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					shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy or shall there be any sale of these securities in any jurisdiction in which such offer,                     PRELIMINARY OFFICIAL STATEMENT DATED JULY 16, 2010
 THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO COMPLETION AND AMENDMENT. Under no circumstances



                                                                                                                                                                                                       NEW ISSUE                                                                                                    RATING: Moody’s Rating Requested
                                                                                                                                                                                                       BOOK-ENTRY-ONLY

                                                                                                                                                                                                                                                             $12,200,000
                                                                                                                                                                                                                                          AZTEC MUNICIPAL SCHOOL DISTRICT NO. 2
                                                                                                                                                                                                                                                    San Juan County, New Mexico
                                                                                                                                                                                                                                        General Obligation Qualified School Construction Bonds
                                                                                                                                                                                                                                                 (Federally Taxable - Direct Subsidy)
                                                                                                                                                                                                                                                             Series 2010

                                                                                                                                                                                                       Dated: Date of Delivery                                                                                                       Due: August 1, 2027
                                                                                                                                                                                                        In the opinion of McCall, Parkhurst & Horton L.L.P., Co-Bond Counsel, based on the District's election to issue the Bonds as
                                                                                                                                                                                                       "qualified school construction bonds," as further described herein, the Bonds are not obligations described in Section 103(a) of
                                                                                                                                                                                                       the Internal Revenue Code of 1986 (the "Code"); accordingly, interest paid with respect to the Bonds is includable in "gross
                                                                                                                                                                                                       income" within the meaning of section 61 of the Code of each owner thereof. See the discussion "TAX MATTERS" herein,
                                                                                                                                                                                                       including a discussion on New Mexico income taxes.

                                                                                                                                                                                                       The Aztec Municipal School District No. 2 (the “District”) General Obligation Qualified School Construction Bonds, (Federally
                                                                                                                                                                                                       Taxable-Direct Subsidy) Series 2010 (the “Bonds”) are being issued pursuant to the Constitution and general laws of the State
                                                                                                                                                                                                       of New Mexico (the “State”), are general obligations of the District and are payable from general (ad valorem) taxes which may
                                                                                                                                                                                                       be levied against all taxable property within the District without limitation as to rate or amount. The Bonds will be designated
                                                                                                                                                                                                       as "qualified school construction bonds" as defined in Section 54F of the Code, and pursuant to Section 6431 of the Code, the
                                                                                                                                                                                                       District has elected to receive federal subsidy payments (the "Subsidy Payments") on each interest payment date in an amount
                                                                                                                                                                                                       equal to the lesser of the amount of interest payable on the Bonds on such date or the amount of interest that would have been
                                                                                                                                                                                                       payable with respect to the Bonds if the interest were determined at the applicable tax credit rate for the Bonds pursuant to Section
                                                                                                                                                                                                       54A(b)(3) of the Code.

                                                                                                                                                                                                       The Bonds will be issued as fully registered bonds, initially registered in the name of Cede & Co., as nominee of The Depository
                                                                                                                                                                                                       Trust Company, New York, New York, the securities depository for the Bonds, to which principal and interest payments on the
                                                                                                                                                                                                       Bonds will be made. Individual purchases will be made in book-entry form only in denominations of $5,000 or any integral
                                                                                                                                                                                                       multiple thereof. Purchasers of the Bonds will not receive physical delivery of bond certificates. (See “THE BONDS - Book-
                                                                                                                                                                                                       Entry-Only System” herein.) The Bank of Albuquerque, N.A., Albuquerque, is the initial Paying Agent/Registrar for the Bonds.

                                                                                                                                                                                                       Interest is payable semi-annually on February 1 and August 1, commencing February 1, 2011, and continuing until maturity or
                                                                                                                                                                                                       prior redemption. The Bonds are also subject to optional redemption, special mandatory redemption and extraordinary optional
                                                                                                                                                                                                       redemption, prior to maturity, as further described herein. (See “THE BONDS” herein.)

                                                                                                                                                                                                                                                                     MATURITY SCHEDULE

                                                                                                                                                                                                                                         Maturity           Principal                      Interest              Price or            CUSIP(1)
                                                                                                                                                                                                                                           Date              Amount                         Rate                  Yield              Number
                                                                                                                                                                                                                                        8/1/2027          $12,200,000                           %                 100%

                                                                                                                                                                                                       The Bonds are being offered when, as and if issued by the District, subject to the prior approval of Cuddy & McCarthy, LLP,
                                                                                                                                                                                                       Santa Fe, New Mexico and McCall, Parkhurst & Horton L.L.P., Austin, Texas, as Co-Bond Counsel, and the New Mexico
                                                                                                                                                                                                       Attorney General. Certain legal matters will be passed upon for the Underwriters by their counsel, Modrall, Sperling, Roehl,
                                                                                                                                                                                                       Harris & Sisk, P.A., Albuquerque, New Mexico. It is anticipated that the Bonds will be available for delivery through The
                                                                                                                                                                                                       Depository Trust Company, New York, New York, on August 24, 2010.

                                                                                                                                                                                                             RBC Capital Markets                                                                      Southwest Securities
                                                                                                                                                                                                       _____________
                                                                                                                                                                                                       (1)
                                                                                                                                                                                                           CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard &
                                                                                                                                                                                                       Poor’s Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as
                                                                                                                                                                                                       a substitute for the CUSIP Services. Neither the Underwriter, the District nor the Financial Advisor is responsible for the selection or correctness of the CUSIP
                                                                                                                                                                                                       numbers set forth herein.
                AZTEC MUNICIPAL SCHOOL DISTRICT NO. 2
                         1118 W. Aztec Boulevard
                        Aztec, New Mexico 87410
                             (505) 334-9474


                             BOARD OF EDUCATION

                             Mitch Waggoner, President
                            Roger Collins, Vice President
                            Christina Lillywhite, Secretary
                              E. Wayne Ritter, Member
                              Wayne Farmer, Member

                         DISTRICT ADMINISTRATION

                      Kirk Carpenter, Superintendent of Schools
                Kathleen Runnels, Assistant Superintendent for Finance


                               CO-BOND COUNSEL

    Cuddy & McCarthy, LLP                         McCall, Parkhurst & Horton L.L.P.
           PO Box 4160                             600 Congress Ave., Suite 1800
Santa Fe, New Mexico 87502-4160                       Austin, TX 78701-3248
          (505) 988-4476                                   (512) 478-3805

                                  UNDERWRITERS

RBC Capital Markets Corporation                       Southwest Securities, Inc.
6301 Uptown Blvd. NE, Suite 110                  6565 Americas Parkway NE, Ste 239
    Albuquerque, NM 87110                             Albuquerque, NM 87110
        (505) 872-5999                                     (505) 563-5860


                         UNDERWRITERS’ COUNSEL
                     Modrall, Sperling, Roehl, Harris & Sisk, P.A.
                                     PO Box 2168
                         Albuquerque, New Mexico 87103
                                    (505) 848-1800


                              FINANCIAL ADVISOR
                             Casey Financial Consulting
                                   PO Box 56635
                            Albuquerque, NM 87187-6635
                                  (505) 898-3165


                          REGISTRAR/PAYING AGENT
                            Bank of Albuquerque, N.A.
                            Corporate Trust Department
                             201 3rd St. NW, Suite 1400
                             Albuquerque, NM 87102
                                   (505) 222-8457
                                                              TABLE OF CONTENTS
                                                                                                                                                           Page

USE OF INFORMATION IN THIS OFFICIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         The Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Description of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Sources and Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
         Designation of the Bonds as Qualified School Construction Bonds with Direct Subsidy . . . . . . . . 5
         Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Special Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Extraordinary Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
         Selection of Bonds for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
         Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
         Cumulative Sinking Fund Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
         Security for the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
         Book-Entry-Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
         Successor Securities Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
         Use of Certain Terms in Other Sections of this Official Statement . . . . . . . . . . . . . . . . . . . . . . . . . 12
         DTC Redemption Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
         Exchange and Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
         Limitation on Transfer of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
         Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
         Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECURITY AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DEBT AND OTHER OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
         Debt Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
         Present Bonding Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
         Bonds Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
         Debt Service Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
         District Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
         Bonded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
         Direct and Overlapping Bonded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
         Debt Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
         Bonding Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
TAX BASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
         Property Subject of Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
         Assessment of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
         Reassessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
         Taxation of Oil and Natural Gas Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         Taxation of Oil and Natural Gas Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         Expectation for 2010 Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
         Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         Residential and Non-Residential Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         Comparison of Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
         Major Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
TAX RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
         City of Aztec Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TAX COLLECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
        Method of Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                24
        Penalty for Delinquent Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      24
        Interest on Delinquent Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    24
        Remedies Available for Non-Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                   24
TAX COLLECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              25
THE DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      26
        General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       26
        School District Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                26
        Governing Board and Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            26
        Administration and Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  27
        Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             27
        Retiree Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               27
        Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         28
        Accreditation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           28
        Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          28
PUBLIC SCHOOL FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       29
        Local Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           29
        Federal Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             29
        State Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           29
        Other Funds Maintained by the School District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 30
DISTRICT BUDGETING PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          31
GENERAL (OPERATIONAL) FUND BUDGET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       31
AUDITED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE . .                                                                                         32
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           34
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           34
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    36
CONTINUING DISCLOSURE UNDERTAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       36
        Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              36
        Material Event Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  37
        Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   37
        Limitations and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        37
        Compliance with Prior Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            38
SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                    38
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   38
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        39
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             39

APPENDIX A - AREA ECONOMIC INFORMATION
APPENDIX B - FORM OF CO-BOND COUNSEL’S OPINIONS
APPENDIX C - EXCERPT OF AUDITED FINANCIAL STATEMENTS
                      USE OF INFORMATION IN THIS OFFICIAL STATEMENT

This Official Statement has been prepared by Casey Financial Consulting as Financial Advisor to the Aztec
Municipal School District No. 2, San Juan County, New Mexico (the "District"). The information contained in
this Official Statement has been obtained from the District, from annual audits performed for the District, and
from other sources deemed reliable. No representation or warranty is made, however, as to the accuracy or
completeness of such information; and nothing contained herein is, or shall be, relied upon as a promise or
representation of the Financial Advisor, the District, or Underwriters of these bonds. The information and
expressions of opinion herein are subject to change without notice, and neither the delivery of this official
statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been
no change in the affairs of the District since the date hereof.

THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE
COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE
REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH
APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THE BONDS HAVE
BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A
RECOMMENDATION THEREOF.

FOR PURPOSES OF COMPLIANCE WITH RULE 15C2-12 OF THE SECURITIES EXCHANGE
COMMISSION, THIS DOCUMENT CONSTITUTES AN OFFICIAL STATEMENT OF THE DISTRICT
WITH RESPECT TO THE OBLIGATIONS THAT HAVE BEEN DEEMED "FINAL" BY THE DISTRICT AS
OF ITS DATE EXCEPT FOR THE OMISSION OF NO MORE THAN THE INFORMATION PERMITTED
BY RULE 15C2-12.

Co-Bond Counsel, Cuddy & McCarthy, LLP, Santa Fe, New Mexico and McCall, Parkhurst & Horton L.L.P.,
Austin, Texas, were not asked and did not take part in the preparation of the Official Statement nor have such
firms undertaken to independently verify any of the information contained herein. Except as discussed in
"LEGAL MATTERS" herein, such firms have no responsibility for the accuracy or completeness of any
information furnished in connection with any offer or sale of the Bonds in the Official Statement or otherwise.

