municipal securities rulemaking board::emma - continuing … · 2011. 8. 9. · oakridge mall lp...

CONTINUING DISCLOSURE ANNUAL REPORT

FISCAL YEAR ENDING JUNE 30, 2009

IN CONNECTION WITH THE CONTINUING DISCLOSUREOBLIGATIONS:

$16,620,000SAN JOSÉ UNIFIED SCHOOL DISTRICT

(Santa Clara County, California)2001 Certificates of Participation


County of Santa Clara, California2001 General Obligation Refunding Bonds


(Santa Clara County, California)2002 General Obligation Bonds

(Election of 2002, Series A)

$24,754,371.20SAN JOSÉ UNIFIED SCHOOL DISTRICT2002 Refunding Certificates Of Participation



(Election of 2002, Series B)

$148,148,960.80SAN JOSÉ UNIFIED SCHOOL DISTRICT

(Santa Clara County, California)2005 General Obligation Refunding Bonds



(Election of 2002, Series C)


(Santa Clara County, California)2006 Refunding Certificates of Participation



(Election of 2002, Series D)

SAN JOSÉ UNIFIED SCHOOL DISTRICT645 Wool Creek Dr.

San José, California 95112

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(Santa Clara County, California)2001 Certificates of Participation

MATURITY DATE(January 1) CUSIP

2012 798182DB42013 798182DC22014 798182DD02015 798182DE82016 798182DF52017 798182DG32018 798182DH12019 798182DJ72020 798182DK42021 798182DL22022 798182DM0

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County of Santa Clara, California2001 General Obligation Refunding Bonds

MATURITY DATE(August 1) CUSIP

2011 798186QA32012 798186QB12013 798186QC92014 798186QD72015 798186QE52016 798186QF22017 798186QG02018 798186QH82019 798186QJ42020 798186QK12021 798186QL92024 798186QM7

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(Election of 2002, Series A)


2012 798186RU82013 798186RV62014 798186RW42015 798186RX22016 798186RY02017 798186RZ72018 798186SA12019 798186SB92020 798186SC72021 798186SD52022 798186SE32024 798186SF02027 798186SG8

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$24,754,371.20SAN JOSÉ UNIFIED SCHOOL DISTRICT2002 Refunding Certificates Of Participation

MATURITY DATE(January 1) CUSIP

2012 798182DU22013 798182DV02014 798182DW82015 798182DX62016 798182DY42017 798182DZ12018 798182EA52019 798182EB32020 798182EC12021 798182ED92022 798182EE72023 798182EF42024 798182EG22025 798182EH02026 798182EJ62027 798182EK32028 798182EL12029 798182EM9

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(Election of 2002, Series B)


2012 798186SU72013 798186SV52014 798186SW32015 798186SX12016 798186SY92017 798186SZ62018 798186TA02019 798186TB82020 798186TC62021 798186TD42022 798186TE22023 798186TF92024 798186TG72025 798186TH52026 798186TJ12029 798186TM4

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(Santa Clara County, California)2005 General Obligation Refunding Bonds


2012 798186UC42012 798186UD22013 798186UE02013 798186UF72014 798186UG52015 798186UH32015 798186UJ92015 798186UN02016 798186UP52017 798186UK62017 798186UL42018 798186UM2

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(Election of 2002, Series C)


2012 798186UV22013 798186UW02014 798186UX82015 798186UY62016 798186UZ32017 798186VA72018 798186VB52019 798186VC32020 798186VD12021 798186VE92022 798186VF62023 798186VG42024 798186VH22025 798186VJ82026 798186VK52027 798186VL32028 798186VM12029 798186VN92030 798186VP4

June 1, 2031 798186VQ2

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(Santa Clara County, California)2006 Refunding Certificates of Participation

MATURITY DATE(July 1) CUSIP

2012 798182ET42013 798182EU12014 798182EV92015 798182EW72016 798182EX52017 798182EY32018 798182EZ02019 798182FA42020 798182FB22021 798182FC02024 798182FD82011 798182FE62013 798182FF32014 798182FG12018 798182FH9

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(Santa Clara County, California)2008 General Obligation Bonds (Election of 2002, Series D)


2016 798186WB42017 798186WC22018 798186WD02019 798186WE82020 798186WF52021 798186WG32022 798186WH12023 798186WJ72024 798186WK42025 798186WL22026 798186WM02027 798186WN82028 798186WP32029 798186WQ12030 798186WR92032 798186WT5

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CONTINUING DISCLOSUREANNUAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2009

This Continuing Disclosure Annual Report has been prepared to satisfy the obligations of theSan José Unified School District (the “District”), as provided under that certain ContinuingDisclosure Certificate, dated August 21, 2001 (the “2001 COPs Disclosure Certificate”), executed byand between the District and the Union Bank, in connection with the issuance of the District’s$16,620,000 2001 Certificates of Participation (the “2001 COPs”); under that certain ContinuingDisclosure Certificate, dated July 12, 2001 (the “2001 Refunding Disclosure Certificate”), executedby the District in connection with the issuance of the District’s $21,490,000 2001 General ObligationRefunding Bonds (the “2001 Refunding Bonds”); under that certain Continuing DisclosureCertificate, dated July 24, 2002 (the “2002 Series A Disclosure Certificate”), executed by the Districtin connection with the issuance of the District’s $84,000,000 2002 General Obligation Bonds(Election of 2002, Series A) (the “2002 Series A Bonds”); under that certain Continuing DisclosureCertificate, dated November 6, 2002 (the “2002 Refunding Disclosure Certificate”), executed by theDistrict in connection with the issuance of the District’s $24,754,371.20 2002 Refunding Certificatesof Participation (the “2002 Refunding COPs”); under that certain Continuing Disclosure Certificate,dated May 3, 2005 (the “2002 Series B Disclosure Certificate”), executed by the District inconnection with the issuance of the District’s $91,000,000 2005 General Obligation Bonds (Electionof 2002, Series B) (the “2002 Series B Bonds”); under that certain Continuing Disclosure Certificate,dated January 4, 2006 (“the 2005 Refunding Disclosure Certificate”), executed by the District inconnection with the issuance of the District’s $148,148,960.80 2005 General Obligation RefundingBonds (the “2005 Refunding Bonds”); under that certain Continuing Disclosure Certificate, datedJune 27, 2006 (the “2002 Series C Disclosure Certificate”), executed by the District in connectionwith the issuance of the District’s $149,999,025.35 2006 General Obligation Bonds (Election of2002, Series C) (the “2006 Series C Bonds”); under that certain Continuing Disclosure Certificate,dated August 17, 2006 (the “2006 Refunding Disclosure Certificate”), executed by the District inconnection with the issuance of the District’s $32,875,000 2006 Refunding Certificates ofParticipation (the “2006 Refunding COPs”), under that certain Continuing Disclosure Certificate,dated May 6, 2008 (the “2002 Series D Disclosure Certificate,” and together with the 2001 COPsDisclosure Certificate, the 2001 Refunding Disclosure Certificate, the 2002 Series A DisclosureCertificate, the 2002 Refunding Disclosure Certificate, the 2002 Series B Disclosure Certificate, the2005 Refunding Disclosure Certificate, the 2002 Series C Disclosure Certificate and the 2006Refunding Disclosure Certificate, the “Disclosure Certificates”), executed by the District inconnection with the issuance of the District’s $104,000,000 2008 General Obligation Bonds(Election of 2002, Series D) (the “2002 Series D Bonds,” and together with the 2001 COPs, the 2001Refunding Bonds, the 2002 Series A Bonds, the 2002 Refunding COPs, the 2002 Series B Bonds, the2005 Refunding Bonds, the 2002 Series C Bonds and the 2006 Refunding COPs, the “Bonds”).

