$52,000,000 PASADENA AREA COMMUNITY …cdiacdocs.sto.ca.gov/2009-1112.pdfOBLIGATION BONDS 2009 SERIES D and $25,295,000 2002 ELECTION TAXABLE GENERAL OBLIGATION BUILD AMERICA BONDS

NEW ISSUE — BOOK-ENTRY ONLY RATINGS: Moody’s: “Aa3” S&P: “AA+” (See “RATINGS” herein.)

In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, under existing law, interest on the Bonds is exempt from personal income taxes of the State of California, and, assuming continuing compliance after the date of initial delivery of the Bonds with certain covenants contained in the Resolutions authorizing the Series D Bonds and subject to the matters set forth under “TAX MATTERS” herein, interest on the Series D Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions will be excludable from the gross income of the owners thereof pursuant to section 103 of the Internal Revenue Code of 1986, as amended, to the date of initial delivery of the Series D Bonds, and will not be included in computing the alternative minimum taxable income of the owners thereof. See “TAX MATTERS” herein.

$52,000,000 PASADENA AREA COMMUNITY COLLEGE DISTRICT

(Los Angeles County, California)

$26,705,000 2002 ELECTION GENERAL

OBLIGATION BONDS 2009 SERIES D

and

$25,295,000 2002 ELECTION TAXABLE GENERAL

OBLIGATION BUILD AMERICA BONDS (DIRECT SUBSIDY), 2009 SERIES E

Dated: Date of Delivery Due: August 1, as shown on the inside cover.

The above-captioned bonds (the “Bonds”) offered hereunder on behalf of the Pasadena Area Community College District (the “District”) were authorized at a bond election conducted within the District on March 5, 2002 (the “2002 Authorization”), as more fully described herein under the caption “THE BONDS – Authority for Issuance and Security for the Bonds.” The Bonds are being issued to finance the acquisition, construction and modernization of certain District property and facilities as permitted in the official project list of the District approved at the Election and to pay costs of issuance associated therewith. See the caption “PLAN OF FINANCE.” The Series E Bonds will be issued as Build America Bonds under the provisions of the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”), with a direct subsidy to be paid to the District by the United States Department of the Treasury, representing 35% of each interest payment made. The Bonds will be issued in denominations of $5,000 principal amount or integral multiples thereof and are payable as to principal amount or redemption price at the office of the Treasurer and Tax Collector of the County of Los Angeles, California, or its agent, as Paying Agent for the Bonds (the “Paying Agent”). Interest on the Bonds is payable on February 1 and August 1 of each year, commencing February 1, 2010.

The Bonds are dated their date of delivery and are issued on a parity with all other general obligation bonds of the District. The Bonds are the final series of bonds issued under the 2002 Authorization.

The Bonds are issued in fully registered form and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the Bonds as described herein under the caption “THE BONDS – Book-Entry Only System.”

The Bonds are subject to optional, mandatory sinking fund and extraordinary optional redemption prior to maturity as described herein. See “THE BONDS – Optional Redemption,” “– Mandatory Redemption” and “– Extraordinary Optional Redemption” herein.

The Bonds are general obligations of the District only and are not obligations of the County of Los Angeles, the State of California or any of its other political subdivisions. The Board of Supervisors of the County of Los Angeles has the power and is obligated to levy and collect ad valorem property taxes for each fiscal year upon the taxable property of the District in an amount at least sufficient, together with other moneys available for such purpose, to pay the principal of, premium, if any, and interest on each Bond as the same becomes due and payable.

MATURITY SCHEDULE On Inside Cover

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, and certain other conditions. Fulbright & Jaworski L.L.P., Los Angeles, California, is acting as Disclosure Counsel for the issue. Certain legal matters will be passed upon for the Underwriter by its counsel, Hawkins Delafield & Wood LLP, Los Angeles, California. Certain legal matters for the County of Los Angeles are being passed upon by the Office of County Counsel of the County of Los Angeles. It is anticipated that the Bonds will be available through the facilities of DTC in New York, New York, on or about October 15, 2009.

RBC CAPITAL MARKETS

Dated: September 30, 2009.

MATURITY SCHEDULE

$26,705,000 2002 ELECTION GENERAL OBLIGATION BONDS

2009 SERIES D

Maturity (August 1)

Principal Amount

Interest Rate

Yield

2011 $ 90,000 3.00% 0.790% 2012 110,000 3.00 1.130 2013 860,000 3.00 1.440 2014 1,485,000 4.00 1.790 2015 1,545,000 4.00 2.070 2016 1,605,000 4.00 2.340 2017 1,670,000 5.00 2.580 2018 1,755,000 5.00 2.760 2019 1,840,000 5.00 2.900 2020 1,935,000 5.00 3.040* 2021 2,030,000 5.00 3.160* 2022 2,130,000 5.00 3.260* 2023 2,240,000 5.00 3.370* 2024 2,350,000 5.00 3.450* 2025 2,470,000 5.00 3.540* 2026 2,590,000 5.00 3.630*

______________________________ *Yield to call at par on August 1, 2019.

$25,295,000 2002 ELECTION TAXABLE GENERAL OBLIGATION

BUILD AMERICA BONDS (DIRECT SUBSIDY), 2009 SERIES E

$11,590,000.00 6.529% Term Bonds due August 1, 2030 – Priced to Yield 6.529%

$13,705,000.00 6.654% Term Bonds due August 1, 2034 – Priced to Yield 6.654%

No dealer, broker, salesperson or other person has been authorized by the Pasadena Area Community College District (the “District”) to provide any information or to make any representations other than as contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the District. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as a representation of facts.

The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Although certain information set forth in this Official Statement has been provided by the County of Los Angeles, the County of Los Angeles has not approved this Official Statement and is not responsible for the accuracy or completeness of the statements contained in this Official Statement except for the information set forth under the caption “THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS.”

The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, BANKS OR OTHERS AT PRICES LOWER OR HIGHER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.

PASADENA AREA COMMUNITY COLLEGE DISTRICT Los Angeles County, State of California

District Board of Trustees

Dr. Jeanette Mann, President Dr. Hilary Bradbury-Huang, Vice President

Dr. Consuelo Rey Castro, Clerk Mr. Geoffrey L. Baum, Member

Mr. John Martin, Member Ms. Beth Wells-Miller, Member

Mr. William E. Thomson, Member Mr. Brian Abadia, Student Member

District Administrators

Dr. Lisa A. Sugimoto, Interim Superintendent/President Dr. Richard P. van Pelt, Interim Vice President, Administrative Services

Dr. Jacqueline W. Jacobs, Vice President, Instruction Ms. Odessa M. Walker, Director, Fiscal Services

SPECIAL SERVICES

Underwriter

RBC Capital Markets Corporation Los Angeles, California

Bond Counsel and Disclosure Counsel

Fulbright & Jaworski L.L.P. Los Angeles, California

Paying Agent

Treasurer and Tax Collector of the County of Los Angeles

TABLE OF CONTENTS

Page

i

INTRODUCTION .......................................................................................................................................1

THE BONDS ...............................................................................................................................................1

Authority for Issuance and Security for the Bonds.........................................................................1 Purpose of Issue ..............................................................................................................................2 Description of the Bonds ................................................................................................................2 Estimated Sources and Uses of Funds ............................................................................................3 Optional Redemption......................................................................................................................3 Extraordinary Optional Redemption...............................................................................................4 Notice of Redemption.....................................................................................................................5 Partial Redemption of Bonds ..........................................................................................................6 Effect of Notice of Redemption......................................................................................................6 Transfer and Exchange ...................................................................................................................6 Debt Service Schedule ....................................................................................................................7 Discharge and Defeasance ..............................................................................................................7 Book-Entry Only System................................................................................................................8 Continuing Disclosure Undertaking................................................................................................8

SECURITY FOR THE BONDS..................................................................................................................8

General ...........................................................................................................................................8

PLAN OF FINANCE...................................................................................................................................9

DISTRICT FINANCIAL INFORMATION ..............................................................................................10

Assessed Valuations......................................................................................................................10 Tax Rates ......................................................................................................................................14 District Investments ......................................................................................................................15 Revenue Limits .............................................................................................................................15 Federal Revenues..........................................................................................................................16 Expenditures .................................................................................................................................16 Financial Statements of the District ..............................................................................................16 Budgets of District ........................................................................................................................17 General Fund.................................................................................................................................17 Retirement Systems ......................................................................................................................20 Post-Employment Benefits ...........................................................................................................20 Long-Term Debt ...........................................................................................................................21 General Obligation Debt ...............................................................................................................21 Direct and Overlapping Debt ........................................................................................................22

PASADENA AREA COMMUNITY COLLEGE DISTRICT ..................................................................24

District Organization.....................................................................................................................24 Key Personnel ...............................................................................................................................24 District Employees........................................................................................................................25 Joint Powers Authorities ...............................................................................................................26 District Growth .............................................................................................................................26 Population .....................................................................................................................................27 Construction and Commercial Activity ........................................................................................28

TABLE OF CONTENTS (continued)

Page

ii

FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA ........................................... 30

Major Revenues ............................................................................................................................ 30 Ad Valorem Property Taxes .......................................................................................................... 32 Proposition 98 ............................................................................................................................... 33 State Assistance ............................................................................................................................ 34 Final State Budgets ....................................................................................................................... 40 Supplemental Information Concerning Litigation Against the State of California ...................... 41

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS ..................................................................................................................... 41

Article XIIIA of the California Constitution ................................................................................. 41 Legislation Implementing Article XIIIA ...................................................................................... 42 Article XIIIB of the California Constitution ................................................................................. 42 Unitary Property ........................................................................................................................... 42 California Lottery ......................................................................................................................... 43 Proposition 46 ............................................................................................................................... 43 Proposition 39 ............................................................................................................................... 43 Article XIIIC and XIIID of the California Constitution ............................................................... 44 Proposition 1A .............................................................................................................................. 45 Future Initiatives ........................................................................................................................... 45

THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS............................................... 45

LEGAL OPINIONS ................................................................................................................................... 47

TAX MATTERS ........................................................................................................................................ 47

Series D Bonds .............................................................................................................................. 47 Tax Accounting Treatment of Discount and Premium on Certain of the Series D Bonds ........... 48 Series E Bonds .............................................................................................................................. 49

LEGALITY FOR INVESTMENT ............................................................................................................. 51

RATINGS .................................................................................................................................................. 51

UNDERWRITING .................................................................................................................................... 52

NO LITIGATION ...................................................................................................................................... 52

OTHER INFORMATION ......................................................................................................................... 52

APPENDIX A – FORM OF BOND COUNSEL OPINION ................................................................ A-1 APPENDIX B – SELECTED INFORMATION FROM AUDITED FINANCIAL

STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2008 ............................................................................................ B-1

APPENDIX C – FORM OF CONTINUING DISCLOSURE UNDERTAKING ................................ C-1 APPENDIX D – BOOK-ENTRY ONLY SYSTEM ............................................................................ D-1

1

$52,000,000 PASADENA AREA COMMUNITY COLLEGE DISTRICT

(Los Angeles County, California)

$26,705,000

2002 ELECTION GENERAL OBLIGATION BONDS 2009 SERIES D and

$25,295,000 2002 ELECTION TAXABLE GENERAL

OBLIGATION BUILD AMERICA BONDS (DIRECT SUBSIDY), 2009 SERIES E

INTRODUCTION

The Pasadena Area Community College District (the “District”) proposes to have the Board of Supervisors (the “County Board”) of the County of Los Angeles (the “County”) issue in the name and on behalf of the District $26,705,000 aggregate principal amount of its 2002 Election General Obligation Bonds, 2009 Series D (the “Series D Bonds”) and $25,295,000 aggregate principal amount of its 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E (the “Series E Bonds,” and, collectively with the Series D Bonds, the “Bonds”), under and pursuant to a bond authorization (the “Authorization”) for the issuance and sale of not more than $150,000,000 of general obligation bonds approved by a vote of more than 55% of the qualified electors of the District voting on the proposition at an election held therein on March 5, 2002 (the “Election”). The Bonds are the final series to be issued under the Authorization.

All general obligation bonds issued by or on behalf of the District will be issued on a parity with the Bonds and with each other. The District previously issued its 2002 Election General Obligation Bonds, Series A in the aggregate principal amount of $33,000,000, its 2002 Election General Obligation Bonds, 2006 Series B in the aggregate principal amount of $65,000,000 and its 2002 Election General Obligation Bonds, 2006 Refunding Series C, in the aggregate principal and issue amount of $22,657,773.75.

Proceeds from the sale of the Bonds will be used to finance the acquisition, construction and modernization of certain District property and facilities (collectively, the “Project”), all as further described herein under “THE BONDS – Purpose of Issue” and “THE PROJECT” and as provided in the bond proposition approved at the Election, in accordance with the Constitution and laws of the State of California, and to pay costs of issuance of the Bonds.

The District’s full-time equivalent students (“FTES”) for 2009-10 are projected to be approximately 23,000. The local secured assessed valuation of the District for 2009-10 is $57,392,145,682. The District has direct and overlapping bonded indebtedness as set forth under the caption “DISTRICT FINANCIAL INFORMATION – Direct and Overlapping Debt.” Excerpts from the District’s audited financial statements for the fiscal year ended June 30, 2008 are attached hereto as APPENDIX B. For further information concerning the District, see the caption “PASADENA AREA COMMUNITY COLLEGE DISTRICT” herein.

THE BONDS

Authority for Issuance and Security for the Bonds

The Bonds are general obligations of the District. The Bonds are being issued by the County in the name and on behalf of the District under the provisions of Article XIIIA of the Constitution of the State of California and Title 1, Division 1, Part 10, Chapter 1.5 of the Education Code of the State of California (commencing at Section 15264) (the “Education Code”) and pursuant to resolutions of the

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Governing Board of the District adopted on August 19, 2009 (the “District Resolution”), and of the County Board adopted on September 15, 2009 (the “County Resolution” and together with the District Resolution, the “Resolutions”).

The Bonds are being issued pursuant to provisions of the State Constitution affected by Proposition 39, the Constitutional initiative passed by voters on November 7, 2000, and were therefore approved by a 55% vote of the electorate voting on the proposition at the elections conducted within the District on March 5, 2002 (the “Election”). See the caption “Proposition 39” under the heading “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS” herein.

Purpose of Issue

The net proceeds of the Bonds will be used for the purposes specified in the District bond proposition submitted at the Election, which include the following: to repair and rehabilitate District facilities to meet health, safety, accessibility and instructional standards, replace worn-out plumbing, upgrade existing electrical systems to better access technology, replace aging heating, ventilating and air conditioning systems, renovate outdated classrooms and other vocational training facilities, and construct other facilities to relieve overcrowding in the District.

Description of the Bonds

The Bonds will be dated their date of delivery and will be issued only as fully registered bonds in denominations of $5,000 in principal amount or integral multiples thereof. The Series E Bonds will be issued as Build America Bonds under the provisions of the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”), with a direct subsidy to be paid to the District by the United States Department of the Treasury (“Treasury”), representing 35% of each interest payment made. The principal of the Bonds is payable on the maturity dates of the respective Bonds or the earlier redemption of such Bonds. Interest on the Bonds is payable on February 1 and August 1 in each of the years, commencing February 1, 2010, and in the principal amounts, set forth on the inside cover page of this Official Statement.

The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners or registered owners shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, principal amount or Maturity Value of and interest or premium, if any, on the Bonds are payable by wire transfer or New York Clearing House or equivalent next-day funds or by wire transfer of same day funds by the Treasurer and Tax Collector of the County of Los Angeles (the “Treasurer”), as paying agent (the “Paying Agent”), to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners. See APPENDIX D – “Book-Entry Only System” herein.

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Estimated Sources and Uses of Funds

The proceeds of the Bonds are expected to be applied as follows:

Sources of Funds Principal Amount of Bonds $52,000,000.00 Net Original Issue Premium 3,582,085.95

Total Sources $55,582,085.95

Uses of Funds

Deposit to Building Fund $51,768,020.54 Direct Payment of Costs of Issuance(1) 517,158.00 Deposit to Debt Service Fund 3,296,907.41

Total Uses $55,582,085.95

____________________ (1) Costs of Issuance includes, but is not limited to, Underwriter’s discount, printing and rating costs, fees and expenses of Paying Agent, Bond and Disclosure Counsel, and other costs of issuance.

Optional Redemption

Series D Bonds

Optional Redemption. The Series D Bonds maturing on or before August 1, 2019 are not subject to redemption prior to their fixed maturity dates. The Series D Bonds maturing on and after August 1, 2020 are subject to redemption prior to their stated maturity dates, at the option of the District, from any source of available funds, on any date on or after August 1, 2019, as a whole or in part, at a redemption price equal to the principal amount of the Series D Bonds called for redemption, with interest accrued thereon to the date of redemption, without premium.

Selection of Series D Bonds for Redemption. If less than all of the Series D Bonds are called for redemption, such Series D Bonds will be redeemed in inverse order of maturities, or as otherwise directed by the District, and if less than all of the Series D Bonds of any given maturity are called for redemption, the portions of such Series D Bonds of a given maturity to be redeemed will be determined by lot. For purposes of such determination, each Series D Bond will be deemed to consist of individual Bonds in denominations of $5,000 principal amount which may be separately redeemed.

Series E Bonds

Optional Redemption. The Series E Bonds maturing on or before August 1, 2019 are not subject to redemption prior to their fixed maturity dates. The Series E Bonds maturing on and after August 1, 2020 are subject to redemption prior to their stated maturity dates, at the option of the District, from any source of available funds, on any date on or after August 1, 2019, as a whole or in part, at a redemption price equal to the principal amount of the Series E Bonds called for redemption, with interest accrued thereon to the date of redemption, without premium.

Mandatory Redemption. The $11,590,000 Series E Term Bonds maturing on August 1, 2030, shall be subject to mandatory sinking fund redemption, in part, on August 1 of each year from moneys in the Debt Service Fund established under the County Resolution, and in the respective principal amounts

4

set forth in the following scheduled, each mandatory sinking fund payment to be distributed proportionately among the bondholders in $5,000 denominations, at a redemption price equal to the principal amount of the Series E Bonds called for redemption, with interest accrued thereon to the date of redemption, without premium.

Mandatory Sinking Fund Payment Date

(August 1) Mandatory Sinking Fund Payment

2027 $2,720,000 2028 2,835,000 2029 2,955,000 2030(1) 3,080,000

_______________ (1) Maturity

The $13,705,000 Series E Term Bonds maturing on August 1, 2034, shall be subject to

mandatory sinking fund redemption, in part, on August 1 of each year from moneys in the Debt Service Fund established under the County Resolution, and in the respective principal amounts set forth in the following scheduled, each mandatory sinking fund payment to be distributed proportionately among the bondholders in $5,000 denominations, at a redemption price equal to the principal amount of the Series E Bonds called for redemption, with interest accrued thereon to the date of redemption, without premium.

Mandatory Sinking Fund Payment Date

(August 1) Mandatory Sinking Fund Payment

2031 $3,215,000 2032 3,350,000 2033 3,495,000 2034(1) 3,645,000

_______________ (1) Final Maturity

Extraordinary Optional Redemption

Upon the occurrence of an Extraordinary Event (as defined below) the Series E Bonds shall be subject to extraordinary optional redemption, in whole or in part, at the option of the District, on any date at a redemption price (“Series E Extraordinary Optional Redemption Price”) equal to the greater of (i) the principal amount of the Series E Bonds to be redeemed, plus interest accrued to the redemption date, and (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series E Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which such Series E Bonds are to be redeemed, discounted to the date on which such Series E Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate plus 1.00% and plus interest accrued to the redemption date. Such redemption may be made from the moneys deposited therefor in the Interest and Sinking Fund.

The redemption price will be determined by an independent accounting firm, investment banking firm, or financial advisor retained by the District at the District’s expense to make such calculation. The Paying Agent and the District may conclusively rely on such determination and will not be liable for such reliance.

5

“Extraordinary Event” means any event whereby Section 54AA or Section 6431 of the Code (as such Sections were added by Section 1531 of the American Recovery and Reinvestment Act of 2009 pertaining to “Qualified Build America Bonds”) is modified, amended or interpreted in a manner pursuant to which the direct subsidy payments to be paid to the District by the Treasury representing 35% of each interest payment to be made (the “Subsidy Payments”) are reduced or eliminated.

“Treasury Rate” means, as of any redemption date of any Series E Bonds, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two business days prior to such redemption date (excluding inflation-indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such redemption date to the maturity date of such Series E Bonds; provided, however, that if the period from such redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

Selection of Series E Bonds for Redemption. If fewer than all of the Series E Bonds are called for redemption, then (i) if the Series E Bonds are in book-entry form at the time of such redemption, the Paying Agent shall instruct DTC to instruct the DTC participants to select the specific Series E Bonds for redemption pro rata, and neither the District nor the Paying Agent shall have any responsibility to ensure that DTC or the DTC participants properly select such Series E Bonds for redemption; and (ii) if the Series E Bonds are not in book-entry form at the time of redemption, on each redemption date, the Paying Agent shall select the specific Series E Bonds for redemption pro rata. The portion of any registered Series E Bond in a denomination of more than $5,000 to be redeemed will be redeemed in the principal amount of $5,000 or any integral multiple thereof. The Paying Agent will select portions of the Series E Bonds to be redeemed in such manner as the Paying Agent in its discretion may deem to be fair and appropriate.

Notice of Redemption

When redemption is authorized or required pursuant to the County Resolution, the Paying Agent, upon written instruction from the District given at least 60 days prior to the date designated for such redemption, shall give notice (a “Redemption Notice”) of the redemption of the Bonds. Such Redemption Notice shall specify: (a) the Bonds or designated portions thereof (in the case of any Bond to be redeemed in part but not in whole) which are to be redeemed, (b) the date of redemption, (c) the place or places where the redemption will be made, including the name and address of the Paying Agent, (d) the redemption price, (e) the CUSIP numbers (if any) assigned to the Bonds to be redeemed, (f) the Bond numbers of the Bonds to be redeemed in whole or in part and, in the case of any Bond to be redeemed in part only, the principal amount of such Bond to be redeemed, and (g) the original issue date, interest rate and stated maturity date of each Bond to be redeemed in whole or in part. Such Redemption Notice shall further state that on the specified date there shall become due and payable upon each Bond or portion thereof being redeemed the redemption price thereof, and that from and after such date, interest on Bonds shall cease to accrue.

The Paying Agent shall take the following actions with respect to such Redemption Notice: (i) at least 30 days but not more than 45 days prior to the redemption date, such Redemption Notice shall be given to the respective Owners of the Bonds designated for redemption by registered or certified mail, postage prepaid, at their addresses appearing on the Bond Register; (ii) at least 30 but not more than 45 days prior to the redemption date, such Redemption Notice shall be given by (1) registered or certified mail, postage prepaid, (2) telephonically confirmed facsimile transmission, or (3) overnight delivery service, to each of the Securities Depositories and to one of the Information Services.

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Neither failure to receive any Redemption Notice nor any defect in any such Redemption Notice so given shall affect the sufficiency of the proceedings for the redemption of the affected Bonds. Each check issued or other transfer of funds made by the Paying Agent for the purpose of redeeming Bonds shall bear the CUSIP number identifying, by series and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Partial Redemption of Bonds

Upon the surrender of any Bond redeemed in part only, the Paying Agent shall execute and deliver to the Owner thereof a new Bond or Bonds of like tenor and maturity and of authorized denominations equal in transfer amounts to the unredeemed portion of the Bond surrendered. Such partial redemption shall be valid upon payment of the amount required to be paid to such Owner, and the County and the District shall be released and discharged thereupon from all liability to the extent of such payment.

Effect of Notice of Redemption

Notice having been given as required in the County Resolution, and the moneys for redemption (including the interest to the applicable date of redemption) having been set aside in the District’s Debt Service Fund, the Bonds to be redeemed shall become due and payable on such date of redemption.

If on such redemption date, money for the redemption of all the Bonds to be redeemed, together with interest to such redemption date, shall be held by the Paying Agent so as to be available therefor on such redemption date, and if notice of redemption thereof shall have been given, then from and after such redemption date, interest on the Bonds to be redeemed shall cease to accrue and become payable.

Transfer and Exchange

Any Bond may be exchanged for Bonds of like series, tenor, maturity and principal amount or Maturity Value upon presentation and surrender at the principal office of the Paying Agent, together with a request for exchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred on the Bond Register only upon presentation and surrender of such Bond at the principal office of the Paying Agent together with an assignment executed by the Owner or a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of like series, tenor and of any authorized denomination or denominations requested by the Owner equal to the principal amount of the Bond surrendered and bearing or accreting interest at the same rate and maturing on the same date.

[Remainder of this page intentionally left blank.]

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Debt Service Schedule

The following table summarizes the debt service requirements of the District for all its outstanding general obligation bonds (the “Outstanding Bonds”) and the Bonds:

The Bonds Year Ending (August 1)(1)

Outstanding Bonds Debt Service(2) Series D Bonds Series E Bonds

Aggregate Debt Service

2009 $ 10,950,737.50 $ -0- $ -0- $ 10,950,737.50 2010 11,187,537.50 1,007,117.22 1,325,643.21 13,520,297.93 2011 10,870,362.50 1,357,700.00 1,668,641.80 13,896,704.30 2012 10,975,737.50 1,375,000.00 1,668,641.80 14,019,379.30 2013 10,627,237.50 2,121,700.00 1,668,641.80 14,417,579.30 2014 9,359,412.50 2,720,900.00 1,668,641.80 13,748,954.30 2015 3,807,412.50 2,721,500.00 1,668,641.80 8,197,554.30 2016 3,802,262.50 2,719,700.00 1,668,641.80 8,190,604.30 2017 3,808,962.50 2,720,500.00 1,668,641.80 8,198,104.30 2018 3,807,712.50 2,722,000.00 1,668,641.80 8,198,354.30 2019 3,806,962.50 2,719,250.00 1,668,641.80 8,194,854.30 2020 3,806,462.50 2,722,250.00 1,668,641.80 8,197,354.30 2021 3,805,687.50 2,720,500.00 1,668,641.80 8,194,829.30 2022 3,804,137.50 2,719,000.00 1,668,641.80 8,191,779.30 2023 3,806,550.00 2,722,500.00 1,668,641.80 8,197,691.80 2024 3,807,400.00 2,720,500.00 1,668,641.80 8,196,541.80 2025 3,806,425.00 2,723,000.00 1,668,641.80 8,198,066.80 2026 3,803,362.50 2,719,500.00 1,668,641.80 8,191,504.30 2027 3,802,275.00 -0- 4,388,641.80 8,190,916.80 2028 3,804,775.00 -0- 4,326,053.00 8,130,828.00 2029 3,808,250.00 -0- 4,260,955.86 8,069,205.86 2030 3,803,750.00 -0- 4,193,023.90 7,996,773.90 2031 3,806,250.00 -0- 4,126,930.70 7,933,180.70 2032 -0- -0- 4,048,004.60 4,048,004.60 2033 -0- -0- 3,970,095.60 3,970,095.60 2034 -0- -0- 3,887,538.30 3,887,538.30

Total $128,669,662.50 $41,232,617.22 $61,225,155.77 $231,127,435.49

____________________ (1) The District’s 2002 Election, Series A has a final maturity of June 1, 2013. The District’s 2002 Election, 2006 Series B and 2002 Election, 2006 Refunding Series C have final maturities of August 1, 2031 and August 1, 2014, respectively. The Bonds have a final maturity of August 1, 2034. (2) Represents the outstanding general obligation bonds of the District, 2002 Election, Series A, 2002 Election, 2006 Series B and 2002 Election, 2006 Refunding Series C. Discharge and Defeasance

If all or any portion of the Outstanding Bonds of a series shall be paid and discharged in any one of the following ways:

(a) by well and truly paying or causing to be paid the principal of and interest on all Bonds Outstanding, and when the same become due and payable;

(b) by depositing with the Paying Agent, in trust, at or before maturity, cash which, together with the amounts then on deposit in the Debt Service Fund plus the interest to accrue thereon without the need for further investment, is fully sufficient to pay all Bonds Outstanding at maturity thereof, including

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any premium and all interest thereon, notwithstanding that any Bonds shall not have been surrendered for payment; or

(c) by depositing with an institution to act as escrow agent selected by the District and approved by the County and which meets the requirements of serving as Paying Agent pursuant to the County Resolution, in trust, lawful money or noncallable direct obligations issued by the United States Treasury (including State and Local Government Series Obligations) or obligations which are unconditionally guaranteed by the United States of America and permitted under Section 149(b) of the Code and Regulations which, in the opinion of nationally recognized bond counsel, will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds, in such amount as will, together with the interest to accrue thereon without the need for further investment, be fully sufficient, in the opinion of a verification agent satisfactory to the County, to pay and discharge all Bonds Outstanding at maturity thereof, including any premium and all interest thereon, notwithstanding that any Bonds shall not have been surrendered for payment;

then all obligations of the County, the District and the Paying Agent under the applicable Resolution with respect to the affected Bonds shall cease and terminate, except only the obligation of the Paying Agent to pay or cause to be paid to the Owners of the Bonds all sums due thereon, and the obligation of the District to pay the Paying Agent amounts owing to the Paying Agent under such Resolution.