The Underwriters have reviewed the information contained in the Official Statement in accordance with their
responsibilities to investors under federal securities laws as applicable to the circumstances of this transaction,
but the Underwriters do not guarantee the accuracy or completeness of such information.

All terms used in this Official Statement which are not defined herein shall have the meanings given such terms
in the resolution authorizing issuance of the Bonds adopted by the Board of Education of the District (the
"Board") on July 22, 2010 (the “Bond Resolution").

THE PRICES OR YIELDS AT WHICH THE BONDS ARE OFFERED TO THE PUBLIC BY THE
UNDERWRITERS MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES OR YIELDS
APPEARING ON THE COVER OF THIS OFFICIAL STATEMENT.




                                                         1
                                      INTRODUCTION AND SUMMARY

This Official Statement is furnished to prospective purchasers of the Aztec Municipal School District No. 2, San
Juan County, New Mexico (the "District"), General Obligation Qualified School Construction Bonds, (Federally
Taxable-Direct Subsidy) Series 2010 (the "Bonds") issued in the aggregate principal amount of $12,200,000. This
summary only provides an overview of the offering and a prospective purchaser must read the entire Official
Statement to make an informed decision regarding the Bonds.

The Bonds:             The Bonds are issued as fully registered bonds in denominations of $5,000 or integral
                       multiples thereof. The Bonds mature and bear interest as set forth on the cover page hereof
                       and as more fully described in the section entitled “THE BONDS.”

Security:              The Bonds are secured by the District’s full faith and credit and are general obligations of
                       the District payable from ad valorem taxes to be levied against all taxable property within
                       the District without limitation as to rate or amount. See “THE BONDS - Security for the
                       Bonds.”

Purposes:              The Bonds are being issued to provide funds to remodel Koogler Middle School.

Authorization:         The Bonds are issued pursuant to Article IX, Sec. 11 of the New Mexico Constitution,
                       NMSA 1978, Sections 6-15-1 through 6-15-28, which authorize the District to issue general
                       obligation bonds payable from ad valorem taxes, NMSA 1978, Sections 22-18C-1 through
                       22-18C-4, which authorize the issuance of Qualified School Construction Bonds, and the
                       Bond Resolution adopted by the Board of Education of the District on July 22, 2010.

Prior Redemption:      Bonds maturing on and after August 1, 2021, are subject to redemption prior to maturity,
                       at the option of the District, in whole or in part, in principal amounts of $5,000 or any
                       integral multiple thereof, on August1, 2020 or any date thereafter, at a redemption price
                       equal to the principal amount thereof plus accrued interest to the date fixed for redemption.
                       The Bonds are subject to special mandatory redemption and extraordinary optional
                       redemption as further described herein. (See THE BONDS - Special Mandatory
                       Redemption and THE BONDS - Extraordinary Optional Redemption.)

Registrar/
  Paying Agent:        Bank of Albuquerque, N.A., Corporate Trust Department, 201 3rd St. NW Suite 1400,
                       Albuquerque, NM 87102.

Delivery:              Delivery of the Bonds to the purchaser is expected on August 24, 2010.

Compliance:            The District will provide a reasonable supply of Final Official Statements to the Purchaser
                       within seven business days in compliance with SEC Rule 15c2-12. The Final Official
                       Statement will also be filed with the Municipal Securities Rulemaking Board’s “EMMA”
                       web site.

Federal Tax
  Treatment:           Interest on the Bonds is includable in the recipient’s gross income for federal income tax
                       purposes.




                                                        2
                                        Summary of Key Financial Information


Assessed Valuation (33 1/3% Assessment Ratio) 1                                                               $1,400,714,637
Estimated Actual Valuation                                                                                    $4,273,125,691
Total Direct Debt (including the Bonds) 2                                                                        $52,425,000
Net Direct Debt                                                                                                  $48,995,339
District Net Debt as a Percentage of:
        Assessed Valuation                                                                                              3.50%
        Estimated Actual Valuation                                                                                      1.15%

Estimated Direct & Overlapping General Obligation Debt                                                           $68,207,481
Direct and Overlapping Debt as a Percentage of:
       Assessed Valuation                                                                                               4.87%
       Estimated Actual Valuation                                                                                       1.60%

Estimated Population                                                                                                   13,800
District Net Debt Per Capita                                                                                           $3,550
Direct and Overlapping Debt Per Capita                                                                                 $4,943
Assessed Valuation per Capita                                                                                        $101,501
1
    Preliminary assessed valuation for property tax year 2010 (to be finalized in October 2010) is estimated to be $819,268,035.
    See: “DEBT AND OTHER OBLIGATIONS - Present Bonding Capacity” and “Financial Data,” and “TAX BASE -
    Expectations for 2010 Assessed Valuation,” herein.
2
    Without giving effect to defeasance of approximately $3,375,000 in principal amount of the District's outstanding general
    obligation indebtedness to occur prior to closing on the Bonds.



                                  (The remainder of this page intentionally left blank.)




                                                               3
                                                  THE BONDS

The Issuer

The District is a political subdivision of the State of New Mexico (the “State”) organized for the purpose of
operating and maintaining an educational program for the school-age children residing within its boundaries. The
District includes the city of Aztec and part of the unincorporated areas of San Juan County. The District is located
in the northwestern part of the State.

Authorization

The Bonds are issued pursuant to Article IX, Sec. 11 of the New Mexico Constitution, NMSA 1978, Sections 6-15-
1 through 6-15-28 which authorize the District to issue general obligation bonds payable from ad valorem taxes,
NMSA 1978, Sections 22-18C-1 through 22-18C-4, which authorize the issuance of Qualified School Construction
Bonds, and the Bond Resolution adopted by the Board of Education of the District on July 22, 2010.

Purpose

The Bonds are being issued to provide funds to remodel the Koogler Middle School.

Description of the Bonds

The Bonds will be dated as of the date of initial delivery and will bear interest from that date, payable on February
1 and August 1 of each year commencing February 1, 2011. The Bonds will bear interest at the rate per annum and
mature in the amounts and at the times set forth on the cover page of this Official Statement.

Record Date

The "Record Date" is the fifteenth day of the month immediately preceding the interest payment date. The person
in whose name any Bond is registered at the close of business on any Record Date with respect to any interest
payment date shall be entitled to receive the interest payable thereon on such interest payment date. In the event
of a non-payment of interest on the Bonds on a scheduled payment date, and for 30 days thereafter, a new record
date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and
when funds for the payment of such interest have been received from the District. Notice of the Special Record Date
and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after
the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States
mail, first class postage prepaid, to the address of each Holder of a Bond appearing on the registration books of the
Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such
notice.

Sources and Uses of Funds

          Sources:
              Principal Amount of the Bonds
                Total Sources

          Uses:
              Deposit to Construction Fund
              Cost of Issuance
              Underwriter’s Discount
                Total Uses:


                                                         4
Designation of the Bonds as Qualified School Construction Bonds with Direct Subsidy

The Code authorizes a school district to issue tax-credit bonds known as "Qualified School Construction Bonds"
to finance the construction, rehabilitation, or repair of a public school facility or for the acquisition of land on which
such a facility is to be constructed. The Hiring Incentives to Restore Employment Act (the "HIRE Act") which was
introduced and passed by the United States Congress and was signed into law on March 18, 2010, allows an issuer
of Qualified School Construction Bonds to elect to receive subsidy payments (each a "Subsidy Payment") from the
federal government equal to the lesser of (i) the amount of interest payable under such bond on such date, or (ii) the
amount of interest which would have been payable under such bond on such date if such interest were determined
at the applicable credit rate determined under section 54A(b)(3) of the Code with respect to such bond. The District
has irrevocably elected to designate the Bonds as "Qualified School Construction Bonds" and has additionally
irrevocably elected that Section 6431(f) of the Code apply to the Bonds permitting the District to receive Subsidy
Payments from the United States Treasury in connection therewith. The Bonds will not be obligations described in
section 103(a) of the Code and the interest on the Bonds will not be excludable from gross income for federal
income tax purposes. See "TAX MATTERS" herein. The Subsidy Payments will be paid to the District and may
be used by the District for any lawful purpose, including payment of debt service on the Bonds. The Subsidy
Payments, however, are not pledged as security on the Bonds. No owners of any of the Bonds are entitled to such
Subsidy Payments or to receive a tax credit with respect to the Bonds.

The receipt of such Subsidy Payments is subject to various requirements. No assurances are provided that the
District will receive each of the Subsidy Payments. Subsidy Payments will only be paid if the Bonds remain
qualified therefor. For the Bonds to be and remain qualified school construction bonds for which Subsidy Payments
will be received, the District must comply with certain covenants and the District must establish certain facts and
expectations with respect to the Bonds, the use and investment of proceeds thereof and the use of property financed
therewith. Failure on the part of the District to comply with the conditions imposed by the Code, and future guidance
to be provided by the U.S. Treasury and the Internal Revenue Service (the "IRS"), may cause the District to fail to
receive the Subsidy Payments for the remaining terms of the Bonds, and it could subject the District to a claim for
refund of previously received Subsidy Payments. Moreover, Subsidy Payments are subject to automatic offsets
against certain amounts that may, for unrelated reasons, be owed by the District to an agency of the United States
of America. See ("THE BONDS - Extraordinary Optional Redemption") for information concerning extraordinary
optional redemption of the Bonds in the event of certain events that result in the loss of the right or opportunity of
the District to receive the Subsidy Payments with respect to the Bonds.

An issuer of qualified school construction bonds must receive an allocation of the national qualified school
construction bond limitation for the calendar year. The State received an allocation of $64,602,000 for the 2009
calendar year of the national qualified school construction bond limitation from the United States Treasury, and the
New Mexico Public School Capital Outlay Council (the "PSCOC") is responsible for further allocating such funds
to issuers within the State. Federal law allows PSCOC to roll forward any unused allocation for the 2009 calendar
year into the 2010 calendar year. The District submitted an application to the PSCOC and received an allocation for
the 2009 calendar year in the amount of $12,200,000 on May 6, 2010.

Proceeds from the sale of the Bonds (including investments thereon) will be applied solely to the construction,
rehabilitation or repair of a public school facility in the District (including the acquisition of equipment to be used
in such portion or portions of the public school facility that is being constructed, rehabilitated or repaired with the
proceeds of the Bonds), and to payment of the costs of issuing the Bonds not in excess of two percent of the par
amount of the issue taking into account any de minimis amount of premium or discount on the Bonds. The District
reasonably expects that all available project proceeds will be spent for such "qualified expenditures" (as defined in
Section 54F of the Code) within three years of the date of issuance of the Bonds, and that a binding commitment
with a third party to spend at least 10 percent of such available project proceeds has been incurred or will be incurred
within the six month period beginning on the date of issuance of the Bonds. See "THE BONDS - Special Mandatory
Redemption" for information concerning special mandatory redemption of the Bonds in the event that the proceeds of
the Bonds are not spent within three years of the Delivery Date of the Bonds.

