlimited tax general obligation of the School District. The principal of and interest on the Bonds are payable from the proceeds of ad valorem taxes levied on all taxable property in the School District which may be levied without limitation as to rate or amount. As of the date of delivery, the Bonds will be fully qualified for participation in the State of Michigan School Bond Qualification and Loan Program. See "QUALIFICATION BY THE STATE OF MICHIGAN" and APPENDIX A, "State Qualification," in this Official Statement.

PLAN OF REFUNDING

A portion of the proceeds of the Bonds will be used to pay certain costs of issuance relating to the refunding of the Prior Bonds to establish an escrow fund (the "Escrow Fund") composed of cash and non-callable direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America or other obligations the principal of and interest on which are fully secured by the foregoing. The Escrow Fund will be held by U. S. Bank, National Association, Detroit, Michigan, as escrow agent (the "Escrow Agent"). As of the date of this official statement, LaSalle Bank N.A., Troy, Michigan has agreed to serve as Escrow Agent. LaSalle Bank N.A. has agreed to sell and transfer its municipal corporate trust and paying agent business to U.S. Bank National Association, effective on December 15, 2006, and in connection with such business transfer, U.S. Bank National Association, Detroit, Michigan will become the successor Escrow Agent and perform and be responsible for the duties thereof under the Escrow Agreement in place of LaSalle Bank N.A. and will be used to pay the principal of and interest on the Prior Bonds when due or at call for redemption. The Escrow Fund will be held by the Escrow Agent pursuant to an escrow agreement (the "Escrow Agreement") which irrevocably directs the Escrow Agent to make the payment of principal of and interest on the Prior Bonds when due or at call for redemption. The Escrow Fund will be such that

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the cash and the principal and interest payments received on the investments will be sufficient, without reinvestment, except as provided in the Escrow Agreement, to pay the principal of and interest on the Prior Bonds as they become due or are called for earlier redemption, as set forth in the table below.

Principal of and Interest on the

Prior Bonds to be paid from the Escrow Fund

Date

Principal

Interest

Total

05/01/2007 $1,342,625.00 $1,342,625.00 11/01/2007 1,342,625.00 1,342,625.00 05/01/2008 1,342,625.00 1,342,625.00 11/01/2008 1,342,625.00 1,342,625.00 05/01/2009 1,342,625.00 1,342,625.00 11/01/2009 1,342,625.00 1,342,625.00 05/01/2010 1,342,625.00 1,342,625.00 11/01/2010 1,342,625.00 1,342,625.00 05/01/2011 1,342,625.00 1,342,625.00 11/01/2011 1,342,625.00 1,342,625.00 05/01/2012 1,342,625.00 1,342,625.00 11/01/2012 1,342,625.00 1,342,625.00 05/01/2013 $53,855,000.00 1,342,625.00 55,197,625.00

TOTAL $53,855,000.00 $17,454,125.00 $71,309,125.00

The accuracy of (i) the mathematical computations of the adequacy of cash and certain obligations to be held in the Escrow Fund and used, together with the earnings thereon, to pay the principal of and interest on the Prior Bonds and (ii) the computations of the yield on the Bonds and the yield of such obligations in the Escrow Fund purchased with proceeds of the Bonds supporting the conclusion of Bond Counsel that the interest on the Bonds is excluded from gross income for federal income tax purposes as indicated under the caption "TAX MATTERS" below, will be verified by H.J. Umbaugh & Associates, Certified Public Accountants, LLP. Such verification of accuracy of the computations shall be based upon information supplied by the Underwriters and the interpretations of Section 148 of the Internal Revenue Code of 1986, as amended, as provided by Bond Counsel.

ESTIMATED SOURCES AND USES OF FUNDS

SOURCES Par Amount of Bonds $56,515,000.00 Original Issue Premium 1,123,953.60 Original Issue Discount (766,672.40) Total Sources $56,872,281.20

USES Escrow Fund 56,392,530.00 Underwriters' Discount 226,060.00 Estimated Costs of Issuance1 253,691.20 Total Uses $56,872,281.20

1 Includes municipal bond insurance premium.

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THE BONDS

Description and Form of the Bonds

The Bonds will be issued in book-entry-only form as one fully registered Bond per maturity, without coupons, in the aggregate principal amount for each maturity set forth on the cover page hereof and may be purchased in denominations of $5,000 or any integral multiple thereof. The Bonds will be dated as of, and bear interest from, the date of issuance. Interest on the Bonds shall be payable semiannually each May 1 and November 1 thereafter to maturity or early redemption, commencing May 1, 2007. Interest on the Bonds shall be computed using a 360-day year with twelve 30-day months, and the Bonds will mature on the dates and in the principal amounts and will bear interest at the rates as set forth on the cover of this Official Statement.

U. S. Bank, National Association, Detroit, Michigan or its successor will serve as the Paying Agent (the "Paying Agent") and also as bond registrar and transfer agent if the Bonds cease to be held in book-entry-only form. LaSalle Bank N. A. has agreed to sell and transfer its municipal corporate trust and paying agent business to U.S. Bank National Association, effective on December 15, 2006, and in connection with such business transfer, U.S. Bank National Association will become the successor Paying Agent and perform and be responsible for the duties thereof under the Paying Agency Agreement in place of LaSalle Bank. For a description of payment of principal and interest, transfers and exchanges and notice of redemption on the Bonds, which are held in the book-entry-only system, see "Book-Entry-Only System" below. In the event the Bonds cease to be held in the book-entry-only system, then interest on the Bonds shall be payable when due by check or draft to the person or entity who or which is, as of the fifteenth (15th) day of the month preceding each interest payment date, the registered owner of record, at the owner's registered address. See "Transfer Outside Book-Entry-Only System" below.

Book-Entry-Only System

The information in this section has been furnished by The Depository Trust Company, New York, New York ("DTC"). No representation is made by the School District, the Paying Agent or the Underwriters as to the completeness or accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. No attempt has been made by the School District, the Paying Agent or the Underwriters to determine whether DTC is or will be financially or otherwise capable of fulfilling its obligations. Neither the School District nor the Paying Agent will have any responsibility or obligation to Direct Participants, Indirect Participants (both as defined below) or the persons for which they act as nominees with respect to the Bonds, or for any principal, premium, if any, or interest payment thereof.

DTC 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, each in the aggregate principal amount of such maturity and will be deposited with DTC.

DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct

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Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC System is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

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 and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests 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 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 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 account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of 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 Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its

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usual procedures, DTC mails an Omnibus Proxy to the School District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal and interest and redemption amounts, if any, 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 detailed information from the School District or Paying Agent, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, Paying Agent, or the School District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal, interest and redemption amounts, if any, to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the School District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the School District or Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

The School District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

Transfer Outside Book-Entry-Only System

In the event that the book-entry-only system is discontinued, the following provisions would apply to the Bonds. The Paying Agent shall keep the registration books for the Bonds (the "Bond Register") at its principal corporate trust office. Subject to the further conditions contained in the Resolution, the Bonds may be transferred or exchanged for one or more Bonds in different authorized denominations upon surrender thereof at the principal corporate trust office of the Paying Agent by the registered owners or their duly authorized attorneys; upon surrender of any Bonds to be transferred or exchanged, the Paying Agent shall record the transfer or exchange in the Bond Register and shall authenticate replacement bonds in authorized denominations; during the fifteen (15) days immediately preceding the date of mailing of any notice of redemption or any time following the mailing of any notice of redemption, the Paying Agent shall not be required to effect or register any transfer or exchange of any Bond which has been selected for such redemption, except the Bonds properly surrendered for partial redemption may be exchanged for new Bonds in authorized denominations equal in the aggregate to the unredeemed portion; the School District and the Paying Agent shall be entitled to treat the registered owners of the Bonds, as their names appear in the Bond Register as of the appropriate dates, as the owners of such Bonds for all purposes under the Resolution. No transfer or exchange made other than as described above and in the Resolution shall be valid or effective for any purposes under the Resolution.

Optional Redemption

The Bonds or portions of the Bonds in multiples of $5,000 maturing on or after May 1, 2017, are subject to optional redemption at the option of the School District in such order as the School District may determine and by lot within any maturity, on any date occurring on or after November 1, 2016, at par plus accrued interest to the date fixed for redemption.

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Mandatory Redemption of Term Bonds

The Bonds maturing on May 1, 2023, May 1, 2029 and May 1, 2033 are term bonds (the "Term Bonds") subject to mandatory redemption, in part, by lot, on the redemption dates and in the principal amounts set forth below and at a redemption price equal to the principal amount thereof, without premium, together with interest thereon to the redemption date. When Term Bonds are purchased by the School District and delivered to the Paying Agent for cancellation or are redeemed in a manner other than by mandatory redemption, the principal amount of the Term Bonds affected shall be reduced by the principal amount of the Bonds so redeemed or purchased in the order determined by the School District.

Term Bonds due May 1, 2023

Redemption Dates Principal Amounts

May 1, 2020 $2,845,000 May 1, 2021 2,830,000 May 1, 2022 2,815,000 May 1, 2023 (Maturity) 2,800,000







Notice of Redemption and Manner of Selection

Notice of redemption of any Bond shall be given not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption by mail to the registered owner at the registered address shown on the registration books kept by the Paying Agent. The Bonds shall be called for redemption in multiples of $5,000 and Bonds of denominations of more than $5,000 shall be treated as representing the number of Bonds obtained by dividing the face amount of the Bond by $5,000 and such Bonds may be redeemed in part. The notice of redemption for Bonds redeemed in part shall state that upon surrender of the Bond to be redeemed a new Bond or Bonds in an aggregate face amount equal to the unredeemed portion of the Bond surrendered shall be issued to the registered owner thereof.

If less than all of the Bonds of any maturity shall be called for redemption prior to maturity, unless otherwise provided, the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the Paying Agent, in the principal amounts designated by the School District. Any Bonds selected for redemption will cease to bear interest on the date fixed for redemption, whether presented for redemption or not, provided funds are on hand with the Paying Agent to redeem said Bonds. Upon presentation and surrender of such Bonds at the principal corporate trust office of the Paying Agent, such Bonds shall be paid and redeemed.

So long as the book-entry-only system remains in effect, in the event of a partial redemption the Paying Agent will give notice to Cede & Co., as nominee of DTC, only, and only Cede & Co. will be

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deemed to be a holder of the Bonds. DTC is expected to reduce the credit balances of the applicable DTC Participants in respect of the Bonds and in turn the DTC Participants are expected to select those Beneficial Owners whose ownership interests are to be extinguished or reduced by such partial redemption, each by such method as DTC or such DTC Participants, as the case may be, deems fair and appropriate in its sole discretion.

QUALIFICATION BY THE STATE OF MICHIGAN

The Bonds will be fully qualified as of the date of delivery pursuant to Act 92 of the Public Acts of Michigan, 2005, as amended ("Act 92"), enacted pursuant to Article IX, Section 16, of the Michigan Constitution of 1963. Under the terms of said constitutional and statutory provisions, if for any reason the School District will be or is unable to pay the principal and interest on the Bonds when due, the School District shall borrow and the State of Michigan (the "State") shall lend to it from the School Loan Revolving Fund (the "School Loan Revolving Fund") established by the State, an amount sufficient to enable the School District to make the payment. Article IX, Section 16 of the State Constitution as implemented by Act 112 of the Public Acts of Michigan, 1961, as amended, authorizes the State, without approval of its electors, to borrow from time to time such amounts as shall be required, pledge the State's full faith and credit and issue its notes or bonds therefor, for the purpose of making loans to school districts as provided under such section. Loans to school districts for such purposes are made from the proceeds of such State borrowing. See also APPENDIX A, "State Qualification," in this Official Statement.

Complete financial statements of all of the State's funds as included in the State's Comprehensive Annual Financial Report ("CAFR") prepared by the State's Office of the State Budget are available from the Budget web site www.michigan.gov/budget. The State has agreed to file its CAFR with the Nationally Recognized Municipal Securities Information Repositories and the State Information Depository (as described in Rule 15c2-12(b)(5) of the Securities and Exchange Commission) annually, so long as any bonds qualified for participation in the Michigan School Bond Qualification and Loan Program remain outstanding.

TAX PROCEDURES

Article IX, Section 3, of the Michigan Constitution provides that the proportion of true cash value at which property shall be assessed shall not exceed 50% of true cash value. The Michigan Legislature by statute has provided that property shall be assessed at 50% of its true cash value, except as described below. The Michigan Legislature or the electorate may at some future time reduce the percentage below 50% of true cash value.

On March 15, 1994, the electors of the State approved an amendment to the Michigan Constitution permitting the Legislature to authorize ad valorem taxes on a non-uniform basis. The legislation implementing this constitutional amendment added a new measure of property value known as "Taxable Value." Beginning in 1995, taxable property has two valuations -- State equalized valuation ("SEV") and Taxable Value. Property taxes are levied on Taxable Value. Generally, Taxable Value of property is the lesser of (a) the Taxable Value of the property in the immediately preceding year, adjusted for losses, and increased or reduced by the lesser of the inflation rate or 5%, plus additions, or (b) the property's current SEV. Under certain circumstances, therefore, the Taxable Value of property may be different from the same property's SEV.

When property is sold or transferred, Taxable Value is adjusted to the SEV, which under existing law is 50% of the current true cash value. The Taxable Value of new construction is equal to current SEV. Taxable Value and SEV of existing property are also adjusted annually for additions and losses.

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Responsibility for assessing taxable property rests with the local assessing officer of each township and city. Any property owner may appeal the assessment to the local assessor, to the local board of review and ultimately to the Michigan Tax Tribunal.

The Michigan Constitution also mandates a system of equalization for assessments. Although the assessors for each local unit of government within a county are responsible for actually assessing at 50% of true cash value, adjusted for Taxable Value purposes, the final SEV and Taxable Value are arrived at through several steps. Assessments are established initially by the municipal assessor. Municipal assessments are then equalized to the 50% levels as determined by the county's department of equalization. Thereafter, the State equalizes the various counties in relation to each other. SEV is important, aside from its use in determining Taxable Value for the purpose of levying ad valorem property taxes, because its role in the spreading of taxes between overlapping jurisdictions, the distribution of various State aid programs, State revenue sharing and in the calculation of debt limits.

Property that is exempt from property taxes, e.g., churches, government property, public schools, is not included in the SEV and Taxable Value data in the Official Statement. Property granted tax abatements under Act 198, Public Acts of Michigan, 1974, amended, is recorded on a separate tax roll while subject to tax abatement. The valuation of tax-abated property is based upon SEV but is not included in either the SEV or Taxable Value data in the Official Statement except as noted.

LEVY AND COLLECTION OF TAXES FOR PAYMENT OF THE BONDS AND BONDHOLDERS' REMEDIES

The Resolution authorizing the issuance of the Bonds and State law obligate the School District to levy a tax annually in an amount sufficient so that the estimated collections therefrom, together with amounts, if any, to be borrowed from the School Loan Revolving Fund for the Bonds, will be sufficient to pay promptly when due the principal of and interest on the Bonds becoming due prior to the time of the next tax levy. The tax levy shall not be subject to limitation as to rate or amount. Taxes for the payment of the principal of or interest on the Bonds are certified for collection each year with the school tax levies. In the event of the failure of the proper officials to certify taxes for the payment of the principal and interest requirements, a timely action in the nature of mandamus could compel certification and collection of adequate taxes or could compel the School District to make application to borrow the necessary funds from the School Loan Revolving Fund and thus prevent a default. However, if a paying agent for any bonds of the School District qualified for State loans as provided in Article IX, Section 16, of the State Constitution notifies the State Treasurer that the School District has failed to deposit sufficient funds to pay principal and interest on the qualified bonds when due or if a bond holder notifies the State Treasurer that the School District has failed to pay principal or interest on such qualified bonds when due, whether or not the School District has filed a draw request with the State Treasurer, the State Treasurer shall promptly pay the principal or interest on the qualified bonds when due.

If sufficient funds for full payment of debt service on the Bonds do not reach the Paying Agent five business days prior to the debt service payment due date, the Paying Agent will notify the School District of the amount of insufficient funds four business days prior to the due date. In the event that the School District does not immediately resolve the insufficient funds situation, the Paying Agent will notify the Michigan Department of Treasury of the deficiency three business days before the payment due date and the State Treasurer shall make the payment.

Any amount paid by the State Treasurer as described in the preceding paragraphs shall be deemed a loan made to the School District pursuant to the requirements of said Article IX, Section 16, of the State Constitution. Registered owners of the Bonds may attempt to obtain a money judgment against the School District for the principal amount of the Bonds or interest not paid when due and may periodically attempt to enforce the collection of the money judgment by requiring the tax assessing

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officers for the School District to place the amount of such judgment on the next tax rolls of the School District. The rights of the holders of the Bonds and the enforceability thereof are subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and their enforcement also may be subject to the exercise of judicial discretion in appropriate cases.

SOURCES OF SCHOOL OPERATING REVENUE

On March 15, 1994, the electors of the State of Michigan approved a ballot proposition to amend the State Constitution of 1963, in part, to increase the State sales tax from 4% to 6% as part of a complex plan to restructure the source of funding of public education (K-12) in order to reduce reliance on local property taxes for school operating purposes and to reduce the per pupil finance resource disparities among school districts. The State aid package passed by the Legislature as part of the school finance reform legislation instituted a per pupil foundation allowance beginning in fiscal year 1994/95. The Legislature has appropriated funds to establish a base foundation allowance in 2006/07 ranging from $7,085 to 8,385 per pupil, depending upon the district's 1993/94 revenue. In the future, the foundation allowance may be adjusted annually by an index based upon the change in revenues to the State school aid fund and change in the total number of pupils statewide. The foundation allowance is funded by locally raised property taxes plus State aid. The revenues for the State's contribution to the foundation allowance are derived from a mix of taxing sources, including, but not limited to, a statewide property tax of 6 mills on all taxable property (homestead and non-homestead), a State sales and use tax, a real estate transfer tax and a cigarette tax.

School districts are required to levy a local property tax of not more than 18 mills or the number of mills levied in 1993 for school operating purposes, whichever is less, on non-homestead properties in order for the district to receive its per pupil foundation allowance. The School District did not receive its full per pupil foundation grant in 2002/03, 2003/04, and 2005/06 and will not for 2006/07. The School district's voted operating millage levied on non-homestead properties for 2002/03, 2003/04, and 2005/06 was, and for 2006/07 is, less than 18 mills by application of Article IX, Section 31 of the State Constitution. See "Constitutional Millage Rollback" and "Tax Rates (per $1,000 of valuation)" in APPENDIX B of this Official Statement. An intermediate school district may seek voter approval for three enhancement mills for distribution to local constituent school districts on a per pupil basis. The enhancement mills are not counted toward the foundation allowance. Furthermore, districts whose per pupil foundation allowance in 2006/07 calculates to an amount in excess of $8,385 are authorized to levy additional millage to obtain the foundation allowance, first by levying such amount of the 18 mills against non-homestead property as is necessary to hold themselves harmless and, if the 18 mills is insufficient, to then levy such additional mills against all property uniformly as is necessary to obtain the foundation allowance. The School District's per pupil foundation allowance does exceed $8,385, and the School District levies such additional millage as described in APPENDIX B.

State aid appropriations and the payment schedule for state aid may be changed by the Legislature at any time.

THE SOURCES OF THE SCHOOL DISTRICT'S OPERATING REVENUE DO NOT IMPACT THE TAXING AUTHORITY OF THE SCHOOL DISTRICT FOR PAYMENT OF GENERAL OBLIGATION UNLIMITED TAX SCHOOL BONDS AND DO NOT AFFECT THE OBLIGATION OF THE SCHOOL DISTRICT TO LEVY TAXES FOR PAYMENT OF DEBT SERVICE ON GENERAL OBLIGATION UNLIMITED TAX BONDS OF THE SCHOOL DISTRICT, INCLUDING THE BONDS OFFERED HEREIN.