The 2001 COPs have been issued pursuant to a Trust Agreement, dated as of August 1, 2001,by and among the District, Union Bank of California, N.A., as Trustee, and the San José UnifiedSchool District Financing Corporation (the “Corporation”). The 2001 Refunding Bonds have beenissued pursuant to a Resolution of the District dated June 7, 2001. The 2002 Series A Bonds havebeen issued pursuant to a Resolution of the District dated June 20, 2002 and a Resolution of theBoard of Supervisors of the County of Santa Clara (the “County”) adopted on June 25, 2002. The2002 Refunding COPs have been issued pursuant to a Trust Agreement, dated November 1, 2002, byand among the District, Union Bank of California, N.A., as Trustee, and the Corporation. The 2002Series B Bonds have been issued pursuant to a resolution of the District adopted March 10, 2005 anda resolution of the County adopted March 22, 2005. The 2005 Refunding Bonds have been issued

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pursuant to a resolution of the District adopted November 3, 2005. The 2002 Series C Bonds havebeen issued pursuant to a resolution of the District adopted May 18, 2006 and a resolution of theCounty adopted May 23, 2006. The 2006 Refunding COPs have been issued pursuant to a TrustAgreement, dated as of August 1, 2006, by and among the District, the Corporation and The Bank ofNew York Trust Company, N.A., as trustee. The 2002 Series D Bonds have been issued pursuant toa resolution of the District adopted March 20, 2008 and a resolution of the County adopted onApril 8, 2008.

As provided in Section 3 of the Disclosure Certificates, this Continuing Disclosure AnnualReport is being prepared to be forwarded to the Municipal Securities Rulemaking Board throughtheir EMMA website at http://emma.msrb.org for the benefit of the Beneficial Owners of the Bondsand the Participating Underwriter. All capitalized terms used herein shall have the meanings setforth in the Disclosure Certificates.

The following information is being provided as required under Section 4 of the DisclosureCertificates:

1. The audited financial statements of the District for the Fiscal Year ending June 30,2009 is attached hereto as Exhibit A.

2. The adopted annual budget of the District for the Fiscal Year ending June 30, 2010, isattached hereto as Exhibit B.

3. An update from the Official Statement, dated August 2, 2001, relating to the 2001COPs; the Official Statement, dated June 28, 2001, relating to the 2001 Refunding Bonds; theOfficial Statement, dated July 24, 2002, relating to the 2002 Series A Bonds, the Official Statement,dated October 17, 2002, relating to the 2002 Refunding COPs, the Official Statement dated May 3,2005, relating to the 2002 Series B Bonds; the Official Statement, dated December 14, 2005, relatingto the 2005 Refunding Bonds, the Official Statement, dated June 8, 2006, relating to the 2002Series C Bonds, the Official Statement, dated August 3, 2006, relating to the 2006 Refunding COPs,and the Official Statement, dated April 24, 2008, relating to the 2002 Series D Bonds (collectively,the “Official Statements”), in regards to information contained in the following sections of theOfficial Statements:

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A. Assessed Valuation

The following table summarizes the taxable assessed valuation of property within theDistrict.

San José Unified ELEMENTARY SCHOOL DISTRICTAssessed Valuations

Fiscal Years 2005-06 to 2011-12

Fiscal YearNet Taxable

Assessed ValuationAnnual

% Change

2005-06 $27,829,793,657 8.8%2006-07 29,062,877,247 4.42007-08 32,660,744,891 12.42008-09 33,269,400,023 1.92009-10 34,857,012,427 4.82010-11 33,782,717,469 (3.08)2011-12 32,394,482,073 (4.11)

B. Secured Tax Levy and Delinquencies

The secured tax levy and year-end delinquencies for the District are included for the fiscalyears shown in the Table below.

SECURED TAX CHARGES AND DELINQUENCY RATESFiscal Years 1995-96 through 2008-09

County of Santa Clara

FiscalYear

SecuredTax Charge (1)

AmountDelinquent

June 30

PercentDelinquent

June 302005-06 $19,734,876.50 $344,397.64 1.75%2006-07 25,215,748.96 706,476.32 2.802007-08 28,460,003.03 1,061,809.34 3.732008-09 30,162,888.29 1,183,475.11 3.922009-10 33,144,206.90 871,762.37 2.63

(1) Debt service levy only.

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C. Largest Secured Taxpayers

20 LARGEST LOCAL SECURED TAXPAYERS2009-10 Assessed Valuations

San Jose Unified School District

Property Owner Primary Land Use2009-10

Assessed Valuation% of

Total (1)

1. Adobe Systems Inc. Sublessee Office Building $338,899,727 1.02%2. Sobrato Development Co. Office Building 278,822,219 0.843. Oakridge Mall LP Shopping Center 244,581,229 0.744. Blackhawk Parent LLC Office Building 233,257,680 0.705. Park Center Plaza Investors LP Office Building 180,591,000 0.546. Legacy Partners I Riverpark LLC Office Building 143,220,677 0.437. BEA Systems Inc. Office Building 140,454,000 0.42

8.Legacy Partners II SJ AlmadenLLC

Office Building 130,050,000 0.39

9.International Business MachinesCorporation

Manufacturing 108,536,246 0.33

10. Tishman Speyer Archstone-Smith Apartments 99,940,813 0.3011. KMF Foxchase LLC Apartment 92,927,581 0.2812. San Jose Water Works Water Company 91,752,638 0.28

13. 360 Residences LLCResidential

Development87,553,844 0.26

14. Light Tower Associates LP Commercial 85,791,581 0.2615. Walton San Jose Investors III LLC Commercial 85,075,846 0.2616. Guardian KW Blossom Hill LLC Apartments 83,580,000 0.2517. FC Fairmont SPE, LLC Hotel 81,216,098 0.24

18.Legacy III SJ America Center ILLC

Office Building 79,659,855 0.24

19. SMS-VEF IV LLC Office Building 73,060,083 0.2220. Alameda Financing LP Apartments 68,873,735 0.21

$2,727,844,852 8.21%

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D. General Fund Revenues and Expenditures

The table below summarizes the District’s budgeted General Fund Revenues andExpenditures for Fiscal Year 2009-10:

GENERAL FUND REVENUES AND EXPENDITURESFiscal Year 2009-10

REVENUESRevenue Limit Sources $175,448,741Federal Revenue 24,614,626Other State Revenues 68,690,713Other Local Revenues 12,975,217TOTAL REVENUES 281,729,297

EXPENDITURESCertificated Salaries 138,502,335Classified Salaries 40,362,940Employee Benefits 58,565,940Books and Supplies 19,279,982Services and Other Expenses 31,612,296Other Outgo 581,879Capital Outlay 319,815Direct Support/Indirect Costs (489,365)Debt Service – Principal --Debt Service – Interest --TOTAL EXPENDITURES 288,735,822

EXCESS (DEFICIENCY) OF REVENUES OVEREXPENDITURES

(7,006,525)

OTHER FINANCING SOURCES/USES 6,531,895

EXCESS (DEFICIENCY) OF REVENUES (474,630)

BEGINNING FUND BALANCE (July 1) 54,070,787

ENDING FUND BALANCE (June 30) $53,596,157

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The information set forth in Parts A, B and C above, which was obtained from CaliforniaMunicipal Statistics, Inc., is believed by the District to be reliable but has not been independentlyverified by the District and is not guaranteed as to accuracy by the District. There can be noassurance on to the accuracy of such information and inquiries concerning the scope andmethodology of procedures carried out to complete such information should be directed to CaliforniaMunicipal Statistics, Inc.