Book-Entry Only System

The Bonds will be issued in denominations of $5,000 principal amount, or Maturity Value, or any integral multiple thereof, and will mature on the dates and in the principal amounts and bear interest at the rates per annum, all as set forth on the inside cover page of this Official Statement.

The Bonds will be issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York. DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Owners or registered owners shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners (as defined herein) of the Bonds. For further information regarding DTC and the book entry system, see APPENDIX D – “Book-Entry Only System” hereto.

Continuing Disclosure Undertaking

In accordance with the requirements of Rule 15c2-12 (the “Rule”) promulgated by the Securities and Exchange Commission, the District will enter into a Continuing Disclosure Undertaking (the “Continuing Disclosure Undertaking”) in the form of Appendix C hereto, on or prior to the sale of the Bonds in which the District will undertake, for the benefit of the Beneficial Owners of the Bonds, to provide certain information as set forth therein. The covenants contained in the Continuing Disclosure Undertaking have been made to assist the Underwriter in complying with the Rule. See APPENDIX C – “Form of Continuing Disclosure Undertaking” hereto. In the last five years, the District has complied in all material respects with any previous undertaking with regard to the Rule to provide annual reports or notices of material events.

SECURITY FOR THE BONDS

General

The Bonds are general obligations of the District, and the Board of Supervisors of the County of Los Angeles has the power and is obligated to levy and collect ad valorem taxes upon all property within

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the District subject to taxation by the County, without limitation as to rate or amount (except certain personal property which is taxable at limited rates) for payment of principal of, Maturity Value and interest on the Bonds.

The Series E Bonds are being issued as “Build America Bonds” under pertinent provisions of the Recovery Act. Pursuant to the Recovery Act, the District expects to receive a cash subsidy payment from the Treasury equal to 35% of the interest payable on the Series E Bonds on or about each Interest Payment Date. Such cash payments do not constitute a guarantee by the United States of America, but are required to be paid to the District under the terms of the Recovery Act. The District has covenanted in the District Resolution to deposit each such direct subsidy payment into the Interest and Sinking Fund established for payment of the Series E Bonds.

PLAN OF FINANCE

The Project. The “Strict Accountability in Local School Construction Bonds Act of 2000,” comprising Section 15264 et seq. of the Education Code, controls the method by which the District will expend amounts derived from the sale of the Bonds on its capital improvements. Prior to the Election, the District prepared and submitted to the Board for approval a master list of capital improvement projects to be built, acquired, constructed or installed with the proceeds of the Bonds. The following description includes all elements of the Project List applicable to the bonds issued under the Election:

General Project Components

The following Projects will be financed at locations throughout the main campus of the District:

1. acquisition of furnishings and equipment for all modernization, renovation, improvement and/or new construction projects;

2. installation and/or upgrades of emergency lighting, fire alarm and security systems;

3. improvement of roadways, walkways, grounds, parking lots, fencing and entrances to the campus;

4. upgrading of water, plumbing, electrical and ventilation systems;

5. purchase and installation of signage for safety and public information purposes;

6. modernization and/or construction of new restrooms;

7. preparation and implementation of Facilities Master Plan and related requirements, such as environmental impact reports and soils testing;

8. demolition of obsolete facilities; and

9. relocation and/or acquisition of temporary facilities during the modernization, renovation, improvement and/or new construction of project components as necessary to maintain educational programs in operation during construction.

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Specific Project Components

The following specific Projects will be financed:

1. ease overcrowding by reconstructing, reconfiguring, modernizing and remodeling existing classrooms, offices, laboratories and other facilities (certain facilities will be converted to classrooms);

2. construct new Industrial Technology Building for automotive, printing, machine shop, welding and building construction programs;

3. construct new Arts Building for music, music technology, fine arts and graphic arts programs;

4. construct new Parking Structure on Bonnie Avenue just north of Del Mar Boulevard to provide approximately 1,000 additional parking spaces; and

5. construct new Campus Center to replace the 40-year-old structure now housing classrooms, the cafeteria, bookstore and student activities spaces for the District’s 29,000 students; configure new facility to permit safe access to west campus for delivery, security and emergency vehicles.

DISTRICT FINANCIAL INFORMATION

Assessed Valuations

The assessed valuation of property in the District is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Assessed valuations are reported at 100% of the full value of the property, as defined in Article XIIIA of the California Constitution. (See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”)

The State-reimbursed exemption currently provides a credit of $7,000 of the full value of an Own-occupied dwelling for which application has been made to the County Assessor. The revenue estimated to be lost to local taxing agencies due to the exemption is reimbursed from State sources. Reimbursement is based upon total taxes due upon such exempt value and is not reduced by any amount for estimated or actual delinquencies.

In addition, certain classes of property such as churches, colleges, not-for-profit hospitals and charitable institutions are exempt from property taxation and do not appear on the tax rolls. No reimbursement is made by the State for such exemptions.

For fiscal year 2009-10, the District’s total assessed valuation before redevelopment increment was $58,547,347,735. Shown in the following tables are the assessed valuation of property in the District during the past five fiscal years and the twenty largest locally secured taxpayers in the District for the 2008-09 fiscal year.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT SUMMARY OF ASSESSED VALUATIONS

FISCAL YEARS 2005-06 THROUGH 2009-10

Local

Secured Utility Unsecured Total Before

Rdv. Increment

2005-06 $44,214,643,023 $9,572,078 $1,078,787,074 $45,303,002,175 2006-07 48,758,143,620 9,496,984 1,101,804,965 49,869,445,569 2007-08 52,750,694,951 8,205,180 1,091,307,134 53,850,207,265 2008-09 56,793,441,226 7,285,489 1,169,476,501 57,970,203,216 2009-10 57,392,145,682 1,888,859 1,153,313,194 58,547,347,735

____________________ Source: California Municipal Statistics, Inc. (fiscal years 2005-06 through 2008-09); Los Angeles County Auditor-Controller’s

Office (fiscal year 2009-10).

PASADENA AREA COMMUNITY COLLEGE DISTRICT 2008-09 ASSESSED VALUATION BY JURISDICTION(1)

Jurisdiction Assessed Valuation

in District % of District Assessed Valuation

of Jurisdiction % of Jurisdiction

in District City of Arcadia $ 9,500,415,626 16.39% $ 9,670,219,924 98.24% City of El Monte 1,338,895,896 2.31 5,944,706,254 22.52% City of Glendale 58,205,047 0.10 22,588,450,418 0.26% City of La Canada-Flintridge 4,871,240,911 8.40 5,316,451,119 91.63% City of Los Angeles 405,241 0.00 413,823,442,807 0.00% City of Monrovia 13,745,904 0.02 4,004,092,990 0.34% City of Pasadena 20,888,548,554 36.03 20,888,548,554 100.00% City of Rosemead 1,516,384,885 2.62 3,362,646,146 45.09% City of San Gabriel 254,110,044 0.44 3,670,473,094 6.92% City of San Marino 4,016,157,668 6.93 4,016,157,668 100.00% City of Sierra Madre 1,573,247,804 2.71 1,573,247,804 100.00% City of South El Monte 584,729 0.00 1,638,786,359 0.04% City of South Pasadena 3,180,426,457 5.49 3,180,426,457 100.00% City of Temple City 3,167,739,832 5.46 3,270,425,923 96.86% Unincorporated Los Angeles County 7,590,094,618 13.09 86,895,963,407 8.73% Total Los Angeles County $57,970,203,216 100.00% $1,076,567,251,535 5.38%

_____________________ (1) Before deduction of redevelopment incremental valuation. Source: California Municipal Statistics, Inc.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT Assessed Valuation and Parcels by Land Use

2008-09

Assessed Valuation(1) % of Total

No. of Parcels

% of Total

Non-Residential: Agricultural/Dairy $ 27,478,298 0.05% 43 0.04% Commercial 4,025,419,473 7.09 3,550 3.01 Vacant Commercial 156,148,188 0.27 437 0.37 Professional office 3,185,539,761 5.61 1,166 0.99 Industrial 1,174,683,206 2.07 782 0.66 Vacant Industrial 72,127,992 0.13 111 0.09 Recreational 315,503,427 0.56 126 0.11 Government/Social/Institutional 1,018,914,823 1.79 1,785 1.51 Miscellaneous 23,591,738 0.04 456 0.39 Subtotal Non-Residential $9,999,406,906 17.61% 8,456 7.17% Residential: Single Family Residence $36,192,402,299 63.73% 81,994 69.55% Condominium/Townhouse 4,955,908,521 8.73 14,999 12.72 Mobile Home 383,502 0.00 1 0.00 Mobile Home Park 9,954,094 0.02 9 0.01 2-4 Residential Units 2,419,741,625 4.26 7,023 5.96 5+ Residential Units/Apartments 2,786,452,072 4.91 2,412 2.05 Vacant Residential 429,192,207 0.76 2,994 2.54 Subtotal Residential $46,794,034,320 82.39% 109,432 92.83% Total $56,793,441,226 100.00% 117,888 100.00% _____________________ (1) Local Secured Assessed Valuation; excluding tax-exempt property. Source: California Municipal Statistics, Inc.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT Per Parcel 2008-09 Assessed Valuation of Single Family Homes

Single Family Residential 2008-09

Assessed Valuation No. of

Parcels (1) % of Total

Cumulative % of Total

Total Valuation

%of Total

Cumulative % of Total

$0-$24,999 552 0.673% 0.673% $ 5,813,013 0.016% 0.016% $25,000-$49,999 3,750 4.574 5.247 150,478,128 0.416 0.432 $50,000-$74,999 5,536 6.752 11.998 344,592,361 0.952 1.384 $75,000-$99,999 4,360 5.317 17.316 379,407,726 1.048 2.432

$100,000-$124,999 3,656 4.459 21.775 411,067,356 1.136 3.568 $125,000-$149,999 3,488 4.254 26.029 478,662,767 1.323 4.891 $150,000-$174,999 3,127 3.814 29.842 508,772,594 1.406 6.296 $175,000-$199,999 3,146 3.837 33.679 590,325,777 1.631 7.927 $200,000-$224,999 3,328 4.059 37.738 707,426,045 1.955 9.882 $225,000-$249,999 2,995 3.653 41.391 711,068,373 1.965 11.847 $250,000-$274,999 2,920 3.561 44.952 767,357,286 2.120 13.967 $275,000-$299,999 2,723 3.321 48.273 782,448,203 2.162 16.129 $300,000-$324,999 2,606 3.178 51.451 814,334,053 2.250 18.379 $325,000-$349,999 2,350 2.866 54.317 792,898,972 2.191 20.570 $350,000-$374,999 2,144 2.615 56.932 777,395,642 2.148 22.718 $375,000-$399,999 2,086 2.544 59.476 808,318,367 2.233 24.951 $400,000-$424,999 2,000 2.439 61.916 825,470,168 2.281 27.232 $425,000-$449,999 1,945 2.372 64.288 850,554,411 2.350 29.582 $450,000-$474,999 1,861 2.270 66.557 860,119,279 2.377 31.958 $475,000-$499,999 1,756 2.142 68.699 856,120,309 2.365 34.324

$500,000 and greater 25,665 31.301 100.000 23,769,771,469 65.676 100.000 Total 81,994 100.000% $36,192,402,299 100.000%

_____________________ (1) Improved single family residential parcels, Excludes condominiums and parcels with multiple family units. Source: California Municipal Statistics, Inc.


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PASADENA AREA COMMUNITY COLLEGE DISTRICT 2008-09 Largest Local Secured Taxpayers

Property Owner Land Use

2008-09 Assessed Valuation

% of Total(1)

1. Leonard M. Marangi Hospital $ 381,183,097 0.67% 2. Santa Anita Fashion Park LLC Shopping Center 296,343,435 0.52 3. Kaiser Foundation Health Plan Inc. Office Building 206,177,343 0.36 4. Equity Office Properties Trust Office Building 182,580,000 0.32 5. 234567 Developments Inc. Race Track 168,064,893 0.30 6. Paseo Colorado Holdings LLC Shopping Center 129,939,533 0.23 7. SPF 888 Walnut Pasadena LLC Office Building 129,358,440 0.23 8. Tishman Speyer Archstone Smith Del Mar Apartments 120,608,426 0.21 9. Wells REIT II Pasadena Corporate Park LP Office Building 116,000,000 0.20

10. SSR Paseo Colorado LLC Apartments 108,315,203 0.19 11. Pasadena Towers LLC Office Building 106,247,937 0.19 12. Operating Engineers Funds Inc. Office Building 86,095,979 0.15 13. Parfinco EWA LLC Office Building 83,910,726 0.15 14. BBCAF Inc. Office Building 79,000,000 0.14 15. Wells Fargo Bank Office Building 75,757,751 0.13 16. Marc Ittah Commercial 73,600,000 0.13 17. 621 Colorado Associates Commercial 72,421,680 0.13 18. Holly Street LP Apartments 71,595,882 0.13 19. South Lake Avenue Investors LLC Office Building 71,106,263 0.13 20. Maguire Partners WAP LLC Office Building 66,021,548 0.12

$2,624,328,136 4.62% ____________________ (1) 2008-09 Local Secured Assessed Valuation: $56,793,441,226. Source: California Municipal Statistics, Inc. Tax Rates

The following table sets forth typical tax rates levied in Tax Rate Area (7500) for fiscal years 2004-05 through 2008-09:

PASADENA AREA COMMUNITY COLLEGE DISTRICT Typical Total Tax Rates (TRA 7500)

2004-05 2005-06 2006-07 2007-08 2008-09 County General 1.000000 1.000000 1.000000 1.000000 1.000000 City of Pasadena .011643 .009792 .000663 - - Los Angeles County .000923 .000795 .040078 .054911 .063747 Pasadena Area Community College District .008786 .004103 .020801 .019720 .017417 Pasadena Unified School District .086312 .109911 .000052 - - Los Angeles County Flood Control .000245 .000049 .004700 .004500 .004300 Metropolitan Water District .005800 .005200 .011055 - - Total Tax Rate 1.113709 1.129850 1.077349 1.079131 1.085464

____________________ Source: California Municipal Statistics, Inc.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT Secured Tax Charges and Delinquencies

Secured Tax Charge(1)

Amount Del. June 30

% Del. June 30

2004-05 $ 3,506,198.19 $ 74,380.62 2.12% 2005-06 1,799,097.34 31,047.11 1.73 2006-07 10,015,833.95 246,439.36 2.46 2007-08 10,292,018.97 333,013.40 3.24 2008-09 9,729,697.01 336,295.46 3.46

____________________ (1) 1% General Fund apportionment. Excludes redevelopment agency impounds. Source: California Municipal Statistics, Inc.

District Investments

The Treasurer manages, in accordance with California Government Code Section 53600 et seq., funds deposited with the Treasurer by County school and community college districts, various special districts, and some cities within the State of California. State law generally requires that all moneys of the County, school and community college districts and certain special districts be held in the County’s pooled investment fund (the “Pooled Investment Fund”). All money held in any of the funds or accounts established pursuant to the County Resolution shall be held in the Pooled Investment Fund and disbursed in accordance with the County Resolution.

The composition and value of investments under management in the Pooled Investment Fund vary from time to time depending on cash flow needs of the County and public agencies invested in the pool, maturity or sale of investments, purchase of new securities, and due to fluctuations in interest rates generally.

For a further discussion of the Pooled Investment Fund, see the caption “THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS” herein.

Revenue Limits

California community college districts (other than Basic Aid districts, as described below) receive approximately 52 percent of their funds from the State, 44 percent from local sources, and 4 percent from federal sources. State funds include general apportionment, categorical funds, capital construction, the lottery (slightly less than 3 percent of the District’s General Fund), and other minor sources. Local funds include property taxes, student fees, and miscellaneous sources. Funds for fiscal years up to and including 2005-06 were allocated to the colleges using a program-based model. The model used different factors to establish support levels for five different programs or functions: (1) Instruction and Instructional Administration; (2) Instructional Services; (3) Student Services; (4) Operation and Maintenance of Plants; and (5) Institutional Support. The program-based model was instituted in 1991, and replaced an older model based on enrollments. From and after fiscal year 2006-07, a revised model was and is used based on the adoption of Senate Bill 361 (“SB 361”). See “FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA – Major Revenues – SB 361” herein. All State aid is subject to the appropriation of funds in the State’s annual budget. Decreases in State revenues may affect appropriations made by the legislature to the districts.

Funding of a district’s revenue limit is accomplished by a mix of (1) local property taxes, (2) State apportionments of basic aid and (3) student enrollment fees. Generally, the State

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apportionments amount to the difference between the district’s revenue limit and its local property tax revenues and student enrollment fees.

Proposition 13 and its implementing legislation permit each county to levy and collect all property taxes (except for levies to support prior voter approved indebtedness), and prescribe how levies on county-wide property values were to be shared with local taxing entities within each county.

Taxes are levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. For assessment and collection purposes, property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”

Property taxes on the secured roll are due in two installments, on November 1 and February 1 of each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax defaulted for non-payment on or about June 30 of the fiscal year and is subject to the power of sale five years from such date if delinquent taxes are not paid. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is then subject to sale by the Treasurer. For additional details on property tax levies and collections, see “FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA – Ad Valorem Property Taxes” herein.

Federal Revenues

The federal government provides funding for several District programs, including Supplemental Education Opportunity Grants (“SEOG”), Work Study, Pell, Vocational Technology Education Act, Veterans’ Education, TANF and the Small Business Development Center. The federal revenues, most of which are restricted, comprised approximately 31.6% of total operating revenues in 2007-08.

Expenditures

Funding of the above revenue limits is accomplished by a mix of local property taxes and State aid. Since the passage of Article XIIIA of the California Constitution in 1978, property taxes received by the District have been limited to the District’s share of one percent of the full cash value collected by the County. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Article XIIIA of the California Constitution” herein.

As noted in the financial statements included herein, the District’s major expenditures each year are employee salaries and benefits.

Financial Statements of the District

The District’s General Fund finances the legally authorized activities of the District. General Fund revenues are derived from such sources as State fund apportionments, taxes, use of money and property, and aid from other governmental agencies. Certain information from the District’s financial statements follows. Selected information from the District’s audited financial statements for the 2007-08 fiscal year is attached hereto as Appendix B. The District’s complete audited financial statements for prior and subsequent fiscal years can be obtained by contacting the District’s Fiscal Services Office

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located at 1570 East Colorado Boulevard, Pasadena, California 91106-2003 telephone (626) 585-7258. The District may impose a fee for copying, mailing and handling.

The District’s financial statements are prepared on a modified accrual basis of accounting in accordance with generally accepted accounting principles as set forth by the Governmental Accounting Standards Board.

Funds and Account Groups used by the District are categorized as follows:

Governmental Funds Fiduciary Funds General Fund Associated Students Trust Fund Special Revenue Funds Student Financial Aid Trust Fund Debt Service Funds Capital Projects Funds Account Groups General Fixed Assets Account Group General Long-Term Debt Account Group

The General Fund of the District, as shown herein, is a combined fund comprised of moneys

which are unrestricted and available to finance the legally authorized activities of the District not financed by restricted funds and moneys which are restricted to specific types of programs or purposes. General Fund revenues shown thereon are derived from such sources as taxes, aid from other government agencies, charges for current services and other revenue.

The financial statements included herein were prepared by the District using information from the Annual Financial Reports which are prepared by the Director of Fiscal Services for the District and audited by independent certified public accountants each year. Excerpts from the District’s audited financial statements for the year ending June 30, 2008, are attached hereto as Appendix B.

Budgets of District

The fiscal year of the District begins on the first day of July of each year and ends on the 30th day of June of the following year. The District adopts on or before July 1 of each year a fiscal line-item budget setting forth expenditures in priority sequence so that appropriations during the fiscal year can be adjusted if revenues do not meet projections.

The District is required by provisions of the California Education Code to maintain a balanced budget each year, where the sum of expenditures plus the ending fund balance cannot exceed the revenues plus the carry-over fund balance from the previous year. The Chancellor of California Community Colleges imposes a uniform budgeting format for each community college district in the State.

General Fund

The following pages describe the District’s audited financial results for the fiscal years 2005-06, 2006-07 and 2007-08 as well as a comparison of adopted budgets for fiscal years 2006-07, 2007-08 and 2008-09 to unaudited figures for fiscal years 2006-07, 2007-08 and 2008-09 and the Proposed Budget for 2009-10.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT Statement of Revenues, Expenditures and Changes in Net Assets

Fiscal Years Ending June 30, 2006 through June 30, 2008

2006 2007 2008 OPERATING REVENUES Student Tuition and Fees $23,344,325 $22,907,839 $23,701,781 Less: Scholarship discount and allowance (6,985,732) (6,068,446) (4,915,872) Net tuition and fees 16,358,593 16,839,393 18,785,909 Grants and Contracts, noncapital: Federal 16,706,924 16,370,363 19,930,686 State 10,005,514 11,254,269 12,083,545 Auxiliary Enterprise Sales and Charges Bookstore 6,213,893 6,582,576 6,883,658 Internal Service Sales and Charges 3,052,965 4,603,061 5,323,646 TOTAL OPERATING REVENUES $52,337,889 $55,649,662 $63,007,444 OPERATING EXPENSES Salaries 78,438,825 85,424,787 91,521,899 Employee benefits 21,506,995 24,209,276 26,339,000 Supplies, materials, and other operating expenses and services 37,882,071 41,583,750 43,355,659 Equipment, maintenance, and repairs 2,298,441 3,642,511 2,178,956 Depreciation 4,871,411 6,489,803 6,926,851 TOTAL OPERATING EXPENSES $144,997,743 $161,350,127 $170,322,365 OPERATING LOSS $ (92,659,854) $(105,700,465) $(107,314,921) NONOPERATING REVENUES (EXPENSES) State apportionments, noncapital $ 68,694,008 $ 80,402,701 $ 83,071,149 Local property taxes for general purposes 17,351,121 15,351,994 16,317,372 Local property taxes levied for debt repayment 11,727,932 11,291,862 State taxes and other revenues 3,816,077 3,938,763 3,268,614 Investment income 1,804,591 5,491,268 8,510,000 Interest expense on capital related debt (1,496,494) (3,163,653) (4,611,433) Interest income on capital asset-related debt, net 44 45 451 Transfer to agency fund (436,742) (212,134) (341,072) Other nonoperating revenue 4,488,590 3,281,734 4,699,487 TOTAL NONOPERATING REVENUES (EXPENSES) $ 94,221,195 $116,818,650 $122,206,430 LOSS BEFORE OTHER REVENUES 1,561,341 11,118,185 14,891,509 State revenues, capital 440,973 1,191,013 393,853 Local revenues, capital 1,032,447 836,818 665,976 TOTAL OTHER REVENUES $ 1,473,420 $ 2,027,831 $ 1,059,829 CHANGE IN NET ASSETS 3,034,761 13,146,016 15,951,338 NET ASSETS, BEGINNING OF YEAR 139,083,208 142,117,969 155,263,985 NET ASSETS, END OF YEAR $142,117,969 $155,263,985 $171,215,323

________________________ Source: The District.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT Comparison of Adopted General Fund Budgets for Fiscal Years 2006-07, 2007-08 and 2008-09

Unaudited Actuals for Fiscal Years 2006-07, 2007-08 and 2008-09 and Proposed Budget for Fiscal Year 2009-10

Adopted Budget 2006-07

Unaudited Actuals

2006-07(1)


Unaudited Actuals

2007-08(1)


Unaudited Actuals

2008-09(1)(2)

Proposed Budget 2009-10

Revenue: Federal $ 3,621,950 $ 3,128,067 $ 3,497,927 $ 3,079,902 $ 4,389,881 $ 3,695,111 $ 4,345,496 State 91,562,339 92,994,611 95,428,482 95,807,049 98,943,845 95,399,193 89,925,301 Local 34,534,714 35,315,942 38,321,364 36,933,844 39,849,077 40,040,619 41,934,311 Total Revenue $129,719,003 $131,438,620 $137,247,773 $135,820,795 $143,182,803 $139,134,923 $136,205,108 Expenditures: Academic Salaries $60,482,441 $ 58,550,735 $ 62,504,073 $ 61,828,967 $ 63,216,882 $ 63,674,747 $ 60,127,695 Classified Salaries 26,352,125 25,120,725 28,491,676 27,778,039 29,367,899 28,930,865 27,671,961 Employee Benefits 22,867,995 21,031,736 23,515,908 23,048,203 25,769,901 24,292,693 24,604,370 Supplies and Materials 4,219,590 3,605,620 3,830,599 2,753,615 3,173,274 2,896,609 3,272,933

Services & Other Operating Expenses 13,840,886 10,488,789 13,409,600 11,299,260 15,133,053 11,241,981 11,994,147 Capital outlay 5,233,318 3,707,474 4,449,618 2,843,954 4,200,164 2,102,973 3,047,617 Total Expenditures $132,996,355 $122,505,079 $136,201,474 $129,552,038 $140,861,173 $133,139,868 $130,718,723 Excess of Revenues Over/(under) Expenditures (3,277,352) 8,933,541 1,046,299 6,268,757 2,321,630 5,995,055 5,486,385 Other Financing Sources 92,237 113,805 91,766 545,243 90,418 119,716 0 Other Outgo 8,576,030 7,365,716 9,580,840 5,060,384 6,608,439 2,786,646 3,821,594 Net Increase/Decrease in Fund Balance $(11,761,145) $ 1,681,630 $ (8,442,775) $ 1,753,616 $ (4,196,391) $ 3,328,125 $ 1,664,791 Fund Balance, Beginning of Year $ 12,811,145 $ 12,811,145 $14,492,775 $14,492,775 $16,246,391 $16,246,391 $21,441,670 Prior Years Adjustments 1,867,154 0 Fund Balance, End of Year $ 1,050,000 $14,492,775 $ 6,050,000 $16,246,391 $12,050,000 $21,441,670 $23,106,461

__________________ (1) Unaudited general fund results in object-oriented format provided for comparison. For audited results of fiscal years 2005-06, 2006-07 and 2007-08, see “DISTRICT FINANCIAL INFORMATION – General Fund.” (2) Unaudited actual results as of June 30, 2009. Source: The District.

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Retirement Systems

The District participates in the State Teachers’ Retirement System (“STRS”). This plan covers all full-time certificated and some classified District employees. The District’s employer contribution to STRS was $4,145,332 for fiscal year 2006-07, $4,226,897 for fiscal year 2007-08 and was budgeted to be $4,497,986 for fiscal year 2008-09.