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LITIGATION

To the knowledge of the appropriate officials of the School District, no litigation, administrative action or proceeding is pending or threatened, restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the Bonds, or questioning or contesting the validity of the Bonds or the proceedings or authorities under which they are authorized to be issued, sold, executed and delivered. A certificate to such effect will be delivered to the Underwriters at the time of the original delivery of the Bonds.

TAX MATTERS

State

In the opinion of Clark Hill PLC, Birmingham, Michigan ("Bond Counsel"), based on its examination of the documents described in its opinion, under existing State of Michigan statutes, regulations, rulings and court decisions, the Bonds and the interest thereon are exempt from all taxation in the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof.

Federal

In the opinion of Bond Counsel, based upon its examination of the documents described in its opinion, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that certain corporations must take into account interest on the Bonds in determining adjusted net current earnings for purposes of computing the alternative minimum tax imposed on such corporations. The opinions set forth in the preceding sentence are subject to the condition that the School District comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The School District has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. Bond Counsel will express no opinion regarding other federal tax consequences with respect to the Bonds.

There are additional federal tax consequences relative to the Bonds and the interest thereon. The following is a general description of some of these consequences but is not intended to be complete or exhaustive and investors should consult with their tax advisors with respect to these matters. Prospective purchasers of the Bonds should be aware that (i) interest on the Bonds is included in the effectively connected earnings and profits of certain foreign corporations for purposes of calculating the branch profits tax imposed by Section 884 of the Code, (ii) interest on the Bonds may be subject to a tax on excess net passive income of certain S Corporations imposed by Section 1375 of the Code, (iii) interest on the Bonds is included in the calculation of modified adjusted gross income for purposes of determining the taxability of social security or railroad retirement benefits, (iv) the receipt of interest on the Bonds by life insurance companies may affect the federal tax liability of such companies, (v) in the case of property and casualty insurance companies, the amount of certain loss deductions otherwise allowed is reduced by a specific percentage of, among other things, interest on the Bonds, (vi) holders of the Bonds may not deduct interest on indebtedness incurred or continued to purchase or carry the Bonds, and (vii) commercial banks, thrift institutions and other financial institutions may not deduct their costs of carrying certain obligations such as the Bonds.

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Original Issue Premium

For federal income tax purposes, the initial offering prices to the public (excluding bond houses and brokers) of certain Bonds, as set forth on the cover of this Official Statement, may be greater than the stated redemption prices at maturity (the "Premium Bonds"), and constitutes for the original purchasers of the Premium Bonds an amortizable bond premium. Such amortizable bond premium is not deductible from gross income but is taken into account by certain corporations in determining adjusted current earnings for the purpose of computing the alternative minimum tax, which may also affect liability for the branch profits tax imposed by Section 884 of the Code. The amount of amortizable bond premium allocable to each taxable year is generally determined on the basis of a taxpayer's yield to maturity determined by using the taxpayer's basis (for purposes of determining loss on sale or exchange) of such Premium Bonds and compounding at the close of each six-month accrual period. The amount of amortizable bond premium allocable to each taxable year is deducted from the taxpayer's adjusted basis of such Premium Bonds to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Premium Bonds.

Original Issue Discount

The initial public offering prices of certain Bonds, as set forth on the cover page of this Official Statement, may be less than the stated redemption prices at maturity (hereinafter referred to as the "OID Bonds"), and, to the extent properly allocable to each owner of such OID Bond, the original issue discount is excludable from gross income for federal income tax purposes with respect to such owner. Original issue discount is the excess of the stated redemption price at maturity of an OID Bond over the initial offering price to the public (excluding bond houses and brokers) at which price a substantial amount of the OID Bonds were sold. Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. For an owner who acquires an OID Bond in this offering, the amount of original issue discount that accrues during any accrual period generally equals (i) the issue price of such OID Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity on such OID Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), less (iii) any interest payable on such OID Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the owner's tax basis in such OID Bond. Any gain realized by an owner from a sale, exchange, payment or redemption of an OID Bond would be treated as gain from the sale or exchange of such OID Bond. Owners of OID Bonds should consult with their individual tax advisors to determine whether the application of the original issue discount federal regulations will require them to include, for state and local income tax purposes, an amount of interest on the OID Bonds as income even though no corresponding cash interest payment is actually received during the tax year.

Future Developments

No assurance can be given that any future legislation or clarifications or amendments to the Code, if enacted into law, will not contain proposals which could cause the interest on the Bonds to be subject directly or indirectly to federal or state income taxation, adversely affect the market price or marketability of the Bonds, or otherwise prevent bondholders from realizing the full current benefit of the status of the interest thereon.

It is to be understood that the rights of the holders of the Bonds and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

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INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS, INCLUDING THE TREATMENT OF ORIGINAL ISSUE PREMIUM OR ORIGINAL ISSUE DISCOUNT.

APPROVAL OF LEGAL PROCEEDINGS

Legal matters incident to the authorization, issuance and sale by the School District of the Bonds and with regard to the tax-exempt status thereof are subject to the approving opinion of Clark Hill PLC, Birmingham, Michigan, Bond Counsel. Except to the extent necessary to issue its approving opinion as to the validity of the Bonds, Bond Counsel has made no inquiry as to any financial information, statements or materials contained in any financial documents, statements or materials that have been or may be furnished in connection with the authorization, issuance or marketing of the Bonds, and accordingly will not express any opinion with respect to the accuracy or completeness of any such financial information, statements or materials. Clark Hill PLC has represented A.G. Edwards & Sons, Inc. in certain legal matters unrelated to the issuance of the Bonds.

Certain legal matters will be passed upon for the Underwriters by their counsel, Thrun Law Firm, P.C., East Lansing, Michigan.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. ("Financial Security") will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Financial Security Assurance Inc.

Financial Security is a New York domiciled financial guaranty insurance company and a wholly owned subsidiary of Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia, S.A., a publicly held Belgian corporation, and of Dexia Credit Local, a direct wholly-owned subsidiary of Dexia, S.A. Dexia, S.A., through its bank subsidiaries, is primarily engaged in the business of public finance, banking and asset management in France, Belgium and other European countries. No shareholder of Holdings or Financial Security is liable for the obligations of Financial Security.

At September 30, 2006, Financial Security's combined policyholders' surplus and contingency reserves were approximately $2,581,107,000 and its total net unearned premium reserve was approximately $1,992,163,000 in accordance with statutory accounting principles. At September 30, 2006, Financial Security's consolidated shareholder’s equity was approximately $3,058,987,000 and its total net unearned premium reserve was approximately $1,590,538,000 in accordance with generally accepted accounting principles.

The consolidated financial statements of Financial Security included in, or as exhibits to, the annual and quarterly reports filed on December 31, 2005 by Holdings with the Securities and Exchange Commission are hereby incorporated by reference into this Official Statement. All financial statements of Financial Security included in, or as exhibits to, documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this Official Statement

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and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement. Copies of materials incorporated by reference will be provided upon request to Financial Security Assurance Inc.: 31 West 52nd Street, New York, New York 10019, Attention: Communications Department (telephone (212) 826-0100).

The Policy does not protect investors against changes in market value of the Bonds, which market value may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other causes. Financial Security makes no representation regarding the Bonds or the advisability of investing in the Bonds. Financial Security makes no representation regarding the Official Statement, nor has it participated in the preparation thereof, except that Financial Security has provided to the School District the information presented under this caption for inclusion in the Official Statement.

RATINGS

Moody's Investors Service ("Moody's") and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P") will assign, as of the date of delivery of the Bonds, their municipal bond ratings of "Aaa" and "AAA", respectively, to the Bonds with the understanding that the scheduled payment of principal and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds by Financial Security. See “BOND INSURANCE” and APPENDIX G, “Specimen of Municipal Bond Insurance Policy,” herein.

Moody's and S&P will also assign, as of the date of delivery of the Bonds, their municipal bond ratings of "Aa2" and "AA", respectively, to the Bonds based upon the fact that each Bond will be fully qualified for participation in the Michigan School Bond Qualification and Loan Program as of its date of delivery. See "QUALIFICATION BY THE STATE OF MICHIGAN," "LEVY AND COLLECTION OF TAXES FOR PAYMENT OF THE BONDS AND BONDHOLDERS' REMEDIES" and APPENDIX A, "State Qualification," herein.

S&P will also assign, as of the date of delivery of the Bonds, its underlying municipal bond rating of "A-" to the Bonds without regard to qualification of the Bonds for participation in the Michigan School Bond Qualification and Loan Program or municipal bond insurance.

No application has been made to any other ratings service for a rating on the Bonds. The School District furnished to Moody's and S&P certain materials and information in addition to that provided herein. Generally, rating agencies base their ratings on such information and materials, and on investigations, studies and assumptions. There is no assurance that such ratings will prevail for any given period of time or that they will not be revised downward or withdrawn entirely by Moody's and S&P if, in their judgment, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse affect on the market price of the Bonds. Any ratings assigned represent only the views of Moody's and S&P. Further information is available upon request from:

Moody's Investors Service Inc. Standard & Poor's Ratings Services 99 Church Street 55 Water Street New York, NY 10007 New York, NY 10041 (212) 553-0377 (212) 438-1000

UNDERWRITING

A.G. Edwards & Sons, Inc., UBS Securities LLC and LaSalle Financial Services, Inc. (the "Underwriters"), have agreed, subject to the terms of the Bond Purchase Agreement, to purchase the Bonds from the School District. The Bond Purchase Agreement provides, in part, that the Underwriters,

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subject to certain conditions, will purchase from the School District the aggregate principal amount of Bonds for a purchase price as set forth therein. The Underwriters have further agreed to offer the Bonds to the public at the approximate initial offering prices as set forth on the cover hereto. The Underwriters may offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated on the cover hereto. The offering prices may be changed from time to time by the Underwriters. The aggregate underwriting fee equals 0.400 percent of the original principal amount of the Bonds.

The Bond Purchase Agreement provides that the obligations of the Underwriters are subject to certain conditions, including, among other things, that (i) no event has occurred which impairs or threatens to impair the status of the Bonds or interest thereon as exempt from taxation in the State (except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition thereof) and the interest on the Bonds is excluded from gross income for federal income tax purposes and (ii) proceedings relating to the Bonds are not pending or threatened by the Securities and Exchange Commission. The Bond Purchase Agreement further provides that the School District will provide to the Underwriters, within seven business days of the date of the Bond Purchase Agreement, sufficient copies of the Official Statement to enable the Underwriters to comply with the requirements of Rule 15c2-12(b)(4) under the Securities Exchange Act of 1934, as amended.

FINANCIAL ADVISOR'S OBLIGATION

H.J. Umbaugh & Associates, Certified Public Accountants, LLP (the "Financial Advisor") has been retained by the School District to provide certain financial advisory and verification services. The information contained in the Official Statement was prepared in part by the Financial Advisor and is based on information supplied by various officials from records, statements and reports required by various local, county or state agencies of the State of Michigan in accordance with constitutional or statutory requirements.

To the best of the Financial Advisor's knowledge, all of the information contained in the Official Statement, which it assisted in preparing, while it may be summarized is (i) complete and accurate; (ii) does not contain any untrue statement of a material fact; and (iii) does not omit any material fact, or make any untrue statement which would be misleading in light of the circumstances under which these statements are being made. However, the Financial Advisor has not or will not independently verify the completeness and accuracy of the information contained in the Official Statement.

The Financial Advisor's duties, responsibilities and fees arise solely as financial advisor and verification agent to the School District and it has no underwriting, secondary market obligations or other responsibility to the School District. The Financial Advisor's fees are expected to be paid from Bond proceeds.

Further information concerning the Bonds may be secured from H.J. Umbaugh & Associates, Certified Public Accountants, LLP, 6639 Centurion Drive, Suite 100, Lansing, Michigan 48917, (517) 321-0110, Financial Advisor to the School District, or from Allen Park Public Schools, 9601 Vine, Allen Park, Michigan 48101-1309, (313) 827-2150.

CONTINUING DISCLOSURE

Prior to delivery of the Bonds, the School District will execute a Continuing Disclosure Agreement (the "Agreement") for the benefit of the holders of the Bonds and the Beneficial Owners (as hereinafter defined under this caption only) to send certain information annually and to provide notice of certain events to certain information repositories pursuant to the requirements of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. "Beneficial Owner" means, under this caption only, any person which has the power,

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directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including any person holding Bonds through nominees, depositories or any other intermediaries). The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and the other terms of the Agreement, are set forth in APPENDIX F, "Form of Continuing Disclosure Agreement." Additionally, the School District shall provide certain annual financial information and operating data generally consistent with the information contained within the tables under the headings "Enrollments-Enrollment History," "Labor Relations," "Retirement Plan," "History of Valuations – State Equalized Valuation and Taxable Valuation," "Tax Levies and Collections," "State Aid Payments," "School District Tax Rates (Per $1,000 of Valuation)," "Largest Taxpayers," "School Loan Revolving Fund," and "Direct Debt," in APPENDIX B and General Fund Budget Summary in APPENDIX C.

A failure by the School District to comply with the Agreement will not constitute an event of default under the Resolution and holders of the Bonds or Beneficial Owners are limited to the remedies described in the Agreement. A failure by the School District to comply with the Agreement must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price. Further, the School District has not, in the previous five years, failed to comply, in all material respects, with any previous continuing disclosure agreements executed by the School District pursuant to the Rule.

OTHER MATTERS

All information contained in this Official Statement, in all respects, is subject to the complete body of information contained in the original sources thereof. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact.

ALLEN PARK PUBLIC SCHOOLS COUNTY OF WAYNE STATE OF MICHIGAN

By: /s/ Dr. John J. Sturock Its: Superintendent of Schools

[THIS PAGE INTENTIONALLY LEFT BLANK]

A-1

APPENDIX A STATE QUALIFICATION

ARTICLE IX, SECTION 16 OF THE

1963 STATE OF MICHIGAN CONSTITUTION

State loans to school districts.

Sec. 16. The state, in addition to any other borrowing power, may borrow from time to time such amounts as shall be required, pledge its faith and credit and issue its notes or bonds therefor, for the purpose of making loans to school districts as provided in this section.

Amount of loans.

If the minimum amount which would otherwise be necessary for a school district to levy in any year to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies, exceeds 13 mills on each dollar of its assessed valuation as finally equalized, or such lower millage as the legislature may prescribe, then the school district may elect to borrow all or any part of the excess from the state. In that event the state shall lend the excess amount to the school district for the payment of principal and interest. If for any reason any school district will be or is unable to pay the principal and interest on its qualified bonds when due, then the school district shall borrow and the state shall lend to it an amount sufficient to enable the school district to make the payment.

Qualified bonds.

The term "qualified bonds" means general obligation bonds of school districts issued for capital expenditures, including refunding bonds, issued prior to May 4, 1955, or issued thereafter and qualified as provided by law pursuant to Section 27 or Section 28 of Article X of the Constitution of 1908 or pursuant to this section.

Repayment of loans, tax levy by school district.

After a school district has received loans from the state, each year thereafter it shall levy for debt service, exclusive of levies for nonqualified bonds, not less than 13 mill or such lower millage as the legislature may prescribe, until the amount loaned has been repaid, and any tax collections therefrom in any year over and above the minimum requirements for principal and interest on qualified bonds shall be used toward the repayment of state loans. In any year when such levy would produce an amount in excess of the requirements and the amount due to the state, the levy may be reduced by the amount of the excess.

Bonds, state loans, repayment.

Subject to the foregoing provisions, the legislature shall have the power to prescribe and to limit the procedure, terms and conditions for the qualification of bonds, for obtaining and making state loans, and for the repayment of loans.

Power to tax unlimited.

The power to tax for the payment of principal and interest on bonds hereafter issued which are the general obligations of any school district, including refunding bonds, and for repayment of any state loans made to school districts, shall be without limitations as to rate or amount.

Rights and obligations to remain unimpaired.

All rights acquired under Sections 27 and 28 of Article X of the Constitution of 1908, by holders of bonds heretofore issued, and all obligations assumed by the state or any school district under these sections, shall remain unimpaired.

ACT 92, PUBLIC ACTS OF MICHIGAN 2005, AS AMENDED School Bond Qualification, Approval and Loan Act*

AN ACT to prescribe the procedures, terms, and conditions for the qualification or approval of school bonds and other

bonds; to authorize this state to make loans to certain school districts for the payment of certain bonds and to authorize schools to borrow from this state for that purpose; to prescribe the terms and conditions of certain loans to school districts; to prescribe the powers and duties of certain state agencies and certain state and local officials; to provide for certain fees; to prescribe certain penalties; and to repeal acts and parts of acts.

The People of the State of Michigan enact:

Sec. 1. This act shall be known and may be cited as the “school bond qualification, approval, and loan act”.

*Act 92 was signed into law with immediate effect on July 20, 2005. It repealed Act 108, Public Acts of Michigan, 1961, as amended.

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Sec. 2. The purpose of this act is to implement section 16 of article IX of the state constitution of 1963 and to provide for loans to school districts.

Sec. 3. As used in this act:

(a) “Computed millage” means the number of mills in any year, not less than 7 mills and not more than 13 mills, determined on the date of issuance of the order qualifying the bonds or on a later date if requested by the school district and approved by the state treasurer, that, if levied by the school district, will generate sufficient annual proceeds to pay principal and interest on all the school district’s qualified bonds plus principal and interest on all loans related to those qualified bonds no later than the date specified in the note and repayment agreement entered into by the school district under this act.

(b) “Qualified bond” means a bond that is qualified under this act for state loans as provided in section 16 of article IX of the state constitution of 1963. A qualified bond includes the interest amount required for payment of a school district’s net interest obligation under an interest rate exchange or swap, hedge, or other agreement entered into pursuant to the revised municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821, but does not include a termination payment or similar payment related to the termination or cancellation of an interest rate exchange or swap, hedge, or other similar agreement. A qualified bond may include a bond issued to refund loans owed to the state under this act.

(c) “Qualified loan” means a loan made under this act or 1961 PA 108, MCL 388.951 to 388.963, from this state to a school district to pay debt service on a qualified bond.

(d) “Revolving loan fund” means the school loan revolving fund created under section 16c of the shared credit rating

act, 1985 PA 227, MCL 141.1066c. (e) “School district” means a general powers school district organized under the revised school code, 1976 PA 451,

MCL 380.1 to 380.1852, or a school district of the first class as described in the revised school code, 1976 PA 451, MCL 380.1 to 380.1852, having the power to levy ad valorem property taxes.

(f) “State treasurer” means the state treasurer or his or her duly authorized designee. (g) “Superintendent of public instruction” means the superintendent of public instruction appointed under section 3 of

article VIII of the state constitution of 1963.

(h) “Taxable value” means the value determined under section 27a of the general property tax act, 1893 PA 206, MCL 211.1 to 211.157.

Sec. 4. (1) A school district may issue and market bonds as qualified bonds if the state treasurer has issued an order granting qualification under this act.

(2) Except with regard to qualification of new bonds, nothing in this act shall be construed to alter the terms and

conditions applicable to outstanding qualified bonds issued in accordance with 1961 PA 108, MCL 388.951 to 388.963, and the loans associated with those qualified bonds. Unless otherwise amended as permitted by this act, outstanding qualified loans incurred in association with outstanding qualified bonds described in this subsection shall continue to bear interest and be due and payable as provided in the repayment agreements entered into between the school district and the state before the effective date of this act.

(3) The state treasurer may qualify bonds for which the state treasurer has received an application for prequalification

on or before May 25, 2005 without regard to the requirements of section 5(2)(f) if the electors of the school district approve the bonds at an election held during 2005.