                                                            5
Optional Redemption

The District reserves the right, at its option, to redeem Bonds having stated maturities on and after August 1, 2021,
in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on August 1, 2020, or any date
thereafter, at the par value thereof plus accrued interest from the most recent interest payment date to the date of
redemption. If a Bond (or any portion of the principal sum thereof) shall have been called for redemption and notice
of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become
due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption
date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying
Agent/Registrar on the redemption date. If less than all of the Bonds are to be redeemed, the District shall determine
the principal amount and maturities to be redeemed and shall direct the Paying Agent/Registrar to select by lot or
other customary method that results in a random selection, the Bonds or portions thereof within a maturity, to be
redeemed (see "BOOK-ENTRY-ONLY SYSTEM").

Special Mandatory Redemption

To the extent that 100% of the Applicable Project Proceeds of the Bonds are not expended by the close of the three
year period beginning on the Delivery Date of the Bonds (or if an extension of such period has been granted by the
Secretary of the Treasury, such extended period), then the District shall redeem, at a price of par, an amount of
Bonds equal to such unexpended proceeds (rounded up to the next highest authorized denomination of $5,000 in
principal amount) plus the amount, if any, on deposit in the Cumulative Sinking Fund Deposit Account (defined
below) that is proportionate to the principal amount of the Bonds redeemed to the principal amount of the Bonds
outstanding immediately prior to the redemption date, plus accrued interest thereon to the redemption date within
90 days after the end of such period. In the event of such redemption, the unexpended proceeds of sale of the Bonds
and amounts on deposit in the Cumulative Sinking Fund, if any are required to be used to redeem principal of the
Bonds.

“Available Project Proceeds” means proceeds of the sale of the Bonds other than proceeds used to pay costs of
issuance (not to exceed two percent thereof) plus proceeds received from investing the proceeds of the sale of the
Bonds.

Extraordinary Optional Redemption

Upon the occurrence of an Extraordinary Event, the Bonds are subject to extraordinary optional redemption, at the
option of the District, prior to their maturity date, in whole or in part, on the date designated by the District, which
date shall be a date prior to August 1, 2020, at the Make-Whole Redemption Price.

The "Make-Whole Redemption Price" means the amount equal to the greater of the following:

1.        The initial offering price of the Bonds set forth on the inside cover page hereof (but not less than 100%
          of the principal amount of the Bonds to be redeemed) or

2.        The sum of the present value of the remaining scheduled payments of principal and interest on the Bonds
          to be redeemed to the maturity date of such Bonds, not including any portion of those payments of interest
          accrued and unpaid as of the date on which the Bonds are to be redeemed, discounted to the date on which
          the Bonds are to be redeemed on a semiannual basis, assuming a 360-day year containing twelve 30-day
          months, at the Treasury Rate, plus 100 basis points, plus in each case accrued interest on the Bonds to be
          redeemed to the redemption date.

For the purpose of determining the Make-Whole Redemption Price, "Treasury Rate" means, with respect to any
redemption date for a particular Bond, 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

                                                           6
H. 15 (519) (the "Statistical Release") that has become publicly available at least two Business Days prior to the
redemption date (excluding inflation-indexed securities) (or, if the Statistical Release is no longer published, any
publicly available source of similar market data) most nearly equal to the period from the redemption date to the
maturity date of the Bonds to be redeemed; provided, however that if the period from the redemption date to the
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 shall be used.

The term "Extraordinary Event" means (a) a final determination by the Internal Revenue Service ("IRS") (after the
District has exhausted all administrative appeal remedies) determining that an Accountable Event of Loss of
Qualified School Construction Bond Status has occurred and specifying the Date of Loss of Qualified School
Construction Bond Status; (b) a non-appealable holding by a court of competent jurisdiction holding that an
Accountable Event of Loss of Qualified School Construction Bond Status has occurred and specifying the Date of
Loss of Qualified School Construction Bond Status'; (c) the occurrence of a material adverse change under Section
54F or 6431 of the Code; (d) the publication by the IRS or the United States Treasury of any guidance with respect
to such sections; or (e) any other determination by the IRS or the United States Treasury, which determination is
not the result of a failure of the District to satisfy certain requirements of the Bond Resolution, if as a result of an
event as described in (c), (d), or (e) of this sentence, the Subsidy Payments expected to be received with respect to
the Bonds are eliminated or reduced, as reasonably determined by the Superintendent of the District or his designee,
which determination shall be conclusive.

The term “Accountable Event of Loss of Qualified School Construction Bond Status” means any act or any failure
to act on the part of the District, which act or failure to act causes the Bonds to lose their status, or fail to qualify,
as Qualified School Construction Bonds, under the Code.

The Make-Whole Redemption Price will be determined by an independent accounting firm, investment banking firm
or financial advisor retained by and at the expense of the District to calculate such redemption price. The
determination of the Make-Whole Redemption Price by such independent accounting firm, investment banking firm
or financial advisor shall be conclusive and binding on the District and the Bondholders and the Paying
Agent/Registrar and the District will be permitted to conclusively rely on such determination.

Selection of Bonds for Redemption

If less than all of the Bonds are to be redeemed, the District shall determine the Bonds to be redeemed. If a Bond
(or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption
shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable
on such redemption date, provided funds for the payment of the redemption price are held by the Paying
Agent/Registrar on the redemption date.

The Paying Agent/Registrar and the District, so long as a Book-Entry-Only System is used for the Bonds, will send
any notice of redemption, notice of proposed amendment to the Bond Resolution or other notices with respect to
the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect
participant to notify the beneficial owner, shall not affect the validity of the redemption of the Bonds called for
redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the District
will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement,
through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants in
accordance with its rules or other agreements with DTC participants and then DTC participants and indirect
participants may implement a redemption of such Bonds from the beneficial owners.

Any such selection of Bonds to be redeemed will not be governed by the Bond Resolution and will not be conducted
by the District or the Paying Agent/Registrar. Neither the District nor the Paying Agent/Registrar will have any
responsibility to DTC participants, indirect participants or the persons for whom DTC participants act as nominees,
with respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants, or

                                                            7
beneficial owners of the selection of portions of the Bonds for redemption (see “BOOK-ENTRY- ONLY
SYSTEM”).

Notice of Redemption

Not less than 30 days prior to a redemption date for the Bonds, the District shall cause a notice of redemption to be
sent by United States mail, first class, postage prepaid, to the registered owners of such Bonds, to be redeemed, in
whole or in part, at the address of the registered owner appearing on the registration books of the Paying
Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. With
respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the
Bond Resolution have been met and money sufficient to pay the principal of and interest on the Bonds to be
redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption,
such notice will state that said redemption may, at the option of the District, be conditional upon the satisfaction of
such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such
redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption
is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the
District will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the
notice of redemption was given, to the effect that such Bonds have not been redeemed. ANY NOTICE SO
MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT
THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS
CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION
DATE. Notwithstanding that any Bond or portion thereof has not been surrendered for payment, interest on such
Bond or portion thereof shall cease to accrue.

Upon notice from the District that the District has cured the conditions that caused the Bonds to be subject to special
mandatory redemption, the District may rescind any such redemption and notice thereof on any date prior to the date
fixed for special mandatory redemption by causing written notice of the rescission to be given to the owners of the
Bonds so called for redemption. Notice of rescission will be given in the same manner in which notice of special
mandatory redemption was originally given.

Cumulative Sinking Fund Deposits

The Code provides that an issue of Qualified School Construction Bonds shall not fail to satisfy the programmatic
requirements for such bonds by reason of any fund that is expected to be used to repay such Qualified School
Construction Bonds, that (i) is funded at a rate not more rapid than equal annual installments, (ii) is funded in a
manner reasonably expected to result in an amount not greater than the amount necessary to repay the bonds, and
(iii) is invested at a yield that is not greater than the applicable discount rate published by the U.S. Treasury. The
District shall make mandatory deposits into such an account (the "Cumulative Sinking Fund Deposit Account") held
by the Paying Agent/Registrar for the Bonds on August 1 in each of the years and the respective amounts set forth
below:




                                                          8
                                           All Deposits Due on August 1

                           Date of Sinking      Amount of Sinking           Cumulative
                            Fund Deposit          Fund Deposit               Deposits

                                  2013                  $ 200,000             $200,000
                                  2014                    100,000              300,000
                                  2015                    400,000              700,000
                                  2016                    700,000            1,400,000
                                  2017                    700,000            2,100,000
                                  2018                    700,000            2,800,000
                                  2019                  1,000,000            3,800,000
                                  2020                  1,000,000            4,800,000
                                  2021                  1,000,000            5,800,000
                                  2022                  1,000,000            6,800,000
                                  2023                  1,000,000            7,800,000
                                  2024                  1,000,000            8,800,000
                                  2025                  1,000,000            9,800,000
                                  2026                  1,000,000           10,800,000
                                  2027                  1,400,000           12,200,000


Notwithstanding the deposit amounts set forth above, upon the redemption of a portion of the Bonds, the District
shall reduce each future required deposit by an amount equal to the total principal amount of the Bonds redeemed
divided by the total principal amount of the Bonds outstanding immediately prior to such redemption. Funds
deposited to the Cumulative Sinking Fund Deposit Account shall be applied to pay (i) the principal on the Bonds
at maturity and (ii) upon prior redemption of all or part of the Bonds, an amount of the Redemption Price equal to
the total principal amount of Bonds redeemed divided by the total principal amount of the Bonds outstanding
immediately prior to a redemption. Any money and investments on deposit in the Cumulative Sinking Fund Deposit
Account are pledged to payments on the Bonds.

Any interest earnings from the investment of prior deposits shall be applied as a credit against a subsequent year’s
mandatory sinking fund amount. Such deposits and any interest earned thereon shall be used to pay the principal
of the Bonds upon maturity and are pledged to pay the debt service requirements of the Bonds.

Security for the Bonds

The Bonds are general obligation bonds of the District and are payable from ad valorem taxes which shall be levied
against all taxable property within the boundaries of the District without limitation as to rate or amount. The Bonds
are additionally secured by the New Mexico Credit Enhancement Program as discussed in more detail under “NEW
MEXICO CREDIT ENHANCEMENT PROGRAM,” herein. The District will covenant in the Bond Resolution
to levy, in addition to all other taxes, direct annual ad valorem taxes sufficient to pay the principal of and interest
on the Bonds. The District may pay the principal of and interest on the Bonds from any funds belonging to the
District, which funds may be reimbursed from the ad valorem taxes when the same are collected.

Book-Entry-Only System

The Depository Trust Company ("DTC"), New York, NY, will act initially 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
certificate will be issued for each maturity of the Bonds in the aggregate principal amount of such maturity, and will
be deposited with DTC.

                                                          9
DTC, the world's largest securities 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.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, who will receive a credit
for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase.

Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction.

Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct or
Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the
Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name
of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative
of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co., or such other 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 Participants will remain responsible for keeping
account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to
the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the
Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the Registrar/Paying Agent and request that copies of
notices be provided directly to them.


                                                         10
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless
authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

Principal, 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 the Registrar/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, the Registrar/Paying Agent, or the District, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of principal, 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 the Registrar/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. Under such circumstances, in the event that a successor securities 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). In that event, Bonds will be printed and delivered in accordance with the Bond Resolution.

In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System,
references in other sections of this Official Statement to registered owners should be read to include the person for
which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through
DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered
owners under the Bond Resolution will be given only to DTC.