The District also participates in the State Public Employees’ Retirement System (“CalPERS”). This plan covers all classified personnel who are employed four or more hours per day. The District’s employer contribution to CalPERS was $1,793,019 for fiscal year 2006-07, $1,529,727 for fiscal year 2007-08 and was budgeted to be $2,256,409 for fiscal year 2008-09.

Both CalPERS and STRS are operated on a statewide basis and, based on available information, STRS and CalPERS both have unfunded liabilities. CalPERS may issue certain pension obligation bonds to reach funded status. (Additional funding of STRS by the State and the inclusion of adjustments to such State contributions based on consumer price changes were provided for in 1979 Statutes, Chapter 282.) The amounts of the pension/award benefit obligation (CalPERS) or actuarially accrued liability (STRS) will vary from time to time depending upon actuarial assumptions, rates of return on investments, salary scales, and levels of contribution. The District is unable to predict what the amount of unfunded liabilities will be in the future or the amount of the contributions which the District may be required to make.

Post-Employment Benefits

In June 2004, the Governmental Accounting Standards Board (“GASB”) pronounced Statement No. 45, Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions. The pronouncement will require public agency employers providing healthcare benefits to retirees to recognize and account for the costs for providing these benefits on an accrual basis and provide footnote disclosure on the progress toward funding the benefits. The implementation date for this pronouncement will be staggered in three phases based upon the entity’s annual revenues, similar to the implementation for GASB Statement No. 34 and 35. GASB Statement No. 45 (“GASB 45”) became effective for the District for the fiscal year ending June 30, 2008.

GASB 45 provides that agencies should establish a reserve fund and annually transfer sufficient funds to this reserve in order to pay for retiree employment benefits other than pensions (“Health & Welfare Benefits”), for the period of time agreed in union contracts. Employees who are eligible to receive Health & Welfare Benefits while in retirement must meet specific criteria, i.e., age and years with the District. The District provides medical and dental insurance coverage, as prescribed in the various employee union contracts, to retirees meeting plan eligibility requirements. The eligibility requirements for employees is a minimum age of 55 and a minimum 14 years of service with the District. Additional age and service criteria may be required. Such benefits are provided until the eligible retiree reaches the age of 65. After age 65, eligible retirees receive a Medicare wraparound benefit in the amount of $1,440 per year. The District also has minimum continuous service requirements for retirement that range from three years to ten years and varies by employee class. The District recognizes expenditures for these post-employment health benefits on a pay-as-you-go-basis. During the 2008-09 fiscal year, the District provided insurance premium benefits to 58 retired employees with total expenditures of $695,120. The approximate accumulated future liability for the District amounts to $22,000,000, for which the District has set aside $11,912,491 in a self-insurance fiscal reserve fund. As of April 2008, the District’s total Unfunded Actuarial Accrued Liability (UAAL) was $10,087,509. The District’s Annual Required Contribution (ARC) necessary to fund such benefits for the 2008-09 fiscal year was $1,724,551. The District has budgeted $2,500,000 for those costs for the 2009-10 fiscal year. The District is in the process

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of determining the impact the implementation of GASB 45 will have on the government-wide statement of net assets and activities.

The District has chosen to prefund retiree health benefits based upon the actuarial report dated August 25, 2008:

Actuarial cost method Entry age normal Interest rate assumption 5% Projected salary increase assumption 3% Health inflation assumption 4% Actuarially required contributions Year Beginning May 1, 2008

Normal cost $1,135,223 Unfunded Actuarial accrued liability amortization $589,328 Actuarial accrued liability as of April 1, 2008 $13,305,204 Actuarial present value of total projected benefits as of April 1, 2008 $22,435,160

Long-Term Debt

A schedule of changes in long-term debt for the year ended June 30, 2008 is shown below:

Balance

July 1, 2007 Additions Deletions Balance

June 30, 2008 Amounts Due in One Year

Bond and Notes Payable General Obligation Bonds, Election 2002, Series A

$ 5,405,000 $ - $ 835,000 $ 4,570,000 $ 855,000

General Obligation Bonds, Election 2002, Series B

65,000,000 - 6,160,000 58,840,000 6,860,000

Unamortized premium 1,965,547 - 78,622 1,886,925 - General Obligation Bonds, Election 2002, Series C 23,764,887 2,393,199 990,000 25,168,086 999,900 Unamortized premium 7,582,736 - 947,842 6,634,894 - 2003 Certificates of Participation Series A 3,915,000 - 505,000 3,410,000 520,000 Notes payable 819,207 - 189,707 629,500 199,750 Total Bonds and Notes Payable $108,452,377 $2,393,199 $9,706,171 $101,139,405 $9,434,650

Other Obligations

Compensated absences 2,734,382 261,934 - 2,996,316 2,040,944 Capital leases 225,720 21,213 141,366 105,567 87,106

Total Other Obligations 2960,102 283,147 141,366 3,101,883 2,128,050 Total Long-Term Obligations

$111,412,479 $2,676,346 $9,847,537 $104,241,288 $11,562,700

_______________________ Source: The District.

General Obligation Debt

Prior to delivery of the Bonds, the District’s general obligation indebtedness as of September 1, 2009 was $70,642,378, which is 0.12% of its total 2009-10 assessed valuation. All general obligation bonds issued on behalf of the District are issued on a parity with one another.

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Direct and Overlapping Debt

Following is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics, Inc. and dated September 1, 2009. The Debt Report is included for general information purposes only. The District has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith.

The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long term obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations secured by land within the District. In many cases long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency.

The first column in the table names each public agency which has outstanding debt as of the date of the report and whose territory overlaps the District in whole or in part. Column 2 shows the percentage of each overlapping agency’s assessed value located within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which is not shown in the table) produces the amount shown in column 3, which is the apportionment of each overlapping agency’s outstanding debt to taxable property in the District.


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PASADENA AREA COMMUNITY COLLEGE DISTRICT DIRECT AND OVERLAPPING BONDED INDEBTEDNESS

2008-09 Assessed Valuation: $57,970,203,216 Redevelopment Incremental Valuation: 3,791,772,357 Adjusted Assessed Valuation: $54,178,430,859 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 9/1/09 Los Angeles County Flood Control District 6.061% $ 5,133,970 Metropolitan Water District 2.839 8,330,336 Pasadena Area Community College District 100. 70,642,378 (1) Arcadia Unified School District 100. 172,419,239 La Canada Unified School District 100. 33,243,228 Pasadena Unified School District 100. 189,635,000 San Marino Unified School District 100. 43,559,808 South Pasadena Unified School District 100. 38,870,782 Temple City Unified School District 100. 19,814,750 High School and School Districts 38.996-100. 104,933,376 City of Arcadia 98.164 6,773,316 Community Facilities Districts 100. 16,220,000 County 1915 Act Bonds 100. 3,860,000 Los Angeles County Regional Park and Open Space Assessment District 5.803 14,326,156 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $727,762,339 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 5.803% $ 51,964,086 Los Angeles County Pension Obligations 5.803 13,677,141 Los Angeles County Superintendent of Schools Certificates of Participation 5.803 765,152 Pasadena Area Community College District Certificates of Participation 100. 2,355,000 South Pasadena Unified School District Certificates of Participation 100. 8,874,474 School District Certificates of Participation Various 9,591,719 City of Pasadena General Fund Obligations 100. 380,994,972 City of Pasadena Pension Obligations 100. 117,742,623 Other City General Fund Obligations Various 9,419,805 Los Angeles County Sanitation District Authorities Various 40,328,115 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $635,713,087 Less: Rosemead School District Qualified Zone Academy Bonds (supported by Guaranteed Investment Contract) 5,000,000 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $630,713,087 GROSS COMBINED TOTAL DEBT $1,363,475,426 (2) NET COMBINED TOTAL DEBT $1,358,475,426 (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease

obligations. Ratios to 2008-09 Assessed Valuation: Direct Debt ($70,642,378)...................................................................0.12% Total Direct and Overlapping Tax and Assessment Debt ......................1.26% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($72,997,378) ................................................0.13% Gross Combined Total Debt ..................................................................2.52% Net Combined Total Debt .....................................................................2.51% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05: $0 ____________________ Source: California Municipal Statistics, Inc.

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PASADENA AREA COMMUNITY COLLEGE DISTRICT

District Organization

The District is a community college district of the State of California. The District was established in 1966. The District’s boundaries include the City of Arcadia, a portion of El Monte, La Canada Flintridge, Pasadena, Rosemead, San Marino, Sierra Madre, South Pasadena, Temple City and portions of the unincorporated Los Angeles County.

The District is governed by a Board of Trustees (the “District Board”). The District Board consists of 7 members who are elected at-large to overlapping four-year terms at elections held in staggered years and one student member elected for a one-year term. The years in which the current terms for each member of the District Board expire are set forth below:

PASADENA AREA COMMUNITY COLLEGE DISTRICT BOARD OF TRUSTEES

Name Office Term Expires Dr. Jeanette Mann President November 2011 Dr. Hilary Bradbury-Huang Vice President November 2009 Dr. Consuelo Rey Castro Clerk November 2009 Mr. Geoffrey L. Baum Member November 2009 Mr. John Martin Member November 2011 Ms. Beth Wells-Miller Member November 2009 Mr. William E. Thomson Member November 2011 Mr. Brian Abadia Student Member June 2010

Unless otherwise indicated, the following financial, statistical and demographic data has been

provided by the District. Additional information concerning the District and copies of the most recent and subsequent audited financial statements of the District may be obtained by contacting: Pasadena Area Community College District, 1570 E. Colorado Boulevard – C235, Pasadena, CA 91106, Attention: Vice President, Administrative Services. A fee may be charged for copying, mailing and handling.

Key Personnel

The following is a listing of the key administrative personnel of the District:

Name Title Dr. Lisa A. Sugimoto Interim Superintendent/President Dr. Richard P. van Pelt Interim Vice President, Administrative Services Dr. Jacqueline W. Jacobs Vice President, Instruction Ms. Odessa M. Walker Director, Fiscal Services

The Superintendent/President of the District is responsible for administering the affairs of the

District in accordance with the policies of the Board. Dr. Lisa A. Sugimoto is the District’s Interim Superintendent/President.

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Brief biographies of the Interim Superintendent/President and the Interim Vice President, Administrative Services follow:

Lisa A. Sugimoto, Ed.D., Interim Superintendent/President. Dr. Lisa Sugimoto was appointed to serve as Interim President of Pasadena City College on September 16, 2009. Dr. Sugimoto previously served as Vice President of Student and Learning Services at the District and has 33 years of experience in the community college system. She started at the District in 1976 as a part-time support staff member and became a counselor in 1977. Before joining the District as Vice President, Dr. Sugimoto ran counseling, student development and student support services at Long Beach Community College. In 2005, she was elected President of the Association of California Community College Administrators, the foremost member-supported professional organization for administrators and managers of California’s 108 community college campuses. Dr. Sugimoto earned her Ed.D. from the University of California, Los Angeles, her M.B.A. from the USC School of Business, her M.S.Ed. in Counseling and Rehabilitation Counseling from USC and a B.A. in Sociology from the University of California, San Diego.

Richard P. van Pelt, Ph.D., Interim Vice President, Administrative Services. Richard P. van Pelt became Interim Vice President for Administrative Services for Pasadena City College in August, 2009. In addition to serving as Interim Vice President, Dr. van Pelt is also an instructor in the College’s Business and Computer Technology Division. Over the past nine years, Dr. van Pelt has worked on the development, planning and execution of the District’s $150 million voter-approved general obligation bonds for facilities and technology improvement projects. Additionally, he has written articles and presented seminars in many states and countries, focusing on crisis management, contingency planning, interest-based problem solving and computer application technologies. Dr. van Pelt has attended institutions of higher learning in both the United States and England and has earned several degrees, including a Bachelor of Science degree in psychology, a Master of Science degree in Business Organizational Management, a Master of Business Administration degree and a Ph.D. in Administration Management with an emphasis on Change Management.

District Employees

As of July 14, 2009, the District employed 401 full-time certificated professionals and 426 full-time classified employees and managers. In addition, the District employs 1,889 part-time faculty and staff. These employees, except management and some part-time employees, are represented by three bargaining units as noted in the following schedule:

PASADENA AREA COMMUNITY COLLEGE DISTRICT Labor Relations Organizations

The District’s collective bargaining units, the employees they represent and the contract expiration dates are listed below. There have been no strikes or work stoppages in the last five years.

Bargaining Unit Represents Contract Expiration

PCC Faculty Association (FA) All Faculty June 30, 2008

California School Employees Association (CSEA) – Chapter No. 777

Classified Employees June 30, 2009

Instructional Support Services Unit (ISSU) Classified Employees June 30, 2010

PCC (Peace Officers Association) (POA) Classified Employees June 30, 2008

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The District will be negotiating with FA, CSEA – Chapter No. 777 , ISSU and POA for the fiscal year 2009-10 contracts.

Joint Powers Authorities

The District participates in two joint ventures under joint powers agreements (the “JPAs”) for insurance purposes: the Statewide Association of Community Colleges Joint Powers Authority and the Schools Alliance for Worker’s Compensation Excess II Joint Powers Authority. The District pays an annual premium to each JPA for property liability and workers’ compensation coverage.

Under California law, the JPAs are not a component unit of the District. The JPAs have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in the District’s audited financial statements; however, fund transactions between the District and the JPAs are included in the District financial statements. Audited financial statements are available from the respective entities.

Based upon prior claims experience, the District believes it has adequate insurance coverage from the JPAs.

District Growth

The table below sets forth the enrollment for Full-Time Equivalent Students for the District for fiscal years 2004-05 through 2008-09.

PASADENA AREA COMMUNITY COLLEGE DISTRICT Full-Time Equivalent Students

Fiscal Years 2004-05 through 2008-09

Fiscal Year FTES Increase/Decrease From Prior Year

2004-05 22,107 85 2005-06 22,107 0 2006-07 22,290 183 2007-08 23,017 727 2008-09 24,028 1,011

_______________ Source: The District.

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The District has unfunded FTES of 1,380 as of the Second Period Apportionment for fiscal year 2008-09 and plans to maintain or reduce those unfunded FTES until growth allocations prove sufficient to fully fund all FTES earned. The table below sets forth the projected FTES in the District for the next five fiscal years.

PASADENA AREA COMMUNITY COLLEGE DISTRICT FTES Five-Year Projections

Fiscal Year FTES 2009-10 23,000 2010-11 23,500 2011-12 24,000 2012-13 24,400 2013-14 24,600 _________________ Source: The District.

Population

The population of the City of Pasadena, the County, the State and FTES of the District are set forth in the following table.

Population and Enrollment Figures Fiscal Years 2004-05 through 2008-09

Fiscal Year

Population City of

Pasadena(1) (2)

Population County of

Los Angeles(1) (2)

Population State of

California(1) (2) FTES at

District(3)

2004-05 145,219 10,158,409 36,676,931 22,107 2005-06 145,695 10,209,201 37,086,191 22,107 2006-07 146,051 10,243,764 37,472,074 22,290 2007-08 147,293 10,301,658 37,883,992 23,017 2008-09 150,185 10,393,185 38,292,687 24,028

__________________ Sources: (1) California State Department of Finance. (2) California Department of Finance, Demographic Research Unit estimates (as of January 1 of the respective year). (3) District’s Statistical Records – Annual Enrollment for Fiscal Year (Full-Time Equivalent Students).

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Construction and Commercial Activity

The tables below set forth the building permit valuations, trade outlets and personal income in the City of Pasadena.

CITY OF PASADENA Building Permit Valuations

2005 2006 2007 2008 2009(1)

Residential $100,501,000 $117,219,186 $125,033,287 $ 85,701,650 $13,334,888 Non-Residential 100,038,000 88,810,566 140,615,923 67,795,323 37,554,057

Total $200,539,000 $206,029,752 $265,649,210 $153,496,973 $50,888,945 New Housing Units

Single 81 53 125 39 8 Multiple 439 495 287 510 0

Total 520 548 412 549 8 _______________ (1) Data current through June 2009. Source: Construction Industry Research Board.

CITY OF PASADENA Taxable Retail Sales

(in thousands of dollars)

2004 2005 2006 2007 2008(1)

Taxable Retail Sales $2,063,395 $2,168,052 $2,225,165 $2,278,454 $1,072,753 _______________ (1) Through the second quarter of 2008. Source: Taxable Sales in California, California State Board of Equalization.


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CITY OF PASADENA

Disposable Personal Income

Disposable Income (in thousands of dollars)

Average Household Disposable Income

2004(1) (2) $3,001,706 $57,590 2005(1)(2) 2,905,153 54,740 2006(1) (2) 2,925,681 53,900 2007(1) (2) 3,006,285 54,339 2008(3) 4,061,232 46,845 2009(1) (2) 2,940,974 52,536

_______________ (1) Disposable Personal Income (“DPI”) – Sometimes referred to as “Effective Buying Income” (“EBI”) or “Consumer

Spendable Income,” the DPI is equal to current income received by individuals, unincorporated business and non-profit institutions, from all sources. It includes all received wages, salaries and commissions, including pensions, trust and welfare funds, labor, farm, non-farm, professional, rental, dividends, personal interest and transfer payments after taxes. The amounts usually deducted for income, property, and other taxes not deductible as business expenses, as well as other general government revenues, such as fines and penalties, have been subtracted.

(2) Income Per Household (Disposable Income) – The total average income earned or received by each household with direct or indirect taxes deducted.

(3) “Effective Buying Income” (“EBI”) and “Median Household Buying Income” are used by Sales and Marketing Management Survey of Buying Power. EBI is designated by Sales and Marketing Management Magazine as personal income, less personal tax and non-tax payments. Personal income is the aggregate of wages and salaries, other labor income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, personal interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local, non-tax payments (such as fines, fees, penalties)), and personal contributions for social insurance. EBI is a bulk measure of market potential. It indicates the general ability to buy and is essential in comparing, selecting and grouping markets on that basis.

Source: Editor and Publisher Market Guide for years 2004-2007 and 2009; Sales and Marketing Management Survey of Buying Power for the year 2008.


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Listed below in alphabetical order are the major employers in the City of Pasadena.

CITY OF PASADENA Largest Local Employers

AlliedSignal Kaiser Permanente Ameron International The Langham, Huntington Hotel AT&T Las Encinas Hospital Art College Center of Design Macy’s West Avery Dennison Montgomery Watson Avon Products Parsons Corporation Bank of America Pasadena City College Bolton Insurance Pasadena Hilton Cal Fed Pasadena Unified School District California Institute of Technology Sears Chicago Title Sheraton, Pasadena Christie Parker Hale Target City of Pasadena Tetra Tech, Inc. Community Bank Tokio Bank Fuller Theological Seminary United Commercial Bank HCM Claims Vons Companies Huntington Memorial Hospital Wausau Insurance idealab! Wescom Credit Union IndyMac Western Asset Management Jacobs Engineering Westin Jet Propulsion Laboratory

_______________ Source: www.CityofPasadena.net/planninganddevelopment/technology/topemploy.asp as of July 8, 2009.

FUNDING OF COMMUNITY COLLEGE DISTRICTS IN CALIFORNIA

Major Revenues

General. In 2005-06, California community college districts received, on average, approximately 54.5% of their funds from the State, 41.6% from local sources, and 3.9% from federal sources. State funds include general apportionment, categorical funds, the State lottery (which is less than 3 percent of a District’s annual budget), and mandated cost reimbursements. Local funds include property taxes, student fees and interest earnings.

For fiscal years up to and including fiscal year 2005-06, a community college district determined its revenue allocation using a program-based model. The model used different factors to establish support levels for five different expenditure categories at the community college district: (1) Instruction and Instructional Administration; (2) Instructional Services; (3) Student Services; (4) Operation and Maintenance of Plants; and (5) Institutional Support. Different standards were used in each category to determine fund requirements. The target allocation was obtained by calculating the exact cost of funding the specific standards in each category on a district by district basis. The aggregate total of the financial needs of the five categories established the amount of funding a district received. State general fund moneys, local property taxes and certain other local revenues, were allocated to the community college districts based on annual State apportionments of basic and equalization aid to community college districts for general purposes computed up to a revenue limit per unit of full time equivalent students

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(“FTES”). Such apportionments, generally speaking, amounted to the difference between a district’s revenue limit and its local property tax allocation and student enrollment fees. Revenue limit calculations were adjusted annually in accordance with a number of factors designed primarily to provide cost of living increases and to equalize revenues among all community college districts in the State.

SB 361. On September 29, 2006, the Governor signed into law Senate Bill No. 361 (“SB 361”) which reformed the formulas for allocating general-purpose apportionments to California community college districts beginning fiscal year 2006-07. SB 361 required the Board of Governors of the California Community Colleges (the “Board of Governors”) to develop criteria and standards in accordance with prescribed Statewide minimum requirements. SB 361 provides a more comprehensive form of equalization that recognizes the fixed costs of operating individual colleges and centers, improves the calculation of district-specific enrollment growth caps and funds selected noncredit courses (examples of such non-credit courses for career development and college preparation include basic skills, high school equivalency, short-term occupational training and English-as-a-second language (“ESL”)). The bill specified that, commencing with the 2006-07 fiscal year, the marginal amount of credit revenue allocated per credit FTES would not be less than $4,367, noncredit instruction would be funded at a uniform rate of $2,626 per FTES and career development and college preparation would be funded at a rate of $3,092 per FTES, each adjusted for the change in COLA provided in the annual Budget Act for subsequent years.

The major local revenue source is local property taxes that are collected from within district boundaries. Student enrollment fees from the local community college district generally account for the remainder of local revenues for the district. Property taxes and student enrollment fees are applied towards fulfilling the district’s financial needs. State aid is subject to the appropriation of funds in the State’s annual budget. Decreases in State revenues may affect appropriations made by the Legislature to the districts. The sum of the property taxes, student enrollment fees, and State aid generally comprise the district’s revenue limit.

A small part of each community college district’s budget is from local sources other than property taxes and student enrollment fees, such as interest income, donations and sales of property. Every community college district receives the same amount of lottery funds per pupil from the State. The initiative authorizing the lottery does require the funds to be used for instructional materials, and prohibits their use for capital purposes.

Budget Procedures. On or before September 15 of each calendar year, the respective board of trustees for each community college district is required under Section 58305 of the California Code of Regulations, Title V, to adopt a balanced budget. Each September, every State agency, including the Chancellor’s Office of the California Community Colleges, submits to the Department of Finance (“DOF”) proposals for changes in the State budget. These proposals are submitted in the form of Budget Change Proposals (“BCPs”), involving analyses of needs, proposed solutions and expected outcomes. Thereafter, the DOF makes recommendations to the Governor, and by January 10 a proposed State budget is presented by the Governor to the Legislature. The Governor’s Budget is then analyzed and discussed in committees, and hearings begin in the State Assembly and Senate. In May, based on the debate, analysis and changes in the economic forecasts, the Governor issues a revised budget with changes he or she supports. The law requires the Legislature to submit its approved budget by June 15, and by June 30 the Governor should announce his or her line item reductions and sign the State budget.

In response to growing concern for accountability the statewide Board of Governors and the Chancellor’s Office have, through enabling legislation (AB 2910, Chapter 1486, Statutes of 1986), established expectations for sound district fiscal management and a process for monitoring and evaluating the financial condition to ensure the financial health of California’s community college districts. In accordance with statutory and regulatory provisions, the Chancellor has been given the responsibility to

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identify districts at risk and, when necessary, the authority to intervene to bring about improvement in their financial condition. To stabilize a district’s financial condition, the Chancellor may, as a last resort, seek an appropriation for an emergency apportionment.

The monitoring and evaluation process is designed to provide early detection and amelioration that will stabilize the financial condition of the district before an emergency apportionment is necessary. This is accomplished by (1) assessing the financial condition of districts through the use of various information sources, and (2) taking appropriate and timely follow-up action to bring about improvement in a district’s financial condition, as needed. A variety of instruments and sources of information are used to provide a composite of each district’s financial condition, including quarterly financial status reports, annual financial and budget reports, attendance reports, annual district audit reports, district input and other financial records. In assessing each district’s financial condition, the Chancellor will pay special attention to each district’s general fund balance, spending pattern, and FTES patterns. Those districts with greater financial difficulty will receive follow-up visits from the Chancellor’s Office where financial solutions to the district’s problems will be addressed and implemented.

Ad Valorem Property Taxes

Taxes are levied for each fiscal year on taxable real and personal property which is situated in the County as of the preceding January 1. However, upon a change in ownership of property or completion of new construction, State law permits an accelerated recognition and taxation of increases in real property assessed valuation (known as a “floating lien date”). For assessment and collection purposes, property is classified either as “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State assessed property secured by a lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.”

The County levies a 1% property tax on behalf of all taxing agencies in the County. The taxes collected are allocated on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of ownership, inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special and school districts. In addition, the County levies and collects additional approved property taxes and assessments on behalf of any taxing agency within the County.

Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the Treasurer.

Property taxes on the unsecured roll are currently due as of the January 1 lien date prior to the commencement of a fiscal year and become delinquent, if unpaid, on August 31. A ten percent penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of one and one-half percent per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder’s office in

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order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements, bank accounts or possessory interests belonging or assessed to the taxpayer.

The County levies and collects all property taxes for property falling within its taxing boundaries.

Certain counties in the State operate under a statutory program entitled Alternate Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”). Under the Teeter Plan local taxing entities receive 100% of their tax levies net of delinquencies, but do not receive interest or penalties on delinquent taxes collected by the county. The County of Los Angeles has not adopted the Teeter Plan, and consequently the Teeter Plan is not available to local taxing entities within the County, such as the District. The District’s receipt of property taxes is therefore subject to delinquencies. See the table entitled “Secured Tax Charges and Delinquencies” under the heading “DISTRICT FINANCIAL INFORMATION” herein.

Proposition 98

General. In 1988, California voters approved Proposition 98, an initiative that amended Article XVI of the State Constitution and provided specific procedures to determine a minimum guarantee for annual grade kindergarten to 14 (“K-14”) funding. The constitutional provision links the K-14 funding formulas to growth factors that are also used to compute the State appropriations limit. Proposition 111 (Senate Constitutional Amendment 1), adopted in June 1990, among other things, revised certain funding provisions of Proposition 98 relating to the treatment of revenues in excess of the State spending limit and added a third funding “test” to calculate the annual funding guarantee. This third calculation is operative in years in which general fund tax revenue growth is weak. The amendment also specified that under Test 2 (see below), the annual cost of living adjustment (“COLA”) for the minimum guarantee would be the change in California’s per-capita personal income, which is the same COLA used to make annual adjustments to the State appropriations limit (Article XIIIB).

Calculating Minimum Funding Guarantee. There are currently three tests which determine the minimum level of K-14 funding. Test 1 guarantees that K-14 education will receive at least the same funding share of the State general fund budget it received in 1986-87. Initially, that share was just over 40 percent.

Under implementing legislation (AB 198 and SB 98 of 1989), each segment of public education (K-12 districts, community college districts, and direct elementary and secondary level instructional services provided by the State of California) has separately calculated amounts under the Proposition 98 tests. The base year for the separate calculations is 1989-90. Each year, each segment is entitled to the greater of the amounts separately computed for each under Test 1 or 2. Should the calculated amount Proposition 98 guarantee (K-14 aggregated) be less than the sum of the separate calculations, then the Proposition 98 guarantee amount shall be prorated to the three segments in proportion to the amount calculated for each. This statutory split has been suspended in every year beginning with 1992-93. In those years, community colleges received less than that required from the statutory split.

Test 2 provides that K-14 education will receive as a minimum its prior-year total funding (including State general fund and local revenues) adjusted for enrollment growth (“ADA”) and per-capita personal income COLA.

A third formula, established pursuant to Proposition 111 as “Test 3,” provides an alternative calculation of the funding base in years in which State per-capita General Fund revenues grow more slowly than per-capita personal income. When this condition exists, K-14 minimum funding is determined based on the prior-year funding level, adjusted for changes in enrollment and COLA where

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the COLA is measured by the annual increase in per-capita general fund revenues, instead of the higher per-capita personal income factor. The total allocation, however, is increased by an amount equal to one-half of one percent of the prior-year funding level as a funding supplement.