Sec. 5. (1) A school district may apply to the state treasurer for preliminary qualification of a proposed school bond

issue by filing an application in the form and containing the information required by this act. (2) An application for preliminary qualification of a school bond shall contain all of the following information:

(a) The proposed ballot language to be submitted to the electors. (b) A description of the project or projects proposed to be financed. (c) A pro forma debt service projection showing the estimated mills the school district will levy to provide revenue the

school district will use to pay the qualified bonds. For the purpose of the pro forma debt service projection, the school district may assume for the first 5 years following the date of the application the average growth in taxable value for the 5 years

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preceding the date of the application and the lesser of that average growth rate or 3% for the remaining term of the proposed bonds.

(d) Evidence that the rate of utilization of each project to be financed will be at least 85% for new buildings and 60%

for renovated facilities. If the projected enrollment of the district would not otherwise support utilization at the rates described in this subsection, the school district may include an explanation of the actions the school district intends to take to address the underutilization, including, if applicable, actions to close school buildings or other actions designed to assure continued assured use of the facilities being financed.

(e) Evidence that the cost per square foot of the project or projects will be reasonable in light of economic conditions

applicable to the geographic area in which the school district is located. (f) Evidence that the school district will repay all outstanding qualified loans at the times described in section 9. (g) The weighted average age of all school buildings in the school district based on square footage. (h) The overall utilization rate of all school buildings in the school district, excluding special education purposes.

(i) The taxable value per pupil. (j) The total bonded debt outstanding of the school district and the total taxable value of property in the school district

for the school district fiscal year in which the application is filed. (k) A statement describing any environmental or usability problems to be addressed by the project or projects. (l) An architect’s analysis of the overall condition of the facilities to be renovated or replaced as a part of the project or

projects. (m) An amortization schedule demonstrating that the weighted average maturity of the qualified bond issue does not

exceed 120% of the average reasonably expected useful life of the facilities, excluding land and site improvements, being financed or refinanced with the proceeds of the qualified bonds, determined as of the later of the date on which the qualified bonds will be issued or the date on which each facility is expected to be placed in service.

Sec. 6. The state treasurer shall prequalify bonds of a school district if the state treasurer determines all of the

following: (a) The issuance of additional qualified bonds will not prevent the school district from repaying its outstanding

qualified loans on the earlier of the dates described in section 9. (b) The form of the ballot conforms with the requirements of this act.

Sec. 7. (1) The state treasurer shall qualify bonds of a school district if the state treasurer determines all of the

following: (a) A majority of the school district electors have approved the bonds.

(b) The terms of the bond issue comply with applicable provisions of the revised school code, 1976 PA 451, MCL

380.1 to 380.1852. (c) The school district is in compliance with the revised municipal finance act, 2001 PA 34, MCL 141.2101 to

141.2821. (d) The weighted average maturity of the qualified bond issue does not exceed 120% of the average reasonably

expected useful life of the facilities, excluding land and site improvements, being financed or refinanced with the proceeds of the bonds, determined as of the later of the date on which the qualified bonds will be issued or the date on which each facility is expected to be placed in service.

(e) The school district has filed any information necessary to update the contents of the original application to reflect

changes in any of the information approved in the preliminary qualification process. (f) The school district has paid a qualification fee of not less than $3,000.00 or the amount determined by the state

treasurer, which shall be approximately equal to the amount required to pay the estimated administrative expenses incurred under this act for the fiscal year in which the state treasurer imposes the fee.

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(2) An order qualifying bonds shall specify the principal and interest payment dates for all the bonds, the maximum

principal amount of and maximum interest rate on the bonds, the computed millage, if any, the final repayment date for any loans made with respect to those bonds, and other matters as the state treasurer shall determine or as are required by this act.

(3) If the application for prequalification demonstrates that the school district will borrow from this state in accordance

with this act, the state treasurer and the school district shall enter into a loan agreement setting forth the terms and conditions of any qualified loans to be made to the school district under this act.

(4) If a school district does not issue its qualified bonds within 180 days after the date of the order qualifying bonds,

the school district may reapply for qualification by filing an application and information necessary to update the contents of the original application for prequalification or qualification.

(5) The state treasurer shall qualify refunding bonds issued to refund qualified bonds if the state treasurer finds that the

refunding bonds comply with the provisions of the revised municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821. Sec. 8. A ballot submitted to the school electors of a school district after November 8, 2005 requesting authorization to

issue unlimited tax general obligations that will be guaranteed by this state in accordance with section 16 of article IX of the state constitution of 1963 shall inform the electors that if the school district borrows from this state to pay debt service on the bonds, the school district may be required to continue to levy mills beyond the term of the bonds to repay this state.

Sec. 9. (1) Except as otherwise provided in this act, a school district may borrow from the state an amount not greater than the difference between the proceeds of the school district’s computed millage and the amount necessary to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies.

(2) For school districts having qualified loans outstanding as of July 20, 2005, the state treasurer shall review information relating to each school district regarding the taxable value of the school district and the actual debt service of outstanding qualified bonds as of July 20, 2005 and shall issue an order establishing the payment date for all those outstanding qualified loans and any additional qualified loans expected to be incurred by those school districts related to qualified bonds issued before July 20, 2005. The payment date shall be not later than 72 months after the date on which the qualified bonds most recently issued by the school district are due and payable.

(3) For qualified loans related to qualified bonds issued after July 20, 2005, the qualified loans shall be due not later than 72 months after the date on which the qualified bonds for which the school borrowed from this state are due and payable. This section does not preclude early repayment of qualified bonds or qualified loans.

(4) Except with regard to qualified loans described in subsection (2), each loan made or considered made to a school district under this act shall be for debt service on only a specific qualified bond issue. The state treasurer shall maintain separate accounts for each school district on the books and accounts of this state noting the qualified bond, the related qualified loans, the final payment date of the bonds, the final payment date of the qualified loans, and the interest rate accrued on the loans.

(5) For qualified loans relating to qualified bonds issued after July 20, 2005, a school district shall continue to levy the computed mills until it has completely repaid all principal and interest on its qualified loans.

(6) For qualified loans relating to qualified bonds issued before July 20, 2005, a school district shall continue to comply with the levy and repayment requirements imposed before July 20, 2005. Not less than 90 days after July 20, 2005, the state treasurer and the school district shall enter into amended and restated repayment agreements to incorporate the levy and repayment requirements applicable to qualified loans issued before July 20, 2005.

(7) Upon the request of a school district made before June 1 of any year, the state treasurer annually may waive all or a portion of the millage required to be levied by a school district to pay principal and interest on its qualified bonds or qualified loans under this section if the state treasurer finds all of the following:

(a) The school board of the school district has applied to the state treasurer for permission to levy less than the millage required to be levied to pay the principal and interest on its qualified bonds or qualified loans under subsection (1).

(b) The application specifies the number of mills the school district requests permission to levy.

(c) The waiver will be financially beneficial to this state, the school district, or both.

(d) The waiver will not reduce the millage levied by the school district to pay principal and interest on qualified bonds or qualified loans under this act to less than 7 mills.

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(e) The board of the school district, by resolution, has agreed to comply with all conditions that the state treasurer considers necessary.

(8) Except as otherwise provided in this act, loans shall bear interest at the greater of 3% or the average annual cost of funds computed annually on the basis of all state general obligations issued under section 16 of article IX of the state constitution of 1963 plus 0.125%. In the event this state has no outstanding general obligations under section 16 of article IX of the state constitution of 1963, the average annual cost of funds shall be computed on the basis of all state general obligations issued under section 15 of article IX of the state constitution of 1963 plus 0.125%.

Sec. 10. The state treasurer shall keep all certificates of qualification or approval in a permanent file and shall deliver copies of the certificates to the school district.

Sec. 11. The state treasurer shall promulgate rules to implement this act pursuant to the administrative procedures act

of 1969, 1969 PA 306, MCL 24.201 to 24.328.

Sec. 12. If a school district does not apply for prequalification or qualification or approval of a bond issue before the issuance of those bonds, the state treasurer shall not approve or qualify those bonds as qualified bonds under this act.

Sec. 13. (1) If a school district owes a balance due to the revolving loan fund or has been identified as a potential

borrower, the school district shall file an annual loan activity application with the state treasurer no less than 60 days before certifying its annual tax levy. The annual loan activity application shall be submitted in a format prescribed by the state treasurer and shall provide the taxable value, debt service, and any other information necessary to determine the proper required millage levy required under this act. The application shall contain a resolution passed by the local school board authorizing a designated school district official to complete all necessary documents to obtain a loan from the revolving loan fund or for making repayment to the revolving loan fund for the year.

(2) If a school district is eligible to borrow for debt service on qualified bonds, the school district shall file a draw

request with the state treasurer not less than 30 days before each date on which the school district owes the debt service. The draw request shall include all of the following:

(a) A statement of the debt service owed in the next 6 months. (b) A copy of the most recent bank statement showing the amount on hand in the debt service accounts for all qualified

bonds. (c) A statement of any revenue received for payment of the debt service since the date of the bank statement.

(d) A statement of any withdrawals made from the debt service account since the date of the bank statement.

(3) Not more than 7 days before the date established by the state treasurer for making qualified loans, the school

district shall confirm in writing the final qualified loan amount to be drawn on a certificate in the form prescribed by the state treasurer.

(4) Upon receipt of a qualified loan confirmation described in subsection (3), the state treasurer shall determine the

amount of the draw, which shall be the difference between the funds on hand in all debt service accounts and the amount of the debt service, and shall make a qualified loan in that amount to the school district no later than 6 days before the date the debt service is due.

(5) When a school district’s computed millage is sufficient to pay principal and interest on its qualified bonds, a school

district shall file a loan activity statement with the state treasurer no later than 30 days before the date set for payment of the qualified bonds setting forth all of the following:

(a) A statement of the debt service owed in the next 6 months. (b) A copy of the most recent bank statement showing the amount on hand in the debt service account for the qualified

bonds.

(c) A statement of any revenue received for payment of the debt service since the date of the bank statement. (d) A statement of any withdrawals made from the debt service account since the date of the bank statement. (6) Within 30 days after receipt of the loan activity statement under subsection (5), the state treasurer shall send an

invoice to the school district for the amount of repayment the school district owes on its outstanding qualified loans, which shall be the difference between the debt service payable or paid to bondholders and the funds on hand at the school district, less a

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reasonable amount of funds on hand, as determined by the state treasurer, to cover minimum balance requirements or potential tax disputes. The school district shall remit the amount specified in the invoice within 30 days after the dated date of the invoice.

Sec. 14. (1) If any paying agent for a school district’s qualified bonds notifies the state treasurer that the school district

has failed to deposit sufficient funds to pay principal and interest due on the qualified bonds when due, or if a bondholder notifies the state treasurer that the school district has failed to pay principal or interest on qualified bonds when due, whether or not the school district has filed a draw request with the state treasurer, the state treasurer shall promptly pay the principal or interest on the qualified bond when due.

(2) If the state treasurer pays any amount described in this section, the state treasurer shall bill the school district for the amount paid and the school district shall immediately remit the amount to the state treasurer. If the school district would have been eligible to borrow the debt service in accordance with the terms of this act, the school district shall enter into a loan agreement establishing the terms of the qualified loan as provided in this act. If the state treasurer directs the Michigan municipal bond authority to pay any amount described in this section, the state treasurer shall cause the Michigan municipal bond authority to bill the school district for the amount paid and the school district shall immediately remit the amount to the Michigan municipal bond authority.

Sec. 15. (1) If a school district that owes this state loan repayments relating to qualified bonds fails to levy at least the computed millage upon its taxable value for debt retirement purposes for qualified bonds and for repayment of a qualified loan made under this act while any part of the qualified loan is unpaid or defaults in its agreement to repay a qualified loan or any installment of a qualified loan, the school district shall increase its debt levy in the next succeeding year to obtain the amount necessary to repay this state the amount of the default plus a late charge of 3% and shall pay that amount to this state together with any other amounts owed during the next tax year. The school district may use other funds to repay this state including a transfer of general funds of the school district, if approved by the state treasurer. The state treasurer shall not disburse state school aid to the school district until the school district has made satisfactory arrangements with the state treasurer for the payment of the amount in default.

(2) If a school district fails to process any report, application, confirmation, or repayment as required under this act, the

state treasurer may withhold a school district’s state aid funds until the school district complies with the requirements under this act.

Sec. 16. The state treasurer shall deposit all fees collected under this act into a separate fund established within the state treasury, and shall use the proceeds of the fees solely for the purpose of administering and enforcing this act. The unexpended and unobligated balance of this fund at the end of each state fiscal year shall be carried forward over to the succeeding state fiscal year and shall not lapse to the general fund but shall be available for reappropriation for the next state fiscal year.

Sec. 17. A person who knowingly makes a false statement or conceals material information for the purpose of

obtaining qualification of a bond issue under this act or for the purpose of obtaining a qualified loan under this act, or who knowingly uses all or part of the proceeds of a qualified loan obtained under this act for any purpose not authorized by this act, is guilty of a felony punishable by imprisonment for not more than 4 years or a fine of not more than $5,000.00, or both.

Sec. 18. If a school district has completed the projects approved by the school electors of the school district to be funded from proceeds of qualified bonds, a school district may use any remaining proceeds of the qualified bonds as follows:

(a) To pay for enhancements to the projects approved by the school electors as described in the ballot proposing the qualified bonds.

(b) To pay debt service on the qualified bonds. (c) To repay this state.

Sec. 19. The state treasurer may designate in writing a person or persons to take any actions required to be taken by the

state treasurer under this act. The signature of any designee shall have the same force and effect as the signature of the state treasurer for all purposes of this act.

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OPINION #4422 OF THE ATTORNEY GENERAL, STATE OF MICHIGAN DATED MARCH 12, 1965

CONSTITUTIONAL LAW: SCHOOL BONDS: MUNICIPAL FINANCE COMMISSION:

Article 9, § 16, Michigan Constitution of 1963, requires school districts to borrow and State to lend sufficient sum to cover debt service payments on qualified bonds of school districts. Although this is not a pledge of full faith and credit of the State, the Municipal Finance Commission may and must enforce the duty of the district to borrow and the State to lend such sum.

No. 4422 March 12, 1965.

Hon. Sanford A. Brown State Treasurer Lansing, Michigan

You have asked in your letter of February 5 whether Article IX, § 16 of the Michigan Constitution of 1963 pledges the full faith and credit of the State to the payment of principal and interest of qualified school bonds.

Article IX, § 16 of the Michigan Constitution of 1963 provides in pertinent part as follows:

"The state * * * may borrow from time to time such amounts as shall be required, pledge its faith and credit and issue its notes or bonds therefor, for the purpose of making loans to school districts as provided in this section.

"If the minimum amount which would otherwise be necessary for a school district to levy in any year to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies, exceeds 13 mills on each dollar of its assessed valuation as finally equalized, or such lower millage as the legislature may prescribe, then the school district may elect to borrow all or any part of the excess from the state. In that event the state shall lend the excess amount to the school district for payment of principal and interest. If for any reason any school district will be or is unable to pay the principal and interest on its qualified bonds when due, then the school district shall borrow and the state shall lend to it an amount sufficient to enable the school district to make the payment.

"The term 'qualified bonds' means general obligation bonds of school districts issued for capital expenditures, including refunding bonds, issued prior to May 4, 1955, or issued thereafter and qualified as provided by law pursuant to Section 27 or Section 28 of Article X of the Constitution of 1908 or pursuant to this section."

Thus, the school district is required to borrow and the State to lend an amount sufficient to enable the school district to make payments of principal and interest due on qualified bonds, and the state is empowered to borrow and to issue its notes or bonds for the purpose of making such loans, and to pledge its full faith and credit for such state bonds or notes.

The constitutional provision quoted does not pledge the full faith and credit of the state to all qualified bonds. The state is not primarily liable on qualified bonds of a school district. Rather, the state is required to lend whatever the school district needs, from time to time, to meet debt service requirements on such bonds.

You ask what remedies are available to enforce the obligation of the state.

The quoted language makes it mandatory upon the school district to borrow and upon the state to lend "an amount necessary to enable the school district to make the payment." Under Chapter II, Section 2(f) of the Municipal Finance Act [C.L. 1948 § 132.2; M.S.A. 1958 Rev. Vol. § 5.3188(4)f], the Municipal Finance Commission has power to enforce compliance with any law by, inter alia, the "institution of appropriate proceedings in the courts of the state, including those for writs of mandamus and injunction."

The Commission could and indeed must enforce the duty of the district to borrow and the state to lend. The bondholders also would have an action to enforce the duty of the district to borrow and of the state to lend.

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Thus the bondholders are assured of the availability of state funds where needed to meet debt service requirements on qualified bonds. This is not a pledge of full faith and credit, but gives the bondholders as much or more protection as would such a pledge.

FRANK J. KELLEY, Attorney General

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OPINION #4508 OF THE ATTORNEY GENERAL, STATE OF MICHIGAN DATED AUGUST 29, 1966

BONDS: Qualified bonds of school districts. CONSTITUTION OF 1963: School Bond Loan Fund. SCHOOLS: Bond Loans. STATE TREASURER: Payment of principal and interest on qualified school district bonds.

Authority of State Treasurer and procedures to be followed in paying from the School Bond Loan Fund principal and interest on qualified school bonds upon presentment by a bondholder.

No. 4508 Hon. Allison Green August 29, 1966. State Treasurer Capitol Building Lansing, Michigan

You have requested my opinion on what procedures should be followed by the state treasurer preparatory to making loans to local school districts which are unable to make payments on principal and interest of qualified school district bonds.1

Loans to bonded school districts are authorized by Article IX, Section 16, Constitution of 1963, which in part contains pertinent language:

"If the minimum amount which would otherwise be necessary for a school district to levy in any year to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies, exceeds 13 mills on each dollar of its assessed valuation as finally equalized, or such lower millage as the legislature may prescribe, then the school district may elect to borrow all or any part of the excess from the state. In that event the state shall lend the excess amount to the school district for the payment of principal and interest. If for any reason any school district will be or is unable to pay the principal and interest on its qualified bonds when due, then the school district shall borrow and the state shall lend to it an amount sufficient to enable the school district to make the payment.

"The term 'qualified bonds' means general obligation bonds of school districts issued for capital expenditures, including refunding bonds, issued prior to May 4, 1955, or issued thereafter and qualified as provided by law pursuant to Section 27 or Section 28 of Article X of the Constitution of 1908 or pursuant to this section."

Article IX, Section 16, Constitution of 1963, is a continuation with minor revisions of the provisions relating to school bond financing which appeared in Sections 27 and 28 of Article X, Constitution of 1908. Section 27, Article X, Constitution of 1908, was proposed by joint resolution of the legislature in 1955 and approved by the people at the regular election of April 4, 1955. The loan provisions of Section 27 ceased to have effectiveness after July 1, 1962, and were replaced by the provisions of Section 28, Article X, Constitution of 1908, which was proposed by joint resolution of the legislature in 1960 and approved by the people at the general election of November 8, 1960. Section 28 by its own terms took effect on July 1, 1962.

Section 28, Article X, Constitution of 1908, was implemented by the legislature by the enactment of Act 108, P.A. 1961, which took effect September 8, 1961. The first section of Act 108, P.A. 1961, stated that the purpose of the act was to implement Section 28 of Article X of the Constitution of 1908. The Constitution of 1963 took effect on January 1, 1964. In anticipation of the effectiveness of that Constitution, the legislature passed Act 33, P.A. 1963, Second Extra Session, such act to take effect on January 1, 1964. Act 33, P.A. 1963, Second Extra Session, amended Sections 1, 3, 8 and 9 of Act 108, P.A. 1961, and further amended section 7 of Act 108, P.A. 1961, as amended by Act 131, P.A. 1962. The first section of amendatory Act 33 stated that the act's purpose was to implement Section 16 of Article IX of the Constitution of 1963. Subsequent amendment has been made to Sections 2, 4, 6, 9 and 10 of Act 108, P.A. 1961, by Act 169, P.A. 1964, which act also added a new Section 4a.2.