The information in this section concerning DTC and the Book-Entry-Only system has been provided by DTC for use
in disclosure documents such as this Official Statement. The District, the District’s financial advisor and the
Underwriter believe the source of such information to be reliable, but take no responsibility for the accuracy or
completeness thereof.

The District cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the
Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt
service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices,
to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and 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 procedures of DTC to be followed in dealing with DTC Participants are
on file with DTC.

Successor Securities Depository

In the event that the District determines to discontinue the book-entry system through DTC or a successor or DTC
determines to discontinue providing its services with respect to the Bonds, the District shall either (i) appoint a

                                                         11
successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of
1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and
transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants
of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having
Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in
the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the
successor securities depository, or its nominee, or in whatever name or names a Registered Owner transferring or
exchanging Bonds shall designate, in accordance with the provisions of the Bond Resolution.

Use of Certain Terms in Other Sections of this Official Statement

In reading this Official Statement it should be understood that, while the Bonds are in the Book-Entry-Only System,
references in other sections of this Official Statement to registered owners should be read to include the person for
whom the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through
DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered
owners under the Bond Resolution will be given only to DTC.

DTC Redemption Provisions

The Paying Agent/Registrar and the District, so long as a Book-Entry-Only System is used for the Bonds, will send
any notice of redemption, notice of proposed amendment to the Bond Resolution or other notices with respect to
the Bonds only to DTC. Any failure by DTC to advise any DTC Participant, or of any Direct Participant or Indirect
Participant to notify the beneficial owner, shall not affect the validity of the redemption of the Bonds called for
redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the District
will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement,
through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC Participants in
accordance with its rules or other agreements with DTC Participants and then Direct Participants and Indirect
Participants may implement a redemption of such Bonds and such redemption will not be conducted by the District
or the Paying Agent/Registrar. Neither the District nor the Paying Agent/Registrar will have any responsibility to
DTC Participants, Indirect Participants or the persons for whom DTC Participants act as nominees with respect to
the payments on the Bonds or the providing of notice to Direct Participants, Indirect Participants, or beneficial
owners of the selection of portions of the Bonds for redemption. See "The Bonds; Book-Entry-Only System" herein.

Exchange and Transfer

In the event the Book-Entry-Only System is discontinued, books for the registration and transfer of the Bonds shall
be kept by the Registrar (i.e., transfer agent) for the Bonds. Upon the surrender for transfer of any Bonds at the
Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or
his attorney duly authorized in writing, the Registrar shall authenticate and deliver in the name of the transferee or
transferees a new bond or bonds of a like aggregate principal amount and of the same maturity, bearing a number
or numbers not contemporaneously outstanding. Bonds may be exchanged at the Registrar for an equal aggregate
principal amount of bonds of the same maturity of other authorized denominations. The Registrar shall authenticate
and deliver a bond or bonds which the registered owner making the exchange is entitled to receive, bearing a number
or numbers not contemporaneously outstanding. Exchanges and transfers of bonds as provided in the Bond
Resolution shall be without charge to the owner or any transferee, but the Registrar may require the payment by the
owner of any bond requesting exchange or transfer of any tax or other governmental charge required to be paid with
respect to such exchange or transfer.

The Registrar shall not be required (1) to transfer or exchange all or a portion of any bond subject to prior
redemption during the period of fifteen days next preceding the mailing of notice to the registered owners calling
any bonds for prior redemption pursuant to the Bond Resolution or (2) to transfer or exchange all or a portion of
a bond after the mailing to registered owners of notice calling such bond or portion thereof for prior redemption.

                                                         12
The person in whose name any bond shall be registered, on the registration books kept by the Registrar, shall be
deemed and regarded as the absolute owner thereof for the purpose of making payment thereof and for all other
purposes except as may otherwise be provided with respect to payment of interest as is provided in the Bond
Resolution, and payment of or on account of either principal or interest on any bond shall be made only to or upon
the written order of the registered owner thereof or his legal representative, but such registration may be changed
upon transfer of such bond in the manner and subject to the conditions and limitations provided in the Bond
Resolution. All such payments shall be valid and effectual to discharge the liability upon such bond to the extent
of the sum or sums so paid.

If any bond shall be lost, stolen, destroyed or mutilated, the Registrar shall, upon receipt of such evidence,
information or indemnity relating thereto as it may reasonably require, authenticate and deliver a replacement bond
or bonds of a like aggregate principal amount and of the same maturity, bearing a number or numbers not
contemporaneously outstanding. If such lost, stolen, destroyed or mutilated bond shall have matured, the Registrar
may direct the Payment Agent to pay such bonds in lieu of replacement.

Limitation on Transfer of Bonds

Neither the District nor the Paying Agent/Registrar are required to transfer or exchange any Bond (i) during the
period commencing at the close of business on the record date and ending at the opening of business on the next
interest payment date and (ii) if called for redemption, in whole or in part, within 45 days of the date fixed for
redemption; provided, however, such limitation of transfer will not be applicable to an exchange by the registered
owner of the uncalled balance of a Bond.

Defeasance

General. The Bond Resolution provides for the defeasance of the Bonds and the termination of the pledge of taxes
and revenues and all other general defeasance covenants in the Bond Resolution under certain circumstances. Any
Bond and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Bond")
within the meaning of the Bond Resolution when the payment of all principal and interest payable with respect to
such Bond to the due date or dates thereof (whether such due date or dates be by reason of maturity, upon
redemption, or otherwise) either (1) shall have been made or caused to be made in accordance with the terms thereof
(including the giving of any required notice of redemption) or (2) shall have been provided for on or before such
due date by irrevocably depositing with or making available to the Paying Agent/Registrar or an eligible entity for
such payment (a) lawful money of the United States of America sufficient to make such payment, (b) Defeasance
Securities (defined below) that mature as to principal and interest in such amounts and at such times as will ensure
the availability, without reinvestment, of sufficient money to provide for such payment and when proper
arrangements have been made by the District with the Paying Agent/Registrar or an eligible entity for the payment
of its services until after all Defeased Bonds shall have become due and payable or (c) any combination of (a) and
(b). At such time as a Bond shall be deemed to be a Defeased Bond, such Bond and the interest thereon shall no
longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes or revenues levied and
pledged as provided in the Bond Resolution, and such principal and interest shall be payable solely from such money
or Defeasance Securities.

The deposit under clause (2) above shall be deemed a payment of a Bond when proper notice of redemption of such
Bonds shall have been given, in accordance with the Bond Resolution. Any money so deposited with the Paying
Agent/Registrar or an eligible entity may at the discretion of the District also be invested in Defeasance Securities,
maturing in the amounts and at the times as set forth in the Bond Resolution, and all income from such Defeasance
Securities received by the Paying Agent/Registrar or an eligible trust company or commercial bank that is not
required for the payment of the Bonds and interest thereon, with respect to which such money has been
so deposited, shall be remitted to the District.



                                                         13
All money or Defeasance Securities set aside and held in trust pursuant to the provisions of the Bond Resolution
for the payment of principal of the Bonds and premium, if any, and interest thereon, shall be applied to and used
solely for the payment of the particular Bonds and premium, if any, and interest thereon, with respect to which such
money or Defeasance Securities have been so set aside in trust. Until all Defeased Bonds shall have become due and
payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds
the same as if they had not been defeased, and the District shall make proper arrangements to provide and pay for
such services as required by the Bond Resolution.

If money or Defeasance Securities have been deposited or set aside with the Paying Agent/Registrar or an eligible
entity for the payment of Bonds and such Bonds shall not have in fact been actually paid in full, no amendment of
the defeasance provisions of the Bond Resolution shall be made without the consent of the registered owner of each
Bond affected thereby.

Investments. Any escrow agreement or other instrument entered into between the District and the Paying
Agent/Registrar or an eligible entity pursuant to which money and/or Defeasance Securities are held by the Paying
Agent/Registrar or an eligible trust company or commercial bank for the payment of Defeased Bonds may contain
provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution
of other Defeasance Securities upon the satisfaction of certain requirements. All income from such Defeasance
Securities received by the Paying Agent/Registrar or an eligible trust company or commercial bank which is not
required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited,
will be remitted to the District.

For the purposes of these provisions, "Defeasance Securities" means direct, noncallable obligations of the United
States of America, including obligations that are unconditionally guaranteed by the United States of America

Amendments

In the Bond Resolution, the District has reserved the right to amend the Bond Resolution, without the consent of
or notice to any Owner, from time to time and at any time, in any manner not detrimental to the interests of the
Owners, including modifying the projects for which proceeds of the Bonds may be used, curing of any ambiguity,
inconsistency, or formal defect or omission in the Bond Resolution. The Bond Resolution provides in addition, that
the District, with the written consent of Owners holding a majority in aggregate principal amount of the Bonds then
outstanding affected thereby, may amend, add to, or rescind any of the provisions of the Bond Resolution; provided
that, without the consent of all Owners of then outstanding Bonds, no such amendment, addition, or recission shall
(i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the principal amount
thereof, redemption price therefor, or the rate of interest thereon, or in any other way modify the terms of payment
of the principal of or interest on the Bonds, (ii) give any preference to any Bond over any other Bond, or (iii) reduce
the aggregate principal amount of Bonds required for consent to any such amendment, addition, or recission.
Reference is made to the Bond Resolution for further provisions relating to the amendment of the Bond Resolution.




                                                          14
                                          SECURITY AND REMEDIES

Generally

The Bonds are general obligations of the District payable from ad valorem taxes which may be levied against all
taxable property within the District without limitation of rate or amount. The Bonds are secured by the obligation
of the Board of County Commissioners of San Juan County to levy and collect upon all taxable property within the
District a tax levy sufficient, together with other legally available revenues, to meet the debt service on the Bonds.
Such annual levy for debt service creates a statutory tax lien which can be enforced personally against the owner
of the property and enforced by sale of the property. Neither the State nor the County have any responsibility to pay
the debt service on the Bonds. The Bonds are further secured by the New Mexico School District Credit
Enhancement Program (See “New Mexico School District Credit Enhancement Program,” herein).

Various State laws and constitutional provisions apply to the assessment and collection of ad valorem property taxes.
There is no assurance that there will not be any change, interpretation of, or addition to the applicable laws,
provisions, and regulations which would have a material effect, directly or indirectly, on the affairs of the District.

Limitations on Remedies Available to Owners of Bonds

There is no provision to accelerate the maturity of the principal of the Bonds in the event of a default in the payment
of principal of or interest on the Bonds. Consequently, remedies available to the owners of the Bonds may have to
be enforced from year to year. The enforceability of the rights and remedies of the owners of the Bonds, and the
obligations incurred by the District in issuing the Bonds, are subject to the following: the federal bankruptcy code
and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the
enforcement of creditor's rights generally, now or hereafter in effect; usual equity principles that may limit the
specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers
delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional
situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest
of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the
federal or state government, if initiated, could subject the owners of the Bonds to judicial discretion and
interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation, or
modification of their rights.