In order to make up for the lower funding level under Test 3, in subsequent years K-14 education receives a maintenance allowance equal to the difference between what should have been provided if the revenue conditions had not been weak and what was actually received under the Test 3 formula. This maintenance allowance is paid in subsequent years when the growth in per-capita State tax revenue outpaces the growth in per-capita personal income.

The enabling legislation to Proposition 111, Chapter 60, Statutes of 1990 (SB 88, Garamendi), further provides that K-14 education shall receive a supplemental appropriation in a Test 3 year if the annual growth rate in non-Proposition 98 per-capita appropriations exceeds the annual growth rate in per-pupil total spending.

State Assistance

The principal funding formulas and revenue sources for school and community college districts are derived from the budget of the State of California. The following information concerning the State of California’s budgets has been obtained from publicly available information which the District believes to be reliable; however, the State has not entered into any contractual commitment with the District, the County, the Underwriter, Bond Counsel nor the owners of the Bonds to provide State budget information to the District or the owners of the Bonds. Although they believe the State sources of information listed above are reliable, neither the District, the County, Bond Counsel nor the Underwriter assume any responsibility for the accuracy of the State budget information set forth or referred to herein or incorporated by reference herein. Additional information regarding State budgets is available at various State-maintained websites including www.dof.ca.gov. This website is not incorporated herein by reference and neither the District nor the Underwriter makes any representation as to the accuracy of the information provided therein.

Budget Reform and 2009 Budget Act. On November 6, 2008, the Governor called a special session of the State Legislature and announced a plan to address a projected revenue shortfall for fiscal year 2008-09, estimated as of December 10, 2008 to be approximately $14.8 billion, as well as substantial shortfalls in future fiscal years. This legislative special session ended without a resolution. Coinciding with the swearing-in of the new Legislature on December 1, 2008, the Governor declared a fiscal emergency for the State, allowing him to call several Proposition 58 legislative special sessions to address the shortfall.

On February 19, 2009, the State Legislature passed a budget-balancing reform signed by Governor Schwarzenegger on February 20, 2009 (the “2009 Budget Act”), intended to close the State’s projected $41.6 billion deficit through June of 2010. The 2009 Budget Act enacted nearly five months ahead of the constitutional deadline, along with a number of accompanying measures, was designed to reduce the deficit forecasts and to achieve budget solutions for both the 2008-09 and 2009-10 fiscal years. The Department of Finance reported that California’s chronic and cyclic budget crises are largely attributable to the use of higher than normal revenues to create permanent, ongoing spending commitments and tax cuts. The 2009 Budget Act and accompanying legislation are designed to end this cycle by preventing government from spending revenue above the long-term trend line and by creating a substantial Rainy Day fund of up to 12.5 percent of General Fund revenue for use only during times when revenue is insufficient to fund a moderate, population-and-inflation-based growth in spending. Certain of these reforms, to be effective, required voter approval at the May 19, 2009 special election. See “May Revision to 2009 Budget Act” below.

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Features of the 2009 Budget Act and accompanying legislation as they pertain to education funding and programs include the following:

• Proposition 98 Reduction. An expenditure reduction of $8.4 billion in Proposition 98 funding included in the 2009 Budget Act reflects the reduction in the Proposition 98 minimum guarantee that results from the severe decline in General Fund revenues. In order to protect classroom funding during the financial downturn, the 2009 Budget Act includes $3.24 billion of deferrals from the 2008-09 fiscal year to July of the 2009-10 fiscal year from school district revenue limits, K-3 class size reduction and community college apportionment payments.

• Allocation of Proposition 98 Funding. The 2009 Budget Act contains reductions and changes in the way the total Proposition 98 funding is allocated to various programs: (a) eliminating the $286.9 million cost-of-living adjustment (COLA) included in the 2008 Budget Act; (b) reducing $943.8 million to school district and county office of education revenue limits in 2008-09, and makes an additional reduction to revenue limits of $267.5 million in 2009-10; and (c) reducing $1,211.3 million from most all K-12 categorical programs, which consists of a reduction of $943.8 million in 2008-09, and an additional reduction of $267.5 million in 2009-10. In order to increase school districts’ flexibility to accommodate these reductions, the 2009 Budget Act provides 100-percent flexibility for 42 of the 61 categorical programs.

• Long-term Funding for Education. The severe decline in the State’s General Fund revenues has impacted K-14 funding by dramatically reducing the Proposition 98 guarantee. In the long term, given the manner in which Proposition 98 is tied to General Fund revenues, the guarantee would return to historical levels. The 2009 Budget Act recognizes the need to plan for this transition over a number of years by scheduling increases in K-14 funding as part of the budget reform package. This mechanism uses one-half of the annual 3-percent General Fund transfer into the “Rainy Day” fund to provide education over a period of several years.

• Educational Categorical Flexibility. To assist school districts manage their budgets during these economic times, the 2009 Budget Act and accompanying legislation provides relief in connection with 42 categorical programs. This flexibility will be provided through fiscal year 2012-13, allowing school districts to shift funds to meet their highest priority needs. In addition, 2009 Budget Act and accompanying legislation proposes to significantly reduce the penalties associated with K-3 Class Size Reduction through 2011-12, allowing districts to retain up to 70 percent of funding if pupil-to-teacher ratios increase more than 25 to 1, which will provide greater local flexibility. This proposal will not include programs that are protected under federal law or that were approved though a voter initiative. The most notable programs in this category include Special Education, Child Nutrition, Child Care and the After School Education and Safety Program.

• Higher Education. The $793.8 million reduction in higher education funding reflects (a) an ongoing reduction beginning in the current year to achieve the 10-percent reduction initially proposed in the Governor’s Proposed 2008-09 Budget ($132.2 million in both years), (b) elimination of the Higher Education Compact-related increases scheduled for the budget year ($427.6 million), (c) elimination of the anticipated budget year increase to restart state contributions to University of California’s retirement system ($95.7 million) including legislative elimination of the proposed $20 million partial year start-up

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proposed by the Administration, and (d) legislative elimination of proposed new cohorts of nursing and medical enrollments for the budget year ($6.1 million). The 2009 Budget Act includes unallocated reductions, through a veto, of $255 million each from the University of California and California State University. The additional reductions will be offset by funding intended for restoration from the State Fiscal Stabilization Fund under the Federal American Recovery and Reinvestment Act of 2009.

• Federal Stimulus Funds. On April 19, 2009, $3.1 billion in federal economic stimulus funds were released by the Federal Government for California education purposes, including more than $0.5 billion for California community colleges and universities, and $2.6 billion slated for K-12 education.

Additional reductions featured in the 2009 Budget Act and accompanying legislation in other programs include reductions in Medi-Cal and Supplemental Security Income/State Supplementary Payment spending, California Work Opportunities and Responsibility to Kids programs, certain other mental health and health and human services programs, as well as reductions in State employee compensation. Legislation accompanying the 2009 Budget Act includes measures designed to help stimulate the State’s economy through changes in the manner in which corporate taxes are calculated, a temporary new job creation credit for small businesses under personal income and corporate tax laws, a trailer bill creating a home buyers’ credit against personal income tax liability, and measures to authorize state and local transportation agencies to seek private sector financing to build transportation projects in addition to those financed with public funds.

LAO Overview of 2009 Budget Act. The LAO’s Overview of the 2009 Budget Act (the “2009 LAO Overview”) is being included in a series of reports as part of the LAO’s 2009-10 Budget Analysis Series, a portion of which was released on March 13, 2009. The 2009 LAO Overview confirms that the 2009 Budget Act includes spending reductions, temporary tax increases, the use of federal stimulus funds, and borrowing from future lottery profits, almost $6 billion of which depended on voter approval at the May 19, 2009 special election. It also recognizes that the State’s economic outlook has continued to deteriorate. Consequently, the LAO projects that the State Legislature and the Governor will need to agree to additional budgetary solutions to rebalance the 2009-10 budget. The 2009 LAO Overview highlights the major components of the 2009 Budget Act, then lays out the LAO’s new long-term forecast of the State’s revenues and spending, and includes considerations for the Legislature as it moves forward. A complete copy of the LAO Overview is posted by the Office of the Legislative Analyst at www.lao.ca.gov. This website is not incorporated herein by reference and neither the District nor the Underwriter makes any representation as to the accuracy of the information provided therein.

As it relates to CCCs, the 2009 LAO Overview reports that the 2009 Budget Act allocates approximately $6.4 billion to CCC funding and notes that the 2009 Budget Act does not include any increase in fees for CCC students. CCCs would receive an augmentation specifically for enrollment growth in 2009-10, raising its funded enrollment based upon a specified level of full-time equivalent students, however, preliminary estimates suggest that CCCs have already achieved this level of enrollment in the current fiscal year. The LAO recommends, in particular, that the State commence raising CCC fees in light of recent changes to federal tax credits which would allow the State to tap hundreds of millions of new federal dollars without a significant financial effect on students.

May Revision to the 2009 Budget Act. On May 14, 2009, the office of the Governor released its May Revision to the 2009 Budget Act (the “May Revision”). The May Revision proposes additional solutions to address growing revenue losses and expenditure increases experienced by the State since the passage of the 2009 Budget Act. The May Revision projects that, absent corrective action, State expenditures will exceed revenues by approximately $15.4 billion through the current fiscal year and

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fiscal year 2009-10. To address this projected deficit, the May Revision proposes $2 billion in expenditure reductions and revenue increases for fiscal year 2008-09 and $12.5 billion of such solutions for fiscal year 2009-10, coupled with a $889 million reduction to the $2.1 billion reserve approved as part of the 2009 Budget Act. With respect to K-12 education funding, the proposed solutions include reductions in Proposition 98 funding of $1 billion fiscal year 2008-09 and $2 billion in fiscal year 2009-10. The May Revision also acknowledges that the 2009 Budget Act included approximately $6 billion of solutions subject to voter approval at the May 19, 2009 special election, including the sale of future State Lottery revenues and diversion of tax revenues to general fund purposes that were previously dedicated by voter initiative to childhood development and mental health services. However, on May 19, 2009, five of the six proposed Statewide ballot measures failed to pass. Failure to secure voter approval for these measures, increases the projected deficit by the amount of approximately $6 billion. Accordingly, in response to worsening revenue projections and the May 19, 2009 special election results, the May Revision proposes the following budgetary measures, among numerous others:

Revenues: the acceleration of state income tax withholding ($1.7 billion) and personal and corporation estimated tax payments ($610 million) and sale of a portion of the State Compensation Insurance Fund ($1.0 billion).

Expenditures: a cut and deferral of K-14 education funding (Proposition 98) by $1.6 billion in 2008-09 and by $4.6 billion in 2009-10 and a reduction of $1.02 billion from 2008-09 California State University and University of California funding.

Borrowing: diversion of $1.98 billion in local property tax revenues to the State, to be repaid within three years under Proposition 1A of 2004.

Additional changes include spending cuts, revenue enhancements, and shifting revenues and expenditures between programs. For further details regarding the May Revision, please see the summary thereof published by the California State Department of Finance (the “May Revision Report”). The May Revision Report may be found at www.dof.ca.gov. This website is not incorporated herein by reference and neither the District nor the Underwriter makes any representation as to the accuracy of the information provided therein.

LAO Overview of May Revision. The LAO points out that the May Revision proposals include major spending reductions and efforts for long-term State efficiencies and savings and that by acting promptly, rejecting the Governor’s revenue anticipation warrants (“RAW”) proposal, and reducing reliance on certain of the Governor’s proposals, the State Legislature can return the budget to balance, prevent another State cash crunch, and preserve core funding for what it deems to be the State’s long-term priorities. To accomplish these goals, the LAO believes that the State Legislature must cut lower-priority programs substantially or eliminate them and, to address significant budget deficits forecast in future years, the State Legislature also needs to begin work on measures that further improve the efficiency of State services in future fiscal years. With regard to K-14 education, the following features are included in the May Revision:

Minimum Guarantee for K-14 Education. From levels assumed in February, the administration estimates that the Proposition 98 minimum guarantee has fallen by $1.6 billion in 2008-09 and $3.8 billion in 2009-10. The Governor’s May Revision reduces Proposition 98 funding in both years to these lower levels.

Additional Cuts to K-14 Education. The largest current-year proposal in the May Revision is a $1.3 billion decrease in general purpose funding for K-12 school districts, a revenue limit reduction of 3.7 percent (for a total cut of 6.4 percent when combined with earlier 2008-09 reductions). The

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May Revision provides for revenue limits to be reduced an additional $387 million in 2009-10 (for a total cut of 8.1 percent when combined with earlier reductions). For CCC, the May Revision reduces support for categorical programs by $85 million in 2008-09 and an additional $249 million in 2009-10, equating to a cumulative reduction of almost 50 percent. In addition, for 2009-10, the administration proposes to reduce enrollment growth from 3 percent to 1 percent ($127 million savings) and lower the funding rate for recreational courses ($120 million savings).

Additional Deferrals. The May Revision includes two additional K-14 deferrals. Under the administration’s plan, $115 million in 2008-09 community college apportionment payments would be deferred until 2009-10 and $1.7 billion in 2009-10 K-12 revenue limits payments would be deferred until 2010-11. These deferrals represent approximately one-third of the administration’s proposed May Revision K-14 solutions.

Additional Flexibility. To assist school districts and CCCs respond to the 2009 Budget Act, the May Revision includes two major new flexibility proposals. For K-12 school districts, the administration proposes changing state law to provide school districts with the option of reducing instructional time the equivalent of up to 7.5 days a year for the next three years. For CCCs, the administration proposes to consolidate the vast majority of the existing 22 CCC categorical programs into a block grant (similar to the “flex item” created for K-12 school districts in the February package). Under the block grant approach, community colleges no longer would need to adhere to underlying program requirements. They would have discretion to shift funding among existing categorical programs or away from these programs to other priorities.

Federal Stimulus Funding. The May Revision reduces K-12 education by $2.8 billion and CCC by $820 million over the 2008-09 and 2009-10 period. These program reductions would be mitigated by the federal economic stimulus funding available to the State. For K-12 education, the State will receive approximately $6.3 billion in federal stimulus funding over this period. As a result, compared to the February funding level, K-12 funding, on average, would increase by about $600 per pupil. Compared to the earlier September 2008-09 Budget Act level, however, per pupil K-12 funding would fall by about $250, or roughly 3 percent. The impact on a particular district would depend on the amount of federal stimulus funding it receives. As some stimulus funding (such as Title I funding) is not distributed to every district, programmatic effects will vary across districts. Under the May Revision, CCCs would also receive a small amount of federal stimulus funding to partially mitigate proposed cuts.

Community College Fees. The LAO notes that the Federal government recently expanded the tax credits available to CCC students and that by increasing CCC fees, the State could take advantage of this federal aid and mitigate hundreds of millions of dollars of the Governor’s proposed reductions without substantially affecting most students and their families.

LAO Recommendations. In connection with the Proposition 98 proposal set forth in the May Revision, the LAO recommends the State Legislature achieve the same level of General Fund savings as the May Revision by reducing spending to the minimum guarantee. Yet, to achieve these savings, the LAO recommends making more targeted reductions based on the merits of individual programs and avoiding additional deferrals. In addition, the LAO recommends the State Legislature work with the administration to explore additional flexibility options. The LAO believes the May Revision misses several opportunities to eliminate existing programs that are duplicative, inefficient, ineffective, or over-budgeted, and that approximately ten existing categorical programs fall into this category (as well as many education mandates). For example, the LAO recommends the State Legislature eliminate a childcare extended day and the California Technology Assistance Project, among others. The LAO points out that the May Revision includes $1.8 billion in new K-14 deferrals which, together with already existing K-14 deferrals, provides that the State would be deferring $6.3 billion in K-14 payments from

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2009-10 into 2010-11. Accordingly, the LAO suggests that the administration is expecting school districts to run a program in 2009-10 that the State cannot afford and that another sizeable deferral could make many districts, especially small districts with small cash cushions, more susceptible to becoming insolvent. Moreover, the LAO advises against planning for deferrals even before a fiscal year has begun.

While the LAO believes that the Governor’s estimate of the budget problem that now needs to be addressed, namely $21.3 billion, is reasonable, the LAO’s updated estimates of General Fund revenues and expenditures differ somewhat from the administration’s, indicating that the problem may be larger by about $3 billion. In March 2009, the LAO projected that the State faced huge operating shortfalls in future years even after the adoption of the 2009 Budget Act. The LAO now estimates that the May Revision proposals would leave the General Fund with an imbalance between resources and expenditures of greater than $15 billion in 2010-11, with the annual shortfall rising even more in the subsequent three fiscal years. A complete copy of the LAO overview of the May Revision is posted by the Office of the Legislative Analyst at www.lao.ca.gov. This website is not incorporated herein by reference and neither the District nor the Underwriter makes any representation as to the accuracy of the information provided therein.

Revised 2009-10 Budget. On July 29, 2009, Governor Schwarzenegger signed a package of bills (the “Revised 2009-10 Budget”) that revised the 2009 Budget Act. The 2009 Budget Act included $36 billion in budgetary measures at a time when the General Fund budget gap was estimated to be $42 billion. The Revised 2009-10 Budget includes an additional $24 billion to address the further deterioration of the State’s fiscal situation as identified in the May Revision. The $60 billion Revised 2009-10 Budget addresses the largest budget gap faced by the State, both in dollar amount and in the percent of General Fund revenues it represents. The largest contributor to the budget gap is the reduction in the baseline revenue forecast for fiscal years 2008-09 and 2009-10. This reduction is due in large part to the economic recession. In May 2008, the Department of Finance forecasted the output of the State’s economy (as measured by personal income) to be $1.589 trillion in 2008, $1.655 trillion in 2009 and $1.739 trillion in 2010.

The Revised 2009-10 Budget imposes deep cuts to CCCs that will reduce CCC spending by over $680 million from the amount approved in February, and is expected to reduce enrollment by approximately 250,000 students. General funding for CCCs, which is allocated on a per-student basis, will be reduced by a total of $235,600,000. Of this, $120 million is a specific reduction approved by the State Legislature and the other $115.6 million is due to anticipated shortfalls in general revenue (apportionment-$41 million), and overestimates in property taxes ($21.2 million) and student fees ($53.4 million). The reduction in general funding will lead to a “workload reduction” that will match funded enrollment with available funding, an adjustment expected to reduce funded enrollment in districts by 2.5-3.5%. This is designed to keep per-student funding in line with the statutorily prescribed funding levels and avoid a permanent erosion of quality. Major components of the Revised 2009-10 Budget affecting CCCs include the following:

Proposition 98 Impacts. Two significant revenue sources for CCCs sunset in January 2011: (i) the personal income tax increase and (ii) suspension of the dependent credit. As a consequence of these reductions, Proposition 98 funding is expected to be based on Test 3, or a combination of the change in K-12 average daily attendance (a largely flat number) and the change in per capita General Fund (expected to drop barring an extension of the tax increases). With the sunset of the Federal stimulus funds and a decline in the State's minimum funding guarantee, it is expected that during fiscal year 2010-11, CCCs will face additional cuts.

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Student Enrollment Fees. Effective Fall 2009, CCC student enrollment fees will be $26 per credit unit and CCCs will be required to collect fees for students that have already registered. Any revenue not collected will be subtracted from the CCC system's apportionment.

Categorical Funding. The Revised 2009-10 Budget provides deep reductions to categorical programs, and provides local districts significant latitude to accommodate the cuts. Categorical programs fall into two separate groups--protected and unprotected. The following programs have been cut 32%, with the possibility of up to one-half of the cut being restored with federal funds: Basic Skills Initiative; Disabled Students Programs and Services; Extended Opportunity Programs and Services; Cooperative Agencies Resources for Education; Foster Care Education (25% cut); Nursing Support; Student Financial Aid Administration (24% cut); and Telecommunications and Technology programs. The following “unprotected” categorical programs were mostly cut by 62%, with the possibility of up to one half of the cut being restored with federal funds: Apprenticeship Programs; Campus Childcare Tax Bailout; Career-Technical Education (36% cut); Economic Development; Equal Employment Opportunity; Matriculation; Part-time Faculty Compensation; Part-time Faculty Health Insurance; Physical Plant and Instructional Support (100% cut); and Transfer Education and Articulation. Following a public hearing and a vote of the governing board of a CCC, the funding for these “unprotected” programs can be transferred to any other categorical purpose listed in either the protected or unprotected items (but not general fund). After such a vote, all statutory and regulatory mandates are waived. Funds for these programs will be distributed based on the proportion of the statewide allocations for these items in fiscal year 2008-09.

Federal Stabilization Funds. The Revised 2009-10 Budget officially relies on $130 million in funds received under the American Recovery and Reinvestment Act of 2009. However, the actual amount that CCCs will receive is based on the proportion of cuts received by CCCs relative to UC, CSU and K-12 schools, and the total amount of money provided by the federal government. Many analysts believe CCC will receive between $60-90 million in federal stabilization funds. To the extent these one-time revenues are not provided to CCCs, the offset to the categorical cuts will not be provided.

Proposition 1A. Proposition 1A (“Proposition 1A”), proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS – Proposition 1A” herein.

Final State Budgets

Under State law, the State Legislature is required to adopt its budget by June 15 of each year for the upcoming fiscal year, with approval by the Governor to occur on June 30. The State Legislature failed to pass a State budget for fiscal year 2008-09 until September 23, 2008. Accordingly, many State payments were held until the 2008-09 State Budget was adopted, including those scheduled to be made to school and community college districts under Proposition 98 and receipt of State categorical funds by the District was delayed until the State budget was adopted for the 2008-09 fiscal year. As described herein, as of July 1, 2009, the State Legislature failed to pass amendments to the adopted State Budget for 2009-10, which are necessary to correct a projected shortfall of approximately $24 billion. The events leading to the inability of the State Legislature to pass a budget in a timely fashion are not unique, and the District cannot predict what circumstances may cause a similar failure in future years. In each year where the State budget lags adoption of the District’s budget, it will be necessary for the District’s staff to review the consequences of the changes, if any, at the State level from the proposals in the May Revision for that year, and determine whether the District’s budget will have to be revised.

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The State has in past years experienced budgetary difficulties and has balanced its budget by requiring local political subdivisions to fund certain costs theretofore borne by the State. No prediction can be made as to whether the State will take further measures to resolve its current projected budget deficit for the 2008-09 fiscal year or the 2009-10 fiscal year which would, in turn, adversely affect the District. Further State actions taken to address its budgetary difficulties could have the effect of reducing the District’s support indirectly, and the District is unable to predict the nature, extent or effect of such reductions.

A complete copy of the Revised 2009-10 Budget is posted at www.ebudget.ca.gov. This website is not incorporated herein by reference and neither the District nor the Underwriter makes any representation as to the accuracy of the information provided therein. In addition, it is impossible for the District to predict what further actions might be taken by the State Legislature and the Governor to address the State’s very severe budget challenges or to determine the exact impact the current budget or any such actions will have on the District or on State revenues available for the District’s purposes.

Supplemental Information Concerning Litigation Against the State of California

In June 1998, a complaint was filed in Los Angeles County Superior Court in the case of White v. Davis challenging the authority of the State Controller to make payments in the absence of a final, approved State Budget. The Superior Court judge issued a preliminary injunction preventing the State Controller from making payments including those made pursuant to continuing appropriations prior to the enactment of the State’s annual budget. As permitted by the State Constitution, the Legislature immediately enacted and the Governor signed an emergency appropriations bill that allowed continued payment of various State obligations, including debt service, and the injunction was stayed by the California Court of Appeal, pending its decision. On May 29, 2002, the California Court of Appeal issued its opinion, upholding the Controller’s authority to make payments pursuant to continuous appropriations in the absence of a State budget. The California Supreme Court granted the Controller’s Petition for Review on a procedural issue unrelated to continuous appropriations and on the substantive question of state employee salaries during a budget impasse, and also stayed the trial court’s injunction.

On May 1, 2003, the California Supreme Court issued its opinion upholding the Controller’s authority to make payments essential to State services, including when payment is authorized by certain self-executing provisions of the California Constitution (which includes Proposition 98 payments of that portion of state excess revenues transferred to the State School Fund for the support of school and community colleges under article XVI, section 8.5 of the California Constitution), in the absence of a State Budget. The Court also remanded the preliminary injunction issue to the Court of Appeal with instructions to set aside the preliminary injunction in its entirety.

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

Article XIIIA of the California Constitution

Article XIIIA of the California Constitution limits the amount of any ad valorem tax on real property, to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978 and on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters on such indebtedness. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change

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in ownership have occurred after the 1975 assessment.” The full cash value may be increased at a rate not to exceed two percent per year to account for inflation.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in other minor or technical ways.

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the county and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years.

All taxable property is shown at full market value on the tax rolls, with tax rates expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all general tax rates reflect the $1 per $100 of taxable value.

Article XIIIB of the California Constitution

Under Article XIIIB of the California State Constitution state and local government entities have an annual “appropriations limit” and are not permitted to spend certain moneys which are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriations of moneys which are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

Unitary Property

AB 454 (Chapter 921, Statutes of 1986) provides that revenues derived from most utility property assessed by the State Board of Equalization (“Unitary Property”), commencing with the 1988-89 fiscal year, will be allocated as follows: (1) each jurisdiction will receive up to 102% of its prior year State-assessed revenue; and (2) if county-wide revenues generated from Unitary Property are less than the previous year’s revenues or greater than 102% of the previous year’s revenues, each jurisdiction will share the burden of the shortfall or excess revenues by a specified formula. This provision applies to all Unitary Property except railroads, whose valuation will continue to be allocated to individual tax rate areas.

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The provisions of AB 454 do not constitute an elimination of the assessment of any State-assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be shared by all jurisdictions in a county.

California Lottery

In the November 1984 general election, the voters of the State approved a Constitutional Amendment establishing a California State Lottery (the “State Lottery”), the net revenues (revenues less expenses and prizes) of which shall be used to supplement other moneys allocated to public education. The legislation further requires that the funds shall be used for the education of pupils and students and cannot be used for the acquisition of real property, the construction of facilities or the financing of research.

Allocation of State Lottery net revenues is based upon the average daily attendance or full-time equivalent students at each school and community college district; however, the exact allocation formula may vary from year to year. At this time, the amount of additional revenues that may be generated by the State Lottery in any given year cannot be predicted.

Proposition 46

On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XIIIA. Under this amendment to Article XIIIA, local governments and school and community college districts may increase the property tax rate above 1% for the period necessary to retire new, general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property.

Proposition 39

On November 7, 2000, California voters approved Proposition 39, called the “Smaller Classes, Safer Schools and Financial Accountability Act” (the “Smaller Classes Act”) which amends Section 1 of Article XIIIA, Section 18 of Article XVI of the California Constitution and Section 47614 of the California Education Code and allows an alternative means of seeking voter approval for bonded indebtedness by 55 percent of the vote, rather than the two-thirds majority required under Section 18 of Article XVI of the Constitution. The 55 percent voter requirement applies only if the bond measure submitted to the voters includes, among other items: (1) a restriction that the proceeds of the bonds may be used for “the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities,” (2) a list of projects to be funded and a certification that the school district board has evaluated “safety, class size reduction, and information technology needs in developing that list” and (3) that annual, independent performance and financial audits will be conducted regarding the expenditure and use of the bond proceeds.

Section 1(b)(3) of Article XIIIA has been added to exempt the one percent ad valorem tax limitation that Section 1(a) of Article XIIIA of the Constitution levies, to pay bonds approved by 55 percent of the voters, subject to the restrictions explained above.