1In your letter of request you stated that you were familiar with Opinion No. 4422 issued by me on March 12, 1965, in which it was ruled that Article IX, Section 16, Constitution of 1963, requires school districts to borrow and the state to lend sufficient sums to cover debt service payments on qualified bonds of school districts but that this requirement is not a pledge of the full faith and credit of the state; the Municipal Finance Commission however may and must enforce the duty of the school district to borrow and have the state to lend the necessary amounts. 2Act 108, P.A. 1961, in its present amended form appears in M.S.A. 1965 Cum. Supp. § S 3.424(111) et seq.

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Answer to your question is to be found in amended Sections 6, 7 and 8 of the act. These sections present two situations in which you may become involved as state treasurer. The first situation is where a loan is to be made to the school district to permit the district to meet the principal and interest requirements on its bonds without a default in payment; the second is where the principal or interest on the bonds has not been paid when due upon proper presentation because of inadequate funds resulting in a default in payment.

Under amended Section 6 of the act, in any school district where the amount necessary to be levied in any year for principal and interest on qualified bonds exceeds 7 mills on each dollar of the assessed valuation of the school district as last equalized by the state, such school district on or before 60 days prior to the time of certification of its tax levy to the assessing officer shall file with the superintendent of public instruction3 a preliminary application for a loan from the state in the amount of any part of such excess over 7 mills which the school district does not propose to levy in such year.4 Amended Section 6 specifies the information to be supplied in the application. The superintendent of public instruction if he finds the application in proper form shall approve or deny the application in whole or in part and notify the school district of his action. Amended Section 7 of the act provides that if a loan from the state shall become necessary for the payment of principal and interest on qualified bonds in accordance with an approved preliminary application to the superintendent of public instruction or by virtue of a supplemental application, it shall be the duty of the superintendent of public instruction after audit to forward to the state treasurer a statement setting forth the amount to be loaned to the school district for the payment of principal and interest and the date on or before which loan shall be made.5 The superintendent shall prepare a voucher as a basis for the issuance of a warrant and upon receipt of such statement and warrant, it shall be the duty of the state treasurer to loan to the school district from the school bond loan fund the amount set forth in the statement of the superintendent of public instruction on or before the date specified therein. The state treasurer upon making such loan shall obtain from the school district a receipt for the amount so loaned which receipt shall specify the terms of repayment in accordance with the provisions of Section 16 of Article IX, Constitution of 1963 and the act. The school district treasurer upon receipt of the loan is required to deposit the same in the debt retirement fund to be used solely for the payment of principal and interest on qualified bonds.

The foregoing summaries of the procedures prescribed by amended Section 6 and 7 relate to the first situation above-described where the loan to the school district is to be made before the school district has defaulted in the payment of the principal or interest on its bonds.

The second situation described above is covered by amended Section 8 of the act which prescribes that in the event the principal or interest on any qualified bond is not paid when due, upon proper presentation of the bond or interest coupon to the agent or officer charged with making payment thereof, the state treasurer shall forthwith pay such principal or interest upon presentation of the bond or coupon to him. Any amount so paid by the state treasurer shall be deemed a loan to the school district made pursuant to the requirements of Section 16, Article IX, Constitution of 1963, and the act and the school district shall give a receipt therefor and repay the loan in the manner provided in the act for the repayment of loans.

The method of processing loans to school districts under amended Sections 6 and 7 before default in payment of principal or interest is adequately spelled out in those sections and no additional comment from me is necessary. Your real concern is in regard to the applicable procedures which you should follow in the situation where the school district has defaulted in the payment of principal or interest on its bonds and the bond or bonds and the interest coupons have not been paid when due by the paying agent because of lack of funds. In the event of such a happening it is assumed for the purposes of this opinion that the holder of the bond or of the interest coupon will make demand on you as state treasurer for the prompt payment of the obligation thereunder. Should such demand be made on you as state treasurer, you would be entitled to take the following action before making payment:

a. Ascertaining from the superintendent of public instruction or from the records in your own office that the bonds involved are duly qualified bonds as defined and described in amended Section 3 of the act;

b. Requiring proof reasonably satisfactory to you that the bond or bonds or the interest coupons have been properly presented for payment to the paying agent or officer charged with the responsibility for making payment thereof and that payment has been refused because sufficient monies had not been deposited by the school district for that purpose; such proof of nonpayment may be furnished you in the form of a certificate from the paying agent.

3Article VIII, Section 3, Constitution of 1963 requires the state board of education to appoint a superintendent of public instruction who shall be the principal executive officer of the department of education and who shall have powers and duties provided by law. Section 14 of Act 287, P.A. 1964 (M.S.A. 1965 Cum. Supp. § 15.1023(14)) specifies that after June 30, 1965, a reference in any law to the powers and duties of the superintendent of public instruction shall be deemed to be made to the state board of education, subject to exceptions not pertinent here, and that the state board of education may delegate any of its functions to the superintendent. Section 300 of Act 380, P.A. 1965, creates a department of education. Section 301 of that act provides that the head of the department of education is the state board of education. Section 303 of that act transfers by a Type III transfer all powers, duties and functions then vested by law in the superintendent of public instruction to the department of education. Section 305 of the act specifies that the principal executive officer of the department of education is the superintendent of public instruction. Act 380 appears in M.S.A. 1965 Cum. Supp. at § 3.29(1) et seq. Act 380, P.A. 1965, was amended without regard to the sections involved here by Act 407, P.A. 1965. Without doubt, under the foregoing provisions the state board of education could delegate to the superintendent of public instruction the performance of all of the functions and duties imposed on the board in connection with the School Bond Loan Fund. 4Other details set forth in amended Section 6 have been omitted. 5Other details set forth in amended Section 7 have been omitted.

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c. Notification to the school district given by you or your designee of the action taken by paying agent in refusing payment of the bonds or interest coupons on presentment because of the failure of the school district to have deposited funds with the paying agent for that purpose and verification from the school district of the fact of such failure to supply the required funds; notification to the school district by you or your designee that payment of the required amounts were to be made from the school bond loan fund by you as state treasurer and that such payment would be in the form of a loan to the school district which the school district would be required to be repay to the school bond loan fund in the manner required by law; the school district will be required to furnish you as state treasurer with a receipt evidencing the loan and specifying the terms of repayment, as required by law.

Upon the fulfillment of the above conditions in a manner reasonably acceptable to you, you would be authorized to make payment of the amounts due on the bonds and interest coupons and thereupon to demand their surrender and delivery to you as state treasurer.

Because of the safeguards built into the Michigan Constitution and statutes there should be no default of Michigan qualified school bonds. The School Loan Fund Program will have afforded the school district access to loan funds prior to the due date of the principle [sic] and interest on such bonds. In order to advise of the procedures in the remote possibility of nonpayment, however, I have set forth the foregoing guide lines [sic].

FRANK J. KELLEY, Attorney General

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APPENDIX B1

SCHOOL DISTRICT DATA

Location and Area

Allen Park Public Schools (the "School District") is a K-12 school district located in the City of Allen Park in Wayne County in the southeastern portion of Michigan’s lower peninsula approximately ten miles southwest of the City of Detroit. The School District covers an area of approximately 3.5 square miles.

Existing school facilities include three elementary schools, one middle school, one high school and Riley Education Center which houses an alternative education high school.

Population2

The School District’s estimated 1980, 1990, 2000 and 2006 populations within its boundaries are as follows:

1980 25,738 1990 22,204 2000 21,309 2006 20,000

The following is a record of the 1990 and 2000 populations for the entire City of Allen Park, without regard to the School District boundaries.

1990 2000 % ChangeCity of Allen Park 31,092 29,376 (5.5)

School Administration

John J. Sturock, Ed.D., Superintendent of Schools

Dr. Sturock has served as Superintendent of Schools since August 1, 2006. He has 35 years of experience in education. Prior to this appointment, Dr. Sturock was Superintendent of Schools for Charlevoix Public Schools from 1998 to 2006. He served as Superintendent of Schools for Concord Community Schools from 1993 to 1998. He served Williamston Community Schools as high school principal from 1986 to 1993 and as assistant high school principal and athletic director from 1983 to 1986. He was the acting high school assistant principal and a vocational education teacher for Howell Public Schools from 1980 to 1983. Dr. Sturock previously served the Allen Park Public Schools as a high school vocational education teacher from 1975 to 1980. He also was a vocational education teacher for Pinckney Community Schools from 1971 to 1975.

1 Unless otherwise noted, the information contained in Appendix B was provided by the School District. 2 Sources: School District figures: 1980 – Wayne State University, Michigan Metropolitan Information Center, 1990 – Michigan Department of Management and Budget, 2000 – SEMCOG, 2006 – School District. City figures: U.S. Census of Population.

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Dr. Sturock received his Bachelor of Science degree in secondary education and industrial arts in 1971 from Eastern Michigan University. He received his Master of Arts degree in Educational Leadership in 1976 from Eastern Michigan University. In 1997, he completed his Doctorate of Education degree in Educational Administration and Supervision from Wayne State University.

Dr. Sturock is a member of a number of professional organizations including the Michigan and American Associations of School Administrators and the Michigan Association of School Boards.

Deborah Lee, Director of Finance

Ms. Lee has served as Director of Finance since July 1999. From 1995 to 1999, she was the accounting supervisor at the School District. From 1993 to 1995, she was an accountant for Horvath & Horvath, PC.

Ms. Lee received her Bachelor of Science Degree in Accounting in 1975 from Wayne State University. She is a member of the Michigan School Business Officials and the Wayne County School Business Officials.

Board of Education

The School District is governed by seven elected Board of Education members who serve staggered four-year terms.

TERM EXPIRATIONFrank Liberati President 12/31/2008 Guy DesJardins Vice President, Operations 12/31/2010 Michael Lash Vice President, Human Resources 12/31/2006 Margaret Marten Vice President, Teaching/Learning 12/31/2009 Richard Moynihan Vice President, Extracurricular Issues 12/31/2007 Gordon Miller Secretary 12/31/2008 Frances Babbage Treasurer 12/31/2009

Enrollments

The following tables show total enrollments as of the Fall pupil count day at the School District for the past ten years and the present enrollment by grade.

Enrollment History

2006/07 3,744 2001/02 3,4522005/06 3,692 2000/01 3,2982004/05 3,622 1999/00 3,3032003/04 3,636 1998/99 3,2452002/03 3,485 1997/98 3,238

Projected enrollment for 2008/2009 is 3,602.

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2006/07 Enrollment by Grade

Pre-Primary 11 7th 323 Kindergarten 207 8th 321 1st 236 9th 317 2nd 239 10th 362 3rd 255 11th 341 4th 255 12th 3115th 291 6th 275 Total 3,744

School District Facilities

School BuildingGradesServed

YearCompleted

Additions/Remodeling

BuildingEnrollment

Arno Elementary K-5 1949 1951, 1959, 1983, 1992, 2004 541 Bennie Elementary K-5 1951 1992, 1995, 2005 410 Lindemann Elementary PreK-5 1951 1953, 1983, 1992, 2004 543 Allen Park Middle School 6-8 1961 1983, 1992, 2005 919 Allen Park High School 9-12 1954 1983, 1998, 2006 1,178 Riley Education Center Community High School Alt. Ed. 1955 1957, 1998, 2005 153 Maintenance Building 1994 2006 _____ Total 3,744

Other Schools1

There are no public school academies within the School District boundaries. There is one parochial school within the School District boundaries: Cabrini Catholic Schools, serving grades K-12, with approximately 456 students.

Labor Relations

As shown in the table below, the School District has 355 full-time and part-time employees, and 307 employees serve under four different union affiliated contracts. The School District has not experienced a strike within the past ten years.

Class Number Affiliation Contract ExpiresTeachers 185 Allen Park Education Assoc., MEA/NEA 08/31/062

Transportation, Maintenance & Cafeteria 65 Local 142, AFLCIO, Council 25 06/30/07Secretaries 16 Allen Park Educ. Secretaries Assoc., MEA/NEA 06/30/042

Para-professionals 41 Local 3831, AFLCIO 06/30/07 Administrators 18 No affiliation None Community Service 30 No affiliation None Total 355

1 Source: Michigan Education Directory. 2 In negotiations.

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Retirement Plan

For the period from October 1 through September 30, the School District pays an amount equal to a percentage of its employees’ wages to the Michigan Public School Employees Retirement System (“MPSERS”) which is administered by the State of Michigan. These contributions are required by law and are calculated by using the contribution rates and periods provided in the table below. The School District's estimated contribution to MPSERS for the 2006/07 fiscal year and the contributions for the previous five years are shown below. The School District does not have an unfunded accrued liability under MPSERS. For more information regarding this and other retirement plans see the School District’s audited financial statements in this Official Statement.

Contribution Period Contribution RateOctober 1, 2006 – September 30, 2007 17.74% October 1, 2005 – September 30, 2006 16.34 October 1, 2004 – September 30, 2005 14.87 October 1, 2003 – September 30, 2004 12.99 October 1, 2002 – September 30, 2003 12.99 October 1, 2001 – September 30, 2002 12.17

Fiscal Year Ending June 30, Contribution to MPSERS2007 $3,306,568 (estimate) 2006 2,925,688 2005 2,527,543 2004 2,277,154 2003 2,224,950 2002 1,977,478

Other Post-Employment Benefits

MPSERS is a cost-sharing, multi-employer, statewide plan. Pension benefits and retiree health benefits are established by law and funded through employer contributions. The cost of retiree benefits is funded annually on a pay-as-you-go basis, with retirees paying some of the costs. Current year liability for retiree health benefits is reflected in the figures provided above. Further information regarding MPSERS, including retiree health benefits, can be found at www.michigan.gov/orsschools.

GENERAL FINANCIAL INFORMATION

Assessed Valuations

Taxable property in the School District is assessed by the respective municipal assessors and is subject to review by the County Equalization Department. Tax levies on property in Michigan are applied against the taxable value of all property on the ad valorem tax roll as finally equalized by the State of Michigan.

In accordance with Act 539, Public Acts of Michigan, 1982, as amended, and Article IX, Section 3, of the 1963 Michigan Constitution, the ad valorem state equalized valuation ("SEV") represents 50 percent of true cash value. SEV does not include any value of tax exempt property (e.g. churches, governmental property and public schools) or property granted tax abatements under Act 198, Public Acts of Michigan, 1974, as amended. The assessed values of Industrial Facilities Tax (IFT) properties are maintained on a separate tax roll. Beginning in 1994, ad valorem property taxes are levied on the basis of taxable value, which is subject, in the case of some property, to assessment caps. See "TAX PROCEDURES" herein.

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The following tables show the five-year history of assessed valuations for the School District and an analysis of the 2006 taxable valuation by class and by municipal unit.

History of Valuations – State Equalized Valuation and Taxable Valuation1

State Equalized Valuation Taxable Valuation2006 $738,286,329 $572,676,958 2005 736,121,489 548,964,999 2004 703,353,928 525,100,640 2003 663,424,808 501,777,456 2002 623,365,127 489,282,380

2006 Taxable Valuation by Class1

Taxable Valuation % of Total Taxable ValuationCommercial $ 44,556,800 7.78% Industrial 895,701 0.16 Personal 9,475,400 1.65 Residential 509,247,031 88.92 Utility 8,502,026 1.49Total $572,676,958 100.00%

2006 Taxable Valuation by Municipal Unit1

Name of Unit Homestead Non-HomesteadTotal

Taxable Valuation% of

Total ValueCity of Allen Park $481,885,066 $90,791,892 $572,676,958 100%

Tax Increment Authorities2

Act 450 of the Public Acts of Michigan, 1980, as amended (the “TIFA Act”), and Act 197 of the Public Acts of Michigan, 1975, as amended (the “DDA Act” and, together with the TIFA Act, the “TIF Acts”), authorize the designation of specific districts known as Tax Increment Finance Authority (“TIFA”) Districts or Downtown Development Authority (“DDA”) Districts. TIFA and DDA Districts are authorized to formulate tax increment financing plans for public improvements, economic development, neighborhood revitalization and historic preservation within such areas.

Tax increment financing permits the TIFA or DDA District to capture tax revenues attributable to increases in value (“TIF Captured Value”) of real and personal property located within an approved development area while any tax increment financing plans by an established District are in place. These captured revenues are used by the District and are not passed on to the local taxing jurisdictions.

In 1991, the City of Allen Park created a Downtown Development Authority (“DDA”) district for the purpose of funding improvement projects. The School District’s operating and debt millages are not captured by the DDA.

1 School District, City of Allen Park Assessor and Wayne County Equalization Department. 2 Source: City of Allen Park Assessor.

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Tax Levies and Collections

The School District's fiscal year begins July 1. School District property taxes are due on July 1 and December 1 of the fiscal year and are payable without interest on or before the following September 14 and February 14, respectively, and without penalty on or before the following February 14. On March 1, unpaid real property taxes are returned delinquent to the County Treasurer for collection with penalties and interest. On the first Tuesday in May in each year, a tax sale is held by the County at which lands delinquent for taxes assessed in the third year preceding the sale, or in a prior year, are sold for the total of the unpaid taxes of those years.

The County, to date, has purchased for and paid from its Tax Payment Fund delinquent taxes on real property to all taxing units in the County. The decision to make such payments is determined on an annual basis by the County. There is no guarantee that the payments will continue in future years. If the delinquent taxes which are due and payable to the County are not received by the County for any reason, the County has full rights of recourse against the School District to recover the amount of uncollected delinquent taxes, together with interest thereon, at the rate of one percent per month or fraction of a month until repaid to the County by the School District.

A history of tax levies and collections for the School District is as follows:

SchoolYear

Operating Tax Levy

Current collections to March 1, Each Year

Collections Plus Funding to August 31, Each Year

2006/07 $1,629,842 In process of collection Not available 2005/06 1,505,881 $1,369,397 90.94% $1,460,944 97.02% 2004/05 1,391,556 1,226,435 88.13 1,319,545 94.83 2003/04 1,294,591 1,163,119 89.84 1,244,139 96.10 2002/03 1,295,560 1,148,821 88.67 1,227,869 94.78 2001/02 1,159,981 1,075,692 92.73 1,135,023 97.85

State Aid Payments

The School District’s primary source of funding for operating costs is the State aid foundation allowance per pupil. The foundation guarantee for all school districts in the State of Michigan is from $7,085 to $8,385 per pupil for the fiscal year 2006/07. In future years, this allowance may be adjusted by an index based upon the change in revenues to the State school aid fund and the change in the total number of pupils statewide. See “SOURCES OF SCHOOL OPERATING REVENUE” herein for additional information.

The following table shows a history and current year estimate of the School District’s Blended Pupil Count, Foundation Allowance Per Pupil and Total State Aid Payments including categoricals.