                                      DEBT AND OTHER OBLIGATIONS

Debt Limitations

Article IX, Section 11 of the New Mexico Constitution limits the powers of a District to incur general obligation
debt extending beyond a fiscal year. Generally, the District can only incur such debt for "the purpose of erecting,
remodeling, making additions to and furnishing school buildings or purchasing or improving school grounds or any
combination of these purposes." The District must submit any proposition to create such debt to a vote of the
qualified electors of the District, and a majority of those voting must vote in favor of creating the debt. Finally, the
total indebtedness of the District may not exceed six percent of the assessed valuation of the taxable property within
the District as shown by the last preceding general assessment. Despite these general limitations, New Mexico
school districts may acquire education technology equipment on a lease-purchase basis without voter approval,
provided that the lease-purchase does not exceed five years and the total indebtedness does not exceed the six
percent limitation. The District may refund outstanding general obligation bonds without voter approval even if the
resulting total indebtedness will exceed six percent of its assessed valuation.




                                                          15
Present Bonding Capacity

The total indebtedness of the District may not exceed six percent of the assessed valuation of the taxable property
within the District as shown by the last preceding general assessment. The District’s 2009 assessed valuation, as
shown by the last preceding general assessment, is $1,400,714,637 for a total bonding capacity of $84,042,878.
After subtracting the Net Direct Debt to be outstanding in the amount of $48,995,339, the District will have available
bonding capacity of $35,047,539. However, the preliminary 2010 assessed valuation data indicates a large reduction
in the tax base due to lower oil and natural gas production values which will lower the District’s bonding capacity.
The District will defease or call sufficient existing debt to avoid exceeding the six percent limitation. See also “TAX
BASE- Expectation for 2010 Assessed Valuation” herein.

Bonds Outstanding

The District has the following bond issues outstanding.1

                                   Series Date                                Issue Amount                   Balance Remaining
                                   Series 2000                                  $ 3,000,000                       $ 1,300,000
                                   Series 2001                                    3,800,000                         2,600,000
                                   Series 2002                                    6,785,000                        10,300,000
                                   Series 2007                                    5,000,000                        13,300,000
                                   Series 2008                                   15,000,000                        12,725,000
                                                                                                                  $40,225,000

1
        Without giving effect to defeasance of approximately $3,375,000 in principal amount of the District's outstanding general obligation
        indebtedness to occur prior to closing on the Bonds.


Debt Service Schedule

             Calendar            Outstanding Debt1                                The Bonds2                               Total
              Year         Principal            Interest       Sinking Fund       Interest Paid      Subsidy Pmt.        Debt Service
              2010        $2,725,000        $ 794,952.50                                                                $3,519,952.50
              2011         3,100,000         1,470,030.00                        $ 668,102.50    ($615,567.94)           4,622,564.56
              2012         3,500,000         1,334,530.00                          713,700.00     (657,580.00)           4,890,650.00
              2013         3,800,000         1,201,850.00        $ 200,000         713,700.00     (657,580.00)           5,257,970.00
              2014         4,300,000         1,057,550.00          100,000         713,700.00     (657,580.00)           5,513,670.00
              2015         4,600,000           890,600.00          400,000         713,700.00     (657,580.00)           5,946,720.00
              2016         3,500,000           709,100.00          700,000         713,700.00     (657,580.00)           4,965,220.00
              2017         3,700,000           583,200.00          700,000         713,700.00     (657,580.00)           5,039,320.00
              2018         4,000,000           437,600.00          700,000         713,700.00     (657,580.00)           5,193,720.00
              2019         4,000,000           279,200.00        1,000,000         713,700.00     (657,580.00)           5,335,320.00
              2020         3,000,000           120,000.00        1,000,000         713,700.00     (657,580.00)           4,176,120.00
              2021                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2022                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2023                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2024                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2025                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2026                                               1,000,000         713,700.00     (657,580.00)           1,056,120.00
              2027                                               1,400,000         713,700.00     (657,580.00)           1,456,120.00
                         $40,225,000         $8,878,612.50     $12,200,000     $12,087,302.50 ($11,136,847.94)         $62,254,067.06
    1
            Without giving effect to defeasance of approximately $3,375,000 in principal amount of the District's outstanding general obligation
            indebtedness to occur prior to closing on the Bonds.
    2
            For the Bonds, Interest Paid amounts were estimated at 5.85% and the Subsidy Payment amounts were estimated at 5.39% . These
            estimates are for illustration purposes only and are subject to change once the Bonds are sold.



                                                                        16
                                                         FINANCIAL DATA

    District Valuation
    2009-2010 Assessed Valuation1                                                                                    $1,400,714,637
    Estimated Actual Value2                                                                                          $4,273,125,691


    Bonded Indebtedness
    Outstanding Bonds                                                                                                   $40,225,000
    This issue                                                                                                           12,200,000
    Total General Obligation Debt                                                                                        52,425,000
    Less sinking fund balance3                                                                                           (3,429,661)
    Net Direct Debt                                                                                                     $48,995,339


    Direct and Overlapping Bonded Debt

                                                  Assessed Valuation          Bonded Debt       % Applicable         District's Share
    Aztec School District 4                          $1,400,714,637           $52,425,000          100.00%             $52,425,000
    City of Aztec                                        98,797,883                     0          100.00%                          0
    San Juan Junior College                           4,765,779,308            19,190,000           29.39%                5,640,151
    San Juan County                                   4,765,779,308                     0           29.39%                          0
    State of New Mexico 5                            55,046,209,183           398,580,000            2.54%               10,142,330
    Total Overlapping Debt                                                                                             $68,207,481


    Debt Ratios
                                                  To Assessed Value       To Actual Value       Per Capita4
    Net Direct Debt                                            3.50%                 1.15%             $3,550
    Direct and Overlapping Debt                                4.87%                 1.60%             $4,943
    Per Capita6                                             $101,501              $309,647


    Bonding Capacity
    Legal bonding capacity (6% of assessed valuation)                                                                  $84,042,878
    Less Net Debt to be outstanding                                                                                    (48,995,339)
    Capacity in excess of present requirements                                                                         $35,047,539


1
       Preliminary assessed valuation for property tax year 2010 ( to be finalized in October 2010) is estimated to be $819,268,035. See:
       “DEBT AND OTHER OBLIGATIONS - Present Bonding Capacity,” “Financial Data,” and “TAX BASE - Expectations for 2010
       Assessed Valuation,” herein.
2
       Estimated actual assessed valuation was computed by adding the exemptions to the 2009 assessed valuation of the District and
       dividing the result by .333 (33.3% assessment ratio).
3
       The debt service fund balance on June 30, 2010, was $4,431,087.79. The portion of the balance applicable to principal was
       computed by a ratio of the remaining principal coming due in 2010 to the remaining total debt service due in 2010.
4
       The bonded debt show for the District is without giving effect to defeasance of approximately $3,375,000 in principal amount of
       the District's outstanding general obligation indebtedness to occur prior to closing on the Bonds.
5
       As of July 1, 2010, the State has $705,285,000 of severance tax revenue bonds, and $140,060,000 of supplemental severance tax
       bonds. Various State agencies also have self-liquidating revenue bonded debt outstanding.
6
       Estimated population: 13,800.




                                                                  17
                                                    TAX BASE

Property Subject of Taxation

Real property is subject to taxation with certain exemptions. Within the real property classification, exemptions
include: property of the United States of America; property of the State, all counties, towns, cities and school
districts or other municipal corporations; public libraries; community ditches and all laterals thereof; all church
property not used for commercial purposes; all property used for educational and charitable purposes; all
cemeteries not used or held for private or corporate profit; motor vehicles (other than mobile homes) and all
bonds of the State, counties, municipalities and districts. Also, certain amounts of the taxable value of residential
property are exempt from taxation if such property is owned by the head of a family who is a State resident
($2,000 of residential property) or is owned by a veteran or a veteran's unmarried surviving spouse if the veteran
or spouse is a State resident ($4,000 of residential property or, for disabled veterans or spouses, the entire value
of residential property). All tangible personal property has been exempted from property taxation by statute
except for tangible personal property used, produced, manufactured, held for sale, leased or maintained by a
person for purposes of his profession, business or occupation (unless otherwise specifically exempted from
property taxation by the federal or State Constitution or law); tangible property for which the owner has claimed
a deduction from depreciation for federal income tax purposes; mobile homes; livestock; and certain inventories
of personal property.

Assessment of Property
The county assessor sets the value of most residential and nonresidential real and personal property within the
county. However, those properties used in the businesses of railroads, communications, pipelines, public utilities
and airlines are valued by the Central Assessment Bureau, Property Tax Division of the Taxation and Revenue
Department. The Central Assessment Bureau also is responsible for the valuation of electric generating facilities,
mineral properties and certain industrial machinery. The value of oil and natural gas property and equipment
is determined by the Oil and Gas Accounting Division of the Taxation and Revenue Department based on the
prior calendar year's output. The net taxable value of all property is one-third of the full taxable value (the
"Assessment Ratio").

The value of residential property for property taxation purposes is its market value as determined by sales of
comparable property, or if that method cannot be used due to the lack of comparable sales data for the property
being valued, its value is determined using an income method or costs method of valuation. Regardless of the
method used for valuation, the valuation authority must apply generally accepted appraisal techniques.

The county assessor must mail a notice by April 1 of each year to each property owner informing him of the net
taxable value of his property that has been valued for property taxation purposes, the tax ratio, the classification
of the property valued, and other information. The Central Assessment Bureau must also send notices by May
1 of each year to property owners with property subject to valuation by the Property Tax Division. A property
owner may protest the value or classification of his or her property by filing a petition of protest with the Director
of the Property Tax Division or with the appropriate county assessor. The protest hearing may be held before
the Director of the Property Tax Division or before the appropriate county valuation protest board, dependent
upon whether the Property Tax Division or the local county assessor was responsible for review of the valuation.
A property owner may appeal an order made by the Director of the Property Tax Division or a county valuation
protest board by filing with the court of appeals a notice of appeal within 45 days of the date the order was made.




                                                         18
Reassessment

New Mexico has a state-wide property reassessment program. The program's objective is to keep property values
close to their market values so that there will be a high correlation between the value of a property and its share
of the tax burden. The first reassessment under this present program was in 1986, and such reassessments
continue biannually in the odd numbered years.

There are limitations on the percentage change in a county’s assessed valuation due to the re-assessment of
residential property and valuation of the residential property of qualifying seniors age 65 or older can be frozen.
NMSA 1978, Section 7-36-21.2 (the “Statutory Valuation Cap on Residential Increases”) states, in pertinent
part, that the value of a property in the 2001 and subsequent Property Tax Years shall not exceed the higher of
103% of the value in the tax year immediately prior to the tax year in which the property is being valued or
106.1% of the value in the tax year two years prior to the tax year in which the property is being valued.
Exceptions to this limitation include new additions to the tax rolls, the value of new improvements to existing
properties, properties in which there is a change of ownership, properties where the zoning classification has
changed, and properties that are subject to the value limitations of NMSA 1978, Section 7-36-21.3.

The Statutory Valuation Cap on Residential Increases was enacted in response to an amendment to the uniformity
clause (Article VIII, Section 1) of the New Mexico Constitution. This Constitutional amendment directs the
Legislature to provide for valuation of residential property in a manner that limits annual increases in valuation.
The limitation may be applied to classes of residential property taxpayers based on occupancy, age or income.
Further, the limitations may be authorized statewide or at the option of a local jurisdiction and may include
conditions for applying the limitations.