The Legislature enacted AB 1908, Chapter 44, which became effective upon passage of Proposition 39 and amends various sections of the Education Code. Under amendments to Section 15268 and 15270 of the Education Code, the following limits on ad valorem taxes apply in any single election:

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(1) for a school district, indebtedness shall not exceed $30 per $100,000 of taxable property, (2) for a unified school district, indebtedness shall not exceed $60 per $100,000 of taxable property, and (3) for a community college district, indebtedness shall not exceed $25 per $100,000 of taxable property. Finally, AB 1908 requires that a citizens’ oversight committee must be appointed who will review the use of the bond funds and inform the public about their proper usage.

Article XIIIC and XIIID of the California Constitution

On November 5, 1996, an initiative to amend the California Constitution known as the “Right to Vote on Taxes Act” (“Proposition 218”) was approved by a majority of California voters. Proposition 218 added Articles XIIIC and XIIID to the State Constitution and requires majority voter approval for the imposition, extension or increase of general taxes and 2/3 voter approval for the imposition, extension or increase of special taxes by a local government, which is defined in Proposition 218 to include counties. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995, and prior to November 6, 1996 shall continue to be imposed only if approved by a majority vote in an election held within two years following November 6, 1996. All local taxes and benefit assessments which may be imposed by public agencies will be defined as “general taxes” (defined as those used for general governmental purposes) or “special taxes” (defined as taxes for a specific purpose even if the revenues flow through the local government’s general fund) both of which would require a popular vote. New general taxes require a majority vote and new special taxes require a two-thirds vote. Proposition 218 also extends the initiative power to reducing or repealing local taxes, assessments, fees and charges, regardless of the date such taxes, assessments or fees or charges were imposed, and lowers the number of signatures necessary for the process. In addition, Proposition 218 limits the application of assessments, fees and charges and requires them to be submitted to property owners for approval or rejection, after notice and public hearing.

The District has no power to impose taxes except property taxes associated with a general obligation bond election, following approval by 55% or 2/3 of the District’s voters, depending upon the Article of the Constitution under which it is passed. Under previous law, the District could apply provisions of the Landscape and Lighting Act of 1972 to create an assessment district for specified purposes, based on the absence of a majority protest. Proposition 218 significantly reduces the ability of the District to create such special assessment districts. Any assessments, fees or charges levied or imposed by any assessment district created by the District will become subject to the election requirements of Proposition 218 as described above, a more elaborate notice and balloting process and other requirements.

Proposition 218 also expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed, and reduces the number of signatures required for the initiative process. This extension of the initiative power to some extent constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v. Brown, which upheld an initiative that repealed a local tax and held that the State constitution does not preclude the repeal, including the prospective repeal, of a tax ordinance by an initiative, as contrasted with the State constitutional prohibition on referendum powers regarding statutes and. ordinances which impose a tax. Generally, the initiative process enables California voters to enact legislation upon obtaining requisite voter approval at a general election. Proposition 218 extends the authority stated in Rossi v. Brown by expanding the initiative power to include reducing or repealing assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6,1996 and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. Such

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legal authority could include the limitations imposed on the impairment of contracts under the contract clause of the United States Constitution.

Proposition 218 has no effect upon the District’s ability to pursue approval of a general obligation bond issue or a Mello-Roos Community Facilities District bond issue in the future, both of which are already subject to a 2/3 vote, although certain procedures and burdens of proof may be altered slightly. The District is unable to predict the nature of any future challenges to Proposition 218 or the extent to which, if any, Proposition 218 may be held to be unconstitutional.

Proposition 1A

Proposition 1A, proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the State Legislature. Proposition 1A provides, however, that beginning in fiscal year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses of the State Legislature and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the Vehicle License Fee rate from 0.65%, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, schools or community colleges, excepting mandates relating to employee rights, in any year that the State does not fully reimburse local governments for their costs of compliance with such mandates.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC, Article XIIID and Propositions 98, 46 and 39 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time, other initiative measures could be adopted, further affecting the District’s revenues or their ability to expend revenues.

THE LOS ANGELES COUNTY POOLED SURPLUS INVESTMENTS

The following information concerning the Los Angeles County Pooled Surplus Investments Fund has been provided by the Treasurer and has not been confirmed or verified by the District. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof or that the information contained or incorporated hereby by reference is correct as of any time subsequent to its date.

The Treasurer and Tax Collector (the “Treasurer”) of Los Angeles County has the delegated authority to invest funds on deposit in the County Treasury (the “Treasury Pool”). As of August 31, 2009, investments in the Treasury Pool were held for local agencies including school districts, community college districts, special districts and discretionary depositors such as cities and independent districts in the following amounts:

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Local Agency Invested Funds (in billions)

County of Los Angeles and Special Districts $ 7.020 Schools and Community Colleges 10.390 Independent Public Agencies 2.244 Total $19.654

Of these entities, the involuntary participants accounted for approximately 88.58%, and all

discretionary participants accounted for 11.42% of the total Treasury Pool.

Decisions on the investment of funds in the Treasury Pool are made by the County Investment Officer in accordance with established policy, with certain transactions requiring the Treasurer’s prior approval. In Los Angeles County, investment decisions are governed by Chapter 4 (commencing with Section 53600) of Part 1 of Division 2 of Title 5 of the California Government Code, which governs legal investments by local agencies in the State of California, and by a more restrictive Investment Policy (the “Investment Policy”) developed by the Treasurer and adopted by the Los Angeles County Board of Supervisors on an annual basis. The Investment Policy adopted on March 31, 2009, reaffirmed the following criteria and order of priority for selecting investments:

1. Safety of Principal 2. Liquidity 3. Return on Investment

The Treasurer prepares a monthly Report of Investments (the “Investment Report”) summarizing the status of the Treasury Pool, including the current market value of all investments. This report is submitted monthly to the Board of Supervisors. According to the Investment Report dated September 25, 2009, the August 31, 2009 book value of the Treasury Pool was approximately $19.654 billion and the corresponding market value was approximately $19.766 billion.

An internal controls system for monitoring cash accounting and investment practices is in place. The Treasurer’s Compliance Auditor, who operates independently from the Investment Officer, reconciles cash and investments to fund balances daily. The Compliance Auditor’s staff also reviews each investment trade for accuracy and compliance with the Board adopted Investment Policy. The County Auditor-Controller’s Office performs similar cash and investment reconciliations on a quarterly basis and regularly reviews investment transactions for conformance with the approved policies. Additionally, the County’s outside independent auditor annually accounts for all investments.

The following table identifies the types of securities held by the Treasury Pool as of August 31, 2009.

Type of Investment % of Pool

U.S. Government and Agency Obligations 46.28 Certificates of Deposit 16.41 Commercial Paper 32.76 Bankers Acceptances 0.00 Municipal Obligations 0.20 Corporate Notes & Deposit Notes 4.33 Asset Backed Instruments 0.00 Repurchase Agreements 0.00 Other 0.02

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The Treasury Pool is highly liquid. As of August 31, 2009, approximately 49.17% of the investments mature within 60 days, with an average of 530.66 days to maturity for the entire portfolio.

LEGAL OPINIONS

The legal opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel to the District (“Bond Counsel”), attesting to the validity of the Bonds, will be supplied to the original purchasers of the Bonds without charge. Bond Counsel will receive compensation contingent upon the sale and delivery of the Bonds, and undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

TAX MATTERS

Series D Bonds

The delivery of the Series D Bonds is subject to delivery of the opinion of Bond Counsel, to the effect that interest on the Series D Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Series D Bonds (the “Code”), of the owners thereof pursuant to section 103 of the Code, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof. The delivery of the Bonds is also subject to the delivery of the opinion of Bond Counsel, based upon existing provisions of the laws of the State of California, that interest on the Bonds is exempt from personal income taxes of the State of California. The form of Bond Counsel’s anticipated opinion respecting the Series D Bonds is included in APPENDIX A. The statutes, regulations, rulings, and court decisions on which such opinions will be based are subject to change.

In rendering the foregoing opinions, Bond Counsel will rely upon the representations and certifications of the District made in a certificate (the “Tax Certificate”) of even date with the initial delivery of the Series D Bonds pertaining to the use, expenditure, and investment of the proceeds of the Series D Bonds and will assume continuing compliance with the provisions of the Resolutions by the District subsequent to the issuance of the Series D Bonds. The Tax Certificate contains covenants by the District with respect to, among other matters, the use of the proceeds of the Series D Bonds and the facilities and equipment financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Series D Bonds are to be invested, if required, the calculation and payment to the United States Treasury of any “arbitrage profits” and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants could cause interest on the Series D Bonds to be includable in the gross income of the owners thereof from the date of the issuance of the Series D Bonds.

Except as described above, Bond Counsel will express no other opinion with respect to any other federal, State or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Series D Bonds. Prospective purchasers of the Series D Bonds should be aware that the ownership of tax-exempt obligations such as the Series D Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a financial asset securitization investment trust, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers

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should consult their own tax advisors as to the applicability of these consequences to their particular circumstances.

Bond Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District described above. No ruling has been sought from the Internal Revenue Service (“IRS” or the “Service”) or the State of California with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel’s opinion is not binding on the Service or the State of California. The Service has an ongoing program of auditing the tax status of the interest on municipal obligations. If an audit of the Bonds is commenced, under current procedures, the Service is likely to treat the District as the “taxpayer,” and the Owners of the Bonds would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Series D Bonds, the District may have different or conflicting interests from the owners of the respective Series D Bonds. Public awareness of any future audit of the Series D Bonds could adversely affect the value and liquidity of the Series D Bonds during the pendency of the audit, regardless of its ultimate outcome.

Tax Accounting Treatment of Discount and Premium on Certain of the Series D Bonds

The initial public offering price of certain of the Series D Bonds (the “Discount Bonds”) may be less than the amount payable on such Series D Bonds at maturity. An amount equal to the difference between the initial public offering price of a Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Bond. A portion of such original issue discount, allocable to the holding period of such Discount Bond by the initial purchaser, will, upon the disposition of such Discount Bond (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Series D Bonds described above under “TAX MATTERS – Series D Bonds.” Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Bond taking into account the semiannual compounding of accrued interest at the yield to maturity on such Discount Bond, and generally will be allocated to an original purchaser in a different amount from the amount of the payment denominated as interest actually received by the original purchaser during the tax year.

However, such interest may be required to be taken into account in determining the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, “S” corporations with “subchapter C” earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Bond by the initial Owner prior to maturity, the amount realized by such Owner in excess of the basis of such Discount Bond in the hands of such Owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross income.

Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal income tax purposes of accrued interest upon disposition of Discount Bonds and with respect to the state and local tax consequences of owning Discount Bonds. It is possible that, under

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applicable provisions governing determination of state and local income taxes, accrued interest on Discount Bonds may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment.

The initial offering price of certain Series D Bonds (the “Premium Bonds”), may be greater than the amount payable on such bonds at maturity. An amount equal to the difference between the initial public offering price of a Premium Bond (assuming that at least ten percent of the Premium Bonds of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser’s yield to maturity. Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of amortizable bond premium with respect to the Premium Bonds for federal income purposes and with respect to the state and local tax consequences of owning Premium Bonds.

Series E Bonds

General. The following is a general summary of certain federal income tax consequences of the purchase and ownership of the Series E Bonds. The discussion is based upon the Code, U.S. Treasury Regulations, rulings and decisions now in effect, all of which are subject to change (possibly, with retroactive effect) or possibly differing interpretation. No assurances can be given that future changes in the law will not alter the conclusions reached herein. The discussion below does not purport to deal with federal income tax consequences applicable to all categories of investors and generally does not address consequences relating to the disposition of a Series E Bond by a beneficial owner thereof. Further, this summary does not discuss all aspects of federal income taxation that may be relevant to a particular investor in the Series E Bonds in light of the investor’s particular circumstances (for example, persons subject to the alternative minimum tax provisions of the Code), or to certain types of investors subject to special treatment under the federal income tax laws (including insurance companies, tax-exempt organizations and entities, financial institutions, broker-dealers, persons who have hedged the risk of owning the Series E Bonds, traders in securities that elect to use a mark-to-market method of accounting, thrifts, regulated investment companies, pension and other employee benefit plans, partnerships and other pass-through entities, certain hybrid entities and owners of interests therein, persons who acquire Series E Bonds in connection with the performance of services, or persons deemed to sell Series E Bonds under the constructive sale provisions of the Code). The discussion below also does not discuss any aspect of state, local or foreign law or U.S. federal tax laws other than U.S. federal income tax law. The summary is limited to certain issues relating to initial investors who will hold the Series E Bonds as “capital assets” within the meaning of Section 1221 of the Code, and acquire such Series E Bonds for investment and not as a dealer or for resale. The summary addresses certain federal income tax consequences applicable to beneficial owners of the Series E Bonds who are United States persons within the meaning of Section 7701(a)(30) of the Code (“United States persons”) and, except as discussed below, does not address any consequences to persons other than United States persons. Prospective investors should note that no rulings have been or will be sought from the Service with respect to any of the federal income tax consequences discussed below, and no assurance can be given that the Service will not take contrary positions.

ALL PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX

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CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES E BONDS.

Internal Revenue Service Circular 230 Notice. Prospective investors should be aware that:

(a) the discussion in this Official Statement with respect to certain U.S. federal income tax consequences of purchasing and owning the Series E Bonds is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed under the Code;

(b) such discussion was written in connection with the promotion or marketing (within the meaning of IRS Circular 230) of the transactions or matters addressed in this Official Statement; and

(c) each taxpayer should seek advice based on its particular circumstances from an independent tax advisor.

This notice is given solely for purposes of ensuring compliance with IRS Circular 230 with respect to the discussion below regarding the Series E Bonds.

Stated Interest and Reporting of Interest Payments. The stated interest on the Series E Bonds will be included in the gross income, as defined in Section 61 of the Code, of the beneficial owners thereof as ordinary income for federal income tax purposes at the time it is paid or accrued, depending on the tax accounting method applicable to the beneficial owners thereof. Subject to certain exceptions, the stated interest on the Series E Bonds will be reported to the Service. Such information will be filed each year with the Service on Form 1099 which will reflect the name, address and taxpayer identification number (“TIN”) of the beneficial owner. A copy of Form 1099 will be sent to each beneficial owner of a Series E Bond for federal income tax purposes.

Backup Withholding. Under Section 3406 of the Code, a beneficial owner of the Series E Bonds who is a United States person may, under certain circumstances, be subject to “backup withholding” (currently at a rate of 28 percent) on current or accrued interest on the Series E Bonds or with respect to proceeds received from a disposition of the Series E Bonds. This withholding applies if such beneficial owner of Series E Bonds: (i) fails to furnish to the payor such beneficial owner’s social security number or other TIN; (ii) furnishes the payor an incorrect TIN; (iii) fails to report interest properly; or (iv) under certain circumstances, fails to provide the payor or such beneficial owner’s broker with a certified statement, signed under penalty of perjury, that the TIN provided to the payor or broker is correct and that such beneficial owner is not subject to backup withholding. To establish status as an exempt person, a beneficial owner will generally be required to provide certification on IRS Form W-9 (or substitute form).

Backup withholding will not apply, however, if the beneficial owner is a corporation or falls within certain tax-exempt categories and, when required, demonstrates such fact. BENEFICIAL OWNERS OF THE SERIES E BONDS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THEIR QUALIFICATION FOR EXEMPTION FROM BACKUP WITHHOLDING AND THE PROCEDURE FOR OBTAINING SUCH EXEMPTION, IF APPLICABLE. The backup withholding tax is not an additional tax and taxpayers may use amounts withheld as a credit against their federal income tax liability or may claim a refund as long as they timely provide certain information to the Service.

Withholding on Payments to Nonresident Alien Individuals and Foreign Corporations. Under Sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally subject to withholding of U.S. federal income tax by the payor at the rate of 30 percent on periodic

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income items arising from sources within the United States, provided such income is not effectively connected with the conduct of a United States trade or business. Assuming the interest income of such a beneficial owner of the Series E Bonds is not treated as effectively connected income within the meaning of Section 864 of the Code, such interest will be subject to 30 percent withholding, or any lower rate specified in an income tax treaty, unless such income is treated as “portfolio interest.” Interest will be treated as portfolio interest if (i) the beneficial owner provides a statement to the payor certifying, under penalties of perjury, that such beneficial owner is not a United States person and providing the name and address of such beneficial owner, (ii) such interest is treated as not effectively connected with the beneficial owner’s United States trade or business, (iii) interest payments are not made to a person within a foreign country which the Service has included on a list of countries having provisions inadequate to prevent United States tax evasion, (iv) interest payable with respect to the Series E Bonds is not deemed contingent interest within the meaning of the portfolio debt provision, (v) such beneficial owner is not a controlled foreign corporation within the meaning of Section 957 of the Code, and (vi) the beneficial owner is not a bank receiving interest on the Series E Bonds pursuant to a loan agreement entered into in the ordinary course of the bank’s trade or business.

Assuming payments on the Series E Bonds are treated as portfolio interest within the meaning of Sections 871 and 881 of the Code, then no withholding under Section 1441 and 1442 of the Code and no backup withholding under Section 3406 of the Code is required with respect to beneficial owners or intermediaries who have furnished Form W-8 BEN, Form W-8 EXP or Form W-8 IMY, as applicable, provided the payor has no actual knowledge or reason to know that such person is a United States person.

The preceding discussion of certain U.S. federal income tax consequences is for general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to particular tax consequences to it of purchasing, owning and disposing of the Series E Bonds, including the applicability and effect of any state, local or foreign tax laws, and of any proposed changes in applicable laws.

Certain State Income Tax Consequences. In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Series E Bonds is exempt from State of California personal income taxes.

LEGALITY FOR INVESTMENT

Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under provisions of the California Government Code, the Bonds are eligible to secure deposits of public moneys in California.

RATINGS

Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”) have assigned their municipal bond ratings of “AA+” and “Aa3” to the Bonds, respectively. Such ratings reflect only the view of S&P and Moody’s, respectively, and an explanation of the significance of such ratings may be obtained as follows: S&P’s at Municipal Finance Department, 55 Water Street, New York, New York 10041, tel. (212) 208-8000 and Moody’s, at 7 World Trade Center at 250 Greenwich Street, New York, New York 10007, tel. (212) 553-0300. There is no assurance that such ratings will continue for any given period of time or that it will not be revised downward or withdrawn entirely if, in the judgment of the rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds.

52

UNDERWRITING

RBC Capital Markets Corporation, as Underwriter, has agreed to purchase the Bonds from the District at the purchase price of $55,064,927.95 (being the par amount of the Bonds, plus net original issue premium of $3,582,085.95, less amounts to be used to pay certain costs of issuance of $101,158.00, and less Underwriter’s discount of $416,000.00), at the rates and yields shown on the inside cover hereof.

NO LITIGATION

No litigation is pending or threatened concerning the validity of the Bonds. The District is not aware of any litigation pending or threatened questioning the political existence of the District or contesting the District’s ability to receive ad valorem taxes or to collect other revenues or contesting the District’s ability to issue the Bonds.

OTHER INFORMATION

References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of the Resolution and the County Resolution are available upon request from the Vice President, Finance and Administrative Services, Pasadena Area Community College District, 1570 E. Colorado Boulevard – C235 Pasadena, CA 91106. The District may charge a nominal fee for copying and shipping.

Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not be construed as a contract or agreement between the District and the purchasers or owners of any of the Bonds.


53

The execution and delivery of this Official Statement has been duly authorized by the District.

PASADENA AREA COMMUNITY COLLEGE DISTRICT By: /s/ Lisa A. Sugimoto Interim Superintendent/President

[THIS PAGE INTENTIONALLY LEFT BLANK]

A-1

APPENDIX A

FORM OF BOND COUNSEL OPINION

[Closing Date]

Board of Supervisors County of Los Angeles 383 Kenneth Hahn Hall of Administration 500 West Temple Street Los Angeles, California 90012

Board of Trustees Pasadena Area Community College District 1570 E. Colorado Boulevard – C235 Pasadena, California 91106

Re: $52,000,000 Pasadena Area Community College District, Consisting of $26,705,000 2002 Election General Obligation Bonds, 2009 Series D and $25,295,000 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E

Ladies and Gentlemen:

We have acted as bond counsel for the Pasadena Area Community College District, County of Los Angeles, State of California (the “District”), in connection with the issuance by the Board of Supervisors of the County of Los Angeles (the “County Board”) of $26,705,000 aggregate principal amount of the District’s 2002 Election General Obligation Bonds, 2009 Series D (the “Series D Bonds”) and $25,295,000 aggregate principal amount of the District’s 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E (the “Series E Bonds,” and, collectively with the Series D Bonds, the “Bonds”), in the name and on behalf of the District. The Bonds are issued pursuant to Title 1, Division 1, Part 10, Chapter 1.5 of the Education Code of the State of California (commencing at Section 15264), as amended, those certain resolutions adopted by the Board of Trustees of the District on August 19, 2009 (the “District Resolution”) and that certain resolution adopted by the County Board on September 15, 2009 (the “Bond Resolution” and together with the District Resolution, the “Resolutions”). All terms used herein and not otherwise defined shall have the meanings given to them in the Resolutions.

As bond counsel, we have examined copies certified to us as being true and complete copies of the proceedings of the District and the County for the authorization and issuance of the Bonds, including the Resolutions and the Tax Exemption Certificate of the District respecting the Series D Bonds and the Tax Certificate of the District respecting the Series E Bonds, each dated the date hereof (collectively, the “Tax Certificates”). Our services as such bond counsel were limited to an examination of such proceedings and to the rendering of the opinions set forth below. In this connection, we have also examined such certificates of public officials and officers of the District and the County as we have considered necessary for the purposes of this opinion.

A-2

Certain agreements, requirements and procedures contained or referred to in the Resolutions, the Tax Certificates and other relevant documents may be changed and certain actions (including, without limitation, defeasance of Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than ourselves.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by any parties other than the District. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolutions and the Tax Certificates, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Series D Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Resolutions and the Tax Certificates may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors, rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities in the State of California. We express no opinion with respect to any indemnification, contribution, choice of law, choice of forum or waiver provisions contained in the foregoing documents. We express no opinion and make no comment with respect to the sufficiency of the security for the marketability of the Bonds. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute valid and binding obligations of the District, payable as to both principal and interest from the proceeds of a levy of ad valorem taxes on all property subject to such taxes in the District, which taxes are unlimited as to rate or amount.

2. The District Resolution has been duly adopted and constitutes a valid and binding obligation of the District.

3. The Bond Resolution has been duly adopted and constitutes a valid and binding obligation of the County.

4. It is further our opinion, based upon the foregoing, that pursuant to section 103 of the Internal Revenue Code of 1986, as amended and in effect on the date hereof (the “Code”), and existing regulations, published rulings, and court decisions thereunder, and assuming continuing compliance with the provisions of the Resolutions and in reliance upon representations and certifications of the District made in the Tax Certificate for the Series D Bonds of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Series D Bonds, when the Series D Bonds are delivered to and paid for by the initial purchasers thereof, interest on the Series D Bonds (1) will be

A-3

excludable from the gross income, as defined in section 61 of the Code, of the owners thereof for federal income tax purposes, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof.

In our opinion, under existing law, interest on the Bonds is exempt from personal income taxes of the State of California.

We express no other opinion with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Series D Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain S corporations with subchapter C earnings and profits, certain foreign corporations doing business in the United States, owners of an interest in a FASIT, individuals otherwise qualifying for the earned income tax credit, individual recipients of Social Security or Railroad Retirement benefits, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations.

Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above.

The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of results.

Respectfully submitted,


55429834.10 B-1

APPENDIX B

SELECTED INFORMATION FROM AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED JUNE 30, 2008

PCC

PASADENA AREA COMMUNITY COLLEGE

DISTRICT

ANNUAL FINANCIAL REPORT

JUNE 30, 2008

PASADENA AREA COMMUNITY COLL:E:GE DISTRICT

TABLE OF CONTENTS JUNE 30, 2008

FINANCIAL SECTION Independent Auditors' Report Management's Discussions and Analysis Basic Financial Statements

Statements of Net Assets Statements of Revenues, Expenses, and Chan5es in Net Assets Statements of Cash Flows

Discretely Presented Component Unit- Pasadena City College Foundation, Inc. Statements of Financial Position Statements of Activities Statements of Cash Flows

Notes to Financial State:ments

SUPPLEMENTARY INFORMATION

2 4

10 11 12

14 15 16 17

District Organization 42 Schedule of Expenditures of Federal Awards 43 Schedule of Expenditures of State Awards 45 Schedule of Workload Measures for State General Apportionment- Annual/Actual Attendance 46 Reconciliation of Annual Financial and Budget R1port (CCFS-311) with Fund Financial Statements 47

Reconciliation of the Governmental Fund Balance Sheets to the Statement ofNet Assets 48 Note to Supplementary Information 49

FINANCTAL SECTION

Vavrinek, Trine, Day & Co., LLP Certified Public Accountants

INDEPENDENT AUDITORS' REPORT

Board ofTrustees Pasadena Area Community College District Pasadena, California

VALUE THE DIFFERENCE

We have audited the accompanying basic fmancial statements of the business-type activities of the Pasadena Area Community College District (the District) as of and for the years ended June 30, 2008 and 2007, and its discretely presented component unit, Pasadena City College Foundation, Inc., as listed in the Table of Contents. These basic financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audit~, contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those st~mdards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial 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 basic financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the basic fmancial statements referred tc above present fairly, in all material respects, the financial position of the business-type activities of the Pasadena ,!\rea Community College District and its discretely presented component unit as of June 30, 2008 and 2007, and the respective changes in fmancial position and cash flows, for the years then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, W<: have also issued our report dated December 4, 2008, on our consideration of the District's internal control over iinancial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal eontrol over financial reporting and compliance and the results of that testmg, and not to provide an opinion on 1:he 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 is important for assessing the results of our audit.

2

8270 Aspen Street Rancho Cucamonga, CA 91730 Tel 909.466.4410 Fax: 909.466.4431 www.vtdcpa.com

FRESNO • LAGUNA HILLS • PALO ALTI) • PLEASANTON • RANCHO CUCAMONGA

The Management's Discussion and Analysis, as listed in the Table of Contents, is not a required part of the basic financial statements, but is supplementary information n~quired by the Governmental Accounting Standards Board. This supplementary information is the responsibility of the District's management. We have applied certain limited procedures, consisting principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the fmancial statements that collectively comprise the District's basic fmancial statements. The supplementary information listed in the table of contents, including the Schedule of Expenditures of Federal Awards, which is required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the basic fmancial statements. Such 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 fmancial statements taken as a whole.

The Additional Supplementary Information on pages 74 through 81 has been presented at the request of District management for purposes of additional analysis. We have applied certain limited procedures consisting primarily of analysis and inquiry regarding presentation; however, we did not audit the information. Accordingly, we express no opinion on them.

RanchoL~~~~ 'jj~; ~ {1_u_p December 4, 2008

3

' PASA[)ENA Crrvc:<JLLEGE

Office of the Vice President for Administrative Services

This section of our annual financial report offers a muTative overview and analysis of the financial activities of Pasadena Area Community College District (the District) for the year ended June 30, 2008. This analysis is presented with comparative information from our June 30, 2007 and June 30, 2006, fiscal year ends to highlight changes from one year to the next. This section of our report should be read in conjunction with the basic fmancial statements, including footnotes. Responsibility for the completeness and accuracy of this information rests with the District management.

USING THIS ANNUAL REPORT

As required by generally accepted accounting principles, the annual report consists of three basic financial statements that provide information on the District's activities as a whole: the Statement of Net Assets, the Statement of Revenues, Expenses, and Changes in N~:t Assets, and the Statement of Cash Flows.