SAN JOSÉ UNIFIED SCHOOL DISTRICT

/s/ Ann JonesChief Business Officer

A-1

EXHIBIT A

AUDITED FINANCIAL STATEMENTS OF THE DISTRICTFOR FISCAL YEAR ENDING JUNE 30, 2009

(see attachment)

SAN JOSE UNIFIED SCHOOL DISTRICT

ANNUAL FINANCIAL REPORT

JUNE 30, 2009


OF SANTA CLARA COUNTY

SAN JOSE, CALIFORNIA

JUNE 30, 2009

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES

Leslie B. Reynolds President 2012

Veronica Grijalva Lewis Vice President 2010

Pamela Foley Member 2012

Jorge Gonzalez Member 2012

Richard Garcia Member 2010

ADMINISTRATION

Don Iglesias Superintendent

Ann Jones Chief Business Officer Administrative Services

William Erlendson Assistant Superintendent, Educational Accountability and Community Development

Chris Funk Assistant Superintendent, Instructional Services


TABLE OF CONTENTS JUNE 30, 2009

FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 3 Basic Financial Statements

Government-Wide Financial Statements Statement of Net Assets 18 Statement of Activities 19

Fund Financial Statements Governmental Funds - Balance Sheet 20 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 21 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balance 22 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 23

Proprietary Fund - Statement of Net Assets 25 Proprietary Fund - Statement of Revenues, Expenses, and Changes in Fund Net Assets 26 Proprietary Fund - Statement of Cash Flows 27 Fiduciary Funds - Statement of Net Assets 28 Notes to Financial Statements 29

REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 58 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 59

SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 60 Local Education Agency Organization Structure 62 Schedule of Average Daily Attendance 63 Schedule of Instructional Time 64 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 65 Schedule of Financial Trends and Analysis 66 Schedule of Charter Schools 67 Combining Statements - Non-Major Governmental Funds

Combining Balance Sheet 68 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance 69

Note to Supplementary information 70

INDEPENDENT AUDITOR'S REPORTS Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 72 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 74 Report on State Compliance 76

SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor's Results 78 Financial Statement Findings 79 Federal Award Findings and Questioned Costs 80 State Award Findings and Questioned Costs 81 Summary Schedule of Prior Audit Findings 83

FINANCIAL SECTION

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

VALUE THE DIFFERENCE

INDEPENDENT AUDITOR'S REPORT

Governing Board San Jose Unified School District San Jose, California

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the San Jose Unified School District (the "District") as of and for the year ended June 30, 2009, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Standards and Procedures for Audits of California K-I2 Local Educational Agencies 2008-09, issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the San Jose Unified School District, as of June 30, 2009, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated November 16, 2009, on our consideration of the District's internal control over financial 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 control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit.

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

260 Sheridan Avenue, Suite 440 Palo Alto, CA 94306 Tel: 650.462,0400 Fax: 650,462.0500 www.vtdcpa.com

FRESNO • LAGUNA FULLS PALO ALTO • PLEASANTON • RANCHO CUCAMONGA

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial 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 State, Local Governments, and Non-Profit Organizations, the Combining Statements — Non-Major Governmental Funds, is presented for purposes of additional analysis and is not a required part of the basic financial 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 financial statements taken as a whole.

qaorum)i—q—AA4a- In 4 (o LLP Palo Alto, California November 16, 2009

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SAN JOSE UNIFIED SCHOOL DISTRICT Management's Discussion and Analysis

June 30, 2009

PROFILE OF THE DISTRICT

Organization

San Jose Unified School District (the "District") is one of the largest urban school districts in California serving approximately 32,000 students from kindergarten through grade twelve. Located 50 miles south of San Francisco, in the heart of the Silicon Valley, the District serves a large portion of the city of San Jose and encompasses approximately 100 square miles. The number of schools operated during the 2008-09 school year is as follows:

School Type Number Elementary (K-5) 25 K-8 2 Middle Schools (6-8) Comprehensive High Schools (9-12) 6 Continuation High School 1 Community Day School 1

The student population is 27% White, 52% Hispanic, 13% Asian, 3% Black and 5% Other. San Jose Unified employs approximately 3,500 people.

The District had two Charter Schools in 2008-09, Downtown College Preparatory and Bachrodt Elementary School (a conversion charter). Downtown College Preparatory is a direct-funded charter school that receives its allocation of state funds directly from the state. Its financial activities are not reflected in the District's books. Bachrodt is a conversion charter school and its activities are included in the District's books.

Mission and Vision

The purpose of the San Jose Unified School District is to prepare students from a diverse community with the attitudes, knowledge, and skills required to learn and to become productive and responsible citizens who value themselves and others; think critically and creatively, and solve problems individually and collaboratively using multiple technologies; determine personal goals necessary for lifelong learning, productive employment, and competition in a global economy; and demonstrate personal and recognized achievement.

Continuous Improvement

The District's Continuous Improvement (CI) System is based upon deployment of Mission, Vision and Values, and the six Strategic Plan Goals, which are validated annually through performance reviews. The CI process is directed not only at students, but at all other stakeholders including teachers, site administrators, district office staff, parents and community.

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June 30, 2009

Desegregation/Voluntary Integration

The 2008-09 school year marks the fifth year of the District's release from a Federal Desegregation Court Order signed on December 31, 1985 on behalf of the Hispanic student population. The distribution of student demographic populations within the district is due, in part, to the odd geographical configuration of district boundaries. The 1985 Federal Court ordered the District to follow a plan, which is based primarily on parents making choices of the schools they wish their children to attend. The court order was modified in 1998 to allow elementary age students to attend their neighborhood schools. In order to integrate schools; the District offers parents and students a wide variety of middle and high school program and school choices. In May 2003, San Jose Unified School District adopted a voluntary integration plan as part of the release from Federal Court Oversight.

Community Support for Bonds

In 1997, the District passed by a 75% margin, a $165 million bond measure, Measure C, to renovate school facilities, which were on the average over 30 years old. In 2002, the District successfully passed by a 68% margin, a $429 million Measure F bond to bring all facilities up to standard. This was one of the largest bond measures passed by a school district in northern California.

OVERVIEW OF THE FINANCIAL STATEMENTS

This management's discussion and analysis is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements comprise three components: (1) District-wide statements, (2) fund financial statements, and (3) notes to the basic financial statements. In addition to the basic financial statements this report also provides required and other supplementary information.