The Statutory Valuation Cap on Residential Increases has been recently challenged in a number of venues.
Paragraph 3 of NMSA 1978, Section 7-36-21.2, was declared unconstitutional under the New Mexico
Constitution in the case of Dzur vs. Bernalillo County Protests Board, No. CV-2008-12410, filed in Second
Judicial District Court on August 12, 2009. The Court held that the substantially higher increase allowed upon
sale of a residential property over similar residential properties protected by the 3% annual valuation increase
violated the uniformity clause. The Bernalillo County Assessor stated an intention not to appeal the District
Court decision to the New Mexico Court of Appeals and the time period for filing an appeal in that case has
expired. Another case in the Second Judicial District, Wang vs. Bernalillo County Assessor, No. CV-2007-
10109, reached a similar holding. Cases have been filed seeking a class action certification as to this issue.
Currently, the New Mexico Court of Appeals has placed on its general docket two cases that raise the
constitutionality of the Statutory Valuation Cap on Residential Increases. The Legislature considered various
bills dealing with the Statutory Valuation Cap on Residential Increases in the 2010 special legislative session,
but no bills were enacted into law. To the extent that court or legislative action is taken or a further
Constitutional amendment is passed amending the valuation provisions, it could have a material impact on the
valuation of residential property.

NMSA 1978, Section 7-36-21.3, places a limitation on the increase in value for property taxation purposes for
single-family dwellings occupied by low-income owners who are 65 years of age or older or who are disabled.
The statute fixes the valuation of the property to the valuation in the year that the owner turned 65 or became
disabled. The Section 7-36- 21.3 limitation does not apply:

       1.       To property that is being valued for the first time;
       2.       To a change in valuation resulting from physical improvements made to the property in the
                preceding year; and
       3.       To a change in valuation resulting from a change in the zoning or permitted use of the property
                in the preceding year.



                                                        19
Taxation of Oil and Natural Gas Production

Unlike other property taxes, oil and gas production taxes are determined monthly based on the current month's
taxable value of product multiplied by the mill levy certified by the Department of Finance and Administration.
The certified mill levy is based on the preceding calendar year's taxable value of product with possible
adjustment for current market conditions.

The taxable value of products which are severed and sold from each production unit is an amount equal to one
hundred fifty percent (150%) of the value of the output after deducting royalties paid to the United States, the
state of New Mexico or any Indian tribe, Indian pueblo or Indian. This net value is then multiplied by the
standard assessment ratio (presently 33.3%) to determine the taxable value of product.

Any person engaged in the severance of an oil or gas product from a production unit must file a return on or
before the twenty-fifth day of the second month after the month for which a return is required. All taxes due or
to be remitted by the operator must accompany the return. Interest penalties are imposed on any overdue taxes.

Taxation of Oil and Natural Gas Equipment

The taxable value of equipment of each production unit is an amount equal to twenty-seven percent (27%) of
the cumulative net value of product of a production unit for the preceding calendar year. The net value of
equipment so determined is then multiplied by the appropriate assessment ratio and tax rate to determine the
amount of equipment taxes due. The producer is billed by the New Mexico Taxation and Revenue Department
on or before October 15 of each year for payment by November 30th. Interest penalties are imposed on any
overdue taxes.

Expectation for 2010 Assessed Valuation

As discussed above, the oil and natural gas assessed valuation shown for any property tax year (“PTY”) is based
on the value of product sold during prior calendar year, but the majority of oil and gas taxes (except for the oil
and gas equipment taxes) are actually collected on current production. (See “Taxation of Oil and Natural Gas
Production” above.) The District is aware that the value of its oil and natural gas assessed valuation for the 2010
PTY will decline by approximately 41 percent due to the drop in the value of production during calendar year
2009. However, since it is largely a historical number, most of the revenue effects related to the decline have
already been realized. Furthermore, this sizable decline was anticipated by the District in its 2009 tax rate for
debt service which was increased from 2.997 in the 2008 PTY to 5.497 in the 2009 PTY. The tax rate required
for the 2010 PTY is expected to be similar to 2009. Finally, the anticipated decline in the District’s assessed
valuation for the 2010 PTY from $1,400,714,637 to an estimated $819,268,035 will reduce available bonding
capacity as discussed previously under “DEBT AND OTHER OBLIGATIONS - Present Bonding Capacity.




                                                        20
Assessed Valuation

The detail of the District’s assessed valuation by property class is presented below for the latest five property
tax years. (See also “TAX BASE - Expectation for 2010 Assessed Valuation” above.)

Assessments                          2005          2006          2007             2008          2009
Land                           $ 56,996,126   $ 58,009,596   $ 61,027,984     $63,448,174    $69,612,928
Improvements                     103,345,598    114,503,279    143,778,872    157,962,798    179,588,771
Personal Property                 15,751,873     24,255,845     25,828,663      21,221,972    16,184,872
Mobile Homes                      14,695,047     14,825,668     14,798,024      14,956,929    15,277,064
Livestock                            353,520        360,185        596,277         437,752       336,470
Assessor's Taxable Value         191,142,164    211,954,573    246,029,820    258,027,625    281,000,105
Less Exemptions                 (15,471,229)   (15,823,719)   (20,849,948)    (20,747,003)  (22,236,218)
Assessor's Net Taxable Value     175,670,935    196,130,854    225,179,872   $237,280,622    258,763,887
Oil and Gas Assessed Property    881,486,383 1,168,365,088 1,006,185,789      964,708,918 1,051,946,278
Centrally Assessed Property       88,019,813     97,504,075     95,581,774      90,548,493    90,004,472
Total Net Taxable Value       $1,145,177,131 $1,462,000,017 $1,326,947,435 $1,292,538,033 $1,400,714,637

Source: State of New Mexico, Taxation and Revenue Department, Property Tax Division, and the office of the San Juan
County Assessor.

Residential and Non-Residential Property

Property in New Mexico is classified as either residential or non-residential based on its use. The calculation
of revenue limitations for Yield Control, as discussed herein, is performed separately for each property class.
The result is that levies for operational purposes may be different for each property class. (See also “TAX BASE
- Expectation for 2010 Assessed Valuation” above.) The assessed valuation of the District broken down by
residential/non-residential classification is shown below.

                                   2005           2006           2007           2008           2009
Residential                   $ 131,889,452 $ 142,153,566 $ 164,455,247      $174,564,612   $190,395,589
Non-Residential                1,013,287,679 1,319,846,451 1,162,492,188 1,117,973,421 1,210,318,048
Total                         $1,145,177,131 $1,462,000,017 $1,326,947,435 $1,292,538,033 $1,400,714,637

Comparison of Assessed Valuation

The following is a eight year history of assessed valuation for the District compared with San Juan County. (See
also “TAX BASE - Expectation for 2010 Assessed Valuation” above.)

              Tax Year            Aztec Municipal Schools        San Juan County       % of County
               2009                 $1,400,714,637               $4,765,779,308           29.39%
               2008                   1,292,538,033               4,403,286,082           29.35
               2007                   1,346,947,435               4,259,131,064           31.63
               2006                   1,462,000,017               4,313,169,508           33.90
               2005                   1,145,177,131               3,658,523,737           31.30
               2004                     952,630,121               3,257,122,732           29.25
               2003                     646,022,554               2,683,859,099           24.07




                                                        21
Major Taxpayers
                                                                  2009
           Taxpayer                                             Valuation
      Williams Four Corners                                   $32,277,638
      Val Verde Gas                                            15,918,596
      Enterprise Field Services                                10,127,912
      Devon Energy                                              6,349,364
      City of Farmington                                        4,400,745
      Trans-Colorado Pipeline                                   3,522,795
      Mid-America Pipeline                                      2,379,035
      Qwest                                                     1,609,466
      Transwestern Pipeline                                     1,498,119
      El Paso Natural Gas                                       1,494,089
      Compress Systems                                          1,460,759

The above eleven taxpayers represent 5.79% of the District’s total assessed valuation.

Source: Central Assessment Bureau, Property Tax Division, Taxation and Revenue Department


                                                   TAX RATES
Yield Control Limitation

NMSA 1978, Section 7-37-7.1, limits the allowable increase in property taxes from the preceding year.
Specifically, no rate shall be set or assessment imposed which will produce current tax revenues in excess of the
prior year's tax revenues plus a percent that is determined by a growth control factor. The growth control factor
is the sum of ("G") the growth in the assessed valuation due to net new additions to the property tax rolls,
expressed as a percent of the prior year's assessed valuation, and ("I") the percentage change, not in excess of five
percent, in the annual business indicator index between the prior calendar year and the year next preceding the
prior calendar year. The resulting yield control equation is:

                         Current tax revenues = prior tax revenues x (G+I)
                         Where: G is never less than 100%
                                   I is never less than 0% or more than 5%.

The annual business indicator index is defined as "annual implicit price deflator index for state and local
government purchases of goods and services, as published in the United States department of commerce monthly
publication entitled "Summary of Current Business" or any successor publication for the calendar year." The yield
control formula applies to both residential and nonresidential property, but the calculations for each property class
are made separately. Additionally, the yield control formula applies to any authorized operating levy but not to
any debt service levy.

Constitutional Limitation

Article VIII, Section 2, of the New Mexico Constitution limits the total ad valorem taxes for operational purposes
levied by all overlapping governmental units within a taxing district to $20.00 per $1,000 of assessed value. This
limitation does not apply to levies for public debt and levies for additional taxes if authorized at an election by a
majority of the qualified voters of the jurisdiction voting on the question. The overlapping operational levies of
the Aztec Municipal School District are 10.644 residential and 14.373 nonresidential, both of which are within
the 20-mill limit.



                                                         22
City of Aztec Tax Rates
(Residential and Non-Residential)

                                2005               2006                2007               2008             2009
                            Res Nonres         Res Nonres          Res Nonres        Res Nonres       Res Nonres
State Debt Service          1.234 1.234        1.291 1.291         1.221 1.221       1.250 1.250      1.150 1.150

County Operational        6.127      8.000     6.237    8.000      5.951 8.000       6.067   8.000    5.812   8.000
County Water Reserve Fund 0.500      0.500     0.500    0.500      0.500 0.500       0.500   0.500    0.500   0.500
  Total                   6.627      8.500     6.737    8.500      6.451 8.500       6.567   8.500    6.312   8.500

Municipal Operational       5.031    6.256     5.088    6.312      4.802 6.009       4.860   6.324    4.570   5.873
Municipal Debt Service      0.000    0.000     0.000    0.000      0.000 0.000       0.000   0.000    0.000   0.000
  Total Municipal           5.031    6.256     5.088    6.312      4.802 6.009       4.860   6.324    4.570   5.873

School District Operational 0.281    0.500     0.287    0.495      0.276   0.500     0.280   0.500    0.262   0.500
School District Debt Service 2.375   2.375     2.366    2.366      2.967   2.967     2.997   2.997    5.497   5.497
School Capital Improvements 2.000    2.000     2.000    1.979      2.000   2.000     2.000   2.000    1.871   2.000
   Total School District     4.656   4.875     4.653    4.840      5.243   5.467     5.277   5.497    7.630   7.997

Other:
San Juan College            3.916    5.100     3.971    5.100      3.828 5.100       3.883   5.100    3.756   5.100

Grand Total                21.464 25.965      21.740 26.043      21.545 26.297      21.837 26.671    23.418 28.620


Non-municipal Areas

                                2005               2006                2007               2008             2009
                            Res Nonres         Res Nonres          Res Nonres        Res Nonres       Res Nonres
Grand Total                16.433 19.709      16.652 19.731       16.743 20.288     16.977 20.347    18.848 22.747




                                 (The remainder of the page intentionally left blank.)