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YearBlended

Pupil CountFoundation Allowance

Per PupilTotal

State Aid Payments

2006/07 3,719 $7,453 $27,717,707 2005/06 3,671 7,243 25,692,046 2004/05 3,622 7,068 24,707,376 2003/04 3,603 7,0681 24,292,377 2002/03 3,475 7,0681 24,561,300

School District Tax Rates (Per $1,000 of Valuation)

2006 2005 2004 2003 2002

Operating – Extra Voted2 17.9514 17.9514 18.0000 17.9334 17.9334Debt 7.0000 7.0000 7.0000 7.0000 1.4100Total Homestead 7.0000 7.0000 7.0000 7.0000 1.4100Total Non-Homestead 24.9514 24.9514 25.0000 24.9334 19.3434

Other Tax Rates (Per $1,000 of Valuation)3

2006 2005 2004 2003 2002

State Education Tax4 6.0000 6.0000 6.0000 5.0000 6.0000Wayne County 7.8220 7.8220 7.8220 7.8220 7.8220City of Allen Park 13.1200 13.8100 13.6300 12.8500 13.3100Wayne Community College 2.4769 2.4769 2.4844 2.4862 2.4862Wayne County RESA 3.4643 3.4643 3.4643 3.4643 3.4643Huron Clinton Metro Authority 0.2146 0.2146 0.2154 0.2161 0.2170Downriver Sewage EPA 2.3800 1.6400 1.8500 1.5600 2.4400Wayne County Transit Authority 0.5980 0.5980 0.5980 0.5980 0.6000

Constitutional Millage Rollback

Article IX, Section 31 of the Michigan Constitution requires that if the total value of existing taxable property in a local taxing unit, exclusive of new construction and improvements, increases faster than the U.S. Consumer Price Index from one year to the next, the maximum authorized tax rate for that local taxing unit must be permanently reduced through a Millage Reduction Fraction unless the levy of new millage is authorized by a vote of the electorate of the local taxing unit.

1 State Aid in 2002/03 and 2003/04 was reduced by $51 and $74, respectively, due to State revenue shortfalls so the School District did not receive its full Per Pupil Foundation Allowance in those years. 2 Levied on Non-Homestead property only. This levy expires in June 2009. In years 2002, 2003, 2005 and 2006, the extra voted millage was reduced as a result of Article IX, Section 31 of the Michigan Constitution. See “Constitutional Millage Rollback” herein. 3 Source: City of Allen Park Assessor. 4 2002 Public Act 244 provides that for the 2003 year only, the 6 mill State Education tax levy was reduced to 5 mills and the levy was permanently moved forward to July 1 from December 1.

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Largest Taxpayers1

Shown below are the ten largest identifiable taxpayers in the School District based on their 2006 taxable valuations. The taxpayers listed below represent 3.50% of the School District’s 2006 Taxable Valuation of $572,676,958.

Name of Taxpayer Product or Service2006 Taxable

Valuation

Detroit Edison Company Utility $5,545,434Allen Pointe Investments, LLC Condominiums 4,250,949Michigan Consolidated Gas Company Utility 1,774,700LP Shopping Center-Albermar Equities Grocery 1,512,356Health Care & Retirement Corporation Retirement Home 1,445,555Southfield Allen Associates LLC Commercial properties 1,411,900Panhandle E. Pipeline Company Utility Pipeline 1,188,366Bianco, Brigida Neighborhood Shopping Center 1,067,579Park Realty Limited Office Building Rental 990,343Krispy Kreme Doughnut Corporation Doughnuts 850,778Total $20,037,960

Debt History and Future Borrowing

The School District has no record of default on its obligations and does not anticipate issuing additional bonds in the next twelve months.

General Fund Short-Term Operating Debt

The School District currently has a $3,500,000 State Aid Note, dated August 18, 2006 @ 3.68% that matures August 20, 2007.

School Loan Revolving Fund2

As of September 30, 2006, the School District had an outstanding balance, including interest, of $6,071,192 in the School Loan Revolving Fund.

1 Source: City of Allen Park Assessor. 2 Source: Michigan Department of Treasury.

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Legal Debt Margin (as of date of delivery)

2006 State Equalized Valuation $738,286,329 Debt Limit (15% of 2006 State Equalized Valuation) $110,742,949

Debt Outstanding (as of date of delivery) $73,405,000 Less Qualified Bonds1 (as of date of delivery) (72,145,000)Total Subject to Debt Limit 1,260,000

Additional Debt Which Could Be Legally Incurred $109,482,949

Direct Debt (as of date of sale)

02/09/99 1999 Building & Improvement Bonds (LTNQ) $ 1,260,000 02/28/02 2002 Refunding Bonds (UTQ) 2,580,000 05/22/03 2003 School Building and Site Bonds (UTQ) 66,905,000Direct Debt (as of date of sale) $70,745,000 LESS: Prior Bonds (UTQ) (53,855,000) PLUS: The Bonds (UTQ) 56,515,000NET DIRECT DEBT (as of the date of delivery) $73,405,000

Overlapping Debt as of December 1, 2006 2

% APPLICABLE MUNICIPALITYNET TAX

SUPPORTED DEBT SHARE

56.94% City of Allen Park $40,478,041 $23,048,197 1.14 Wayne County 94,712,808 1.079,726 1.80 Wayne Community College 50,100,000 901,800

Net overlapping debt in the School District $25,029,723

NET DIRECT AND OVERLAPPING DEBT $98,434,723

1 Act 451, Public Acts of Michigan, 1976, Section 1351 provides debt limits as follows: The bonded indebtedness of a school district shall not exceed 15% of all assessed valuation of the district. Bonds not included in the computation of the legal debt margin, according to Section 1351(3) are: (1) refunding bonds, (2) any bond qualified under Article IX, Section 16, of the 1963 Michigan Constitution, and (3) deficit budget bonds as authorized by Section 1356. 2 Source: Municipal Advisory Council of Michigan.

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Debt Ratios

2006 State Equalized Valuation (SEV) $738,286,3292006 Taxable Valuation $572,676,9582006 Population Estimate 20,000Direct Debt (Including New Issue) $73,405,000Direct/Overlapping Debt $98,434,723

Direct Debt Per Capita $3,670Direct/Overlapping Debt Per Capita $4,922

Per Capita SEV 2006 $36,914Ratio of Direct Debt to 2006 SEV 9.94%Ratio of Direct/Overlapping Debt to 2006 SEV 13.33%

Per Capita 2006 Taxable Valuation $28,634Ratio of Direct Debt to 2006 Taxable Valuation 12.82%Ratio of Direct/Overlapping Debt to 2006 Taxable Valuation 17.19%

ECONOMIC PROFILE

The School District is located in the southeastern portion of Michigan’s lower peninsula. The area is primarily residential. The School District is in close proximity to the commercial and industrial areas of the greater Detroit area that offer a variety of employment opportunities and cultural and recreational activities. The School District is located the following distances from these commercial and industrial areas:

10 miles southwest of Detroit 28 miles east of Ann Arbor 74 miles southeast of Lansing

Major Employers1

Name of EmployerApprox. No. of Employees Principal Product or Service

City of Allen Park (100 or more employees) Ford Motor Company 2,000 Automobile assembly U.S. Postal Service 980 Bulk mail center Allen Park Public Schools 355 Education Rousch Industries Inc. 300 Prototype automobiles Melvindale-Northern Allen Park Public Schools 296 Education SPX Valley Forge Technical Information Service 200 Service manual publishing City of Allen Park 126 City government Health Care & Retirement Corporation 150 Skilled nursing facility Oakwood Care Connection 150 Home health & hospice services Detroit Lions Inc. 100 NFL team administrative offices Ventcon Inc. 100 Sheet metal fabricating Visteon Auto Systems (Div. of Ford Motor Company) 100 Auto windshields

1 Sources: 2006 Harris Michigan Industrial and Services Directories, 2006 Michigan Manufacturer’s Directory, Crain’s Detroit Business 2006 Book of Lists, School District and individual employers.

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Name of EmployerApprox. No. of Employees Principal Product or Service

Wayne County (1,500 or more employees) Ford Motor Company 47,091 Automotive manufacturer Detroit Public Schools 18,639 EducationCity of Detroit 17,151 City government Detroit Medical Center 10,617 Health care system Chrysler Group 9,900 Automotive products General Motors Corporation 9,863 Automotive manufacturer U. S. Postal Service 8,765 Postal service Oakwood Healthcare Inc. 7,515 Health care system Henry Ford Health System 7,404 Health care system U.S. Government 7,241 Federal government State of Michigan 7,013 State government Visteon Corporation 6,800 Automotive parts supplier DTE Energy Company 5,306 Utility Wayne State University 5,078 EducationSt. John Health System 4,821 Health care system American Axle & Manufacturing Holdings Inc. 4,309 Automotive products Wayne County 4,145 County government Compuware Corporation 3,946 Computer software AT&T Inc. 3,916 Telecommunications Comerica Inc. 3,831 Banking Johnson Controls Auto. Systems Group 3,318 Automotive interiors Motor City Casino 2,800 CasinoBlue Cross and Blue Shield of Michigan 2,694 Health care insurer Greektown Casino 2,600 Casino MGM Grand Detroit Casino 2,350 CasinoLivonia Public Schools 2,344 EducationGreat Lakes Works – U.S. Steel 2,400 Steel mill Wayne-Westland Community Schools 2,139 EducationDearborn Public Schools 2,129 Education Severstal North America 2,096 Steel production Bon Secours Cottage Health Services 2,063 Health care system AAA Michigan 2,000 Insurance and travel services Plymouth-Canton Community Schools 1,747 EducationQuicken Loans/Rock Financial Inc. 1,642 Mortgage banking Yazaki North America Inc. 1,584 Gauges and electrical equipment EDS Corporation 1,500 Information technology

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Retail Sales1

A breakdown of the 2006 estimated retail sales as reported in the 2006 Editor & Publishers Market Guide is as follows. The number of stores is based on the 2002 U.S. Census.

Wayne County State of Michigan No. of Total Retail No. of Total Retail Stores Sales (000) Stores Sales (000)

Motor Vehicles/Parts 567 $ 7,571,003 4,234 $ 44,214,183 Furniture 238 584,994 1,970 4,554,363 Electrical/Appliance 225 582,353 1,589 4,090,927 Building Material 394 1,781,131 3,421 13,641,603 Food/Beverage 1,556 3,515,607 5,973 17,543,450 Health/Personal Care 603 2,125,200 2,861 9,652,260 Gasoline 796 2,310,115 4,201 14,280,459 Clothing/Accessories 841 1,237,354 4,792 7,370,355 General Merchandise 193 3,608,577 1,450 27,621,916 Other Retailers 1,161 N/A 8,385 5,539,523

2006 E&P Estimate 6,574 $23,316,334 38,876 $148,509,039

2002 U.S. Census $18,091,759 $109,350,139

Unemployment2

The following table shows the historical annual average unemployment rates (not seasonally adjusted) for the City of Allen Park, Wayne County and the State of Michigan.

City of Allen Park Wayne County State of MichiganOctober 2006 3.5% 8.2% 6.1%

2005 3.7 8.7 6.7 2004 3.7 8.7 7.0 2003 3.7 8.6 7.1 2002 3.1 7.3 6.2 2001 2.5 6.1 5.3

Higher Education

Residents of the School District have access to many institutions of higher learning including The University of Michigan-Dearborn and Davenport University located in Dearborn and the University of Detroit and Wayne State University in Detroit. Wayne County Community College’s Downriver Campus is located in nearby Taylor. Henry Ford, Macomb, Oakland, Schoolcraft and Washtenaw Community Colleges are located nearby. The Detroit Business Institute–Downriver is located in Riverview and the Detroit College of Business is located in Dearborn. Eastern Michigan University in Ypsilanti and The University of Michigan in Ann Arbor are also nearby.

1 Source: 2006 Editor & Publisher (E&P) Market Guide. 2 Source: State of Michigan Office of Labor Market Information.

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Health Facilities1

Health care needs of School District residents are served primarily by Oakwood Hospital and Medical Center in Dearborn, Michigan with 554 beds and Henry Ford Wyandotte Hospital in Wyandotte, Michigan with 219 beds. Other facilities nearby include Oakwood Heritage Hospital in Taylor, Michigan with 115 beds and Oakwood Southshore Medical Center in Trenton, Michigan with 195 beds.

Transportation

The City of Allen Park is located ten miles southwest of the City of Detroit in the southeastern part of Michigan’s lower peninsula. It is accessed by Interstate 94 (I-94), the Southfield Freeway (M-39) and Interstate 75 (I-75). Detroit-Wayne County Metropolitan Airport is located 10 miles west of Allen Park and offers air passenger and freight services. The SMART bus system provides service to most of the greater Detroit area.

Utilities

Residents of the School District receive electricity from Detroit Edison and natural gas from Michigan Consolidated Gas Company. Residents have access to city water and sewer. AT&T Inc. provides telephone service.

Banking2

The following banks serve residents of the School District:

Name of Bank Main Office Location Statewide Deposits

Charter One Bank, National Association Cleveland, OH N/AComerica Bank Detroit, MI $44,975,629,000Fifth Third Bank Grand Rapids, MI 38,388,498,000JPMorgan Chase Bank, National Association Columbus, OH N/ANational City Bank Cleveland, OH N/A

1 Source: American Hospital Directory. 2 Source: Michigan Bankers Association 2007 Registry of Michigan Financial Institutions.

APPENDIX C

ALLEN PARK PUBLIC SCHOOLS

General Fund Budget Fiscal Year Ending June 30, 2007

2006/07 06-26-06

Adopted Budget REVENUES

Local Sources $ 2,407,344 State Sources 26,675,874 Interdistrict Sources 120,728 Federal Sources 750,928 TOTAL REVENUES $29,954,874

EXPENDITURES

Instruction Basic Programs $16,715,353 Added Needs 2,036,235 Enrichment 16,695 Support Services Pupil 1,989,948 Instruction Staff 947,253 General Administration 369,782 School Administration 1,775,473 Business 489,964 Operations & Maintenance 3,230,816 Transportation 608,109 Central Support Services 618,792 Community Services 505,746 Payments to Other Governmental Agencies 30,000 Outgoing Transfers and Other Transactions 527,525 TOTAL EXPENDITURES $29,861,691

Excess of Revenues Over (Under) Expenditures $ 93,183

Fund Balance (Deficit) - July 1, 2006 $ 269,526

Estimated Fund Balance (Deficit) - June 30, 2007 $ 362,709

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Audited Financial Statements, Notes and Supplemental Information to the Financial Statements of the School District for the Year Ended June 30, 2006

The School District has not obtained the written consent of its auditor, Plante & Moran, PLLC, for the inclusion of the portions of the annual financial report contained in this Official Statement. Therefore, the auditor has not conducted a post-audit review of such information.

APPENDIX D

D-1

Allen Park Public Schools

Financial Report

with Supplemental Information

June 30, 2006

Allen Park Public Schools Contents

Report Letter 1-2

Management’s Discussion and Analysis 3-11

Basic Financial Statements

District-wide Financial Statements: Statement of Net Assets (Deficit) 12 Statement of Activities 13

Fund Financial Statements: Governmental Funds: Balance Sheet 14 Reconciliation of the Balance Sheet of Governmental Funds to the

Statement of Net Assets (Deficit) 15 Statement of Revenue, Expenditures, and Changes in Fund Balances 16 Reconciliation of the Statement of Revenue, Expenditures, and

Changes in Fund Balances of Governmental Funds to the Statement of Activities 17

Fiduciary Fund - Statement of Fiduciary Assets and Liabilities 18

Notes to Financial Statements 19-33

Required Supplemental Information 34

Budgetary Comparison Schedule - General Fund 35

Other Supplemental Information 36

Nonmajor Governmental Funds: Combining Balance Sheet 37 Combining Statement of Revenue, Expenditures, and Changes in Fund

Balances 38

Schedule of Bonded Indebtedness 39

Federal Awards Supplementary Information Issued Under Separate

Cover

D-2

1

Independent Auditor’s Report

To the Board of Education Allen Park Public Schools

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Allen Park Public Schools as of and for the year ended June 30, 2006, which collectively comprise the School District’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Allen Park Public Schools’ management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Allen Park Public Schools as of June 30, 2006 and the respective changes in financial position, where applicable, for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The management’s discussion and analysis and the budgetary comparison schedule, as identified in the table of contents, are not a required part of the basic financial statements but are supplemental information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it.

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To the Board of Education Allen Park Public Schools

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Allen Park Public Schools’ basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

In accordance with Government Auditing Standards, we have also issued our report dated September 15, 2006 on our consideration of Allen Park Public Schools’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide opinions on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

September 15, 2006

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Allen Park Public Schools Management’s Discussion and Analysis

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This section of Allen Park Public Schools’ annual financial report presents our discussion and analysis of the School District’s financial performance during the year ended June 30, 2006. Please read it in conjunction with the School District’s financial statements, which immediately follow this section.

Using this Annual Report

This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Allen Park Public Schools financially as a whole. The district-wide financial statements provide information about the activities of the whole School District, presenting both an aggregate view of the School District’s finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short term as well as what remains for future spending. The fund financial statements look at the School District’s operations in more detail than the district-wide financial statements by providing information about the School District’s most significant funds - the General Fund and the 2003 Capital Project Building and Site Bonds Fund, with all other funds presented in one column as nonmajor funds. The remaining statement, the statement of fiduciary assets and liabilities, presents financial information about activities for which the School District acts solely as an agent for the benefit of students and parents.

Reporting the School District as a Whole - District-wide Financial Statements

One of the most important questions asked about the School District is, “As a whole, what is the School District’s financial condition as a result of the year’s activities?” The statement of net assets (deficit) and the statement of activities, which appear first in the School District’s financial statements, report information on the School District as a whole and its activities in a way that helps you answer this question. We prepare these statements to include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenue and expenses are taken into account regardless of when cash is received or paid.

Management’s Discussion and Analysis (MD&A) (Required Supplemental Information)

Basic Financial Statements

District-wide Financial Statements Fund Financial Statements

Notes to the Basic Financial Statements

(Required Supplemental Information) Budgetary Information for Major Funds

Other Supplemental Information

Allen Park Public Schools Management’s Discussion and Analysis (Continued)

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These two statements report the School District’s net assets - the difference between assets and liabilities, as reported in the statement of net assets (deficit) - as one way to measure the School District’s financial health or financial position. Over time, increases or decreases in the School District’s net assets - as reported in the statement of activities - are indicators of whether its financial health is improving or deteriorating. The relationship between revenue and expenses is the School District’s operating results. However, the School District’s goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the School District.

The statement of net assets (deficit) and the statement of activities report the governmental activities for the School District, which encompass all of the School District’s services, including instruction, support services, community services, athletics, and food services. Property taxes, unrestricted state aid (foundation allowance revenue), and state and federal grants finance most of these activities.

Reporting the School District’s Most Significant Funds - Fund Financial Statements

The School District’s fund financial statements provide detailed information about the most significant funds - not the School District as a whole. Some funds are required to be established by state law and by bond covenants. However, the School District establishes many other funds to help it control and manage money for particular purposes (the Cafeteria and Athletics Funds are examples) or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money (such as bond-funded construction funds used for voter-approved capital projects). The governmental funds of the School District use the following accounting approach:

Governmental Funds - All of the School District’s services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end that are available for spending. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the operations of the School District and the services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the School District’s programs. We describe the relationship (or differences) between governmental activities (reported in the statement of net assets (deficit) and the statement of activities) and governmental funds in a reconciliation.

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The School District as Trustee - Reporting the School District’s Fiduciary Responsibilities

The School District is the trustee, or fiduciary, for its student activity funds. All of the School District’s fiduciary activities are reported in a separate statement of fiduciary assets and liabilities. We exclude these activities from the School District’s other financial statements because the School District cannot use these assets to finance its operations. The School District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

The School District as a Whole

Recall that the statement of net assets (deficit) provides the perspective of the School District as a whole. Table 1 provides a summary of the School District’s net assets as of June 30, 2006 and 2005 as follows:

TABLE 1

2006 2005

AssetsCurrent and other assets 16.2$ 44.5$Capital assets 73.8 49.3

Total assets 90.0 93.8

LiabilitiesCurrent liabilities 12.6 15.0Long-term liabilities 78.3 78.6

Total liabilities 90.9 93.6

Net Assets (Deficit)Invested in property and equipment - Net of related debt (1.1) (0.8)Restricted 1.1 1.8Unrestricted (0.9) (0.8)

Total net assets (deficit) (0.9)$ 0.2$

Governmental Activities

(in millions)


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The above analysis focuses on the net assets (see Table 1). The change in net assets (see Table 2) of the School District’s governmental activities is discussed below. The School District’s net assets were ($.9 million) at June 30, 2006. Capital assets, net of related debt ($1.1 million), compare the original cost, less depreciation of the School District’s capital assets, to long-term debt used to finance the acquisition of those assets. Most of the debt will be repaid from voter-approved property taxes collected as the debt service comes due. Restricted net assets are reported separately to show legal constraints from debt covenants and enabling legislation that limit the School District’s ability to use those net assets for day-to-day operations. The remaining amount of net assets ( a deficit of $.9 million) was unrestricted.