1he Pasadena Area Community College District's financial statements are presented in accordance with Governmental Accounting Standards Board Statements No. 34, Basic Financial Statements- and Management's Discussion and Analysis- for State and Local Governments and No. 35, Basic Financial Statements- and Management Discussion and Analysis -for Public College and Universities. These statements allow for the presentation of financial activity and results of operations which focuses on the District as a whole. The entity-wide fmancial statements present the overall results of operations whereby all of the District's activities are consolidated into one total venms the traditional presentation by fund type. The focus of the Statement of Net Assets is designed to be similar to bottom line results for the District. This statement combines and consolidates current financial resources (net short-term spendable resources) with capital assets and long-term obligations. The Statement ofRevenuo~s, Expenses, and Changes in Net Assets focuses on the costs of the District's operational activities with revenues and expenses categorized as operating and nonoperating, and expenses are reported by natural classification. This approach is intended to summarize and simplify the user's analysis of the cost of various District services to students and the public. The Statement of Cash Flows provides an analysis of the sources and uses of cash within the operations of the District.

The California Community Colleges System's Office has recommended that all State community colleges follow the Business-Type Activity (BT A) model for financial statement reporting purposes.

4

1570 Ea~t Colorado Boulevard • Pasadena, California 91106-2003 • (626) 585-7258 • FAX (626) 585-3117


MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2008

FINANCIAL HIGHLIGHTS

• The District ended the year with an Unrestricted General Fund balance of $15,862,854. The State System's Office recommends reserve levels of five percent of total General Fund expenditures, $6,017,5 86, to be set aside for economic uncertainties. We have met this recommendation.

• The primary expenditure of the District is for the salaries and benefits of the Academic, Classified, and Administrative salaries of District employees. Approximately 88 percent of District operating expenditures are consumed by employee compensation.

• A Citizen's Oversight Committee was formed under Proposition 39 requirements and meets quarterly. The meetings are held on the last Wednesday of January, April, July, and October at Pasadena City College in room C233 at 6:00pm and are open to the public.

• The District provides student financial aid to qualifying students of the District in the amount of approximately $23.6 million. This represents an increase of $3.1 million from the 2006-2007 fiscal year. This aid is provided through grants, loans, and tuition reductions from the Federal government, State System's Office, and local funding.

• District's credit FTES were 22,759 and 20,909 for the 2008 and 2007 fiscal years, respectively.

5



Condensed financial information is as follows:

Statement of Net Assets as of June 30,

(Amounts in thousands)

ASSETS Current Assets

Cash, investments, and short-term receivables Inventory and other assets

Total Current Assets Noncurrent Assets

Capital assets, net of depreciation Total Assets

LIABILITIES Current Liabilities

Accounts payable and accrued liabilities Other current liabilities Deferred revenue Claims liability Amounts held in trust Long-term obligations - current portion

Total Current Liabilities Non current Liabilities

Long-term obligations - current portion Total Liabilities

NET ASSETS Invested in capital assets Restricted for expendable purposes Unrestricted

Total Net Assets

Total Liabilities and Net Assets

$

$

$

$

2008

159,420 2,292

161,712

147,711 309,423

21,704 462

8,234 1,500 2,066

11,563 45,529

92,679 138,208

112,107 25,660 33,448

171,215

309,423

2007 2006

$ 157,774 $ 67,491 1,569 1,413

159,343 68,904

131,271 133,841 $ 290,614 $ 202,745

$ 11,890 $ 10,223 493 504

8,116 5,204 1,500 1,625 1,938 6,786

10,722 3,545 34,659 27,887

100,691 32,740 135,350 60,627

103,230 108,049 23,586 9,887 28,448 24,182

155,264 142,118

$ 290,614 $ 202,745

This schedule has been prepared from the District's Statements ofNet Assets (page 10), which is presented on an accrual basis of accounting whereby capital assets are capitalized, and depreciated and all liabilities of the District are recognized.

Cash and short-term investments consist primarily of funds held in the Los Angeles County Treasury. The changes in the cash position are explained in the Statements of Cash Flows (page 12).

Capital assets, net of depreciation is the net historical value (original cost) of land, buildings, construction in progress, and equipment less accumulated depreciation.

6



Long-term obligations consists primarily of the general obligation bond issue, 2003 certificates of participation, and compensated absences. Long-term obligations decreased by approximately $7 million as the District repays the bond obligations.

Statement of Operating Results for the Year Ended June 30,


2008 2007 2006 OPERATING REVENUES

Tuition and fees $ 18,786 $ 16,839 $ 16,359 Grants and contracts 32,014 27,625 26,712 Auxiliary sales and charges 6,884 6,583 6,214 Other operating revenues 5,323 4,603 3,053

Total Operating Revenues 63,007 55,650 52,338 OPERATING EXPENSES

Salaries and benefits 117,861 109,634 99,946 Supplies and maintenance 45,534 45,226 40,180 Depreciation 6,927 6,490 4,871

Total Operating Expenses 170,322 161,350 144,997

NET LOSS ON OPERATIONS (107,315) ~105,700) (92,659)

NONOPERATING REVENUES AND (EXPENSES) State apportionments 83,071 80,403 68,694 Property taxes 27,609 27,080 17,351 State revenue 3,269 3,939 3,816 Investment income, net 8,510 5,491 1,804 Interest expense (4,611) (3,164) (1,496) Other nonoperating revenues and transfers 4,358 3,070 4,052

Total Nonoperating Revenues 122,206 116,819 94,221 OTHER REVENUES

State revenues, capital 394 1,191 441 Local revenues, capital 666 837 1,032

Total Other Revenues 1,060 2,028 1,473

NET CHANGE IN NET ASSETS $ 15,951 $ 13,147 $ 3,035

This schedule has been prepared from the Statements of Revenues, Expenses, and Changes in Net Assets (page 11 ).

7



The operating revenue for the District is specifically defined as revenues from users of the colleges' facilities and programs. Excluded from the operating revenues are the components of the primary source of District funding - the State apportionment process. These components include the State apportionment and local property taxes. As these resources of revenue are from the general population of the State of California, and not from the direct users of the educational services (students), they are considered to be nonoperating. As a result, the operating loss of $107 million is balanced by the other funding sources. Total District revenues exceeded all expenditures sources by $16 million for the year ended June 30, 2008.

Auxiliary revenue consists of bookstore net revenues. The bookstore is maintained to provide books, supplies, and other items to the students and faculty of the District. The operations are self-supporting through product sales. Profits from the bookstore are used for student government and club activities.

Grant and contract revenues relate to student financial aid, as well as specific Federal and State grants received for programs serving the students of the District. These grant and program revenues are restricted as to the allowable expenses related to the programs.

The interest income is primarily the result of cash held at the Los Angeles County Treasury. The interest expense relates to interest payments on the certificates of participation, lease commitments, and a note payable described in Note 9 of the financial statements.

Statement of Cash Flows for the Year Ended June 30,


2008 2007 2006 CASH FLOWS FROM

Operating activities $ (103,193) $ (99,889) $ (87,879)

Noncapital financing activities 108,438 103,808 91,727

Capital financing activities (14,416) 82,291 (5,097)

Investing activities 8,797 10,287 2,024 Net Change in Cash and Cash Equivalents $ (374) $ 96,497 $ 775

The Statement of Cash Flows provides information about cash receipts and payments during the year. This statement also assists users in assessing the District's ability to meet its obligations as they come due and its need for external financing.

The primary operating receipts are student tuition and fees and Federal, State, and local grants and contracts. The primary operating expense of the District is the payment of salaries and benefits to instructional and classified support staff, as well as District administrators.

8



ECONOMIC FACTORS AFFECTING THE FUTURE OF PASADENA AREA COMMUNITY COLLEGE DISTRICT

The economic position of the Pasadena Area Community College District is closely tied to California's economic position as State apportionments and property taxes allocated to the District represent approximately 80 percent of the unrestricted General Fund. The 2008-2009 State budget for community collegescontains an .87 percent cost of living increase and growth funds of approximately 2.0 percent. The State economy is in decline with a projected deficit for the 2008-2010 years in the range of $25-$30 billion, and these deficits will impact all education segments in the State. Unfortunately, these budget cuts come at a time when the college enrollment is increasing, putting additional pressure on our already scarce resources. The System's Office has advised districts to expect mid-year budget cuts in early 2009. Management is monitoring closely all factors in an effort to control the ultimate impact of budget cuts on the District's financial health and on our ability to serve our students.

The 2008-2009 fiscal year will bring several significant construction events. It is anticipated that the Industrial Technologies Building, the Campus Center addition and renovation, and the Bookstore projects will be essentially completed. In addition, the District will break ground for the new Arts Building which will rise in place of the K Building. It is likely that the District will sell the final series of bonds authorized by Measure P sometime in the spring of 2009.

There are no other known facts, decisions, or conditions that will have a significant effect on the financial position (net assets) or results of operations (revenues, expenses, and changes in net assets) of the District.

CONTACTING THE DISTRICT

This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the District at: Pasadena Area Community College District, 1570 East Colorado Blvd., Pasadena, CA, 91106-2003 or call (626) 585-7258.

9


STATEMENTS OF NET ASSETS JUNE 30, 2008 AND 2007

2008 2007 ASSETS CURRENT ASSETS

Cash and cash equivalents $ 2,242,867 $ 3,080,618 Investments - unrestricted 20,246,723 18,245,126 Investments - restricted 124,232,342 125,770,258 Accounts receivable 12,030,644 10,063,453 Student loans receivable 667,615 614,249 Prepaid expenses - current portion 1,084,614 455,837 Stores inventories 1,207,224 1,113,161

Total Current Assets 161,712,029 159,342,702 NONCURRENT ASSETS

Nondepreciable capital assets 34,504,382 13,247,863 Depreciable capital assets, net of accumulated depreciation 113,206,600 118,023,533

Total Noncurrent Assets 147,710,982 131,271,396 TOTAL ASSETS 309,423,011 290,614,098

LIABILITIES CURRENT LIABILITIES

Accounts payable 20,436,920 10,516,793 Accrued interest payable 1,266,780 1,373,418 Other current liabilities 462,205 492,787 Deferred revenue 8,233,608 8,116,423 Claims liability 1,500,000 1,500,000 Amounts held in custody on behalf of others 2,066,887 1,938,213 Accrued compensated absences payable 2,040,944 1,919,832 Bonds and notes payable 9,434,650 8,660,529 Lease obligations 87,106 140,873

Total Current Liabilities 45,529,100 34,658,868 NONCURRENT LIABILITIES

Accrued compensated absences payable 955,372 814,550 Bonds and notes payable 91,704,755 99,791,848 Lease obligations 18,461 84,847

Total Noncurrent Liabilities 92,678,588 100,691,245 TOTAL LIABILITIES 138,207,688 135,350,113

NET ASSETS Invested in capital assets, net of related debt 112,106,725 103,230,708 Restricted for:

Debt service 8,922,388 8,682,350 Capital projects 16,738,182 14,902,946

Unrestricted 33,448,028 28,447,981 TOTAL NET ASSETS $ 171,215,323 $ 155,263,985

The accompanying notes are an integral part of these financial statements.

10


STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

2008 2007 OPERATING REVENUES

Student Tuition and Fees $ 23,701,781 $ 22,907,839 Less: Scholarship discount and allowance { 4z9I5z872~ {6,068,446~ Net tuition and fees 18!785,909 I6,839z393

Grants and Contracts, noncapital: Federal I9,930,686 I6,370,363 State 12,083,545 11,254,269

Auxiliary Enterprise Sales and Charges Bookstore 6,883,658 6,582,576

Other Operating Revenues 5!323,646 4,603 061 TOTAL OPERATING REVENUES 63,007,444 55,649!662

OPERATING EXPENSES Salaries 91,52I,899 85,424,787 Employee benefits 26,339,000 24,209,276 Supplies, materials, and other operating expenses and services 43,355,659 41,583,750 Equipment, maintenance, and repairs 2,I78,956 3,642,511 Depreciation 6,926z85I 6,489 803

TOTAL OPERATING EXPENSES 170!322,365 I61,350zl27

OPERATING LOSS {107z314,921~ { 105 '700!465~

NONOPERATING REVENUES (EXPENSES) State apportionments, noncapital 83,07I,l49 80,402,701 Local property taxes levied for general purposes 16,3I7,372 15,351,994 Local property taxes levied for debt repayment 11,291,862 11,727,932 State taxes and other revenues 3,268,614 3,938,763 Investment income 8,510,000 5,49I,268 Interest expense on capital related debt (4,611,433) (3,163,653) Investment income on capital asset-related debt, net 451 45 Transfer to agency fund (341,072) (212,134) Other nonoperating revenue 4,699 487 3z28lz734

TOTAL NONOPERATING REVENUES (EXPENSES) 122,206,430 116,818z650

INCOME BEFORE OTHER REVENUES 14,891,509 li,li8,I85 State revenues, capital 393,853 I,I9I,Ol3 Local revenues, capital 665,976 836818

TOTAL OTHER REVENUES 1!059,829 2,027,831

CHANGE IN NET ASSETS 15,951,338 13,146,016 NET ASSETS, BEGINNING OF YEAR 155!263,985 142,117z969 NET ASSETS, END OF YEAR $ 17I,2I5,323 $ 155,263,985


II


STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES

Tuition and fees $ 18,807,898 $ 17,664,385 Grants and contracts 28,682,424 29,681,593 Payments to or on behalf of employees (117,601,712) (1 09 ,092,885) Payments to vendors for supplies and services (29,119,643) (29,771,831) Payments to students for scholarships and grants (15,751,872) (15,108,106) Auxiliary sales and charges 11,947,907 11,298,159 Other payments (158,362) (4,560,516)

Net Cash Flows From Operating Activities (103, 193,360) (99 ,889,201)

CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES State apportionments 83,010,361 82,661,715 Property taxes - nondebt related 16,317,372 15,351,994 State taxes and other revenues 3,487,659 3,085,743 Other receipts 5,622,446 2,708,615

Net Cash Flows From Noncapital Financing Activities 108,437,838 103,808,067

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

State revenues, capital projects 1,059,829 836,818 Local revenue, capital projects 2,414,412 1' 191,013 Property taxes - related to capital debt 11,291,862 11,727,932 Proceeds from capital debt 98,313,170 Acquisition and construction of capital assets (14,616,530) ( 4,367 ,836) Principal paid on capital debt and leases (9,847,537) (23,453,955) Interest received on capital debt 451 45 Interest paid on capital debt and leases ( 4, 718,071) ( 1 ,956,332)

Net Cash Flows From Capital and Related Financing Activities (14,415,584) 82,290,855

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments 282,736 4,015,741 Investment income 8,514,280 6,271,406

Net Cash Flows From Investing Activities 8,797,016 10,287,147

NET CHANGE IN CASH AND CASH EQUIVALENTS (374,090) 96,496,868 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 147,096,022 50,599,154 CASH AND CASH EQUIVALENTS, END OF YEAR $ 146,721,932 $ 147,096,022


12


STATEMENTS OF CASH FLOWS, CONTINUED FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

RECONCILIATION OF OPERATING LOSS TO NET CASH FLOWS FROM OPERATING ACTIVITIES

Operating Loss

Adjustments to Reconcile Operating Loss to Net Cash Flows From Operating Activities:

Depreciation and amortization expense Changes in Assets and Liabilities:

Receivables, net

Stores inventories

Prepaid expenses

Accounts payable and accrued liabilities Deferred revenue

Funds held for others Net Cash Flows From Operating Activities

Cash and Cash Equivalents Consist of the Following: Cash in banks

Cash in county treasury - unrestricted

Cash in county treasury - restricted

Total Cash and Cash Equivalents

Noncash Transactions On behalf payments for benefits


13

2008 2007

$ (107,314,921) $ (105,700,465)

6,926,851 6,489,803

(1 ,575,690) (1 0,043) (94,063) 88,513

(628,777) (244,911) (465,583) 1,136,497 117,185 2,911,921

( 15 8,3 62) _ ___.,( 4.;..:;,5:;..;:6;.;;.0 ,:.;;..5 .:....;16;..:...) $ (103,193,360) $ (99,889,201)

$ 2,242,867 20,246,723

124,232,342 $ 146,721,932

$ 3,080,618 18,245,126

125,770,258 $ 147,096,002

$ 2,410,925 $ 2,269,632


STATEMENTS OF FINANCIAL POSITION DISCRETELY PRESENTED COMPONENT UNIT PASADENA CITY COLLEGE FOUNDATION, INC. JUNE 30, 2008 AND 2007

2008 2007 ASSETS CURRENT ASSETS

Cash - unrestricted $ 458,570 $ 1,291,379 Cash - restricted 371,223 Accounts receivable 200,000 200,000

Total Current Assets 1,029,793 1,491,379 NONCURRENT ASSETS

Investments - unrestricted 4,645 Investments - restricted 11,103,661 11,333,038 Land held for sale 10,850 10,850

Total Noncurrent Assets 11,114,511 11,348,533 TOTAL ASSETS $ 12,144,304 $ 12,839,912

LIABILITIES AND NET ASSETS Accounts payable $ 81,320 $

NET ASSETS Unrestricted 1,166,960 1,306,874 Temporarily restricted 6,205,592 6,816,047 Permanently restricted 4,690,432 4,716,991

TOTAL NET ASSETS 12,062,984 12,839,912 TOTAL LIABILITIES AND NET ASSETS $ 12,144,304 $ 12,839,912


14


STATEMENTS OF ACTIVITIES DISCRETELY PRESENTED COMPONENT UNIT PASADENA CITY COLLEGE FOUNDATION, INC. FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

2008 Temporarily Permanently

Unrestricted Restricted Restricted Total REVENUES AND OTHER SUPPORT

Donations $ 69,409 $ 1,207,210 $ 100,000 $ 1,376,619 In-kind receipts 239,591 239,591 Special events 6,070 19,814 25,884 Student fees 22,885 22,885 Miscellaneous revenue 6,171 6,171 Assets released from restrictions 1,064,092 ( 1 ,064,092)

Total Revenues and Other Support 1,379,162 191,988 100,000 1,671,150

EXPENSES Operating 325,443 325,443 Program 1,426,027 1,426,027 Fundraising 24,119 24,119

Total Expenses 1,775,589 1,775,589

OTHER INCOME AND (EXPENSE) Realized gain on sale of investments 362,914 362,914 Unrealized gain (loss) (773,024) (607,376) (I ,380,400) Interest and dividends 344,997 344,997 Transfers (451,398) (29,419) 480,817 Transfers from Pasadena Area

Community College District Total Other Income and (Expense) 256,513 (802,443) (126,559) (672,489)

CHANGE IN NET ASSETS (139,914) (610,455) (26,559) (776,928) NET ASSETS, BEGINNING OF YEAR 1,306,874 6,816,047 4,716,991 12,839,912 NET ASSETS, END OF YEAR $ 1,166,960 $ 6,205,592 $ 4,690,432 $ 12,062,984


15

2007 Temporarily Permanently

Unrestricted Restricted Restricted Total

s 277,119 $ 710,991 $ 70,125 $ 1,058,235 244,244 244,244

26,965 14,684 41,649 48,549 48,549 17,940 17,940

1,085,131 (1,085,131)

1,633,459 (292,967) 70,125 1,410,617

272,795 272,795 1,318,660 1,318,660

11,230 11,230 1,602,685 1,602,685

95,092 387,608 482,700 137,487 560,417 697,904 72,101 293,893 365,994

265,543 4,917 (270,460)

3,623,321 1,089,531 4,712,852

570,223 4,870,156 819,071 6,259,450

600,997 4,577,189 889,196 6,067,382 705,877 2,238,858 3,827,795 6,772,530

$ 1,306,874 $ 6,816,047 $ 4,716,991 $ 12,839,912

15


STATEMENTS OF CASH FLOWS DISCRETELY PRESENTED COMPONENT UNIT PASADENA CITY COLLEGE FOUNDATION, INC. FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES

Change in Net Assets $ (776,928) $ 6,067,382 Adjustments to Reconcile Change in Net Assets to Net Cash Flows From Operating Activities

Contributions for long--term purposes (l ,307,21 0) Unrealized (gain) loss 1,380,400 (697,904)

Changes in Assets and Liabilities Increase in other non-current assets (10,850) Increase in accounts payable 81,320

Net Cash Flows From Operating Activities (622,418) 5,358,628

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of investments 3,437,529 (4,525,179) Purchase of investments ~4z955,130~

Net Cash Flows From Investing Activities {1,517,601) (4z525,179)

CASH FLOWS FROM FINANCING ACTIVITIES Collections of contributions restricted for long-term purposes 1:307:210 781,116

Net Cash Flows From Financing Activities 1,307,210 781,116

NET CHANGE IN CASH AND CASH EQUIVALENTS (832,809) 833,449 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,291,379 457,930 CASH AND CASH EQUIVALENTS, END OF YEAR $ 458,570 $ 1,291,379


16


NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007

NOTE 1 -ORGANIZATION

Organization

The Pasadena Area Community College District (the District) was established in 1967 as a political subdivision of the State of California and provides educational services to residents of the surrounding area. The District operates under a locally elected seven-member Board of Trustees form of government, which establishes the policies and procedures by which the District operates. The Board must approve the annual budgets for the General Fund, special revenue funds, capital project funds, and proprietary funds, but these budgets are managed at the department level. Currently, the District operates one community college located in Pasadena, California. While the District is a political subdivision of the State of California, it is not a component unit of the State in accordance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 39.

Financial Reporting Entity

The District has adopted GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. This statement amends GASB Statement No. 14, The Financial Reporting Entity, to provide additional guidance to determine whether certain organizations, for which the District is not financially accountable, should be reported as component units based on the nature and significance of their relationship with the District. The three components used to determine the presentation are: providing a "direct benefit", the "environment and ability to access/influence reporting", and the "significance" criterion. As defined by accounting principles generally accepted in the United States of America and established by the Governmental Accounting Standards Board, the financial reporting entity consists of the primary government, the District, and the following component units:

• Pasadena City College Foundation, Inc.

The Pasadena City College Foundation, Inc. (the Foundation) is a legally separate, tax-exempt organization. The Foundation acts primarily as a fundraising organization to provide grants and scholarships to students and support to employees, programs, and departments of the District. The thirty-one member Board of the Foundation consists of community members, alumni, and other supporters of the Foundation. Although the District does not control the timing or amount of receipts from the Foundation, the majority of resources, or income thereon, that the Foundation holds and invests are restricted to the activities of the District by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the District, the Foundation is considered a component unit of the District. The Foundation is reported in separate financial statements because of the difference in its reporting model, as further described below.

The Foundation is a not-for-profit organization under Internal Revenue Code (IRS) Section 501(c)(3) that reports its financial results under Financial Accounting Standards Board (F ASB) Statements. Most significant to the Foundation's operations and reporting model are FASB Statement No. 116, Accounting for Contributions Received and Contributions Made, and FASB Statement No. 117, Financial Reporting for NotFor-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation's financial information in the District's financial reporting entity for these differences.

Financial statements for the Foundation can be obtained by calling the Foundation at 626-585-7363.

17



• The Los Angeles County Schools Regionalized Business Service Corporation

The Los Angeles County Schools Regionalized Business Service Corporation (the Corporation) is a legally separate organization component unit of the District. The Corporation was formed to issue debt specifically for the acquisition and construction of capital assets for the District. The financial activity has been "blended" or consolidated within the financial statements of the District as if the activity was the District's. Within the other supplementary information section of the report, the activity is included as the Capital Outlay Projects Fund and the Other Debt Service Fund. Certificates of participation issued by the Corporation are included as long-term obligations in of the District. Individually-prepared financial statements are not prepared for the Corporation.

• Joint Powers Agencies and Public Entity Risk Pools

The District is associated with two joint powers agencies (JPAs). These organizations do not meet the criteria for inclusion as component units of the District. The JPAs are the Statewide Association of Community Colleges (SWACC) and the Schools Alliance for Workers' Compensation Excess II (SA WCX II).

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Measurement Focus, Basis of Accounting, and Financial Statement Presentation

For financial reporting purposes, the District is considered a special-purpose government engaged only in business-type activities as defined by GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. This presentation provides a comprehensive entity-wide perspective of the District's assets, liabilities, activities, and cash flows and replaces the fund group perspective previously required. Accordingly, the District's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All material intra-agency and intra-fund transactions have been eliminated.

Revenue resulting Jrom exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year.

Nonexchange transactions, in which the District receives value without directly giving equal value in return, include State apportionments, property taxes, certain grants, entitlements, and donations. Revenue from State apportionments is generally n~cognized in the fiscal year in which it is apportioned from the State. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose requirements.

18



The accounting policies of tht:: District conform to accounting principles generally accepted in the United States of America (US GAAP) as applicable to colleges and universities, as well as those prescribed by the Califomia Community Colleges System's Office. The District reports are based on all applicable GASB pronouncements, as well as applicable F ASB pronouncements issued on or before November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements. The District has not elected to apply F ASB pronouncements after that date. When applicable, certain prior year amounts have been reclassified to conform to current year presentation. The budgetary and financial accounts of the District are maintained in accordance with the State System's Office's Budget and Accounting Manual.

The financial statements are presented in accordance with the reporting model as prescribed in GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. The business-type activities model followed by the District requires the following components of the District's financial statements:

• Management's Discussion and Analysis • Basic Financial Statements for the District as a whole including:

o Statement of Net Assets o Statement of Revenues, Expenses, and Changes in Net Assets o Statement of Cash Flows

• Notes to the Financial Statements

Cash and Cash Equivalents

The District's cash and cash equivalents are considered to be cash on hand and demand deposits. Cash equivalents also include cash with county treasury balances for purposes of the Statements of Cash Flows. Restricted cash and cash equivalents represented balances restricted by extemal sources such as grants and contracts or specifically restricted for the repayment of capital debt.

Investments

In accordance with GASB Statement No. 31, Accounting and Reporting for Certain Investments and for External Investment Pools, investments are stated at fair value. Fair value is estimated based on published market prices at year-end. Investments for which there are no quoted market prices are not material.

Accounts Receivable

Accounts receivable include amounts due from the Federal, State, and/or local govemments or private sources, in connection with reimbursement of allowable expenditures made pursuant to the District's grants and contracts. Accounts receivable also consist of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the State of Califomia. Management has analyzed these accounts and believes all amounts are fully collectable.

19



Prepaid Expenses

Prepaid expenses represent payments made to vendors and others for services that will benefit periods beyond June 30, 2008.

Stores Inventories

Stores inventories consist primarily of bookstore merchandise and supplies held for resale to the students and faculty of the college. Inventories are stated at cost, utilizing the weighted average method. The cost is recorded as an expense as the inventory is consumed.

Capital Assets and Depreciation

Capital assets are long-lived assets of the District as a whole and include land, construction-in-progress, buildings, leasehold improvements, and equipment. The District maintains an initial unit cost capitalization threshold of $5,000 for equipment and $100,000 for land, construction-in-progress, buildings, and leasehold improvements. Assets are recorded at historical cost, or estimated historical cost, when purchased or constructed. The District does not possess any infrastmcture. Donated capital assets are recorded at estimated fair market value at the date of donation. Improvements to buildings and land that significantly increase the value or extend the useful life of the asset are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not. Major outlays for capital improvements are capitalized as constructionin-progress as the projects are constructed. Routine repairs and maintenance that do not extend the life of the building or equipment are charged as operating expenses in the year the expense is incurred.

Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings, 50 years; improvements, 20 years; equipment, 5 to 15 years.

Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities, and long-term obligations are reported in the entity-wide financial statements.

Compensated Absences

Accumulated unpaid vacation benefits are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide financial statements. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid.

Sick leave is accumulated without limit for each employee based upon negotiated contracts. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, credit for unused sick leave is applicable to all classified school members who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit for each day of unused sick leave.

20



Deferred Revenue

Deferred revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Deferred revenues include (1) amounts received for tuition and fees prior to the end of the fiscal year that are related to the subsequent fiscal year and (2) amounts received from Federal and State grants received before the eligibility requirements are met are recorded as deferred revenue.