                                                         23
                                              TAX COLLECTIONS


Method of Collection

General (ad valorem) taxes for all units of government are collected by the county treasurer and distributed
monthly to the various political subdivisions to which they are due. Property taxes are due in two installments.
The first half installment is due on November 10 and becomes delinquent on December 10; the second half
installment is due on April 10 and becomes delinquent on May 10.


Penalty for Delinquent Taxes

Pursuant to NMSA 1978, Section 7-38-50, if property taxes become delinquent, a penalty of 1% of the delinquent
tax for each month, or any portion of a month, they remain unpaid shall be imposed, but the total penalty shall not
exceed 5% of the delinquent taxes. The minimum penalty imposed is $5.00. A county can suspend application
of the minimum penalty requirement for any tax year.

If property taxes become delinquent because of an intent to defraud by the property owner, 50% of the property
tax due or $50.00, whichever is greater, shall be added as a penalty.


Interest on Delinquent Taxes

Pursuant to NMSA 1978, Section 7-38-49, if property taxes are not paid for any reason within thirty (30) days after
the date they are due, interest on the unpaid taxes shall accrue from the thirtieth (30th) day after they are due until
the date they are paid. Interest accrues at the rate of one percent (1%) per month or any fraction of a month.


Remedies Available for Non-Payment of Taxes

Pursuant to NMSA 1978, Section 7-38-47, property taxes are the personal obligation of the person owning the
property on the date on which the property was subject to valuation for property taxation purposes. A personal
judgment may be rendered against the taxpayer for payment of taxes that are delinquent, together with any penalty
and interest on the delinquent taxes.

Taxes on real property are a lien against the real property. Pursuant to Section 7-38-65, NMSA 1978, delinquent
taxes on real property may be collected by selling the real property on which taxes are delinquent.

Pursuant to NMSA 1978, Section 7-38-53, delinquent property taxes on personal property may be collected by
asserting a claim against the owner(s) of the personal property for which taxes are delinquent.




                                                          24
                                         TAX COLLECTION HISTORY
                                              (San Juan County)


                                    Net Taxes Charged        Taxes Collected   Percentage
    Tax Year                           to Treasurer              to Date       Collected

As of June 30, 2010
        2009                           $63,978,897              $61,868,631      96.70%
        2008                            59,522,735               58,747,562      98.70%
        2007                            56,266,854               55,919,609      99.38%
        2006                            51,744,962               51,572,189      99.67%
        2005                            48,878,577               48,849,801      99.94%


As of June 30, 2009
        2008                           $59,289,265              $57,266,846      96.59%
        2007                            56,107,171               55,604,680      99.10%
        2006                            51,589,064               51,435,548      99.70%
        2005                            48,815,575               48,782,160      99.93%
        2004                            46,741,538               46,728,263      99.97%


As of June 30, 2008
        2007                           $56,104,216              $54,445,797      97.04%
        2006                            51,566,768               51,141,479      99.18%
        2005                            48,817,612               48,723,441      99.81%
        2004                            46,741,532               46,709,464      99.93%
        2003                            47,824,834               47,801,470      99.95%


As of June 30, 2007
        2006                           $51,561,282              $50,180,945      97.32%
        2005                            48,809,722               48,460,817      99.29%
        2004                            46,730,853               46,606,601      99.73%
        2003                            47,813,607               47,757,351      99.88%
        2002                            43,778,927               43,748,587      99.93%


As of June 30, 2006
        2005                           $48,740,336              $47,402,124      97.25%
        2004                            46,718,469               46,362,078      99.24%
        2003                            47,804,914               47,650,416      99.68%
        2002                            43,774,980               43,726,132      99.89%
        2001                            43,470,565               43,460,372      99.97%



Source: San Juan County Treasurer




                                                        25
                                                THE DISTRICT

General

The District is a political subdivision of the State organized for the purpose of operating and maintaining an
educational program for the school-age children residing within its boundaries.

School District Powers

The District is a political subdivision of the State organized for the purpose of operating and maintaining an
educational program for school-age children residing within its boundaries. The District’s powers are subject to
regulations promulgated by the Public Education Department (the “PED”) and the Secretary of the Public
Education Department (the “Secretary”). The Secretary is the governing authority and has control, management
and direction of all public schools, except as otherwise provided by law. The Secretary is appointed by the
Governor and confirmed by the Senate. Generally, the powers of the Secretary and PED include determining the
policy of operations of all public schools; prescribing courses of instruction; determining qualifications for
licensure of teachers, instructional support personnel and administrators, providing technical assistance to local
school boards and districts, prescribing minimum educational standards for all public schools, and enforcing the
Public School Code.

The Secretary may order the creation of new school districts or the consolidation of existing school districts and
may approve the annexation of a geographical area from within one district to another with the consent of the
affected school districts.

Governing Board and Administration

The District's Board of Education (the "Board"), subject to the rules of the PED, supervises and controls all public
schools and property within the District. The Board employs a superintendent of schools, delegates administrative
and supervisory functions to the superintendent, reviews and approves the District’s budget, has the capacity to
sue and be sued, leases, purchases and sells for the District, acquires and disposes of all property, adopts rules
pertaining to the administration of all powers or duties of the Board, and, except for salaries, contracts for the
expenditure of money according to the provisions of the Procurement Code. Members serve without compensation
for four-year terms of office and are elected in non-partisan elections held on the first Tuesday in February in the
odd-numbered years.

          Mitch Waggoner, President, term expires March 1, 2013.

          Roger Collins, Vice President, term expires March 1, 2011.

          Christina Lillywhite, Secretary, term expires March 1, 2013.

          Leonard Tillman, Member, term expires 2011.

          E. Wayne Ritter, Member, term expires March 1, 2011.




                                                        26
Administration and Staff

The Superintendent of Schools (the “Superintendent”) is selected by the Board and is under contract at the
discretion of the Board. The Superintendent is the Chief Executive Officer of the District and employs, fixes
salaries of, and assigns and discharges or terminates all employees of the District. The Superintendent administers
and supervises the operations of the District and, in conjunction with the Director of Finance, prepares the budget,
approves budgetary controls, purchasing and payments, subject to review of the Board. The Superintendent and
selected administrative staff for the District are:

Kirk Carpenter, Superintendent of Schools

Superintendent Carpenter has been with the Aztec Municipal School District for twenty years and was named
Superintendent in November of 2009. Prior to the present appointment, he served as the Deputy Superintendent
for the District. Before coming to the Aztec School District office, Mr. Carpenter spent fourteen years serving as
a teacher, Vice Principal and Principal for Aztec High School. Mr. Carpenter received his Bachelors Degree in
Special Education from New Mexico Highlands University and his Masters Degree in Educational Administration
from New Mexico State University.

Kathleen Runnels, Assistant Superintendent for Finance

Kathleen Runnels, a Certified Public Accountant, came to the Aztec Municipal School District in February 2009
after approximately 10 years in the mortgage industry. She was the Director of Finance for the Farmington
Municipal School District from July 1, 1991 through June 30, 1999. She graduated with a MBA from Highlands
University and received a BS in Accounting from Fort Lewis College.

Retirement Plan

Employees of the District participate in a defined benefit contribution retirement plan through the Educational
Retirement Act (ERA) of the State, a cost-sharing multiple employer, public employee retirement system. The
Educational Retirement Board is the administrator of the plan and issues a separate, publicly available financial
report that includes financial statements and required supplementary information. Said report is available from
the Educational Retirement Board, PO Box 26129, Santa Fe, NM 87502-6129.

Funding Policy

Covered employees are required by State statute to contribute 7.825% of their gross compensation. The District
is required to contribute another 10.9%. Under the retirement plan for the 2009 fiscal year, the employee
contributes 7.90% of his annual wages, and the District contributes 11.65%. For the next two years the
contribution rate for employees making over $20,000 will increase an additional 1.5% and the District’s percentage
will decrease by a corresponding 1.5%. The contribution rates will not change for employee’s earning less than
$20,000.

The District’s contribution requirements for the fiscal years ending June 30, 2009, 2008, and 2007 were
$1,825,443, $1,734,943, and $1,554,853, respectively.

Retiree Health Care

The Retiree Health Care Act created the Retiree Healthcare Fund (“the Fund”), administered by the Retiree Health
Care Authority, for the purpose of providing eligible retirees, their spouses and dependents, and surviving spouses
and dependents with healthcare insurance. Payments are made to the fund on a pay-as-you-go basis by eligible
employers and eligible retirees.


                                                        27
Each participating employer, including the District, makes contributions to the fund in the amount of 1.3% of each
participating employee’s annual salary for fiscal year ending June 30, 2010, but the percentage will increase in
future fiscal years reaching to 2.5 percent for fiscal year ending June 30, 2013, and subsequent periods. Similarly,
contributions for participating employees who are not members of the enhanced retirement plan will increase from
0.65% of each salary this fiscal year to 1.0% for fiscal year ending June 30, 2013, and subsequent periods.
Contributions for participating employees who are members of the enhanced retirement plan will increase from
0.65% of each salary this fiscal year to 1.25% for fiscal year ending June 30, 2013, and subsequent periods. The
Retiree Healthcare Authority issues a separate, publicly available audited financial report, and it may be requested
by writing to the Retiree Healthcare Authority, 4308 Carlisle NE, Albuquerque, NM 87107.

For the years ending June 30, 2009, 2008 and 2007, the District remitted $206,322, $206,912, and $199,034, in
employer contributions, respectively.

Insurance

The District is a member of the New Mexico State Public School Insurance Authority (the "Insurance Authority")
which was established to provide a comprehensive insurance program for school districts, board members and
retirees, and public school employees and retirees within the State. The Insurance Authority provides group health
insurance, workman's compensation, property and casualty insurance, general automobile and fire insurance and
general liability insurance for the District, its property, its board members and employees.

Accreditation

All of the District's schools are accredited by the State's Public Education Department. The accreditation is by
school and district.

Enrollment

The following table presents a ten-year history of the District’s enrollment. Recent reductions in enrollment are
related to the opening of the Mosaic Academy Charter School.

                              School Year                         Enrollment
                               2009-10                              3,222
                               2008-09                              3,090
                               2007-08                              3,088
                               2006-07                              3,137
                               2005-06                              3,244
                               2004-05                              3,177
                               2003-04                              3,228
                               2002-03                              3,266
                               2001-02                              3,379
                               2000-01                              3,349




                                                        28
                                       PUBLIC SCHOOL FINANCING

Revenue to finance the basic operation of New Mexico schools is obtained from local, federal and State sources
and accounted for in the District's General Fund.