The ($.9 million) deficit in unrestricted net assets of governmental activities represents the accumulated results of all past years’ operations. A positive unrestricted net assets balance would enable the School District to meet working capital and cash flow requirements as well as to provide for future uncertainties. The operating results of the General Fund will have a significant impact on the change in unrestricted net assets from year to year.

The results of this year’s operations for the School District as a whole are reported in the statement of activities (see Table 2), which shows the comparison of changes in net assets from fiscal year 2005 to fiscal year 2006 as listed below:

TABLE 2

2006 2005

RevenueProgram revenue:

Charges for services 1.5$ 1.1$ Operating grants 1.4 1.3

General revenue:Property taxes 5.3 5.0 State foundation allowance 25.6 24.5 Other 1.1 2.6

Total revenue 34.9 34.5

Functions/Program ExpensesInstruction 19.4 18.1 Support services 10.1 9.3 Community services 0.5 0.5 Food services 1.0 0.9 Athletics 0.5 0.4 Interest on long-term debt 3.8 3.5 Special item - Disposition of capital assets 0.7 1.4

Total functions/program expenses 36.0 34.1

Increase (Decrease) in Net Assets (1.1)$ 0.4$


(in millions)

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As reported in the statement of activities, the cost of all of our governmental activities this year was $36.0 million. Certain activities were partially funded from those who benefited from the programs ($1.5 million) or by other governments and organizations that subsidized certain programs with grants and contributions ($1.4 million). We paid for the remaining “public benefit” portion of our governmental activities with $5.3 million in taxes, $25.6 million in state foundation allowance, and with our other revenue, i.e., interest and general entitlements. The School District experienced a decrease in net assets of $1.1 million.

As discussed above, the net cost shows the financial burden that was placed on the State and the School District’s taxpayers by each of these functions. Since property taxes for operations and unrestricted state aid constitute the vast majority of School District operating revenue sources, the Board of Education and administration must annually evaluate the needs of the School District and balance those needs with state-prescribed available unrestricted resources.

The School District’s Funds

As we noted earlier, the School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the School District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the School District’s overall financial health.

As the School District completed this year, the governmental funds reported a combined fund balance of $6.8 million, a decrease of $26 million from last year. The decrease is due primarily to spending the 2003 Capital Project Building and Site Bonds to remodel the infrastructure of our buildings, upgrade technology, construct an auditorium and additional classroom space, and purchase furniture and equipment.


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In the General Fund, our principal operating fund, the fund balance decreased $516,722 to $269,526. The General Fund’s fund balance is available to fund costs for school operating purposes. This decrease in fund balance is a direct consequence of the School District incurring expenditures that exceeded revenue. The School District seizes every opportunity to increase General Fund revenue and decrease General Fund expenditures. It continued the Schools of Choice program that allows nonresident students to attend Allen Park Schools as a means to offset declining enrollment within the School District boundaries. Although the 2005-2006 per student foundation grant allowance increased $175 to $7,243, the School District continued to experience significant cost increases for retirement and health insurance benefits. In addition, district-wide energy costs skyrocketed. This increase is attributable not only to the rise in energy unit costs across the nation but to an increase in School District consumption. As each school building completes bond renovations, energy consumption increases. There are two primary reasons for the increase. Each classroom is now equipped with a unit ventilator that circulates outside air with classroom air providing for better air quality for students and staff but requires electricity to run. Secondly, each building has additional square footage and additional areas that are now air conditioned. Facing rising costs, budget reductions totaling over $487,000 were implemented prior to the start of the 2005-2006 school year. Since the 2003-2004 school year, $1.8 million in cost reductions have been made by the School District. These have been painful cuts but necessary ones. While these cost reduction efforts reduce the operating deficit, they do not eliminate it. Expenditures continue to exceed revenue and the operating deficit is absorbed by the fund balance. However, the Board of Education and administration remain committed to protecting the School District’s financial health and established a board financial goal that addresses the issue. The 2005-2006 goal stated “to continue to closely evaluate expenditures within the School District’s control, prudently manage available resources, and continue creative concepts when appropriate to increase revenue and to actively inform the citizenry, staff, and state legislators of the School District’s declining financial resources and explore innovative methods to educate individuals, using the School District’s audit as a catalyst, and encourage their participation in seeking fair funding for schools”.

The fund balance of the 2003 Capital Project Building and Site Bonds Fund decreased by $25.9 million as the School District expended bond proceeds in accordance with the bond projects approved by voters in March 2003. During 2005-2006, renovations were completed at Bennie School, the third and final elementary building, Allen Park Middle School, and Riley Center, which houses the Allen Park Community School and the School District’s central offices. Renovations and construction continued at Allen Park High School. The Allen Park Center for the Arts, the School District’s newly constructed auditorium attached to the high school, is scheduled to host its first event on December 1, 2006. Bond projects are on schedule to be completed by the end of the 2006 calendar year.

The School District’s other nonmajor governmental funds experienced a net increase in fund balance of $441,112.

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General Fund Budgetary Highlights

Over the course of the year, the School District revises its budget as it attempts to deal with unexpected changes in revenue and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. The final amendment to the budget was actually adopted just before year end. A schedule showing the School District’s original and final budget amounts compared with amounts actually paid and received is provided in required supplemental information of these financial statements.

There were revisions made to the 2005-2006 General Fund original budget. Budgeted revenue was increased by $395,000 and budgeted expenditures were increased by $750,000 during the year. Budgeted revenue increased for two reasons. Actual student enrollment was above the number originally budgeted by 22 students. Also, the amount for special education categorical funding received from the State was higher than originally budgeted as the School District’s special education expenses increased as payroll, health insurance, and retirement costs rose. The adjustment to budgeted expenditures is due primarily to the increase in natural gas and electricity costs. As explained above, when bond renovations were completed at the school buildings, energy consumption had increased significantly along with the sharp increase in energy costs that the country has experienced.

Capital Assets and Debt Administration

Capital Assets

As of June 30, 2006, the School District had $73.8 million invested in a broad range of capital assets, including land, construction in progress, buildings, vehicles, furniture, and equipment. This amount represents a net increase (including additions, disposals, and depreciation) of approximately $24.5 million from last year.

2006 2005

Land 20,800$ 20,800$Construction in progress 32,841,150 30,955,417Buildings and building improvements 35,296,160 16,274,903Buses and other vehicles 411,528 411,528Furniture and equipment 5,208,260 1,642,102

Total capital assets 73,777,898$ 49,304,750$

This year’s capital assets additions totaled $26.7 million, of which $16 million is construction in progress related to the 2003 Capital Projects Building and Site Bonds Fund projects. Major capital projects continued during 2005-2006 as we entered the third year of the three-year $74.4 million renovation and construction projects approved by School District voters in March 2003. All bond construction is scheduled to be completed by the end of the 2006 calendar year.


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We present more detailed information about our capital assets in the notes to the financial statements.

Debt

At the end of this year, the School District had $70.9 million in bonds outstanding versus $73.2 million in the previous year. Those bonds consisted of the following:

General obligation bonds 70,895,000$

The School District’s general obligation bond rating continues to be equivalent to the State of Michigan’s rating. The State limits the amount of general obligation debt that schools can issue to 15 percent of the assessed value of all taxable property within the School District’s boundaries. If the School District issues “qualified debt,” i.e., debt backed by the State of Michigan, such obligations are not subject to this debt limit. The School District’s outstanding unqualified general obligation debt is significantly below the statutorily imposed limit.

Other obligations include installment purchase agreements, accrued vacation pay, sick leave, School Bond Loan Fund debt, and early severance incentives. We present more detailed information about our long-term liabilities in the notes to the financial statements.

Economic Factors and Next Year’s Budgets and Rates

Our elected officials and administration consider many factors when setting the School District’s 2007 fiscal year budget. One of the most important factors affecting the budget is our student count. The pupil foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The blended count for the 2007 fiscal year is 25 percent and 75 percent of the February 2006 and September 2006 student counts, respectively. The 2006-2007 budget was adopted in June 2006, based on an estimate of students that will be enrolled in September 2006. Approximately 88 percent of total General Fund revenue is from the student foundation allowance. Under state law, the School District cannot assess additional property tax revenue for general operations. Therefore, district funding is heavily dependent on the State’s ability to fund local school operations.

Based on early enrollment data at the start of the 2006-2007 school year, we anticipate that the fall student count may slightly exceed the estimate used in creating the 2006-2007 budget. Once the final student count and related per pupil funding is validated, state law requires the School District to amend the budget if actual district resources are not sufficient to fund original appropriations.

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Since the School District’s revenue is heavily dependent on state funding and the health of the State’s School Aid Fund, the actual revenue received depends on the State’s ability to collect revenues to fund its appropriation to school districts. For two years, state legislators have increased the per pupil foundation allowance after three years with no increases. For 2005-2006, the School District received an increase of $175 per student and an increase of $210 per student for the current 2006-2007 school year. Fortunately, the double digit increase for health insurance benefits that has been the norm for several years has slowed. Premiums will rise 2 percent this year. However, retirement costs continue to steadily increase as the mandated MPSERS rate will increase on October 1, 2006 from 16.34 percent to 17.74 percent. The Board of Education implemented budget reductions totaling $296,000 prior to the start of the 2006-2007 school year. The budget that was approved in June projected an operating surplus of $93,183 and was based on the assumption that the foundation grant allowance would increase by $200 and that the September 2006 student enrollment would be 3,739. It is now known that the foundation grant allowance will increase by $210. Additionally, it appears that student enrollment will exceed budgeted enrollment. Both factors will have a positive impact on the School District’s financial status and will increase the projected operating surplus for 2006-2007.

During September 2006, collective bargaining agreements were reached with two of the four employee groups. AFSCME Local 142 (custodians, bus drivers, and food service workers) agreed to a wage freeze for 2006-2007. Acknowledging the School District’s financial situation, this is the third year that the unit has agreed to no pay increase. The collective bargaining agreement with AFSCME Local 3831 (paraprofessionals) covers two years, 2005-2006 and 2006-2007. The group agreed to a wage freeze for 2005-2006 and a 1 percent pay increase for 2006-2007. The cost of the wage increase will be offset by cost savings realized in changing from a traditional Blue Cross/Blue Shield medical plan to a Blue Cross/Blue Shield PPO and by increasing the prescription drug co-payment. In September 2006, negotiations began with the School District’s secretarial bargaining unit. This employee group has been working under a contract that expired June 30, 2004. The interest-based bargaining negotiating process is being utilized. The collective bargaining agreement with the Allen Park Education Association expired August 31, 2006. The School District and the Association met before the contract’s expiration and agreed to the 2006-2007 school calendar. A date has been scheduled to begin formal negotiations. The financial impact to the School District of the settlements with these two employee groups will not be known until negotiations have been completed.

Contacting the School District’s Financial Management

This financial report is designed to provide the School District’s citizens, taxpayers, customers, investors, and creditors with a general overview of the School District’s finances and to demonstrate the School District’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Business Office, Riley Center, 9601 Vine, Allen Park, Michigan 48101.


The Notes to Financial Statements are an Integral Part of this Statement.

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Statement of Net Assets (Deficit) June 30, 2006

AssetsCash and investments (Note 3) 2,343,984$Restricted assets (Notes 1 and 3) 8,701,496Receivables (Note 4) 5,003,693Inventories 8,603Prepaid costs 102,114Capital assets - Net (Note 5) 73,777,898

Total assets 89,937,788

LiabilitiesAccounts payable 3,157,011Accrued payroll and other liabilities 3,488,200State Aid Anticipation Note (Note 10) 3,190,269Deferred revenue (Note 4) 63,462Long-term liabilities (Note 7):

Due within one year 2,646,499Due in more than one year 78,262,995

Total liabilities 90,808,436

Net Assets (Deficit)Investment in capital assets - Net of related debt (1,104,933)Restricted:

Debt service 552,146Capital projects 589,242

Unrestricted (907,103)

Total net assets (deficit) (870,648)$


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Statement of Activities Year Ended June 30, 2006

Program Revenues


ExpensesCharges for

Services

Operating Grants/

Contributions

Net (Expense) Revenue and Changes inNet Assets

Functions/Programs

Primary government - Governmentalactivities:

Instruction 19,411,286$ -$ 1,120,834$ (18,290,452)$Support services 10,127,284 - - (10,127,284)Food services 1,020,230 713,560 276,225 (30,445)Athletics 440,251 146,724 - (293,527)Community services 519,229 631,044 - 111,815Interest on long-term debt 3,768,652 - - (3,768,652)

Total primary government - Governmental activities 35,286,932$ 1,491,328$ 1,397,059$ (32,398,545)

General revenues:Taxes:

Property taxes, levied for general purposes 1,489,866Property taxes, levied for debt services 3,822,415

State aid not restricted to specific purposes 25,605,094Interest and investment earnings 1,043,497Other 77,153

Special item - Loss on disposition of assets (699,943)

Total general revenues and special item 31,338,082

Change in Net Assets (1,060,463)

Net Assets - Beginning of year, as restated (Notes 1 and 5) 189,815

Net Assets - End of year (870,648)$



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Governmental Funds Balance Sheet June 30, 2006

Assets

Cash and investments (Note 3) 1,663,103$ -$ 680,881$ 2,343,984$Restricted assets (Notes 1 and 3) - 8,701,496 - 8,701,496Receivables (Note 4) 4,846,080 - 157,613 5,003,693Due from other funds (Note 6) - - 10,915 10,915Inventories - - 8,603 8,603 Prepaid costs 102,114 - - 102,114

Total assets 6,611,297$ 8,701,496$ 858,012$ 16,170,805$

Liabilities and Fund Balances

LiabilitiesAccounts payable 144,375$ 2,990,102$ 14,726$ 3,149,203$Accrued payroll and other liabilities 2,933,508 - - 2,933,508State Aid Anticipation Note (Note 10) 3,190,269 - - 3,190,269Due to other funds (Note 6) 18,723 - - 18,723Deferred revenue (Note 4) 54,896 - 8,566 63,462

Total liabilities 6,341,771 2,990,102 23,292 9,355,165

Fund BalancesReserved:

Capital projects (bonded) - 5,711,394 - 5,711,394Inventories - - 8,603 8,603 Debt service - - 552,146 552,146

Unreserved:Designated for capital projects - - 226,546 226,546Undesignated, reported in:

General Fund 269,526 - - 269,526Special Revenue Funds - - 47,425 47,425

Total fund balances 269,526 5,711,394 834,720 6,815,640

Total liabilities and fund balances 6,611,297$ 8,701,496$ 858,012$ 16,170,805$

Total Governmental

FundsGeneral

Fund

Other Nonmajor

Governmental Funds

2003 Capital Project Buildingand Site Bonds

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Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Assets (Deficit) June 30, 2006

Fund Balance - Total Governmental Funds 6,815,640$

Amounts reported for governmental activities in thestatement of net assets are different because:

Capital assets used in governmental activities arenot financial resources and are not reported in the governmental funds:

Cost of capital assets 82,379,900$Accumulated depreciation (8,602,002) 73,777,898

Long-term liabilities are not due and payable in thecurrent period and are not reported in thegovernmental funds:

Bonds payable including premium/discount (73,447,233)School Bond Loan Fund (3,914,700)School Bond Loan Revolving Fund (2,088,358)Installment contracts (14,205)Severance payable (169,341)Compensated absences (1,275,657)

Accrued interest payable is not included as aliability in governmental funds (554,692)

Net Assets - Governmental Activities (870,648)$



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Governmental Funds Statement of Revenue, Expenditures, and

Changes in Fund Balances Year Ended June 30, 2006

GeneralFund

2003 Capital Project

Building and Site Bonds

Other Nonmajor

GovernmentalFunds

Total Governmental

Funds

RevenueLocal sources 2,249,803$ 849,070$ 4,734,235$ 7,833,108$State sources 25,825,613 - 28,337 25,853,950Federal sources 782,208 - 247,888 1,030,096Intermediate sources 118,107 - - 118,107

Total revenue 28,975,731 849,070 5,010,460 34,835,261

ExpendituresCurrent:

Instruction 18,710,522 - - 18,710,522Support services 9,779,765 - - 9,779,765Community services 487,486 - - 487,486Food service - - 972,615 972,615Athletics - - 440,251 440,251

Debt service:Principal - - 2,290,000 2,290,000Interest - - 3,593,665 3,593,665Other - - 475 475

Capital outlay - 26,760,245 29,155 26,789,400

Total expenditures 28,977,773 26,760,245 7,326,161 63,064,179

Excess of Expenditures Over Revenue (2,042) (25,911,175) (2,315,701) (28,228,918)

Other Financing Sources (Uses)Transfers in - - 514,680 514,680Transfers out (514,680) - - (514,680)School Bond Loan Revolving Fund proceeds - - 2,242,133 2,242,133

Total other financingsources (uses) (514,680) - 2,756,813 2,242,133

Net Change in Fund Balances (516,722) (25,911,175) 441,112 (25,986,785)

Fund Balances - Beginning of year, as restated (Note 1) 786,248 31,622,569 393,608 32,802,425

Fund Balances - End of year 269,526$ 5,711,394$ 834,720$ 6,815,640$

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Governmental Funds Reconciliation of the Statement of Revenue, Expenditures,

and Changes in Fund Balances of Governmental Funds to the Statement of Activities

Year Ended June 30, 2006

Net Change in Fund Balances - Total Governmental Funds (25,986,785)$

Amounts reported for governmental activities in thestatement of activities are different because:

Governmental funds report capital outlay as expenditures; in the statement of activities, certain costs are allocatedover their estimated useful lives as depreciation:

Depreciation expense (1,587,154)$Capitalized capital outlay 26,760,245 25,173,091

Governmental funds report capital outlay as expenditureswhen acquired; in the statement of activities, these arerecorded net of the carrying value until disposed of (699,943)

School Bond Loan Fund proceeds are not reported asfinancing sources on the statement of activities (2,242,133)

Interest expense is recorded in the statement ofactivities when incurred; it is not reported ingovernmental funds until paid (174,987)

Repayment of bond and installment purchase agreementprincipal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 2,321,962

Early severance incentive is recorded when earned in thestatement of activities; in the current year, more was paid out than was earned 497,168

Compensated absences are recorded when earned in thestatement of activities. In the current year, more was earned than paid out (39,986)

Bond issuance costs/discounts/premiums reported as expenditures/revenue in the funds and amortized in the statement of activities 91,150

Change in Net Assets of Governmental Activities (1,060,463)$



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Fiduciary Fund Statement of Fiduciary Assets and Liabilities

June 30, 2006

StudentActivities

Agency Fund

Assets Cash and investments (Note 3) 225,981$

Due from other funds (Note 6) 7,808

Total assets 233,789$

Liabilities Due to student groups 223,886$Accounts payable 9,903

Total liabilities 233,789$D-11

Allen Park Public Schools Notes to Financial Statements

June 30, 2006

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Note 1 - Summary of Significant Accounting Policies

The accounting policies of Allen Park Public Schools (the “School District”) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the significant accounting policies used by the School District:

Reporting Entity

The School District is governed by an elected seven-member Board of Education. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational financial relationships that determine which of the governmental organizations are a part of the School District’s reporting entity, and which organizations are legally separate, component units of the School District. Based on the application of the criteria, the School District does not contain any component units.