District-wide Statements

District-wide financial statements provide both short-term and long-term information about the District's overall financial status, in a manner similar to a private-sector business. The statement of net assets, reports all financial and capital resources of the District, which may serve over time as a useful indicator of the District's financial position. The statement of activities reports the District's net assets and how they have changed. All of the District's revenues are recognized in the accounting period in which they become available and measurable, and expenditures are recognized in the accounting period in which the fund liability occurred regardless of the timing of related cash flow.

Fund Financial Statements

The fund financial statements are designed to report information about the District's most significant funds. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required by State law and by bond covenants. The District establishes other funds to control and manage money for particular purposes or to show that it is properly using certain revenues.

Fund financial statements focus on individual parts of the District, reporting the District's operations in more detail than the district-wide statements.

o Governmental funds statements tell how basic services such as instruction and pupil services were financed in the short term as well as what remains for future spending. Most of the District's basic services are included in governmental funds. Because this information does not encompass the additional long-term focus of the district-wide statements, we provide additional information in the reconciliation statements that explains the relationship (or differences) between them.

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June 30, 2009

o Proprietary fund statements offer financial information about the activities the district operates on a cost reimbursement basis, such as the self-insurance fund. Proprietary funds are reported in the same way as the district-wide statements. The District currently has two internal service funds — the self-insurance fund for workers' compensation and the self-insurance fund for health and welfare.

o Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes. All of the District's fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. We exclude these activities from the district-wide financial statements because the District cannot use these assets to finance its operations.

Notes to the Basic Financial Statements

Notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in district-wide and fund financial statements. The notes to the financial statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District's general fund budget, both the adopted and final version, with year end actuals.

San Jose Unified School District Net Assets

(in millions of dollars)

Assets

Governmental Activities 2009 2008

Current and other assets $ 353.45 $ 342.95 Capital assets, net of depreciation 644.13 654.29

Total assets 997.58 997.24

Liabilities Current liabilities 88.94 88.35 Long-term debt 675.78 685.03

Total liabilities 764.72 773.38

Net Assets: Invested in capital assets, net of related debt 85.67 104.16 Restricted 88.76 85.06 Unrestricted 58.43 34.64

Total net assets $ 232.86 $ 223.86


June 30, 2009

FINANCIAL HIGHLIGHTS

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE

Net Assets

The statement of net assets compares assets to liabilities to give an overall view of the financial position of the District. At the close of fiscal year 2008-09, the District has net assets of $232,860,483. Of this amount, $85,667,348 is invested in capital assets (land, buildings, and equipment), $88,764.146 is set aside for restricted programs, and the remaining balance of $58,428,989 is available for unrestricted general use.

San Jose Unified School District Changes In Net Assets (in millions of dollars)

Governmental Activities 2009 2008

Revenues Program Revenues

Charges for Services and Sales 3.65 3.96

Operating Grants and Contributions 117.32 107.70

General Revenues Property taxes, levied for general purposes and debt

service 204.78 192.63 Federal and State aid not restricted to specific

purposes 20.64 30.05

Interest and miscellaneous 42.92 33.62

Total revenues 389.31 369.96

Expenditures

instruction and related activities 257.64 258.88 Pupil services 34.69 34.90 General administration 14.62 11.78 Plant services 33.78 30.97 Ancillary services 4.33 4.06 Interest on long-term debt 31.76 28.23 Other (outgo) 3.49 3.56

Total expenditures 380.31 372.38

Increase (Decrease) In Net Assets 9.00 $ (2.42)


June 30, 2009

Changes in Net Assets

The District's governmental activities revenues totaled $389,313,990 in fiscal year 2008-09, an increase of 5.2% over the last year. The two largest revenues are the operating grants provided by the state and the property taxes levied for general purposes and debt service. Expenditures for the District during the fiscal year were $380,309,970, approximately 2.1% higher than last year. As a result of the excess of revenues over expenditures, the total net assets of the District increased by $9 million.

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2008-2009 General Fund Revenue

Other local sources

Other state $14,926,959 $80,582,154

Revenue limit $174,911,086

Federal revenue $40,609,405

ADA by Year

31,500

31,000

30,500

30,000

29,500

29,000

28,500

28,000

98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09


June 30, 2009

GENERAL FUND

Revenue

For fiscal year 2008-09, the District received $311,029,604 in total revenue from federal, state and local sources. State-controlled revenue (revenue limit plus other state revenue) represents over 82.1% of the District's general fund income. The following is a graphic presentation of revenues by source used to fund the District's operating activities.

Enrollment/ADA Trends

Average daily attendance (ADA) drives the amount of revenue received under the Revenue Limit formula, as well as many State grants. The District experienced enrollment growth in 2007-08 and 2008-09, after six years of decline. The District projects a continued trend of enrollment growth in 2009-10, primarily concentrated at the elementary and high school levels.

8

General Fund Expenditures

In M

illio

ns

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

$40.00

$20.00

$-

II 2008

III 2009

Certificated Classified Employee Materials & Utilities Other Salaries Salaries Benefits Supplies

99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

$40.00

0

$30.00 ■ Restricted N Unrestricted


June 30, 2009

Expenditures

The largest components of the District's expenditures were salaries and benefits of teachers and support personnel. In fiscal year 2008-09, the salaries and related benefits totaled $242,396,865, which accounted for 83.5% of total general fund expenditures. Instructional materials and supplies expenses decreased 4.6% to $13,463,961. Utilities costs were $6,947,633, a decrease of 4.6% compared to the same period last year.

Results of Operation in the General Fund

The General Fund is used to account for the District's general and administrative expenditures. The District ended the year with a general fund balance of $54,070,787 (Unrestricted $27.76 million and Restricted $26.31 million) in fiscal year 2008-09.

General Fund Ending Balance

9


June 30, 2009

RESULTS OF OPERATION IN OTHER FUNDS

SPECIAL REVENUE FUNDS

None of the Special Revenue funds is considered a "Major Governmental Fund" in the annual financial report. The financial results of the following funds are reported together as part of the Non-major Governmental Funds.

SPECIAL REVENUE FUNDS

Balance as ofJune 30, 2009

(Amounts in Thousands)

Beginning

Adult Education

Child Development Cafeteria

Deferred Maintenance

Special Reserve

Retiree Benefit Total

Balance $ $ - $ 286 10,617 $30,349 $ 949 $42,201

Revenues 5,480 1,935 9,601 1,327. 776 24 19,143

Expenditures 5,480 1,935 9,602 3,483 - 20,500 Excess (deficiency) of revenue over expenditures - (1) (2,156) 776 24 (1,357)

Transfers in - - 453 - - 453 Transfers out Ending Balance $ - 285 $ 8,914 . $31,125 $ 973 $41,297

Adult Education Fund

Adult Education programs are conducted by the Metropolitan Education Joint Powers Agency (Metro Ed), of which San Jose Unified School District is a member. SJUSD passes through revenue to Metro Ed.

Child Development Fund

The Child Development Fund is used to account separately for federal, state, and local revenues to operate child development programs.

10


June 30, 2009

Cafeteria Fund

The Cafeteria Fund is used to account separately for federal, state and local revenues to operate the District's child nutrition services. The Cafeteria Fund ended the year with a fund balance of $284,778, which was reserved for stores inventories.