Net Assets

GASB Statements No. 34 and No. 35 report equity as ''Net Assets." Net assets are classified according to external donor restrictions or availability of assets for satisfaction of District obligations according to the following net asset categories:

Invested in Capital Assets, Net of Related Debt - Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.

Restricted- Expendabh:~- Net assets whose use by the District is subject to externally imposed constraints that can be fullilled by actions of the District pursuant to those constraints or by the passage of time. Net assets may be restricted for capital projects, debt repayment, and/or educational programs.

None of the District's restricted net assets have resulted from enabling legislation adopted by the District.

Unrestricted- Net assets that are not subject to externally imposed constraints. Unrestricted net assets may be designated for specific purposes by action of the Board of Trustees or may otherwise be limited by contractual agreements with outside parties.

When both restricted and unrestricted resources are available for use, it is the District's practice to use restricted resources first and the unrestricted resources when they are needed.

Operating Revenues and Expenses

Classification of Revenues - The District has classified its revenues as either operating or nonoperating. Certain significant revenue streams relied upon for operation are classified as nonoperating as defined by GASB Statement No. 35. Classifications are as follows:

Operating revenues - Operating revenues include activities that have the characteristics of exchange transactions, such as, ( 1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, (3) most Federal, State, and local grants and contracts, and ( 4) interest on institutional student loans.

Nonoperating revenues- Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as State apportionments, property taxes, investment income, gifts and contributions, and other revenue sources described in GASB Statement No. 34.

21



Classification of Expenses- Nearly all the District's expenses are from exchange transactions and are classified as either operating or nonoperating according to the following criteria:

Operating expenses - Operating expenses are necessary costs to provide the services of the District and include employee salaries and benefits, supplies, operating expenses, and student financial aid.

Nonoperating expenses ·· Nonoperating expenses include interest expense and other expenses not directly related to the services of the District.

State Apportionments

Certain current year apportionments from the State are based on financial and statistical information of the previous year. Any corrections due to the recalculation of the apportionment are made in February of the subsequent year and are recorded in the District's financial records when received.

On-Behalf Payments

GASB Statement No. 24 requires direct on-behalf payments for fringe benefits and salaries made by one entity to a third party recipient for the 'employees for another legally separate entity be recognized as revenues and expenditures by th(: employer entity. The State of California makes direct on-behalf payments to the California State Teachers' Retirement Systems (CalSTRS) on behalf of all community colleges in California.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Property Taxes

Secured property taxes attach as an enforceable lien on property as of January I. The County Assessor is responsible for assessment of all taxable real property. Taxes are payable in two installments on November I and February 1 and become delinquent on December 10 and April10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County of Los Angeles bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received.

The voters of the District passed a General Obligation Bond in March 2002 for the acquisition, construction, and remodeling of District capital assets. As a result of the passage of the Bond, property taxes are assessed on the property within the District specifically for the repayment of the debt incurred. The taxes are billed and collected as noted above and remitted to the District when collected. The property tax received for the years ended June 30, 2008 and 2007, was $II,29I,862 and $II,727,932, respectively.

22



Scholarship Discounts and Allowances

Student tuition and fee revenue is reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship discounts and allowances represent the difference between stated charges for enrollment fees and the amount that is paid by students or third parties making payments on the students' behalf. To the extent that fee waivers and discounts have been used to satisfy tuition and fee charges, the District has recorded a scholarship discount and allowance.

Federal Financial Assistance Programs

The District participates in federally funded Pell Grants, SEOG Grants, Federal Work-Study, and Stafford Loan programs, as well as other programs funded by the Federal government. Financial aid to students is either reported as operating expenses or scholarship allowances, which reduce revenues. The amount reported as operating expense represents the portion of aid that was provided to the student in the form of cash. These programs are audited in accordance with the Single Audit Act Amendments of 1996, and the U.S. Office of Management and Budget's revised Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, and the related Compliance Supplement. During the year ended June 30, 2008 and 2007, the District distributed $1,027,453 and $838,573, respectively, in direct lending through the U.S. Department of Education.

Interfund Activity

Exchange transactions between funds of the District are reported as revenues and expenses within the Statement of Revenues, Expenses, and Changes in Net Assets. Flows of cash or goods from one fund to another without a requirement for repayment are recognized as interfund transfers within the District's fund financial statements. Amounts owing between funds for both exchange and non-exchange transactions are recorded as interfund receivables and payables within the District's fund financial statements. Interfund transfers and interfund receivables and payables are eliminated during the consolidation process in the entity-wide financial statements.

Component Unit

The Pasadena City College Foundation, Inc. maintains its accounts in accordance with the principles and practices of fund accounting. Fund accounting is the procedure by which resources for various purposes are classified for accounting purposes in accordance with activities or objectives specified by donors. Accordingly, net assets and the changes in net assets are classified as follows:

Permanently Restricted Net Assets- Net assets subject to donor-imposed stipulations that they be maintained permanently by the Foundation. Generally the donors of these assets permit the Foundation to use all or part of the income earned on related investments for general or specific purposes.

Temporarily Restricted Net Assets- Net assets subject to donor-imposed stipulations that will be met by actions of the Foundation and/or the passage of time.

Unrestricted Net Assets- Net assets not subject to donor-imposed restrictions.

23



Revenues are reported as increases in the unrestricted net assets classification unless use of the related assets is limited by donor-impm;ed restrictions. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized as revenue until the conditions on which they depend are substantially met. Contributions for in-kind gifts from outside sources are recorded at their fair market value on th·~ date of the donation.

Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Investments are reported at fair value based upon quoted market prices.

Investments are reported at fair value based upon quoted market prices.

The Foundation is a not-for-profit organization that is exempt from income taxes under Section 50l(c)(3) of the Internal Revenue Code and related California Franchise Tax Codes.

New Accounting Pronouncements

In July 2004, GASB issued GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benejits Other than Pensions. This Statement will require local governmental employers who provide other postemployment benefits (OPEB) as part of the total compensation offered to employees to recognize the expense and related liabilities (assets) in the government-wide financial statements of net assets and activities. This Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of State and local governmental employers.

Current financial reporting practices for OPEB generally are based on pay-as-you-go financing approaches. They fail to measure or recognize the cost ofOPEB during the periods when employees render the services or to provide relevant information about OPEB obligations and the extent to which progress is being made in funding those obligations.

This Statement generaJy provides for prospective implementation - that is, that employers set the beginning net OPEB obligation at zero as of the beginning of the initial year. The District will be required to implement the provisions of this Stat~:ment for the fiscal year ended June 30, 2009. The District is in the process of determining the impact the implem~ntation of this Statement will have on the government-wide statement of net assets and activities.

In June 2005, GASB i~;sued GASB Statement No. 47, Accounting for Termination Benefits. GASB Statement No. 47 addresses accounting for both voluntary and involuntary termination benefits. For termination benefits that affect an employer's obligations for defined benefit OPEB, the provisions ofGASB Statement No. 47 should be applied simultaneously with the requirements ofGASB Statement No. 45. For all other termination benefits, including those that atrect an employer's obligations for defined benefit pension benefits, GASB Statement No. 47 is effective for financial statements for periods beginning after June 15, 2005. Earlier application ofGASB Statement No. 47 is encouraged. The District will be required to implement the provisions of this Statement for fiscal year ended June 30, 2009.

24



In May 2007, GASB issued Statement No. 50, Pension Disclosures- an amendment ofGASB Statements No. 25 and No. 27. This Statement more closely aligns the financial reporting requirements for pensions with those for OPEB and, in doing so, enhances information disclosed in notes to financial statements or presented as RSI by pension plans and by employers that provide pension benefits. The reporting changes required by this Statement amend applicable note disclosure and RSI requirements of Statements No. 25, Financial Reporting/or Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform with requirements of Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans, and No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. This Statement is effective for periods beginning after June 15, 2007, except for requirements related to the use of the entry age actuarial cost method for the purpose of reporting a surrogate funded status and funding progress of plans that use the aggregate actuarial cost method, which are effective for periods for which the financial statements and RSI contain information resulting from actuarial valuations as of June 15, 2007, or later.

In June 2007, GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets. This Statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. Accord:.ngly, existing authoritative guidance related to the accounting and financial reporting for capital assets should be applied to those intangible assets, as applicable. Such guidance should be applied in addition to the existing authoritative guidance for capital assets. The requirements of this Statement are effective for financial statement> beginning after June 15, 2009. The provisions of this Statement generally are required to be applied retroactively. For governments that were classified as Phase 1 or Phase 2 governments for the purpose of implementing Statement No 34, retroactive reporting is required for intangible assets acquired in fiscal years ending after June 30, 1980, except for those considered to have indefinite useful lives as of the effective date of this Statement and tho:;e that would be considered internally generated.

In November 2007, GASB issued Statement No. 52, Land and Other Real Estate Held as Investments by Endowments. This St2tement establishes consistent standards for the reporting of land and other real estate held as investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments are required to report the changes in fair value as investment income and to disclose the method> and significant assumptions employed to determine fair value and other information that they currently present for other investments reported at fair value. The guidance in this Statement is effective for financial statements for reporting periods beginning after June 15, 2008, with earlier application encouraged.

In June 2008, GASB issued Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. This Statement is intended to improve how State and local governments report information about derivative instruments, financial arrangements used by governments to manage specific risks or make investments, in their financial statements. The Statement specifically requires governments to measure most derivative instruments at fair value in their financial statements that are prepared using the economic resources measurement focus and the accrual basis of accounting. The guidance in this Statement also addresses hedge accounting requirements and is effective for financial statements for reporting periods beginning after June 15, 2009, with earlier application encouraged.

Comparative Financial Information

Comparative financial information for the prior year has been presented for additional analysis; certain amounts presented in the prior year data may have been reclassified in order to be consistent with the current year's presentation.

25



NOTE 3- CASH AND INVESTMENTS

Policies and Practices

The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations.

Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accompanying financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.

General Authorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below:

Maximum Maximum Maximum Authorized Remaining Percentage Investment

Investment Ti:Ee Maturiti: of Portfolio in One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None

26



Authorized Under D~bt Agreements

Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements rather than the general provisions of the California Government Code. These provisions allow for the acquisition of investment agreements with maturities of up to 30 years.

Summary of Deposits and Investments

Deposits and investments as of June 30, 2008, consist of the following:

Cash on hand and in banks Cash in revolving Investments

Total Deposits and Investments

Interest Rate Risk

$ 2,135,367 107,500

144,479,065 $ 146,721,932

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by primarily investing in the County investment pool.

Information about the ;;ensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity:

Investment Type County Pool - Los Angeles Certificates of Deposit Stocks Mutual Funds

Total

*Weighted average days to maturity.

27

Fair Value

$ 142,699,272 1,143,205

23,406 454,721

$ 144,320,604

Maturity Date

556 days* 2,712 days*

Not Applicable Not Applicable



Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by th~ assignment of a rating by a nationally recognized statistical rating organization. The District's investment in the County pool is not required to be rated, nor has it been rated as of June 30, 2008. Presented below is the minimum rating required by the California Government Code, the District's investment policy, or debt agreements, and the actual rating as of the year-end for each investment type.

Investment Type County Pool - Los Angeles Certificates of Deposit Stocks Mutual Funds

Total

Custodial Credit Risk - Deposits

$

$

Fair Value

142,699,272 1,143,205

23,406 454,721

144,320,604

Minimum Legal Rating Ratin~ June 30, 2008

Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable

This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging f:rst trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2008, the District's bank balance of $2,188,052 was exposed to custodial credit risk because it was uninsured and collateralized with securities held by the pledging financial institution's trust department or agent, but not in the name of the District.

28


NOTES TO FINAJ'JCIAL STATEMENTS JUNE 30, 2008 MU 2007

NOTE 4- ACCOUNTS RECEIVABLES

Accounts receivable for the District consisted primarily of intergovernmental grants, entitlements, interest, and other local sources. All receivables are considered collectible in full.

The accounts receivabh! are as follows:

2008 2007 Federal Government

Categorical aid $ 2,255,992 $ 1,261,905

State Government

Apportionment 4,953,868 4,893,080

Categorical aid 336,120 213,593

Lottery 1,486,994 1,706,039 Local Sources

Earned salary advc.nce 579,269 536,982 Interest 1,369,987 674,855 Other local source:; 1,048,414 776,999

Total $ 12,030,644 $ 10,063,453

Student receivables $ 667,615 $ 614,249

Discretely Presented Component Unit

The Foundation's accounts receivable consist primarily of short-term donations. In the opinion of management, all amounts have been deemed to be fully collectable.

NOTE 5- INTERFUND TRANSACTIONS

Operating Transfers

Operating transfers between District governmental funds are used to ( 1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) w;e unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. These operating transfers have been eliminated through consolidation within the entity-wide financial statements.

29



NOTE 6- CAPITAL ASSETS

Capital asset activity for the District for the fiscal year ended June 30, 2008, was as follows:

Balance

Beginning

of Year Additions Deductions

Capital Assets Not Being Depreciated

Land $ 10,396,408 $ $

Construction in progress 2,851,455 22,011,929 755,410

Total Capital Assets Not Being Depreciated 13,247,863 22,011,929 755,410

Capital Assets Being Depreciated

Buildings and improvements 150,590,093 755,410 975,327

Site improvements 12,348,587

Equipment 12,767,939 1,354,508 293,065

Total Capital Assets Being Depreciated 175,706,619 2,109,918 1,268,392

Total Capital Assets 188,954,482 24,121,847 2,023,802

Less Accumulated Depr<:ciation

Buildings and improvements 45,562,247 5,238,467 975,327

Site improvements 3,639,227 753,369

Equipment 8,481,612 935,015 293,065

Total Accumt:.lated Depreciation 57,683,086 6,926,851 1,268,392

Net Capital Assets $ 131,271,396 $17,194,996 $ 755,410

Depreciation expense for the year was $6,926,851.

30

Balance

End

of Year

$ 10,396,408

24,107,974

34,504,382

150,370,176

12,348,587

13,829,382

176,548,145

211,052,527

49,825,387

4,392,596

9,123,562

63,341,545

$147,710,982



Capital asset activity for the District for the fiscal year ended June 30, 2007, was as follows:

Balance Balance

Beginning End of Year Additions Deductions of Year

Capital Assets Not Being Depreciated Land $ 10,396,408 $ $ $ 10,396,408 Construction in progress 1,226,648 2,424,416 799,609 2,851,455

Total Capital Assets Not Being Depreciated 11,623,056 2,424,416 799,609 13,247,863

Capital Assets Being De Jreciated

Buildings and improvements 151,216,618 307,475 934,000 150,590,093 Site improvements 11,856,453 492,134 12,348,587 Equipment 12,027,830 1,495,999 755,890 12,767,939

Total Capital . \ssets Being Depreciated 175,100,901 2,295,608 1,689,890 175,706,619 Total Capital \ssets 186,723,957 4,720,024 2,489,499 188,954,482

Less Accumulated Depn:ciation

Buildings and improvements 41,249,432 5,246,815 934,000 45,562,247

Site improvements 3,215,251 423,976 3,639,227

Equipment 8,418,490 819,012 755,890 8,481,612

Total Accumtlated Depreciation 52,883,173 6,489,803 1,689,890 57,683,086

Net Capital Assets $ 133,840,784 $ (1,769,779) $ 799,609 $ 131,271,396

Depreciation expense 'or the year was $6,489,803.

NOTE 7 -ACCOUNTS PAYABLE

Accounts payable for lhe District consisted of the following:

2008 2007 Accrued payroll and benefits $ 6,799,317 $ 6,802,809 Load banking 910,287 867,255 Construction 9,027,654 277,747 Other 3,699,662 2,568,982

To:al $ 20,436,920 $ 10,516,793

31


NOTES TO FINANCIAL STATEMENTS JUNE30,2008AJ_~D_2_0_0_7 ______________________________________ __

NOTE8-DEFERREDREVENUE

Deferred revenue fort 1e District consisted of the following:

2008 2007

Federal categorical ai i $ 28,350 $ State categorical aid 3,090,702 3,329,746

Student fees 3,793,085 3,771,095

Radio agreement 806,266 614,782 Other local 515,205 400,800

Toal $ 8,233,608 $ 8,116,423

NOTE 9- LONG-TEaM OBLIGATIONS

Summary

The changes in the Di: :trict's long-term obligations during the 2008 fiscal year consisted of the following:

Amount Due Beginning Ending Within

Balance Additions Deductions Balance One Year Bonds and Notes Payable

General Obligatiom Bottds, Election 2002, Series f. $ 5,405,000 $ $ 835,000 $ 4,570,000 $ 855,000

General Obligatiom. Bo1Jds, Election 2002, Series I: 65,000,000 6,160,000 58,840,000 6,860,000

Unamortized premium 1,965,547 78,622 1,886,925 General Obligation Bon is,

2006 Refunding, Serie : C 23,764,887 2,393,199 990,000 25,168,086 999,900 Unamortized premium 7,582,736 947,842 6,634,894 2003 Certificates of Par icipation,

Series A 3,915,000 505,000 3,410,000 520,000 Note payable 819,207 189 707 629,500 199,750

Total Bonds and N< •tes Payable I 08,452,377 2 393,199 9,706,171 101!139,405 9,434,650

Other Obligations Compensated absences 2,734,382 261,934 2,996,316 2,040,944 Capital leases 225,720 21,213 141,366 105,567 87,106

Total Other Obligal ions 2!960,102 283,147 141,366 3!101,883 2!128,050

Total Long-Term C bligations $ 111,412,479 $ 2,676,346 $ 9,847,537 $ 104,241,288 $ 11,562,700

32

PASADENA ARE~ COMMUNITY COLLEGE DISTRICT

NOTES TO FINA'lCIAL STATEMENTS JUNE 30, 2008 AND 2007

------------------------------------------------------------------The changes in the Dis rict's long-term obligations during the 2007 fiscal year consisted of the following:

Amount Due Beginning Ending Within

Balance Additions Deductions Refunded Balance One Year Bonds and Notes Payable

General Obligations Bon is, Election 2002, Series A $ 28,040,000 $ $ 815,000 $ 21,820,000 $ 5,405,000 $ 835,000

General Obligations Bon is, Election 2002, Series B 65,000,000 65,000,000 6,160,000

Unamortized premium I ,965,547 1,965,547 General Obligation Bones,

2006 Refunding, Series C 23,764,887 23,764,887 970,822 Unamortized premium 7,582,736 7,582,736 2003 Certificates of Part cipation,

Series A 4,410,000 495,000 3,915,000 505,000 Note payable 998,750 179,543 819 207 189 707

Total Bonds and No:es Payable 33,448,750 98,313,170 1,489,543 21,820,000 I 08,452,3 77 8,660,529

Other Obligations Compensated absences 2,465,790 268,592 2,734,382 1,919,832 Capital leases 370,132 144,412 225,720 140 873

Total Other Obligat ons 2,835,922 268,592 144,412 2,960,102 2,060,705

Total Long-Ter:n 0 >ligations $ 36,284,672 $ 98,581,762 $ 1,633,955 $ 21,820,000 $ 111,412,479 $ 10,721,234

Description of Debt

Payments of the gener: Ll obligation bonds are to be made by the Bond Interest and Redemption Fund with local property tax collectiom. Payments for the certificates of participation (COPs) and the notes payable obligation are made by the Other Debt Service Fund. The compensated absences will be paid by the fund for which the employee worked. Capital lease payments are made out of the General Unrestricted Fund.

General obligation bm1ds were approved by a local election in March 2002. The total amount approved by the voters was $150,000,0)0. At June 30, 2008, $120,657,774 had been issued and $88,578,086 was outstanding. Interest rates on the bends range from 2. 00 percent to 5.25 percent.

The 2003 Certificates )f Participation were issued in September 2003 in the amount of $5,380,000 to prepay its proportionate share of the 1993 Certificates of Participation Series A. At June 30, 2008, the balance outstanding was $3,410,000. The ;ertificates mature through 2014 with interest rates ranging from 2.000 percent to 4.625 percent.

The notes payable were issued in 1996 in the amount of $2,240,000 to fund energy-retrofitting projects throughout the Distric. At June 30, 2008, the balance outstanding was $629,500. The notes mature through 2011.

The District has utilized capital leases purchase agreements to purchase primarily equipment. The current lease purchase agreements \fill be paid through 2010.

33

PASADENA ARE<\ COMMUNITY COLLEGE DISTRICT

NOTES TO FINA'I"CIAL STATEMENTS JUNE 30, 2008 Al' .D 2007

--------------------------------------------------------Bonded Debt

The outstanding gener~ I obligation bonded debt is as follows:

Bonds Issue Maturity Interest Original Outstanding Date Date Rate Issue Jul:t 1 z 2007 Issued

6/112003 611/2013 2 00%-5.00% $ 33,000,000 $ 5,405,000 $ 7112/2006 8/1/2031 4 50%-5.25% 65,000,000 65,000,000 7112/2006 8/1/2014 3 .95%-4.44% 22,657,774 23:764:887

$94:169:887 $

General Obligation Bond 2002 Series A

The general obligation bonds mature through 2013 as follows:

Fiscal Year PrinciEal 2009 $ 855,000 2010 880,000 2011 910,000 2012 945,000 2013 980,000 Total $ 4,570,000

General Obligation E ond 2002 Series B


Fiscal Year PrinciEal 2009 $ 6,860,000 $ 2010 1,390,000 2011 1,635,000 2012 1,395,000 2013 1,460,000

2014-2018 8,360,000 2019-2023 10,590,000 2024-2028 13,640,000 2029-2032 13,510,000

Total $ 58,840,000 $

34

Accreted Bonds Interest Outstanding

Addition Redeemed June 30: 2008 $ $ 835,000 $ 4,570,000

6,160,000 58,840,000 2z393z199 990:000 25:1681086

$2,393)99 $7,985,000 $ 881578,086

Interest to

Maturit:z: Total

$ 163,100 $ 1,018,100

137,450 1,017,450

108,850 1,018,850 77,000 1,022,000

39,200 1,019,200 $ 525,600 $ 5,095,600

Interest to

Maturit:z: Total 2,696,988 $ 9,556,988 2,511,363 2,443,300 2,375,125 2,310,888

10,478,423 8,167,883 5,042,624 1,383,137

37,409,731

3,901,363 4,078,300 3,770,125 3,770,888

18,838,423 18,757,883 18,682,624 14,893,137

$ 96,249,731

PASADENA ARE<\ COMMUNITY COLLEGE DISTRICT

NOTES TO FINA~CIAL STATEMENTS JUNE 30, 2008 AND 2007

--------------------------------------------------------General Obligation B md 2006 Series C


Principal (Including accreted

Fiscal Year interest to date 2 2009 $ 999,900 2010 5,151,816 2011 4,696,743 2012 4,239,465 2013 3,893,171

2014-2015 6,186,991 Total $ 25,168,086

2003 Certificates of Participation Series A

The certificates ofpart[cipation mature through 2014 as follows:

Year Ending June 30,

2009 2010 2011 2012 2013 2014 Total

Notes Payable

The notes payable mature through 2011 as follows:

Fiscal Year 2009 2010 2011 Total

$

$

$

$

35

PrinciEal 520,000 535,000 555,000 575,000 600,000 625,000

3,410,000

PrinciEal 199,750 209,793 219,957 629,500

$

$

Accreted Interest Total

59,119 $ 1,059,019 1,345,920 6,497,736 1,812,031 6,508,774 2,220,132 6,459,597 2,632,975 6,526,146 5,765,758 11,952,749

13,835,935 $ 39,004,021

Interest Total $ 122,463 $ 642,463

105,300 640,300 85,531 640,531 63,625 638,625 40,125 640,125 14,063 639,063

$ 431,107 $ 3,841,107

Interest to Maturiti: Total

$ 30,250 $ 230,000 20,207 230,000 10,043 230,000

$ 60,500 $ 690,000


NOTES TO FINA'JCIAL STATEMENTS

JUNE30,2008A~~D~2~0~07~---------------------------------------

Capital Leases

The District's liability en lease agreements with options to purchase is summarized below:

Balance, July 1, 2007 Additions Payments Balance, June 30, 200:~

The capital leases have minimum lease payments as follows:

Year Ending June 30,

2009 2010 Total

Less: Amount Repres~nting Interest Present Value of Mini num Lease Payments

Accumulated Unpaid Employee Vacation

$ 248,044 23,311

155,347 $ 116,008

Lease Payment

$ 95,721 20,287

116,008 10,441

$ 105,567

The total accumulated mpaid employee vacation for the District at June 30, 2008, amounted to $2,996,316 of which $2,040,944 is ccnsidered current.

NOTE 10- POSTEMl'LOYMENT BENEFITS

The District provides medical, dental, and vision insurance coverage, as prescribed in the various employee union contracts, to retirees m:eting plan eligibility requirements. Eligible employees retiring from the District may become eligible for these benefits when the requirements are met. The eligibility requirement for employees participating in CalPEI~S and CalSTRS is a minimum age of 55 and a minimum 14 years of service with the District. The District r ~cognizes expenditures for these postemployment health benefits on a pay-as-you-go-basis. During the 2008 fiscal year, the District provided insurance premium benefits to 42 retired employees with total expenditures of $638,151.

36



NOTE 11- RISK MANAGEMENT

Property and Liabilitv

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During fiscal year ending June 30, 2008, the District is a member of the Statewide Association of Community Colleges (SWACC) Joint Powers Authority (JPA) for property and liability insurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years. T1ere has not been a significant reduction in coverage from the prior year.

Workers' Compensation

For fiscal year 2008, tr e District participated in the Schools Alliance for Workers' Compensation Excess II (SA WCX II) JP A, an i 1surance purchasing pool. The District is self insured for the first $500,000 of each workers' compensation claim. The intent of the JPA is to achieve the benefit of a reduced premium for the District by virtue of its grouping and representation with other participants in the JP A. The workers' compensation experience of the participating districts is calculated as one experience, and a common premium rate is applied to all di1tricts in the JPA. Each participant pays its workers' compensation premium based on its individual rate. Total1avings are then calculated and each participant's individual performance is compared to the overall saving. A participant will then either receive money from or be required to contribute to the "equitypooling fund." This "equity pooling" arrangement ensures that each participant shares equally in the overall performance of the JP1~. Participation in the JPA is limited to K-12 and community college districts that can meet the JP A's selection crit~ria.

Coverage provided by SA WCX II for property and liability and workers' compensation is as follows:

Insurance Program/Company Name Self-Insured ARCH Specialty SAWCXII

Type of Coverage Workers' Compensation Excess Workers' Compensation Property and Liability

NOTE 12- EMPLOY/?,E RETIREMENT SYSTEMS

$ $ $

Limits 500,000

25,000 1,000,000

Qualified employees a·e covered under multiple-employer contributory retirement plans maintained by agencies of the State ofCaliforria. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS).

37



CaiSTRS

Plan Description

The District contribute; to CalSTRS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teach1:rs' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento, CA 95826.

Funding Policy

Active members of the DB Plan are required to contribute eight percent of their salary while the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalSTRS Teachers' Retirement Board. The required employer contribution rate for fi!:cal year 2007-2008 was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by State statute. The CB Benefit Program is an alternative CalSTRS contribution plan for irtstructors. Instructors who choose not to sign up for the DB Plan or FICA may participate in the CB Benefit Program. The District contribution rate for the CB Benefit Program is always a minimum of four percent with the s 1m of the District and employee contribution always being equal or greater than eight percent. The District's total contributions to CalSTRS for the fiscal years ended June 30, 2008, 2007, and 2006, were $4,226,897, $4,l·l5,332, and $3,816,744, respectively, and equallOO percent ofthe required contributions tor each year.

CalPERS

Plan Description

The District contributes to the School Employer Pool under CalPERS, a cost-sharing multiple-employer public employee retirement s:rstem defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issues a separate comprehensive annual financial report that includes financial statements ard required supplementary information. Copies ofthe CalPERS' annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA 95811.