District-wide and Fund Financial Statements

The district-wide financial statements (i.e., the statement of net assets (deficit) and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All of the School District’s district-wide activities are considered governmental activities.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenue includes (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes, intergovernmental payments, and other items not properly included among program revenues are reported instead as general revenue.

Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the district-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.


June 30, 2006

20

Note 1 - Summary of Significant Accounting Policies (Continued)

Measurement Focus, Basis of Accounting, and Financial Statement Presentation

District-wide Financial Statements - The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

As a general rule, the effect of interfund activity has been eliminated from the district-wide financial statements.

Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes and unrestricted state aid.

Special Item - Transactions within the control of management that are either unusual in nature or infrequent in occurrence are reported as special items in the statement of activities. During the current year, the School District disposed of certain fixed assets amounting to a loss of $699,943.

Fund Financial Statements - Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

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Property taxes, unrestricted state aid, intergovernmental grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be available only when cash is received by the School District.

Fiduciary fund statements are reported using the economic resources measurement focus and the accrual basis of accounting.

The School District reports the following major governmental funds:

General Fund - The General Fund is the School District’s primary operating fund. It accounts for all financial resources of the School District, except those required to be accounted for in another fund.

2003 Capital Project Building and Site Bonds Fund - The 2003 Capital Project Building and Site Bonds Fund is used to record bond proceeds or other revenue and the disbursement for invoices specifically designated for equipment and remodeling. The fund operates until the purpose for which it was created is accomplished.

The July 1, 2005 fund balance for the 2003 Capital Project Building and Site Bonds Fund was decreased by $1,121,799 to adjust for amortization on investment premiums related to prior years.

Additionally, the School District reports the following fund types:

Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted to expenditure for specified purposes. The School District’s Special Revenue Funds include the Cafeteria and Athletics Funds. Any operating deficit generated by these activities is the responsibility of the General Fund.

Debt Service Funds - The Debt Service Funds are used to record tax and interest revenue and the payment of interest, principal, and other expenditures on long-term debt.

Capital Projects General Fund - The Capital Projects General Fund is used to record other revenue and the disbursement of monies specifically for acquiring new equipment and minor remodeling and repairs.


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Student Activity (Agency) Fund - The School District presently maintains a Student Activity Fund to record the transactions of student groups for school and school-related purposes. The funds are segregated and held in trust for the students.

Assets, Liabilities, and Net Assets or Equity

Cash and Investments - Cash and investments include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value.

Receivables and Payables - In general, outstanding balances between funds are reported as “due to/from other funds.” Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “advances to/from other funds.”

All trade and property tax receivables are shown net of an allowance for uncollectible amounts. The School District considers all receivables to be fully collectible; accordingly, no allowance for uncollectible amounts is recorded. Property taxes are assessed as of December 31 and the related property taxes become a lien on July 1 of the following year for approximately 50 percent of the taxes that are due August 15 and December 1 for the remainder of the property taxes that are due on February 14. Taxes are considered delinquent on March 1 of the following year. At this time, penalties and interest are assessed and the total obligation is added to the county tax rolls.

Inventories and Prepaid Costs - Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both district-wide and fund financial statements.

Restricted Assets - The unspent bond proceeds of the 2003 Capital Project Building and Site Bonds Fund require amounts to be set aside for construction. These amounts have been classified as restricted assets.

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Capital Assets - Capital assets, which include land, buildings, equipment, and vehicles, are reported in the applicable governmental column in the district-wide financial statements. Capital assets are defined by the School District as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of five years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Costs of normal repair and maintenance that do not add to the value or materially extend asset life are not capitalized. The School District does not have infrastructure-type assets.

Buildings, equipment, and vehicles are depreciated using the straight-line method over the following useful lives:

Buildings and building additions 20-50 yearsBuses and other vehicles 5-10 yearsFurniture and other equipment 5-10 years

Compensated Absences - The liability for compensated absences reported in the district-wide statements consists of earned but unused accumulated vacation and sick leave benefits. A liability for these amounts is reported in governmental funds as it comes due for payment. The liability has been calculated using the vesting method, in which leave amounts for both employees who are currently eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included.

Early Severance Incentive - The liability for the early severance incentive reported in the district-wide statements is due in annual installments beginning September 2003 through September 2006. The expense is reported in the governmental fund when paid.

Long-term Obligations - In the district-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net assets (deficit). Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period.


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The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issuance costs are reported as debt service expenditures.

Fund Equity - In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

Comparative Data/Reclassifications - Comparative data is not included in the School District’s financial statements.

Note 2 - Stewardship, Compliance, and Accountability

Budgetary Information - Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America and state law for the General Fund, Special Revenue Funds, Capital Projects Funds, and Debt Service Funds. All annual appropriations lapse at fiscal year end.

The budget document presents information by fund, function, and object. The legal level of budgetary control adopted by the governing body (i.e., the level at which expenditures may not legally exceed appropriations) is the function (object) level. State law requires the School District to have its budget in place by July 1. Expenditures in excess of amounts budgeted are a violation of Michigan law. State law permits districts to amend their budgets during the year. There were no significant amendments during the year.

Amounts encumbered for purchase orders, contracts, etc. are not tracked during the year. Budget appropriations are considered to be spent once the goods are delivered or the services rendered.

Capital Projects Fund Compliance - The 2003 Capital Project Building and Site Bonds Fund includes capital project activities funded with bonds issued after May 1, 1994. For this capital project, the School District has complied with the applicable provisions of §1351a of the State of Michigan’s School Code.

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Note 3 - Deposits and Investments

State statutes and the School District’s investment policy authorize the School District to make deposits in the accounts of federally insured banks, credit unions, and savings and loan associations that have offices in Michigan. The School District is allowed to invest in U.S. Treasury or agency obligations, U.S. government repurchase agreements, bankers’ acceptances, commercial paper rated prime at the time of purchase that matures not more than 270 days after the date of purchase, mutual funds, and investment pools that are composed of authorized investment vehicles. The School District’s deposits are in accordance with statutory authority.

The School District has designated two banks for the deposit of its funds.

The School District’s cash and investments are subject to several types of risk, which are examined in more detail below:

Custodial Credit Risk of Bank Deposits

Custodial credit risk is the risk that in the event of a bank failure, the School District’s deposits may not be returned to it. The School District’s investment policy requires that financial institutions be evaluated and only those with an acceptable risk level are used for the School District’s deposits for custodial credit risk. At year end, the School District’s deposit balance of $439,044 had $339,044 of bank deposits (certificates of deposit, checking and savings accounts) that were uninsured and uncollateralized. The School District believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the School District evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories.

Custodial Credit Risk of Investments

Custodial credit risk is the risk that, in the event of the failure of the counterparty, the School District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The School District’s policy for custodial credit risk states that custodial credit risk will be minimized by limiting investments to the types of securities allowed by state law, and by pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors with which the School District will do business using the criteria established in the investment policy. The School District did not invest in uninsured and unregistered investment securities.


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Note 3 - Deposits and Investments (Continued)

Interest Rate Risk

Interest rate risk is the risk that the value of investments will decrease as a result of a rise in interest rates. The School District’s investment policy does not restrict investment maturities, other than commercial paper which can only be purchased with a 270-day maturity. The School District’s policy minimizes interest rate risk by requiring the structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market; investing operating funds primarily in shorter-term securities, liquid asset funds, money market mutual funds, or similar investment pools; and limiting the average maturity in accordance with the School District’s cash requirements.

Credit Risk

State law limits investments in commercial paper to the top two ratings issued by nationally recognized statistical rating organizations. The School District’s investment policy does not further limit its investment choices.

At year end, the maturities of investments and the credit quality ratings of debt securities (other than the U.S. government) are as follows:

Investment Fair Value Maturities Rating Rating Organization

Michigan Liquid Asset Fund $ 5,339,463 N/A AAAm Standard & Poor’sMILAF Term Investment 3,500,000 1.14 years AAAf Standard & Poor’sU.S. agency fixed rate note 1,397,375 1.08 years AAA Standard & Poor’s

Total investments $ 10,236,838

Concentration of Credit Risk

The School District places no limit on the amount the School District may invest in any one issuer. The School District’s policy minimizes concentration of credit risk by requiring diversification of the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized.

Foreign Currency Risk

Foreign currency risk is the risk that an investment denominated in the currency of a foreign country could reduce its U.S. dollar value as a result of changes in foreign currency exchange rates. State law and the School District’s policy prohibit investment in foreign currency.

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Note 4 - Receivables

Receivables as of year end for the School District’s individual major funds, the nonmajor funds, and Fiduciary Fund in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:

GeneralFund

Other Nonmajor

Funds Total

Receivables:Taxes 94,408$ 152,014$ 246,422$Accounts 175,411 5,599 181,010Intergovernmental 4,576,261 - 4,576,261

Total receivables 4,846,080$ 157,613$ 5,003,693$

Governmental funds report deferred revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. Of the $63,462 of deferred revenue recorded in the governmental funds, the entire amount relates to resources that have been received but not yet earned.

Note 5 - Capital Assets

Capital asset activity of the School District’s governmental activities was as follows:

* Balance July 1, 2005 Reclassifications Additions

Disposals andAdjustments

Balance June 30, 2006

Capital assets not being depreciated:Land 20,800$ - $ - $ - $ 20,800$ Construction in progress 30,955,417 (14,113,296) 15,999,029 - 32,841,150

Capital assets being depreciated:Building and building improvements 25,118,311 13,439,687 7,868,667 (3,595,392) 42,831,273 Buses and other vehicles 1,140,309 - - - 1,140,309 Furniture and equipment 2,045,010 673,609 2,892,549 (64,800) 5,546,368

Subtotal 28,303,630 14,113,296 10,761,216 (3,660,192) 49,517,950

Accumulated depreciation:Building and building improvements 8,843,408 - 1,587,154 (2,895,449) 7,535,113 Buses and other vehicles 728,781 - - - 728,781 Furniture and equipment 402,908 - - (64,800) 338,108

Subtotal 9,975,097 - 1,587,154 (2,960,249) 8,602,002

Net capital assets being depreciated 18,328,533 14,113,296 9,174,062 (699,943) 40,915,948

Net governmental capital assets 49,304,750$ - $ 25,173,091$ (699,943)$ 73,777,898$


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Note 5 - Capital Assets (Continued)

* Construction in progress at July 1, 2005 and net assets on the statement of net assets at July 1, 2005 have been increased by $2,754,571 to capitalize construction in progress costs that were recorded as expenditures during the year ended June 30, 2005.

Depreciation expense was charged to activities of the School District as follows:

Governmental activities:Instruction 999,907$Support services 507,889Community services 31,743Food services 47,615

Total governmental activities 1,587,154$

Construction Commitments - The School District has active construction projects at year end. The projects include the 2003 Capital Project Building and Site Bonds Fund. At year end, the School District’s commitment with contractors is as follows:

Spent to Date Remaining

Commitment

2003 Capital Project Building and Site Bonds 68,997,492$ 5,432,790$

Note 6 - Interfund Receivables, Payables, and Transfers

The composition of interfund balances is as follows:

Fund Due From

Nonmajor Governmental

Funds Fiduciary

Funds Total

General Fund 10,915$ 7,808$ 18,723$

Fund Due To

Interfund balances represent temporary cash flow transactions until amounts are transferred from the respective fund investment accounts.

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Note 6 - Interfund Receivables, Payables, and Transfers (Continued)

Interfund Transfers

Transfers Out - General Fund

Transfers in - Other nonmajor governmental funds 514,680$

Transfers from the General Fund subsidized operations in the Athletics Fund and provided funding for Debt Service and the Capital Projects General Fund.

Note 7 - Long-term Debt

The School District issues bonds, notes, and other contractual commitments to provide for the acquisition and construction of major capital facilities and the acquisition of certain equipment. General obligation bonds are direct obligations and pledge the full faith and credit of the School District. Notes and installment purchase agreements are also general obligations of the School District. Other long-term obligations include compensated absences and severance incentives.

Long-term obligation activity can be summarized as follows: Beginning

Balance Additions Reductions

Ending

Balance

Due Within

One Year

Governmental ActivitiesBonds 73,185,000$ - $ 2,290,000$ 70,895,000$ 2,325,000$Less deferred amounts:

Issuance discounts (37,170) - (1,282) (35,888) (1,282)Issuance premiums 3,114,467 - 107,395 3,007,072 107,395Cost of issuance and underwriter's discount (433,914) - (14,963) (418,951) (14,963)

Total bonds payable 75,828,383 - 2,381,150 73,447,233 2,416,150

Installment purchase agreements 46,167 - 31,962 14,205 4,735School Bond Loan Fund 3,760,925 153,775 - 3,914,700 - School Bond Loan Revolving Fund - 2,088,358 - 2,088,358 - Early severance incentive 666,509 - 497,168 169,341 169,341Employee-compensated absences 1,235,671 39,986 - 1,275,657 56,273

Total governmental activities 81,537,655$ 2,282,119$ 2,910,280$ 80,909,494$ 2,646,499$


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Note 7 - Long-term Debt (Continued)

Annual debt service requirements to maturity for the above governmental bond and note obligations are as follows:

Years EndingJune 30 Principal Interest Total

2007 2,329,735$ 3,338,125$ 5,667,860$2008 2,359,735 3,277,548 5,637,2832009 2,404,735 3,199,846 5,604,5812010 2,440,000 3,119,560 5,559,5602011 2,430,000 3,036,720 5,466,720

2012-2016 13,045,000 13,397,817 26,442,8172017-2021 13,500,000 10,107,000 23,607,0002022-2026 13,500,000 6,745,000 20,245,0002027-2031 13,500,000 3,375,000 16,875,0002032-2033 5,400,000 405,000 5,805,000

Total 70,909,205$ 50,001,616$ 120,910,821$


General obligation bonds and installment purchase agreements consist of the following:

$2,300,000 School Building and Improvement bonds due in annualinstallments of $150,000 to $205,000 through November 1, 2014;interest at 4.15 percent to 4.80 percent 1,410,000$

$4,775,000 serial bonds due in annual installments of $600,000 to$695,000 through May 1, 2010; interest at 3.75 percent to 4.00 percent 2,580,000

$71,630,000 School Building and Site bonds due in annual installments of$1,575,000 to $2,700,000 through May 1, 2033; interest at 2.00 percentto 5.00 percent 66,905,000

Total bonded debt 70,895,000$

$28,410 cube van installment purchase agreement due in annualinstallments of $4,908 to $5,655 through April 1, 2009; interest at 3.6percent 14,205$

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Note 7 - Long-term Debt (Continued)

School Bond Loan - The school bond loan payable represents notes payable to the State of Michigan for loans made to the School District, as authorized by the 1963 State of Michigan Constitution, for the purpose of paying principal and interest on general obligation bonds of the School District issued for capital expenditures. Interest rates are to be annually determined by the State Administrative Board. Interest has been assessed on the outstanding balance at 3.125 percent from July 1, 2005 to September 21, 2005, 3.875 percent from September 22, 2005 to October 25, 2005, 4.375 percent from October 25, 2005 to April 2, 2006, and 4.5 percent from April 3, 2006 to June 30, 2006. Repayment is required when the millage rate necessary to cover the annual bonded debt service falls below 7 mills. The School District is required to levy 7 mills and repay to the State any excess of the amount levied over the bonded debt service requirements. Due to the variability of the factors that affect the timing of repayment, including the future amount of state-equalized value of property in the School District, no provision for repayment has been included in the above amortization schedule.

School Loan Revolving Fund - The School Loan Revolving Fund payable represents notes payable to the State of Michigan for loans made to the School District, as authorized by the 1963 State of Michigan Constitution, for the purpose of paying principal and interest on general obligation bonds of the School District issued for capital expenditures. Interest rates are to be annually determined by the State Administrative Board in accordance with Section 9 of Act No. 92 of the Public Acts of 2005, as amended. Interest rates went into effect beginning October 1, 2005 pursuant to Public Act 92. Interest was charged at 4.685 percent from the time the loan was made to the School District in April 2006 through June 30, 2006. Repayment begins as soon as annual tax collections exceed annual debt service payment requirements. The predetermined mandatory final loan repayment date is May 1, 2039. Due to the variability of the factors that affect the timing of repayment, including the future amount of state-equalized value of property in the School District, no provision for repayment has been included in the above amortization schedule.

Note 8 - Risk Management

The School District is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers’ compensation), as well as medical benefits provided to employees. The School District has purchased commercial insurance for health claims and participates in the SET-SEG risk pool for claims relating to property loss, torts, errors and omissions, and employee injuries (workers’ compensation). The School District is uninsured for dental claims. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years.


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Note 8 - Risk Management (Continued)

The shared-risk pool program in which the School District participates operates as a common risk-sharing management program for school districts in Michigan; member premiums are used to purchase commercial excess insurance coverage and to pay member claims in excess of deductible amounts.

For risk retention situations (other than commercial coverage or risk-sharing pools), the School District estimates the liability for dental claims that have been incurred through the end of the fiscal year, including both those claims that have been reported as well as those that have not yet been reported. These estimates are recorded in the district-wide statements.

During the year, the School District was named as a party in a wrongful death case whereby unspecified damages are being sought from the School District. The School District believes it is indemnified from the damage claims. Further, if any damages were to be assessed to the School District, the School District believes it has adequate insurance to cover any monetary exposure.

Note 9 - Defined Benefit Pension Plan and Postemployment Benefits

Plan Description - The School District participates in the Michigan Public School Employees’ Retirement System (MPSERS), a statewide, cost-sharing, multiple-employer defined benefit public employee retirement system governed by the State of Michigan that covers substantially all employees of the School District. The MPSERS provides retirement, survivor, and disability benefits to plan members and their beneficiaries. The Michigan Public School Employees’ Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the system. That report may be obtained by writing to the system at P.O. Box 30171, Lansing, MI 48909-7671.

Funding Policy - Employer contributions to the MPSERS result from the implementing effects of the School Finance Reform Act. Under these procedures, each school district is required to contribute the full actuarial funding contribution amount to fund pension benefits, plus an additional amount to fund retiree health care benefit amounts on a cash disbursement basis.

The pension benefit rate totals 14.87 percent and 16.34 percent of the covered payroll to the plan for the periods from July 1, 2005 through September 30, 2005 and October 1, 2005 through June 30, 2006, respectively. Basic plan members make no contributions, but member investment plan members contribute at rates ranging from 3 percent to 4.3 percent of gross wages. The School District’s contributions to the MPSERS plan for the years ended June 30, 2006, 2005, and 2004 were $2,925,688, $2,527,543, and $2,277,154, respectively.

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Note 9 - Defined Benefit Pension Plan and Postemployment Benefits (Continued)

Postemployment Benefits - Under the MPSERS Act, all retirees participating in the MPSERS pension plan have the option of continuing health, dental, and vision coverages. Retirees having these coverages contribute an amount equivalent to the monthly cost for Part B Medicare and 10 percent of the monthly premium amount for the health, dental, and vision coverages. Required contributions for post-employment health care benefits are included as part of the School District’s total contribution to the MPSERS plan discussed above.

Note 10 - State Aid Anticipation Notes

In August 2005, the School District borrowed $3,100,000 at 2.92 percent under a State Aid Anticipation Note in anticipation of funds to be received by the School District from the State of Michigan. Proceeds from the note were used to fund school operations. The unpaid balance at June 30, 2006 was $3,100,000 plus accrued interest of $90,269. The note was repaid in August 2006.