Deferred Maintenance Fund

The Deferred Maintenance Fund is used to repair or replace qualifying district property that has exceeded its useful life, as established by the District's five-year plan. Under the Deferred Maintenance program, the State usually matches funds deposited by the District. The District made its contribution from the Building Fund (Measure F bond proceeds), in the form of an interfund transfer. The Deferred Maintenance Fund began the year with a fund balance of $10,616,613, which decreased to $8,914,078 at fiscal year end.

Special Reserve Fund

The District is required to maintain a 3% reserve for economic uncertainty. The Special Reserve Fund began the year with a fund balance of $30,348,622 which increased to $31,124,704 at fiscal year end. The District received interest income of $776,082 during the year 2008-09.

Retiree Benefit Fund

The Retiree Benefit Fund is used to accumulate general fund monies for retirees' benefits purposes. The Retiree Benefit Fund began the year with a fund balance of $949,420, which increased to $973,656 at fiscal year end.

CAPITAL PROJECTS FUNDS

The District has an active construction program financed from state modernization assistance, General Obligation (GO) Bonds, and proceeds from Certificates of Participation (COPs). Repayment of GO bonds and COPs comes from property tax overrides authorized by the GO Bond Issue and other specified revenue sources (i.e. lease revenue) respectively.

Building Fund

The Building Fund is considered a "Major Governmental Fund", and as such is reported separately in the financial statements. The Building Fund consists of several sub-funds that account separately for Lease Income, Measure C bond proceeds, Measure F bond proceeds, and proceeds from Certificates of Participation, including two Qualified Zone Academy Bonds (QZAB's).

The District spent $67,417,101 in capital projects in 2008-09, compared with $105,859,734 during the prior year. Major funding applied to capital projects included $47,393,517 from Measure F Bond fund, $8,421,616 from Measure C Bond fund, $5,466,144 from lease revenue, with the remainder financed by debt. The Building Fund ended the year with a fund balance of $98,657,069.

11

BUILDING FUND

Balance as of June 30, 2409 (Amounts in Thousands)

Beginning

Leases

Child Care

Facilities

Bond Measure

C

Bond Measure

F

Certificates of

Participation Total

Balance $6,692 131 $23,934 $74,917 $ 48,948 $154,622

Revenues 5,145 697 434 1,479 2,761 10,516

Expenditures 4,866 600 8,421 47,394 6,136 67,417 Excess (deficiency) of revenue over expenditures 279 97 (7,987) (45,915) (3,375) (56,901)

Transfers in - 2,629 2,629 Transfers out (167) (1,526) (1,693) Ending Balance $6,804 $ 228 $15,947 $27,476 $ 48,202 $ 98,657


June 30, 2009

OTHER CAPITAL PROJECTS FUNDS

The District maintains additional capital projects funds that are considered "Non-Major Funds". These are the Capital Facilities Funds, which record resources received from developer fees, and the County Schools Facilities Fund, which accounts for state modernization funds received in accordance with the School Facilities Act of 1998.

12

OTHER CAPITAL PROJECTS FUNDS

Balance as of June 30, 2009 (Amounts in Thousands)

Beginning Balance

Capital Facilities

County School

Facilities Total

$ 7,372 7,372

Revenues 877 12,507 13,384

Expenditures 38 38 Excess (deficiency) of revenue over expenditures 839 12,507 13,346

Transfers in -

Transfers out (2,600) (2,600)

Ending Balance $ 5,611 $ 12,507 $ 18,118


June 30, 2009

INTERNAL SERVICE FUNDS

The District maintains two self-insurance funds: the Workers' Compensation Fund and the Health and Welfare Fund. The Workers' Compensation Fund is funded by an assessment on all salaries and wages paid by the District. The contribution rate was 1.25% in fiscal year 2008-2009. The District works to provide and maintain a safe work environment for all employees. Periodic safety trainings for preventing work-related injury and disease are conducted. As a result of the District's continued effort, workers' compensation claims have dropped steadily over the past five years.

The rising costs of medical and dental benefits continued to be a major area of concern. The District instituted a cap on its contributions to the cost of employees' medical benefits and implemented the plan to reduce expenditures commencing fiscal year 2007-08. With efforts in cost reductions, the District has managed to contain health care costs.

13

24,000,000

23,000,000

22,000,000

21,000,000

20,000,000 2007 2008 2009 2010

(projected)

INTERNAL SERVICE FUNDS

Balance as of June 30, 2009

(Amounts in Thousands)

Workers' Compensation

Health & Welfare Total

Beginning Balance $ 6,288 4,575 $ 10,863

Revenues 2,708 25,206 27,914

Expenditures 2,313 25,010 27,323 Excess (deficiency) of revenue over expenditures 395 196 591

Transfers in

Transfers out -

Ending Balance 6,683 $ 4,771 $ 11,454

H&W Multi-Year Costs


June 30, 2009

14

CAPITAL ASSETS AT YEAR-END (In Millions of Dollars)

Cost

Total School District Total

Changes 2009 2008

Land $ 12.62 $ 12.62 $

Construction in Progress 20.98 24.88 (3.90)

Buildings & Improvements 801.18 740.60 60.58

Furniture & Equipment 8.48 8.41 0.07

843.26 786.51 56.75

Accumulated Depreciation: Buildings & Improvements 158.92 126.28 32.64

Furniture & Equipment 6.61 5.95 0.66

165.53 132.23 33.30

Net Book Value: Land 12.62 12.62

Construction in Progress 20.98 24.88 (3.90)

Buildings & Improvements 642.26 614.32 27.94

Furniture & Equipment 1.87 2.46 (0.59)

$ 677.73 $ 654.28 $ 23.45


June 30, 2009

CAPITAL ASSET AND DEBT ADMINISTRATION

CAPITAL ASSETS

At June 30, 2009, the District had $677,725,075 invested in capital assets, including land, site improvements, buildings, and furniture and equipment. The District's capital assets are recorded in the district-wide financial statements at historical cost and are being depreciated using the straight-line method over the estimated useful life. Capital additions for construction totaled $60,459,369 in 2008-09. Many construction projects are in various stages of completion. The details of these assets are presented below. Additional information about the District's capital assets is presented in Note 4 to the financial statements.

15

OUTSTANDING LONG-TERM DEBT AT YEAR-END (In Millions of Dollars)

Debt Outstanding:

Total School District Total

Changes 2009 2008

General Obligation Bonds $ 562.21 $ 573.61 $ (11.40)

Certificates of Participation 96.76 99.83 (3.07)

Accumulated Vacation 0.69 0.90 (0.21)

PARS Incentive Payment 0.72 (0.72)

Capitalized Leases Lease Revenue Bonds 1.07 1.31 (0.24)

Qualified Zone Academy Bonds 30.00 30.00

$ 690.73 $ 706.37 $ (15.64)


June 30, 2009

LONG-TERM DEBT

The District had a total of $690,732,611 in outstanding long-term debt at the end of the fiscal year 2008-09. The District uses the debt proceeds to fund for its school modernization projects which include new school buildings, and major school building improvements. More detailed information about the District's long-term liabilities is presented in Note 8 to the financial statements.