Funding Policy

Active plan members are required to contribute seven percent of their salary (seven percent of monthly salary over $133.33 if the m~mber participates in Social Security), and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The District's contribution rate to CalPERS for fiscal year 2007-2008 was 9.306 Jercent of annual payroll. The District's contributions to CalPERS for fiscal years ending June 30, 2008, 2007, and 2006, were $1,529,727, $1,793,019, and $1,640,728, respectively, and equaled 100 percent of the required contributions for each year.

38

PASADENA ARE A COMMUNITY COLLEGE DISTRICT


On-Behalf Payments

The State of California makes contributions to CalSTRS and CalPERS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS which amounted to $2,410,925, $2,269,632, and $1,966,937 (4.517 percent) of salaries subject to CalSTRS for the years ended June 30, 2008, 2007, and 2006, respectively. No contLbutions from the State were made for CalPERS for the year ended June 30, 2008. These amounts have been reflected in the financial statements as a component of nonoperating revenue and employee benefit expense.

Social Security

As established by Federal law, all public sector employees who are not members of their employer's existing retirement system (CalSTRS or CalPERS) must be covered by Social Security or an alternative plan. Only CalPERS members are covered by social security. All others who are not members of CalSTRS are members of an alternative retirement plan referred to as APPLE.

NOTE 13- COMMITWENTS AND CONTINGENCIES

Grants

The District receives financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and eire subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the District. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2008.

Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, 2008.

39


NOTES TO FINA~CIAL STATEMENTS JUNE 30, 2008 AND 2007

Construction Commitments

As of June 30, 2008, the District had the following commitments with respect to the unfinished capital projects:

CAPITAL PROJECT Campus Center Industrial Technology Building Project

*Arts Building *Construction Management *Classroom Conversions *Elevator Upgrades *HVAC Electrical Upgrades

*Funded through Measure P

Remaining Construction Commitment $ 18,125,800

13,105,632 2,304,000

531,369

313,811 78,052 14,250

$ 34,472,914

Expected Date of

Completion September 2009 September 2009 December 20 II December 2011 December 2011

June 2011 June 2011

NOTE 14- PARTICIPATION IN PUBLIC ENTITY RISK POOLS AND JOINT POWERS AUTHORITIES

The District is a member of the Statewide Association of Community Colleges (SW ACC) JP A. The District pays premiums for its property liability coverage. The relationship between the District and the JPA is such that it is not a component unit of the District for financial reporting purposes.

The District is also a member of the Schools Alliance for Workers' Compensation Excess II (SA WCX II) JP A. The District pays premiums for excess workers' compensation coverage. The relationship between the District and the JP A is such that it is not a component unit of the District for financial reporting purposes.

The JPAs have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, transactions between the JPAs and the District are included ir. these statements. Audited financial statements are available from the respective entities.

During the year ended June 30, 2008, the District made payments of $700,845 and $524,878 to SW ACC and SA WCX II, respectively.

40

SUPPLEMENTARY INFORMATION

41


DISTRICT ORGANIZATION JUNE 30, 2008

The Pasadena Area Community College District was established in 1967 and is located in Los Angeles County.

There were no changes in the boundaries of the District during the current year. The District is accredited by The

Western Association of Schools and Colleges (W ASC), which is one of six regional associations that accredit

public and private schools, colleges, and universities in the United States.

MEMBER

Mr. John Martin

Dr. Jeanette Mann

Dr. Hilary Bradbury-Huang

Mr. Geoffrey L. Baum

Dr. Consuela Rey Castro

Mr. William Thomson

Ms. Beth Wells-Miller

Mr. Sean O'Connor

Dr. Paulette J. Perfumo

Ms. Kindred Murillo

Dr. Jacqueline Jacobs

Dr. Lisa Sugimoto

Mrs. Elaine Chapman

Mr. Jorge Aguiiiiga

Dr. Stuart Wilcox

BOARD OF TRUSTEES

OFFICE TERM EXPIRES

President November 2011

Vice President November 2011

Clerk November 2009

Member November 2009




Student Trustee June 30, 2008

ADMINISTRATION

42

President and District Superintendent

Vice President, Administrative Services

Vice President, Instructional Administration

Vice President, Student and Learning Services

Interim Dean, External Relations

Dean, Human Resources

Dean, Planning and Research


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2008

Federal Grantor/Pass-Through Grantor/Program or Cluster Title

U.S. DEPARTMENT OF EDUCATION

Passed through the California State System's Office VATEAI-C VA TEA II, Tech-Prep Education Grant Workforce Investment Act: Adult Basic Education Workforce Investment Act: Foster Nursing Student Success

Passed through the Regents of the University of California Copernicus Project

CCAMPIS - Child Development Program Collaboration to Improve Student Persistence and Degree Completion

TRIO CLUSTER TRIO- Student Support Services and Student Grants TRIO - Upward Bound TRIO - Upward Bound Math and Science

Subtotal TRIO Cluster

STUDENT FINANCIAL AID CLUSTER U.S. DEPARTMENT OF EDUCATION

Pell Grant Pell Grant Administration Grant Supplemental Educational Opportunity Grant Supplemental Educational Opportunity Grant Administration Federal Work-Study Program Federal Work-Study Program- Administrative Cost Allocation Perkins Loan Program Federal Family Education Loans Academic Competitiveness Grants

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Nursing Loan Program

Subtotal Student Financial Aid Cluster

See accompanying note to supplementary information.

43

CFDA Program Number Expenditures

84.048 $ 610,285 84.243 76,648 84.002A 160,787 84.002A 134,999

84.336B 118,880 84.355A 141,553 84.031S 192,019

84.042A 155,053 84.047A 263,791 84.047M 241,285

660,129

84.063 15,222,697 84.063 27,025 84.007 398,773 84.007 21,878 84.033 458,121 84.033 41,942 84.038 103,024 84.032 1,027,453 84.375 14,200

93.364 30,195 17,345,308


SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS, CONTINUED FOR THE YEAR ENDED JUNE 30, 2008

Federal Grantor/Pass-Through CFDA Program Grantor/Pro~ram or Cluster Title Number Ex12enditures

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Passed through the California State System's Office Foster Care Education Program 93.658 $ 50,015 Temporary Assistance for Needy Families (TANF) 93.558 82,496

Passed through the Foundation for California Community Colleges

Passed through the California Department of Education Child Development Program 93.596 24,437 Child Development Program - Infant and Toddler 93.575 3,120 Child Development Program- Facilities Renovation and Repair 93.575 7,510 Child Development Program - Instructional Materials 93.575 2,389

U.S. DEPARTM:ENT OF AGRICULTURE Forest Reserve 10.665 46,580

U.S. DEPARTMENT OF VETERANS AFFAIRS Veterans Education 64.000 2,191

NATIONAL SCIENCE FOUNDATION Providing More to Increase Stem Majors 47.047 344,731

Total Federal Expenditures $ 20,004,077


44



SCHEDULE OF EXPENDITURES OF STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2008

Program Entitlements Current Prior Total

PROGRAM Year Year Entitlement Associate Degree -Nursing Program $ 57,142 $ $ 57,142 Basic Skills 359,560 385,810 745,370 Block Grant 66,247 772,976 839,223 Cal Grant "B" 1,811,740 (6,954) 1,804,786 Cal Grant "C" 26,928 26,928 California High School Exit Exam (CAHSEE) 225,160 90,570 315,730 CalWORKs 616,369 616,369 CaiWORKs - Carryover 164,960 164,960 CalWORKs - Regional Effort 5,000 5,000 Capacity Building/Nursing 301,513 216,445 517,958 Career Technical 545,094 545,094 Child Development Program 199,630 199,630 Child Development Program 463,979 463,979 Cooperative Agencies Resources For Education (CARE) 138,088 138,088 Disabled Students Program and Services (DSPS) 1,278,030 1,278,030 Economic Development - Applied Biological Technology 205,000 6,179 211,179 Economic Development - Multimedia Entertainment Center 205,000 7,808 212,808 Extended Opportunity Program and Services (EOP&S) 1,165,861 1,165,861 Extended Opportunity Program and Services (EOP&S) 86,295 86,295 Faculty/Staff Professional Development 99,991 99,991 Foster Care Education Program 72,398 72,398 Human Resources Tech Training 14,691 14,691 Independent Living Skills "A" 10,210 10,210 Instructional Equipment/On-going 243,411 316,298 559,709 Matriculation - Credit 1,220,967 902 1,221,869 Matriculation -Non Credit 401,880 401,880 Matriculation - Administration 473,000 473,000 Matriculation - Administration 172,174 172,174 Matriculation - Administration 227,512 227,512 MESA 81,500 81,500 Quick Start Biotechnologies 271,114 271,114 SF AA Augmentation 625,218 34,000 659,218 Staff Development - AB 1725 1,279 1,279 Staff Diversity - AB 1725 22,693 38,754 61,447 Statewide Strategic Initiative Hub 121,000 121,000 242,000 Student Financial Aid Administration 215,263 215,263 Student Services Automated Reporting 410,630 410,630 Telecommunications and Technology 45,183 70,484 115,667 Transfer and Articulation 5,000 5,000


45

Cash Accounts Deferred Total Program Received Receivable Revenue Revenue ExEenditures

$ 57,142 $ $ $ 57,142 $ 57,142 745,370 727,512 17,858 17,858 839,223 750,509 88,714 88,714

1,803,475 1,311 1,804,786 1,804,786 26,928 26,928 26,928

123,035 97,994 221,029 221,029 616,369 63,463 552,906 552,906 164,960 164,960

5,000 194 4,806 4,806 437,558 301,513 136,045 136,045 545,094 97,093 448,001 448,001 173,321 10,190 183,511 183,511 419,963 19,910 400,053 400,053 138,088 802 137,286 137,286

1,278,030 1,278,030 1,278,030 206,574 206,574 206,574 190,014 22,406 212,420 212,420

1,165,861 593 1,165,268 1,165,268 86,295 43,438 42,857 42,857 99,991 57,155 42,836 42,836

72,060 72,060 72,060 14,691 3,034 11,657 11,657

655 8,558 9,213 9,213 559,709 350,829 208,880 208,880

1,221,869 1,221,869 1,221,869 401,880 24,362 377,518 377,518 359,855 141,320 218,535 218,535 172,174 172,174 172,174 227,512 227,512 227,512

61,125 20,375 81,500 81,500 127,465 103,226 230,691 230,691 659,218 659,218 659,218

1,279 1,279 1,279 61,447 30,734 30,713 30,713

159,621 54,938 104,683 104,683 215,263 215,263 215,263 410,630 206,677 203,953 203,953 115,667 51,666 64,001 64,001

5 000 5 000 5 000 $ 13z897z351 $ 336 120 $ \090:702 $ 11z142z769 $ 11z142z769

45


SCHEDULE OF WORKLOAD MEASURES FOR STATE GENERAL APPORTIONMENT- ANNUAL/ACTUAL ATTENDANCE FOR THE YEAR ENDED JUNE 30, 2008

Revised Reported Audit Audited

CATEGORIES

A. Summer Intersession 1. Noncredit 2. Credit

B. Summer lntersession 1. Noncredit 2. Credit

C. Primary Terms 1. Census Procedure Courses

(a) Weekly Census Contact Hours

(b) Daily Census Contact Hours

2. Actual Hours of Attendance Procedure Courses (a) Noncredit (b) Credit

3. Independent Study/Work Experience (a) Weekly Census Contact Hours (b) Daily Census Contact Hours

(c) Noncredit Independent Study/Distance Education Courses

D. Total FTES

E. Basic Skills courses and Immigrant Education (FTES) 1. Noncredit 2. Credit


46

Data Adjustments Data

187

1,672

4

16,612

1,934

1,219 392

599 140

22,759

790 636

1,426

187

1,672

4

16,612 1,934

1,219 392

599 140

22,759

790 636

1,426


RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT (CCFS-311) WITH FUND FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30,2008

Summarized below are the fund balance reconciliations between the Annual Financial and Budget Report (CCFS-311) and the fund financial statements.

FUND BALANCE Balance, June 30,2008, (CCFS-311)

Decrease in: Deferred revenue

Balance, June 30, 2008, Fund Financial Statement


General

$ 383,537

1,867,155

$ 2,250,692

47


RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEETS TO THE STATEMENT OF NET ASSETS

JUNE 30, 2008

Amounts Reported for Governmental Activities in the Statement of Net Assets are Different Because:

Total Fund Balance and Due to Student Groups: General Fund

Special Revenue Funds

Capital Project Funds

Debt Service Funds

Enterprise Funds Internal Service Funds

Fiduciary Funds Total Fund Balance and Due to Student Groups - All District Funds

Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds.

The cost of capital assets is

Accumulated depreciation is

Less fixed assets already recorded in the enterprise and fiduciary funds

Amounts held in tmst on behalf of others (Tmst and Agency Funds).

In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unma1ured interest on long-term obligations is recognized when it is incurred.

Long-term obligations at year end consist of:

Bonds payable

Unamortized premium Certificates of participation Notes payable

Capital leases payable Compensated absences (vacations)

Total Net Assets


48

$ 18,113,546

131,909 82,378,897

10,189,168

2,781,146

14,739,018

2,768,070

211,052,527

( 63,341 ,545) (22,458)

88,578,086 8,521,819 3,410,000

629,500

105,567 2,996,316

$ 131,101,754

147,688,524

(2,066,887)

(1 ,266, 780)

(1 04,241 ,288)

$ 171,215,323


NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2008

NOTE 1 -PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards

The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the United States Office of Management and Budget Circular A-133, Audits of" States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements.

Total expenditures by department are as follows:

U.S. Department of Education U.S. Department of Health and Human Services U.S. Department of Agriculture U.S. Department of Veterans Affairs National Science Foundation

Schedule of Expenditures of State Awards

$ 19,410,413 264,376 46,580

2,191 344,731

$ 20,068,291

The accompanying schedule of expenditures of State awards includes the State grant activity of the District and is presented on the modified accrual basis of accounting. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements.

Schedule of Workload Measures for State General Apportionment- Annual/Actual Attendance

Full-Time Equivaknt Students (FTES) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to community college districts. This schedule provides information regarding the attendance of students throughout the District.

Reconciliation of Annual Financial and Budget Report (CCFS-331) with Fund Financial Statements

This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Form CCFS-311 to the audited financial statements.

Reconciliation of the Governmental Funds Balance Sheets to the Statement of Net Assets

This schedule provides a reconciliation of the adjustments necessary to bring the District's fund financial statements, prepared on a modified accrual basis, to the accrual basis required under GASB Statement No. 35.

49


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APPENDIX C

CONTINUING DISCLOSURE UNDERTAKING

This Continuing Disclosure Undertaking (this “Disclosure Undertaking”) is executed and delivered by the Pasadena Area Community College District (the “District”) in connection with the execution and delivery of $26,705,000 aggregate principal or issue amount of the District’s 2002 Election General Obligation Bonds, 2009 Series D and $25,295,000 of its 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E (the “Bonds”). The Bonds are being issued pursuant to a Resolution adopted by the Board of Supervisors of the County of Los Angeles on September 15, 2009 (the “County Resolution”). Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the County Resolution.

In consideration of the execution and delivery of the Bonds by the District and the purchase of such Bonds by the Underwriter described below, the District hereby covenants and agrees as follows:

SECTION 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaking is being executed and delivered by the District for the benefit of the Bondholders and in order to assist RBC Capital Markets Corporation (the “Underwriter”) in complying with Rule 15c2-12(b)(5) (the “Rule”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SECTION 2. Additional Definitions. In addition to the above definitions and the definitions set forth in the County Resolution, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 4 and 5 of this Disclosure Undertaking.

“Bondholder” or “Holder” means any holder of the Bonds or any beneficial owner of the Bonds so long as they are immobilized with DTC.

“Designated Material Event” means any of the events listed in Section 6(a) of this Disclosure Undertaking.

“Dissemination Agent” shall mean any Dissemination Agent, or any alternate or successor Dissemination Agent, designated in writing by the Superintendent/President (or otherwise by the District), which Agent has evidenced its acceptance in writing. Initially, and in the absence of the specific designation of a successor or alternate Dissemination Agent, the Dissemination Agent shall be U.S. Bank National Association.

“Material Events Disclosure” means dissemination of a notice of a Material Event as set forth in Section 6.

“MSRB” shall mean the Municipal Securities Rulemaking Board.

“NRMSIR” shall mean, until otherwise designated by the Securities and Exchange Commission, the Electronic Municipal Market Access (“EMMA”) website of the MSRB located at http://emma.msrb.org.

“Repository” shall mean each NRMSIR and the State Repository, if any.

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“State Repository” shall mean any public or private repository or entity designated by the State of California as a state repository for purposes of the Rule. As of the date of this Disclosure Undertaking, no State Repository exists in the State of California.

SECTION 3. CUSIP Numbers and Final Official Statement. The CUSIP Numbers for the Bonds have been assigned. The Final Official Statement relating to the Bonds is dated September 30, 2009 (“Final Official Statement”).

SECTION 4. Provision of Annual Reports.

(a) The District shall cause the Dissemination Agent, not later than 240 days after the end of the District’s fiscal year (currently ending June 30), commencing with the report for the fiscal year ending June 30, 2009, to provide to each NRMSIR and file with the MSRB, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 5 of this Disclosure Undertaking. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 5 of this Disclosure Undertaking; provided that the audited financial statements of the District may be submitted, when and if available, separately from the balance of the relevant Annual Report.

(b) If the District is unable to provide to the Repository an Annual Report by the date required in paragraph (a) above, the District shall send a notice to each Repository in substantially the form attached as Exhibit A.

(c) The Dissemination Agent shall:

(i) determine the name and address of each Repository each year prior to the date established hereunder for providing the Annual Report; and

(ii) if the Dissemination Agent is other than the District or an official of the District, the Dissemination Agent shall file a report with the District certifying that the Annual Report has been provided pursuant to this Disclosure Undertaking, stating the date it was provided and listing all the Repositories to which it was provided.

SECTION 5. Content of Annual Report. The District’s Annual Report shall contain or incorporate by reference the following:

(a) Financial information including the general purpose financial statements of the District for the preceding fiscal year, prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board and the American Institute of Certified Public Accountants. If audited financial information is not available by the time the Annual Report is required to be filed pursuant to Section 4(a) hereof, the financial information included in the Annual Report may be unaudited, and the District will provide audited financial information to each Repository as soon as practical after it has been made available to the District.

(b) Operating data, including the following information with respect to the District’s preceding fiscal year (to the extent not included in the audited financial statements described in paragraph (a) above):

(i) State funding received by the District for the last completed fiscal year;

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(ii) enrollment of the District for the last completed fiscal year;

(iii) outstanding District indebtedness;

(iv) assessed value of taxable property in the District as shown on the most recent equalized assessment roll;

(v) top twenty property owners in the District for the then-current fiscal year, as measured by secured assessed valuation, the amount of their respective taxable value and their percentage of total secured assessed value;

(vi) summary financial information on revenues, expenditures and fund balances for the District’s General Fund reflecting adopted budget for the current fiscal year.

(c) Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or to the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The District shall clearly identify each other document so incorporated by reference.

SECTION 6. Reporting of Designated Material Events.

(a) The District agrees to provide or cause to be provided, in a timely manner, to each NRMSIR, in readable PDF or other electronic format as prescribed by the MSRB, notice of the following events with respect to the Bonds, if material:

(i) Principal and interest payment delinquencies.

(ii) Nonpayment-related defaults.

(iii) Unscheduled draws on any debt service reserves reflecting financial difficulties.

(iv) Unscheduled draws on any credit enhancements reflecting financial difficulties.

(v) Substitution of or failure to perform by any credit provider.

(vi) Adverse tax opinions or events affecting the tax-exempt status of the Bonds.

(vii) Modifications to rights of security holders.

(viii) Bond calls (other than mandatory, scheduled redemptions, not otherwise contingent upon the occurrence of an event).

(ix) Defeasances.

(x) Release, substitution or sale of any property securing the repayment of the Bonds.

(xi) Rating changes.

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SECTION 7. Termination of Reporting Obligation. The District’s obligations under this Disclosure Undertaking shall terminate when the District is no longer an obligated person with respect to the Bonds, as provided in the Rule, upon the defeasance, prior redemption or payment in full of all of the Bonds.

SECTION 8. Dissemination Agent. The Superintendent/President may, from time to time, appoint or engage an alternate or successor Dissemination Agent to assist in carrying out the District’s obligations under this Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

The Dissemination Agent shall be entitled to the protections, limitations from liability, immunities and indemnities provided to the Paying Agent set forth in the County Resolution which are incorporated by reference herein. The Dissemination Agent agrees to perform only those duties of the Dissemination Agent specifically set forth in the Disclosure Undertaking, and no implied duties, covenants or obligations shall be read into this Disclosure Undertaking against the Dissemination Agent.

The Dissemination Agent shall have no duty or obligation to review the Annual Report nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the District in a timely manner in a form suitable for filing. In accepting the appointment under this Disclosure Undertaking, the Dissemination Agent is not acting in a fiduciary capacity to the registered holders or beneficial owners of the Certificates, the District, or any other party or person.

The Dissemination Agent may consult with counsel of its choice and shall be protected in any action taken or not taken by it in accordance with the advice or opinion of such counsel. No provision of this Disclosure Undertaking shall require the Dissemination Agent to risk or advance or expend its own funds or incur any financial liability. The Dissemination Agent shall have the right to resign from its duties as Dissemination Agent under this Disclosure Undertaking upon thirty days’ written notice to the District. The Dissemination Agent shall be entitled to compensation for its services as Dissemination Agent and reimbursement for its out-of-pocket expenses, attorney’s fees, costs and advances made or incurred in the performance of its duties under this Disclosure Undertaking in accordance with its written fee schedule provided to the District, as such fee schedule may be amended from time to time in writing. The District agrees to indemnify and hold the Dissemination Agent harmless from and against any cost, claim, expense, cost or liability related to or arising from the acceptance of and performance of the duties of the Dissemination Agent hereunder, provided the Dissemination Agent shall not be indemnified to the extent of its willful misconduct or negligence. The obligations of the District under this Section shall survive the termination or discharge of this Disclosure Undertaking and the Bonds.

SECTION 9. Amendment. Notwithstanding any other provision of this Disclosure Undertaking, the District may amend this Disclosure Undertaking under the following conditions, provided no amendment to this Disclosure Undertaking shall be made that affects the rights, duties or obligations of the Dissemination Agent without its written consent:

(a) The amendment may be made only in connection with a change in circumstances that arises from a change in legal requirements, change in law or change in the identity, nature or status of the obligated person, or type of business conducted;

(b) This Disclosure Undertaking, as amended, 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; and

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(c) The amendment does not materially impair the interests of Holders, as determined either by parties unaffiliated with the District or another obligated person (such as the Bond Counsel) or by the written approval of the Bondholders; provided, that the Annual Report containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.

SECTION 10. Additional Information. If the District chooses to include any information from any document or notice of occurrence of a Material Event in addition to that which is specifically required by this Disclosure Undertaking, the District shall have no obligation under this Disclosure Undertaking to update such information or to include it in any future disclosure or notice of occurrence of a Designated Material Event.

Nothing in this Disclosure Undertaking shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Designated Material Event, in addition to that which is required by this Disclosure Undertaking.

SECTION 11. Default. The District shall give notice to the NRMSIR of any failure to provide the Annual Report when the same is due hereunder, which notice shall be given prior to July 1 of that year. In the event of a failure of the District to comply with any provision of this Disclosure Undertaking, any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Undertaking. A default under this Disclosure Undertaking shall not be deemed an event of default under the County Resolution, and the sole remedy under this Disclosure Undertaking in the event of any failure of the District to comply with this Disclosure Undertaking shall be an action to compel performance.

SECTION 12. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the District, the Dissemination Agent, the Underwriter and Holders from time to time of the Bonds, and shall create no rights in any other person or entity.

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SECTION 13. Governing Law. This Disclosure Undertaking shall be governed by the laws of the State, applicable to contracts made and performed in such State.

Dated: October 15, 2009 PASADENA AREA COMMUNITY COLLEGE DISTRICT By:

Interim Superintendent/President

ACCEPTED: U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent By:

Authorized Officer

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EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: Pasadena Area Community College District

Name of Issue: $26,705,000 2002 Election General Obligation Bonds, 2009 Series D and $25,295,000 2002 Election Taxable General Obligation Build America Bonds (Direct Subsidy), 2009 Series E

Date of Issuance: October 15, 2009

NOTICE IS HEREBY GIVEN that the above-named Issuer has not provided an Annual Report with respect to the above-named Bonds as required by Section 4(a) of the Continuing Disclosure Undertaking dated October 15, 2009. The Issuer anticipates that the Annual Report will be filed by ___________________.

Dated: _____________________

[ISSUER/DISSEMINATION AGENT] By:

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EXHIBIT B

Nationally Recognized Municipal Securities Information Repositories (NRMSIRs) The following NRMSIRs are approved by the Securities and Exchange Commission as of the date of this Disclosure Undertaking: Municipal Securities Rulemaking Board (MSRB) http://emma.msrb.org/

D-1

APPENDIX D

BOOK-ENTRY ONLY SYSTEM

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy or completeness thereof. The District cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Bonds, (b) Bonds representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) prepayment or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Official Statement. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedure” of DTC to be followed in dealing with DTC Participants are on file with DTC.

General

The Depository Trust Company (“DTC”), New York, New York, 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 will be issued for each maturity of the Bonds, 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also 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 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 is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). 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. The foregoing internet addresses are included for reference only, and the information on these internet sites is not incorporated by reference herein.

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

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of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in 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 DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping 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.

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

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District (or the Paying Agent on behalf thereof) 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 Bonds are credited on the Record Date (identified in a listing attached to the Omnibus Proxy).

Principal, Maturity Value, premium, if any, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or Paying Agent, on 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 District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, Maturity Value, premium, if any, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the 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 depository with respect to the Bonds at any time by giving reasonable notice to the District or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bonds are required to be printed and delivered.

The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository).Discontinuance of use of the system of book-entry transfers through DTC may require the approval of DTC Participants under DTC’s operational arrangements. In that event, printed certificates for the Bonds will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof.

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Discontinuation of Book-Entry Only System; Payment to Beneficial Owners

In the event that the book-entry system described above is no longer used with respect to the Bonds, the following provisions will govern the payment, transfer and exchange of the Bonds.

The principal, Maturity Value of the Bonds and any premium and interest upon the redemption thereof prior to the maturity will be payable in lawful money of the United States of America upon presentation and surrender of the Bonds at the office of the Paying Agent, initially located in Los Angeles, California. Interest on the Bonds will be paid by the Paying Agent by check or draft mailed to the person whose name appears on the registration books of the Paying Agent as the registered owner, and to that person’s address appearing on the registration books as of the close of business on the Record Date. At the written request of any registered owner of at least $1,000,000 in aggregate principal, payments shall be wired to a bank and account number on file with the Paying Agent as of the Record Date.

Any Bond may be exchanged for Bonds of any authorized denomination upon presentation and surrender at the office of the Paying Agent, initially located in Los Angeles, California, together with a request for exchange signed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. A Bond may be transferred only on the Bond registration books upon presentation and surrender of the Bond at such office of the Paying Agent together with an assignment executed by the registered owner or by a person legally empowered to do so in a form satisfactory to the Paying Agent. Upon exchange or transfer, the Paying Agent shall complete, authenticate and deliver a new Bond or Bonds of any authorized denomination or denominations requested by the owner equal in the aggregate to the unmatured principal amount of the Bond surrendered and bearing interest at the same rate and maturing on the same date.

Neither the District nor the Paying Agent will be required to exchange or transfer any Bond during the period from the Record Date through the next Interest Payment Date.

Documents

$52,000,000 PASADENA AREA COMMUNITY …cdiacdocs.sto.ca.gov/2009-1112.pdfOBLIGATION BONDS 2009 SERIES D and $25,295,000 2002 ELECTION TAXABLE GENERAL OBLIGATION BUILD AMERICA BONDS