In August 2006, the School District borrowed $3,500,000 at 3.68 percent annual interest on a State Aid Anticipation Note. The note, plus interest, is due August 20, 2007.

34

Required Supplemental Information

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35

Required Supplemental Information Budgetary Comparison Schedule - General Fund


OriginalBudget

FinalBudget Actual

Over (Under) Final Budget

RevenueLocal sources 2,336,484$ 2,261,555$ 2,249,803$ (11,752)$ State sources 25,396,841 25,824,535 25,825,613 1,078 Federal sources 692,852 736,275 782,208 45,933 Intermediate sources 121,250 119,980 118,107 (1,873)

Total revenue 28,547,427 28,942,345 28,975,731 33,386

Expenditures - CurrentInstruction:

Basic programs 16,531,480 16,529,567 16,499,259 (30,308) Added needs 2,083,405 2,172,026 2,211,263 39,237

Support services:Pupil 1,988,070 2,002,578 2,013,772 11,194 Instructional staff 890,840 907,420 900,329 (7,091) General administration 354,261 364,275 366,836 2,561 School administration 1,741,040 1,732,724 1,727,187 (5,537) Business services 446,340 460,131 460,767 636 Operation and maintenance 2,657,441 3,232,088 3,178,266 (53,822) Pupil transportation services 587,175 644,837 635,920 (8,917) Central 495,653 496,261 496,688 427

Community services 499,941 483,406 487,486 4,080

Total expenditures 28,275,646 29,025,313 28,977,773 (47,540)

Other Financing Uses - Transfers out (514,075) (515,613) (514,680) (933)

Net Change in Fund Balance (242,294) (598,581) (516,722) 81,859

Fund Balance - July 1, 2005 786,248 786,248 786,248 -

Fund Balance - June 30, 2006 543,954$ 187,667$ 269,526$ 81,859$

36

Other Supplemental Information

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37

Other Supplemental Information Nonmajor Governmental Funds

Combining Balance Sheet June 30, 2006

Special Revenue Funds

Cafeteria Athletics 2003 Issue 2002 Issue 1999 Issue

Capital

Projects

General Fund Total

Assets

Cash and cash equivalents 54,891$ 812$ 377,578$ 22,534$ 20$ 225,046$ 680,881$Receivables - Net:

Taxes - - 123,784 28,230 - - 152,014Accounts receivable 5,599 - - - - - 5,599

Due from other funds - 6,069 - - - 4,846 10,915Inventories 8,603 - - - - - 8,603

Total assets 69,093$ 6,881$ 501,362$ 50,764$ 20$ 229,892$ 858,012$

Liabilities and Fund Balances

LiabilitiesAccounts payable 5,583$ 5,797$ - $ - $ - $ 3,346$ 14,726$Deferred revenue 7,482 1,084 - - - - 8,566

Total liabilities 13,065 6,881 - - - 3,346 23,292

Fund BalancesReserved:

Inventories 8,603 - - - - - 8,603 Debt service - 501,362 50,764 20 - 552,146

Unreserved:Designated for capital projects - - - - - 226,546 226,546Undesignated, reported in

Special Revenue Funds 47,425 - - - - - 47,425

Total fund balances 56,028 - 501,362 50,764 20 226,546 834,720

Total liabilities andfund balances 69,093$ 6,881$ 501,362$ 50,764$ 20$ 229,892$ 858,012$

Debt Service Funds


38

Other Supplemental Information Nonmajor Governmental Funds

Combining Statement of Revenue, Expenditures, and Changes in Fund Balances


Special Revenue Funds

Cafeteria Athletics 2003 Issue 2002 Issue 1999 Issue

Capital

Projects

General Fund Total

RevenueLocal 716,856$ 146,724$ 3,133,051$ 717,771$ 1$ 19,832$ 4,734,235$State 28,337 - - - - - 28,337

Federal 247,888 - - - - - 247,888

Total revenue 993,081 146,724 3,133,051 717,771 1 19,832 5,010,460

ExpendituresCurrent:

Food services 972,615 - - - - - 972,615 Athletics - 440,251 - - - - 440,251

Debt service:Principal - - 1,575,000 570,000 145,000 - 2,290,000Interest - - 3,406,808 120,687 66,170 - 3,593,665Other - 225 250 - - 475

Capital outlay - - - - - 29,155 29,155

Total expenditures 972,615 440,251 4,982,033 690,937 211,170 29,155 7,326,161

Excess of Revenue Over (Under) Expenditures 20,466 (293,527) (1,848,982) 26,834 (211,169) (9,323) (2,315,701)

Other Financing SourcesSchool Bond Loan Revolving

Fund proceeds - - 2,242,133 - - - 2,242,133Transfers in - 293,527 - - 211,153 10,000 514,680

Net Change in Fund Balances 20,466 - 393,151 26,834 (16) 677 441,112

Fund Balances - Beginning of year 35,562 - 108,211 23,930 36 225,869 393,608

Fund Balances - End of year 56,028$ - $ 501,362$ 50,764$ 20$ 226,546$ 834,720$

Debt Service Fund

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39

Other Supplemental Information Schedule of Bonded Indebtedness


February 9, February 28, May 22,June 30 1999 Issue 2002 Issue 2003 Issue Total

2007 150,000$ 600,000$ 1,575,000$ 2,325,000$2008 155,000 625,000 1,575,000 2,355,0002009 165,000 660,000 1,575,000 2,400,0002010 170,000 695,000 1,575,000 2,440,0002011 180,000 - 2,250,000 2,430,0002012 190,000 - 2,250,000 2,440,0002013 195,000 - 2,250,000 2,445,0002014 205,000 - 2,650,000 2,855,0002015 - - 2,650,000 2,650,0002016 - - 2,655,000 2,655,0002017 - - 2,700,000 2,700,0002018 - - 2,700,000 2,700,0002019 - - 2,700,000 2,700,0002020 - - 2,700,000 2,700,0002021 - - 2,700,000 2,700,0002022 - - 2,700,000 2,700,0002023 - - 2,700,000 2,700,0002024 - - 2,700,000 2,700,0002025 - - 2,700,000 2,700,0002026 2,700,000 2,700,000

2027-2033 - - 18,900,000 18,900,000

1,410,000$ 2,580,000$ 66,905,000$ 70,895,000$

Principal payments due November 1 May 1 May 1

Interest payments dueMay 1 and

November 1May 1 and

November 1May 1 and

November 1

Interest rate4.15% to

4.80% 3.75% to

4.00% 2.00% to

5.00%

Original issue 2,300,000$ 4,775,000$ 71,630,000$ 78,705,000$

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255 S. Old Woodward Third Floor

Birmingham, MI 48009 Tel. (248) 642-9692 ▪ Fax (248) 642-2174

www.clarkhill.com

Detroit, Michigan Birmingham, Michigan Lansing, Michigan

DRAFT LEGAL OPINION OF BOND COUNSEL

Allen Park Public Schools County of Wayne State of Michigan

We have acted as bond counsel in connection with the issuance by the Allen Park Public Schools, County of Wayne, State of Michigan (the “School District”), of its 2007 Refunding Bonds, dated January 4, 2007 in the original principal amount of $56,515,000 (the “Bonds”). The Bonds have been issued in fully registered form in denominations of $5,000.00, or integral multiples of that sum not exceeding for each maturity the aggregate principal amount of the Bonds maturing at any one time, bear interest and mature as shown on the faces of the Bonds. The Bonds are subject to mandatory and optional redemption prior to maturity as set forth in the Bonds. The Bonds have been issued pursuant to Act No. 451, Public Acts of Michigan, 1976, as amended, and Act No. 34, Public Acts of Michigan, 2001, as amended, and the proceeds will be used for the purpose of refunding a portion of the School District’s outstanding 2003 School Building and Site Bonds, dated May 22, 2003.

We have examined the law, a specimen of the bond certificates and such certified proceedings and other papers as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation.

The opinions expressed in the first sentence of Paragraph 3 below are subject to the condition that the School District comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be (or continue to be) excluded from gross income for federal income tax purposes. The School District has covenanted to comply with each requirement. Failure to comply with certain of such requirements may cause the inclusion of the interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.

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APPENDIX E

The Bonds are general obligations of the School District, secured by its full faith, credit and resources, and will be payable from ad valorem taxes, which may be levied without limitation as to rate or amount. The Bonds are not an indebtedness or obligation of the State of Michigan or of any other political subdivision thereof other than the School District.

Based on the foregoing, under existing law, we are of the opinion that:

1. The Bonds have been duly authorized, executed and delivered by the School District and are valid and binding obligations of the School District enforceable against the School District in accordance with their terms.

2. The Bonds are general obligations of the School District, secured by its full faith, credit and resources and are payable in the first instance from the collection of taxes levied without limitation as to rate or amount, in addition to all other taxes that the School District is authorized to levy, on all taxable property in the School District and which taxes are to be levied in an amount sufficient to pay the principal of and interest on the Bonds coming due before the next collection of taxes.

3. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. However, it should be noted that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings. We express no opinion regarding other federal tax consequences arising with respect to the Bonds.

4. The Bonds and interest thereon are exempt from all taxation provided by the laws of the State of Michigan, except inheritance and estate taxes and taxes on gains realized from the sale, payment or other disposition of the Bonds.

5. The Bonds have been qualified for purposes of Article IX, Section 16 of the Michigan Constitution of 1963 and Act 92, Public Acts of Michigan, 2005, and if the School District shall be unable to pay the principal of and interest on the Bonds when due, the School District will be obligated to borrow from the State of Michigan, and the State will be obligated to lend to the School District, an amount sufficient to make the payment.

The rights of bondholders may be affected by bankruptcy, reorganization, moratorium, receivership or other similar laws affecting the enforceability of creditors' rights now existing or hereafter enacted to the extent constitutionally applicable and their enforcement may be subject to the exercise of judicial discretion in appropriate cases.

CLARK HILL PLC

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FORM OF

CONTINUING DISCLOSURE AGREEMENT



2007 REFUNDING BONDS (GENERAL OBLIGATION - UNLIMITED TAX)

This Continuing Disclosure Agreement (“Agreement”) is executed and delivered by the Allen Park Public Schools, County of Wayne, State of Michigan (the "School District") in connection with the issuance of its 2007 Refunding Bonds (General Obligation - Unlimited Tax) (the “Bond” or “Bonds”). The Bonds are being issued pursuant to a Resolution adopted by the Board of Education of the School District on November 13, 2006, authorizing the issuance, sale and delivery of the Bonds (the “Resolution”). The School District covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Agreement is being executed and delivered by the School District for the benefit of the Bondholders and in order to assist the Participating Underwriters in complying with the Rule. The School District acknowledges that this Agreement does not address the scope of any application of Rule 10b-5, promulgated by the SEC pursuant to the 1934 Act, to the Annual Reports or notices of the Listed Events provided or required to be provided by the School District pursuant to this Agreement.

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which apply to any capitalized term used in this Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

(a) “Annual Report” shall mean any annual report provided by the School District pursuant to, and as described in, Sections 3 and 4 of this Agreement.

(b) “Bondholder” means the registered owner of a Bond or any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Bonds (including any person holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes.

(c) “CPO” means the Central Post Office disclosure facility, which allows municipal issuers to voluntarily file secondary market disclosure documents through the website located at URL www.DisclosureUSA.org.

(d) “Dissemination Agent” means any agent designated as such in writing by the School District and which has filed with the School District a written acceptance of such designation, and such agent’s successors and assigns.

APPENDIX F

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(e) “Listed Events” shall mean any of the events listed in Section 5(a) of this Agreement.

(f) “MSRB” shall mean the Municipal Securities Rulemaking Board (ww1.msrb.org).

(g) “National Repository” shall mean any nationally recognized Municipal Securities Information Repository for purposes of the Rule. A current list of the National Repositories can be found at the U.S. Securities and Exchange Commission website (www.sec.gov/info/municipal/nrmsir.htm).

(h) “1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

(i) “Official Statement” shall mean the final Official Statement for the Bonds dated December 13, 2006.

(j) “Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

(k) “Repository” shall mean each National Repository and each State Repository.

(l) “Rule” shall mean Rule 15c2-12 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended.

(m) “SEC” shall mean the Securities and Exchange Commission.

(n) “State” shall mean the State of Michigan.

(o) “State Repository” shall mean any public or private repository or entity designated by the State of Michigan as a state repository for the purpose of the Rule and recognized as such by the SEC. Currently, the following is the State Repository:

Municipal Advisory Council of Michigan 1445 First National Building

660 Woodward Avenue Detroit, Michigan 48226-3517

Tel: (800) 337-0696 Fax: (313) 963-0943

www. macmi.com

SECTION 3. Provision of Annual Reports.

(a) Each year, the School District shall provide or cause to be provided, or shall cause the Dissemination Agent to provide or to cause to be provided, on or prior to the 180th day after the end of the fiscal year of the School District commencing with the fiscal year ending June 30, 2007, to each Repository an Annual Report for the preceding fiscal year which is consistent with the requirements of Section 4 of this Agreement. Currently, the School District's fiscal year ends on June 30. So long as the SEC continues to authorize the use of the CPO by

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issuers of municipal securities who make continuing disclosure filings pursuant to the Rule, submission of an Annual Report or other disclosures by the School District or the Dissemination Agent to the CPO shall fulfill the School District’s obligations under this Section 3. In each case, the Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by specific reference other information as provided in Section 4 of this Agreement; provided, however, that if the audited financial statements of the School District are not available by the deadline for filing the Annual Report, they shall be provided when and if available, and unaudited financial statements in a format similar to the financial statements contained in the Official Statement shall be included in the Annual Report.

(b) If the School District is unable to provide to the Repositories an Annual Report by the date required in subsection (a), the School District shall send a notice in a timely manner to each National Repository or the MSRB, and to the State Repository.

(c) If the School District's fiscal year changes, the School District shall send a notice of such change to each National Repository or the MSRB, and to the State Repository. If such change will result in the School District's fiscal year ending on a date later than the ending date prior to such change, the School District shall provide notice of such change to each National Repository or the MSRB, and the State Repository on or prior to the deadline for filing the Annual Report in effect when the School District operated under its prior fiscal year. Such notice may be provided to each National Repository or the MSRB, and to the State Repository along with the Annual Report, provided that it is filed at or prior to the deadline described above.

SECTION 4. Content of Annual Reports. The School District’s Annual Report shall contain or include by reference the following:

(a) Audited financial statements of the School District prepared pursuant to State laws, administrative rules and guidelines and pursuant to accounting and reporting policies conforming in all material respects to generally accepted accounting principles as applicable to governmental units as such principles are prescribed, in part, by the Financial Accounting Standards Board and modified by the Government Accounting Standards Board.

(b) Additional annual financial information and operating data as set forth in the Official Statement under “CONTINUING DISCLOSURE”.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the School District or related public entities, which previously have been provided to each of the Repositories or filed with the SEC. If the document included by specific reference is a final official statement, it must be available from the MSRB. The School District shall clearly identify each document so included by reference.

SECTION 5. Reporting of Significant Events.

(a) The School District covenants to provide, or cause to be provided, notice of the occurrence of any of the following Listed Events with respect to the Bonds, if material, in accordance with the Rule:

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1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 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 or events affecting the tax-exempt status of the

Bonds; 7. Modifications to rights of Bondholders; 8. Bond calls; 9. Defeasance; 10. Release, substitution, or sale of property securing repayment of the Bonds;

or 11. Rating changes.

(b) Whenever the School District obtains knowledge of the occurrence of a Listed Event, the School District shall as soon as possible determine if such event would constitute material information for the Bondholders, provided that any event under Section 5(a)(l), (8), (9), (10) or (11) above (only with respect to any change in any rating on the Bonds) will always be deemed to be material.

(c) The School District shall promptly cause a notice of the occurrence of a Listed Event, determined to be material in accordance with the Rule, to be filed with the MSRB and with the State Repository, together with a Material Event Notice Cover Sheet. A sample Information Cover Sheet and instructions for filing the Material Event Notice can be found at the MSRB Website (ww1.msrb.org). In connection with providing a notice of the occurrence of a Listed Event described in Section 5(a)(9) above, the School District shall include in the notice explicit disclosure as to whether the Bonds have been escrowed to maturity or escrowed to call, as well as appropriate disclosure of the timing of maturity or call.

(d) The School District acknowledges that the “rating changes” referred to above in Section 5(a)(11) of this Agreement may include, without limitation, any change in any rating on the Bonds or other indebtedness for which the School District is liable.

(e) The School District acknowledges that it is not required to provide a notice of a Listed Event with respect to credit enhancement when the credit enhancement is added after the primary offering of the Bonds, the School District does not apply for or participate in obtaining such credit enhancement, and such credit enhancement is not described in the Official Statement.

SECTION 6. Termination of Reporting Obligation.

(a) The School District’s obligations under this Agreement shall terminate

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upon the legal defeasance of the Bonds or the prior redemption or payment in full of all of the Bonds.

(b) This Agreement, or any provision hereof, shall be null and void in the event that the School District: (i) receives an opinion of nationally recognized bond counsel, addressed to the School District, to the effect that those portions of the Rule, which require such provisions of this Agreement, do not or no longer apply to the Bonds, whether because such portions of the Rule are invalid, have been repealed, amended or modified, or are otherwise deemed to be inapplicable to the Bonds, as shall be specified in such opinion; and (ii) delivers notice to such effect to the MSRB, and to the State Repository, if any.

SECTION 7. Dissemination Agent. The School District, from time to time, may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

SECTION 8. Amendment. Notwithstanding any other provision of this Agreement, this Agreement may be amended, and any provision of this Agreement may be waived to the effect that:

(a) Such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, a change in law or a change in the identity, nature or status of the School District, or the types of business in which the School District is engaged;

(b) This Agreement as so amended or taking into account such waiver, would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, in the opinion of independent legal counsel; and

(c) Such amendment or waiver does not materially impair the interests of the Bondholders, in the opinion of independent legal counsel.

If the amendment or waiver results in a change to the annual financial information required to be included in the Annual Report pursuant to Section 4 of this Agreement, the first Annual Report that contains the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of such change in the type of operating data or financial information being provided. If the amendment or waiver involves a change in the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared based on the new accounting principles and those prepared based on the former accounting principles. The comparison should include a qualitative discussion of such differences and the impact of the changes on the presentation of the financial information. To the extent reasonably feasible, the comparison should also be quantitative. A notice of the change in the accounting principles should be sent by the School District to each National Repository or the MSRB and to the State Repository. Further, if the annual financial information required to be provided in the Annual Report can no longer be generated because the

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operations to which it related have been materially changed or discontinued, a statement to that effect shall be included in the first Annual Report that does not include such information.

SECTION 9. Additional Information. Nothing in this Agreement shall be deemed to prevent the School District from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Agreement. If the School District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Agreement, the School District shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 10. Default. In the event of a failure of the School District to comply with any provision of this Agreement, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the School District to comply with its obligations under this Agreement. A default under this Agreement shall not be deemed an Event of Default under the Resolution or the Bonds, and the sole remedy under this Agreement in the event of any failure of the School District to comply with the Agreement shall be an action to compel performance.

SECTION 11. Duties of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Agreement.

SECTION 12. Beneficiaries. This Agreement shall inure solely to the benefit of the School District, the Dissemination Agent, the Participating Underwriters, and the Bondholders and shall create no rights in any other person or entity.

SECTION 13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State, and any suits and actions arising out of this Agreement shall be instituted in a court of competent jurisdiction in the State. Notwithstanding the foregoing, to the extent this Agreement addresses matters of federal securities laws, including the Rule, this Agreement shall be construed and interpreted in accordance with such federal securities laws and official interpretations thereof.

ALLEN PARK PUBLIC SCHOOLS By: _______________________________ Dr. John J. Sturock Its: Superintendent

Dated: January 4, 2007

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APPENDIX G

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