FACTORS BEARING ON THE DISTRICT'S FUTURE

• In February 2009, Congress passed the American Recovery and Reinvestment Act (ARRA). ARRA funding was distributed to school districts in three separate grants. Two of the grants are augmentations to existing federal support to schools: Individuals with Disabilities Education Act (IDEA) funds and No Child Left Behind (Title I) funds. The spending rules follow those of the base grants. A third apportionment, the State Fiscal Stabilization Fund (SFSF), can be used for most educational purposes. The District was granted one-time allocations of $5,979,695 in IDEA, $3,679,535 in Title I, and $18,177,101 in SFSF funds. The ARRA funding is intended to ensure that school districts have the resources to avert program cuts and retain teachers through school year 2010-11. These one-time funds temporarily lessen the impact of severe state budget reductions. However the District must plan for future reduced state funding without this one time federal support.

• In 2008/09 the Governor approved flexibility in over 40 state categorical programs for five years, allowing districts to use these funds for any educational purpose and effectively unrestricting the funding. This flexibility was designed to compensate for deep funding cuts to education. The flexibility programs are designated as "Tier III" programs and include Adult Education, Instructional Materials, School and Library Block Grant, the Targeted Instructional Improvement Grant and numerous other grants. Tier III funding has been cut 20% in 2009-10 when compared with 2007-08 funding. Through this new flexibility, the District is now able to move about $50.8 million annually of formerly restricted categorical funds to the unrestricted general fund. While this funding could be used to provide relief to general operations, the original purpose of

16


June 30, 2009

the Tier III funds was to provide additional support to students in the areas of instructional intervention, counseling and similar activities, and these needs have not gone away. Therefore the funds have been deposited into a separate sub-fund of the Unrestricted General Fund and they have been zero-based budgeted to maintain highest priority support programs. Thus the funds continue to retain some of their original categorical characteristics.

• In 2009/10 the District increased class sizes in Kindergarten through grade 2 from 20:1 to 30:1. Third grade class sizes were already increased to 30:1 in 2005-06. Reduced penalty provisions within the K-3 Class Size Reduction (CSR) program mean that the District is able to have larger class sizes in grades K-3 and still retain some of the CSR incentive funding. This flexibility provision expires in 2011/12.

• After six years of decline, the District experienced enrollment growth in 2007-08 and 2008-09. The District is projecting continued enrollment growth in elementary and high school levels. Actual enrollment as of October 2009 showed that there was an overall enrollment increase of 473 students from October 2008 to October 2009.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of the District's finances and to assist interested parties in understanding the District's sources and uses of resources. If you have questions about this report or need additional financial information, please contact:

Ann Jones Chief Business Officer San Jose Unified School District 855 Lenzen Avenue San Jose, CA 95126

17


STATEMENT OF NET ASSETS JUNE 30, 2009

Governmental

Assets Activities

Deposits and investments $ 277,852,862

Receivables 34,205,785

Prepaid expenses 626,749

Deferred charges 6,585,601

Stores inventories 552,762

Other current assets 30,563

Capital assets not depreciated 33,596,637

Capital assets, net of accumulated depreciation 644,128,436

Total assets 997,579,395

Liabilities Overdrafts 735,890

Accounts payable 43,064,505

Interest payable 10,264,865

Deferred revenue 7,321,391

Claim liabilities 11,928,265

Current portion of long-term obligations 19,093,126

Noncurrent portion of long-term obligations 672,310,870

Total liabilities 764,718,912

Net Assets Invested in capital assets, net of related debt 85,667,348

Restricted for:

Legally restricted 33,213,946

Capital projects 18,117,776

Special revenues 9,198,856

Debt service 15,806,014

Self insurance 11,725,853

Retiree benefits 973,656

Unrestricted 58,157,034 Total net assets $ 232,860,483

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

18


STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009

Charges for

Services and

Functions/Programs Expenses Sales

Governmental activities:

Instruction $ 199,309,188 $

Instruction related activities:

Supervision of instruction 33,291,093 81,924

Instructional library and technology 1,258,318

School site administration 23,778,669 32,565

Pupil services:

Home-to-school transportation 8,146,348 78,536

Food services 10,147,003 2,072,842

All other pupil services 16,396,090 50,795

General administration:

Data processing 2,473,715

All other general administration 12,145,496 103,141

Plant services 33,780,873 31,715

Ancillary services 4,328,146 52,790

Enterprise services 124,620 25,458

Interest on long-term debt 31,762,357

Other (outgo) 3,368,054 933,385 Total governmental activities $ 380,309,970 $ 3,650,781

Net (Expenses)

Revenues and

Changes in

Net Assets

25,604,851 (7,604,318)

658,609 (599,709)

5,354,572 (18,391,532)

4,850,177 (3,217,635)

6,996,430 (1,077,731)

8,168,749 (8,176,546)

(2,473,715)

3,937,957 (8,104,398)

1,088,336 (32,660,822)

2,324,399 (1,950,957)

85,927 (13,235)

(31,762,357)

4,903,128 2,468,459 $ 104,806,582 $ 12,506,973 (259,345,634)

Program Revenues

Operating Capital

Grants and Grants and

Contributions Contributions

187,630 S 40,833,447 $ 12,506,973 $ (145,781,138)

General revenues and subventions:

Property taxes, levied for general purposes

Property taxes, levied for debt service

Federal and State aid not restricted to specific purposes

Interest and investment earnings

Interagency revenues

Miscellaneous

Subtotal, general revenues

Change in net assets

Net assets - beginning Net assets - ending

170,098,231

34,687,586

20,642,786

2,326,887

276,056

40,318,108

268,349,654

9,004,020

223,856,463

$ 232,860,483


19


GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2009

ASSETS

General Fund

Special Reserve Non-Capital

Fund Building

Fund

Deposits and investments $ 64,587,857 $ 31,001,312 $ 104,583,266

Receivables 25,315,768 123,392 1,103,570

Due from other funds 493,877 13

Due from other governments 4,134,549

Prepaid expenditures 53,009 301,785

Stores inventories 205,864 -

Other current assets 200 30,363

Total Assets $ 94,791,124 31,124,704 $ 106,018,997

LIABILITIES AND FUND BALANCES Liabilities:

Overdrafts Accounts payable 32,407,747 7,268,594

Due to other funds 23,061 93,329

Due to other governments 968,138

Deferred revenue 7,321,391

Total Liabilities 40,720,337 7,361,923 Fund Balances:

Reserved for: Legally restricted balances 26,308,646

Other reservations 319,699 301,785

Unreserved: Designated 27,442,442 Undesignated, reported in:

Special revenue funds 31,124,704

Debt service funds -

Capital projects funds 98,355,289

Total Fund Balance 54,070,787 31,124,704 98,657,074 Total Liabilities and Fund Balances $ 94,791,124 $ 31,124,704 $ 106,018,997


20

350,588

9,821,924 26,070,879 18,117,776 54,361,167

26,308,646 972,072

27,442,442

40,946,628 26,070,879

116,473,065 238,213,732

Non Major Total Governmental Governmental

Funds Funds

$ 55,049,010 $ 255,221,445 2,549,941 29,092,671

70,816 564,706 4,134,549

354,794 346,898 552,762

30,563 $ 58,016,665 $ 289,951,490

$ 735,890 $ 735,890 1,537,670 41,214,011

471,377 587,767 910,561 1,878,699

7,321,391 3,655,498 51,737,758

$ 58,016,665 $ 289,951,490

20


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2009

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

Total Fund Balance - Governmental 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 Net Capital Assets

In the governmental funds, the receipt of the special education mandate settlement is reported as revenue in the year received. On the statement of net assets, the settlement amount is recorded as a receivable and payment received in the current year reduces the receivable amount.

Deferred charges relating to issuance of debt is expensed over the life of the debt on the government-wide financial statements, but were recorded as an expenditure in the governmental fund statements when the debt was issued.

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

An internal service fund is used by the District's management to charge the costs of the workers' compensation and health and welfare insurance programs to the individual funds. The assets and liabilities of the internal service fund are included with governmental activities in the statement of activities.

The excess contribution over the OPEB annual required contribution (ARC) is not recorded in the governmental funds, but is recognized in the Government-wide statement of net assets.

Liabilities of a long-term nature are not recorded in the governmental funds, but are reflected in the statement of net assets. Long-term liabilities at year end consist of:

Bonds payable

Certificates of participation

Compensated absences (vacations)

Lease revenue bonds

Qualified zone academy bonds

Total Net Assets - Governmental Activities

$ 238,213,732

$ 843,260,603 (165,535,530)

677,725,073

279,085

6,585,601

(10,264,865)

11,453,898

271,955

563,444,499

96,200,300

689,197

1,070,000

30,000,000 (691,403,996)

$ 232,860,483


21

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GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

FOR THE YEAR ENDED JUNE 30, 2009

REVENUES

General Fund

Special Reserve Non-Capital

Fund Building

Fund

Revenue limit sources $ 174,911,086 $ Federal sources 40,609,405 Other state sources 80,582,154 Other local sources 14,926,959 776,082 10,515,339

Total Revenues 311,029,604 776,082 10,515,339 EXPENDITURES Current

Instruction 177,694,315 Instruction related activities:

Supervision of instruction 24,002,249 Instructional library and technology 1,124,823 School site administration 21,255,994

Pupil Services: Home-to school transportation 7,282,103 Food services All other pupil services 14,656,632

General administration: Data processing 2,211,279 All other general administration 9,841,801

Plant services 27,258,687 339,983 Facility acquisition and construction 827,431 59,038,510 Ancillary services 3,868,974 Other outgo 3,368,054 Enterprise services

Debt service Principal 4,770,000 Interest and other 3,268,606

Total Expenditures 293,392,342 67,417,099 Excess . (deficiency) of revenues over expenditures 17,637,262 776,082 (56,901,760)

Other Financing Sources (Uses): Transfers in 2,735,217 2,600,000 Transfers out (1,525,412) (1,663,344)

Net Financing Sources (Uses) 1,209,805 936,656 NET CHANGE IN FUND BALANCES 18,847,067 776,082 (55,965,104) Fund Balance - Beginning 35,223,720 30,348,622 154,622,178

Fund Balance - Ending $ 54,070,787 $ 31,124,704 $ 98,657,074


22

Nonmajor Total Governmental Governmental

Funds Funds

$ 5,480,441 $ 180,391,527 6,708,460 47,317,865

16,202,232 96,784,386 38,266,804 64,485,184 66,657,937 388,978,962

1,549,375 179,243,690

5,756,998 29,759,247 1,124,823

21,255,994

7,282,103 9,070,509 9,070,509

14,656,632

2,211,279 493,432 10,335,233

36,504 27,635,174 3,521,259 63,387,200

3,868,974 3,368,054

111,399 111,399

13,875,000 18,645,000 22,198,903 25,467,509 56,613,379 417,422,820

10,044,558 (28,443,858)

453,539 5,788,756 (2,600,000) (5,788,756) (2,146,461) 7,898,097 (28,443,858)

46,463,070 266,657,590

$ 54,361,167 $ 238,213,732

22


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2009

Total Net Change in Fund Balances - Governmental Funds $ (28,443,858) Amounts Reported for Governmental Activities in the Statement of Activities are Different Because:

Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures, however, for governmental activities, those costs are shown in the statement of net assets and allocated over their estimated useful lives as annual depreciation expenses in the statements of activities. This is the amount by which capital outlays exceed depreciation in the period.

Depreciation expense $ (36,382,147)

Capital outlays 60,521,260 Net Expense Adjustment 24,139,113

Loss on disposal of capital assets is reported in the government-wide statement of net activities, but is not recorded in the governmental funds. (698,379)

Accreted interest is not an expenditure in the governmental funds, but it increases the long-term liabilities in the statement of net assets and is reflected as additional interest expense in the statement of activities. (6,583,520)

Payments made on long-term obligations are recorded in the governmental funds as expenditures, but the payment decreases the liability on the statement of net assets. Payments on long-term obligations were as follows:

PARS retirement incentive 723,274 General obligation bond principal 13,875,000 Lease revenue principal 240,000 Certificates of Participation 4,530,000

19,368,274

In the statement of activities, compensated absences (vacations) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount actually paid. This year, vacation used was less than the amounts earned.

The excess contribution over the OPEB annual required contribution (ARC) is not recorded in the governmental funds, but is recognized in the Government-wide statement of activities.

In the governmental funds, the receipt of the special education mandate settlement is reported as revenue in the year received. On the statement of net assets, the settlement amount is recorded as a receivable and payment received in the current year reduces the receivable amount.

212,027

271,955

(141,384)


23


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES, CONTINUED


Premiums received and costs paid related to debt issuance are recorded in the governmental funds at the time of debt issuance. However, the cost of issuance is recorded as a deferred charge and the premium received increases the liability of the related debt on the statement of net assets. The premium and deferred charges are then amortized over the life of the debt. Amortization of premium and issuance costs were as follows:

General obligation bond premium

Certificates of Participation premium

Debt cost of issuance

3,086,488 30,545

(697,869)

2,419,164

Defeased costs and gains are not recorded in the governmental funds. However, these amounts increase or decrease the liability on the statement of net assets and are amortized over the life of the refunding debt. Amortization of defeased costs and gains were as follows:

General obligation bond deferred costs for bonds defeased

Certificates of participation gain for amounts defeased

Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the statement of activities is the net result of these factors.

An internal service fund is used by the District's management to charge the costs of the unemployment compensation and health and welfare insurance program to the individual funds. The net revenue of the internal service fund is reported with aovernmental activities.

Change in Net Assets of Governmental Activities

(1,230,349) 81,933

(1,148,416)

(982,076)

591,120

$ 9,004,020


24


PROPRIETARY FUND STATEMENT OF NET ASSETS JUNE 30, 2009

ASSETS Current Assets

Governmental Activities -

Internal Service Fund

Deposits and investments $ 22,631,417

Receivables 699,480

Due from other funds 23,061 Total Current Assets 23,353,958

LIABILITIES Current Liabilities

Accounts payable (28,205) Claim liabilities 11,928,265

Total Current Liabilities 11,900,060

NET ASSETS Unrestricted 11,453,898

Total Net Assets $ 11,453,898

The accompanying notes are an integral part of these fi nancial statements.

25


PROPRIETARY FUND STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS


OPERATING REVENUES

Governmental Activities -

Internal Service Fund

Contributions $ 27,437,641

OPERATING EXPENSES Payroll costs 184,936

Supplies and materials 1,955

Facility rental 933

Insurance Claims 27,135,109

Total Operating Expenses 27,322,933 Operating Income 114,708

NONOPERATING REVENUES Interest income 476,412

Change in net assets 591,120

Total Net Assets - Beginning 10,862,778 Total Net Assets - Ending $ 11,453,898


26


PROPRIETARY FUND STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2009

Governmental Activities - Internal

Service Fund CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from contributions $ 27,173,784 Cash receipts from expenditure abatement 70,154 Cash payments to employees for services (184,936) Cash payments for insurance claims (27,195,595) Cash payments to other suppliers for goods and services (3,190)

Net Cash Used in Operating Activities (139,783)

CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 535,318 .

Net increase in cash and cash equivalents 395,535 CASH AND CASH EQUIVALENTS - BEGINNING 22,235,882 CASH AND CASH EQUIVALENTS - ENDING $ 22,631,417

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income 114,708 Changes in assets and liabilities:

Receivables (216,967) Due from other fund 23,264 Accrued liabilities (60,788)

NET CASH USED IN OPERATING ACTIVITIES (139,783)


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FIDUCIARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2009

ASSETS Agency Funds

Deposits and investments $ 2,786,997 Receivables 7,533 Prepaids 384

Total assets $ 2,794,914

LIABILITIES Accounts payable 48,154 Due to student groups 2,746,760

Total liabilities $ 2,794,914


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NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The San Jose Unified School District was unified on August 3, 1936 under the laws of the State of California. The District operates under a locally-elected five-member Board form of government and provides educational services to grades K - 12 as mandated by the State and Federal agencies. The District operates 27 elementary, six middle, six high schools, one community school and one continuation high school.

A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For San Jose Unified School District, this includes general operations, food service, and student related activities of the District.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Component units may also include organizations that are fiscally dependent on the District in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be incomplete or misleading. For financial reporting purposes, the component unit described below has a financial and operational relationship which meets the reporting entity definition criteria of the Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and thus is included in the financial statements of the District. The component unit, although a legally separate entity, is reported in the financial statements using the blended presentation method as if it were part of the District's operations because the governing board of the component unit is essentially the same as the governing board of the District and because its purpose is to finance the construction of facilities to be used for the direct benefit of the District.

The San Jose Unified School District Financing Corporation (the Corporation) The Corporation's financial -activity is presented in the financial statements as the COP's Capital Projects Fund, which is included in the Building Fund. Certificates of participation issued by the Corporation are included as long-term obligations in the government-wide financial statements. Individual financial statements are not prepared for San Jose Unified School District Financing Corporation.

Other Related Entities

Charter School The District has approved a Charter for Downtown College Preparatory Charter School pursuant to Education Code Section 47605. The Charter School is not operated by the District, and does not meet the criteria for inclusion as a component unit.

Joint Powers Agencies and Public Entity Risk Pools The District is associated with two joint powers agencies. The organizations do not meet the criteria for inclusion as component units of the District. More detailed information is presented in Note 15 to the financial statements. The organizations are:

Metropolitan Education District CSAC Excess Insurance Authority

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Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District's funds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.

Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's governmental funds:

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all Districts_ It is used to account for the ordinary operations of a District. All transactions except those required or permitted by law to be in another fund are accounted for in this fund.

Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued. This Fund is also used to account for the interest and redemption of principal of Certificates of Participation.

Special Reserve Fund for Other Than Capital Outlay Projects The Special Reserve for Other Than Capital Outlay Projects is used primarily to provide for the accumulation of General Fund monies for general operating purposes other than for capital outlay (Education Code Section 42840).

Non-Major Governmental Funds

Special Revenue Funds The Special Revenue Funds are established to account for the proceeds from specific revenue sources (other than trusts or for major capital projects) that are restricted to the financing of particular activities:

Adult Education Fund The Adult Education Fund is used to account separately for federal, State, and local revenues for adult education programs and is to be expended for adult education purposes only.

Child Development Fund The Child Development Fund is used to account separately for federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs.

Cafeteria Fund The Cafeteria Fund is used to account separately for federal, State, and local resources to operate the food service program (Education Code Sections 38090-38093) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections 38091 and 38100).

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Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for state apportionments and the District's contributions for deferred maintenance purposes (Education Code Sections 17582-17587) and for items of maintenance approved by the State Allocation Board.

Retiree Benefits Fund The Retiree Benefits Fund is used for accumulating general fund moneys for retiree benefits purposes.

Debt Service Funds The Debt Service Funds are established to account for the accumulation of resources for and the payment of principal and interest on general long-term debt.

Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a District (Education Code Sections 15125-15262).

Capital Projects Funds The Capital Project funds are established to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds).

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code sections 17620-17626. Expenditures are restricted to the purposes specified in Government Code sections 65970-65981 or to the items specified in agreements with the developer (Government Code Section 66006).

County School Facilities Fund The County School Facilities Fund is established pursuant to Education Code Section 17070.43 to receive apportionments from the 1998 State School Facilities Fund (Proposition 1A), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund (Proposition 55) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section 17070 et seq.).

Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in net assets, financial position, and cash flows. The District applies all GASB pronouncements, as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterprise or internal service. The District has the following proprietary fund:

Internal Service Fund Internal service funds may be used to account for any activity for which services are provided to other funds of the District on a cost-reimbursement basis. The District operates a Self-Insurance Fund that is accounted for in an internal service fund, which includes the activity for the workers' compensation and health and welfare programs.

Fiduciary Funds Fiduciary fund reporting focuses on net assets and changes in net assets. The fiduciary fund category includes only agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency funds account for student body activities (ASB).

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Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared.

The government-wide statement of activities presents a comparison between expenses, both direct and indirect, and program revenues for each governmental program. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities.

Net assets should be reported as restricted when constraints placed on net asset use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net assets restricted for other activities result from special revenue funds and the restrictions on their net asset use.

Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental and proprietary fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column.

Governmental Funds All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures, and changes in fund balance reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide statements are prepared. Governmental fund financial statements, therefore, include reconciliations with brief explanations to better identify the relationship between the government-wide financial statements, prepared using the economic resources measurement focus and the accrual basis of accounting, and the governmental fund financial statements, prepared using the flow of current financial resources measurement focus and the modified accrual basis of accounting.

Proprietary Funds Proprietary funds are accounted for using a flow of economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities associated with the operation of this fund are included in the statement of net assets. The statement of changes in fund net assets presents increases (revenues) and decreases (expenses) in net total assets. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary fund.

Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statements because they do not represent resources of the District.

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Revenues — Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. 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. Generally, available is defined as collectible within 45 or 60 days. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to State-aid apportionments, the California Department of Education has defined available for districts as collectible within one year. The following revenue sources are considered to be both measurable and available at fiscal year-end: State apportionments, interest, certain grants, and other local sources.

Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements, and donations. 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. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized.

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.

Certain grants received before the eligibility requirements are met are recorded as deferred revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as deferred revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on general long-term obligations, which have not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the entity-wide statements.

Cash and Cash Equivalents

The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash equivalents also include cash with county treasury balances for purposes of the statement of cash flows. .

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Investments

Investments held at June 30, 2009 with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in county and State investment pools are determined by the program sponsor.

Prepaid Expenditures

Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures when incurred.

Stores Inventory

Inventories consist of expendable food and supplies held for consumption and unused donated commodities. Inventories are stated at cost, on weighted average basis. The costs of inventory items are recorded as expenditures in the governmental type funds and expenses in the proprietary type funds when used.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are Long-lived assets of the District as a whole. The District maintains a ca

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