Local Sources

School districts are authorized to levy against all taxable property within the district a maximum of .5 mills for
operational purposes. This levy is subject to restriction by Yield Control, discussed earlier in this Official
Statement, so less than the total .5 mills may be actually levied. The State's equalization guarantee program, to
be discussed below, takes credit for 95 percent of the revenue generated through the operational mill levy. Other
sources of local revenue include tuition payments, rental of school property, the sale of property and equipment,
insurance claim proceeds, and earnings on investments.

Federal Sources

Public Law 81-874 ("Impact Aid") Federal funds are provided to school districts to mitigate potential hardships
that result from educating children living on federal lands within the district's boundaries that are not included in
the district's tax base. Such lands include military reservations, Indian reservations, federal public domain lands
and national forest lands. The State's equalization guarantee takes credit for 75 percent of any regular Impact Aid
funds received by the school district. Those school districts which educate students who reside on Indian lands
receive 125% of the basic Impact Aid entitlement for those students. Beginning in 1988, the 25% premium paid
for such students is excluded from the equalization guarantee formula by both federal and State law and is
classified as a federal source revenue in the Special Revenue Fund by the district. School districts are not required
to spend these funds exclusively for Indian children or for special programs for Indian children.

Forest Reserve Funds Revenue generated on federal lands located within a school district is shared with the
district. Twenty-five percent of the net receipts from operations within reserve areas is remitted to the appropriate
county treasurer. These distributions are then split equally between the county road fund and the school district.
The State also takes credit for 75 percent of Forest Reserve funds received by the district when calculating the
equalization guarantee.

Other Federal Funds Both the local school districts and State education agencies receive a variety of federal
assistance funds. These funds include programs under the Johnson-O'Malley Act, the Education Consolidation
and Improvement Act of 1981, and Public Law 94-142. Funds received from such federal programs are placed
in the Special Revenue Fund and are not part of the district's General Fund or operational budget.

State Sources

Equalization Guarantee Program The intent of the Public School Finance Act of 1974 was to equalize financial
opportunity at the highest possible revenue level and to guarantee each New Mexico public school student access
to programs and services appropriate to his educational needs regardless of geographic or local economic
conditions. The resulting "equalization guarantee" funding formula is designed to determine the level of funding
needed by a particular school district without regard to tax base but considering student enrollment, differential
costs of various educational programs and grade levels, and the training and experience of district personnel. The
State guarantees the needed level of financing determined under the formula less credits for 75 percent of district
revenues from local sources, from federal "in lieu of tax" programs and from federal Forest Reserve program
distributions, as discussed previously.




                                                         29
                            Simplified Example of Equalization Guarantee Funding

                        School Year                                     2010-11
                        Program Units                                   5,669.785
                        Times Appropriation Per Unit                   $3,792.65
                        Program Cost                              $21,503,510.08
                        Less Revenue Credits @ 75%                   (312,943.40)
                        Total State Guarantee                     $21,190,566.68


Other State Revenues The State has two other special programs that are operated separately from the equalization
guarantee. The Free Textbook Allocation program is the only significant program not administered through the
Public School Fund. The appropriation for free textbooks is derived exclusively from federal mineral leasing
revenues received by the State. The State also provides a transportation distribution to qualifying school districts
to cover the cost of transporting students in grades K through 12. The distributions are based on a formula which
considers the capacity of the buses used, number of routes, miles traveled on each route and number of students
actually transported on each route.

Other Funds Maintained by the School District

Debt Service Funds
The county treasurer levies and collects debt service funds sufficient to retire bonded debt as it becomes due and
payable. Such funds are distributed to the District and accounted for separately from operating funds. The District
is allowed to borrow all District funds if the collections are insufficient, but such borrowings must be repaid from
tax collections. Debt service funds may not be used for general operating purposes.

Capital Project Fund
The Capital Projects Fund is used to account for the revenues and expenditures under the provisions of two State
programs and general obligation bonds issued by the District.

Public School Capital Improvements Fund
The Public School Capital Improvements Fund exists to account for revenues received under provisions of the
Public School Capital Improvements Act, NMSA 1978, Sections 22-25-1 et. seq. The act provides for imposition
of a property tax to produce revenue for capital improvements. The act further provides that funds will be
distributed by the State to those school districts that impose the special property tax.

General Obligation Bonds
The Capital Projects Fund is also used to account for the costs relating to erecting, remodeling, making additions
to and furnishing school buildings or purchasing or improving school grounds and purchasing computer software
and hardware for student use in public school classrooms, or any combination of these purposes.

Fiduciary Funds
The District acts as an agent for the various organizations by facilitating collection of revenues and payments of
expenses.

Special Revenue Funds
Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for
particular purposes.




                                                        30
                                     DISTRICT BUDGETING PROCESS

A district is required by State law to submit an estimated budget for the next school year to the School Budget and
Finance Analysis Bureau (“SB&FAB”) by April 15 of each year. If no budget is submitted, the SB&FAB must
prepare an estimated budget for the district. Prior to June 20 of each year, the Board must hold a public hearing
to fix the estimated budget for the district for the next fiscal year.

Before July 1 of each year, the SB&FAB approves and certifies a final budget for use by a district. No school
board, officer or employee of a school district may make an expenditure or incur any obligation for the expenditure
of public funds unless such expenditure is made in accordance with the approved operating budget, but this does
not prohibit the transfer of funds between line items within a series in the budget. Final budgets may not be altered
or amended after approval by the SB&FAB, except changes which do not increase the total amount of the budget.
Additional budget items may also be approved if a district receives unanticipated revenues. Finally, if it becomes
necessary to increase a district's budget by more than $1,000 for any reason, other than those listed above, the
SB&FAB may order a special public hearing to consider the requested increase.

Formal budgetary integration is employed as a management control device during the year for the General Fund,
Special Revenue Funds, and Debt Service Fund with appropriations lapsing at year end. Total expenditures of any
activity category may not exceed categorical appropriations. To conform with SB&FAB's requirements, budgets
for all funds of a district are adopted on the cash basis of accounting except for the State instructional materials
credit, which provides for free textbooks from the Public Education Department. Accordingly, the budgets are not
prepared in conformance with generally accepted accounting principles (GAAP).


                               GENERAL (OPERATIONAL) FUND BUDGET

                                                                                                 2010-11
                                                                                                 Budget
OPERATIONAL RESOURCES:
  Beginning cash                                                                             $ 1,133,917
  Revenue:
     State sources                                                                            20,635,629
     Local sources                                                                               723,049
     Federal sources                                                                               6,000
         Total Operational Resources Available                                                22,498,595

OPERATIONAL EXPENDITURES:
  Direct Instruction                                                                          14,646,533
  Student support                                                                              2,126,293
  Instructional support                                                                          469,157
  General administration                                                                         444,261
  School administration                                                                        1,597,658
  Central services                                                                               524,188
  Operation and maintenance                                                                    2,471,164
  Student transportation                                                                          39,891
  Other                                                                                          179,450
      Total Operational Expenditures                                                          22,498,595

Net Excess or Deficiency of Resources                                                        $         -0-




                                                         31
 AUDITED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
                                General Fund

Fiscal Year Ending June 30:               2005         2006         2007         2008       2009
Revenues:
  Local sources                       $   32,827   $   35,330   $  764,328   $  837,715
  Property taxes                               -            -            -            -    $ 540,045
  State sources                       19,150,828   20,662,904   21,423,998   23,536,185            -
  Federal flow-through                         -            -            -            -       17,658
  Federal direct                               -            -            -            -        1,157
  State flow-through                           -            -            -            -   21,304,484
  State direct                                 -            -            -            -      790,257
  State transportation distribution            -            -            -            -      889,645
  Charges for services                         -            -            -            -       86,708
  Interest -                                   -            -            -            -       28,838
  Miscellaneous                                -            -            -            -       60,624
  Federal sources                        550,465      870,686       15,543        6,530            -
        Total Revenues                19,734,120   21,568,920   22,203,869   24,380,430   23,719,416

Expenditures:
  Direct instruction                  11,924,641   12,588,388   13,301,897   14,037,765   14,043,375
  Instructional support                3,706,604    3,810,524            -            -            -
  Student support                              -            -    2,116,045    2,132,724    2,054,513
  Instructional Support                        -            -      437,188      427,161      433,037
  Administration                         369,293      421,478            -            -            -
  General administration                       -            -      272,700      318,917      310,698
  Business/support service               261,181      296,237            -            -            -
  School administration                        -            -    1,485,283    1,670,009    1,718,406
  Central services                             -            -      497,403      510,838      571,045
  Oper. & maint. of plant              2,572,389    2,219,842    2,856,656    2,943,866    2,863,460
  Athletics                              343,614      333,895            -            -            -
  Non-instructional support              129,949      128,565            -            -            -
  Pupil transportation                 1,315,738    1,294,849    1,337,195    1,412,900    1,828,285
  Capital outlay                               -       55,360      194,314      672,759            -
        Total Expenditures            20,623,409   21,149,138   22,498,681   24,126,939   23,822,819

REVENUE OVER (UNDER)
  EXPENDITURES                         (889,289)      419,782    (294,812)      253,491    (103,403)
Transfers in (out)                         6,874       20,632            -            -            -
Fund balance, at beginning of year     2,058,351    1,175,936    1,616,350    1,321,538    1,575,029
Fund balance, at end of year          $1,175,936   $1,616,350   $1,321,538   $1,575,029   $1,471,626




                                                       32
                                             STATEMENT OF NET ASSETS

Fiscal Year Ending June 30:                                   2007           2008         2009

ASSETS
 Current Assets
     Cash and investments                                   $ 7,897,662   $22,135,288   $20,679,625
     Receivables:
         Taxes                                                   78,599       579,552       236,904
         Grants                                                 693,883       449,035             -
         Other                                                  391,193         5,711         4,266
     Due from other governments                                 662,107       976,253       834,758
     Deferred bond issuance costs                                27,751       105,359             -
     Inventory                                                   35,686        52,671         9,086
         Total Current Assets                                 9,814,677    24,303,869    21,764,639

  Noncurrent Assets
     Restricted cash and equivalents                                  -             -     4,477,306
     Bons issuance costs, net                                         -             -       155,429
     Non-depreciable assets                                   7,360,391     7,919,656             -
     Capital assets, net                                              -             -    57,177,736
     Depreciable assets, net                                 39,062,133    41,774,146             -
          Total Noncurrent Assets                            46,422,524    49,693,802    61,810,471

      Total Assets                                          $56,237,201   $73,997,671   $83,575,110

LIABILITIES AND NET ASSETS
  Current Liabilities
      Accounts payable                                       $ 345,078    $ 1,418,907   $ 2,037,903
      Accrued payroll                                                 -             -       747,667
      Due to PED                                                      -             -        12,621
      Interest payable                                          227,422       358,004       429,689
      Deferred grant revenue                                     12,932       143,486        32,450
      Compensated absences                                       93,165        85,252        70,241
      Current portion of long term debt                       2,325,000     2,200,000     3,100,000
           Total Current Liabilities                          3,003,597     4,205,649     6,430,571

  Non current liabilities
     Accrued compensated absences                                     -             -        36,018
     Bond underwriter premiums net                                    -             -       140,611
     Non-current portion of long-term debt                   17,300,000    30,100,000    40,225,000
               Total Liabilities                             20,303,597    34,305,649    46,832,200

  Net Assets
      Invested in capital assets net of related debt         26,797,524     6,659,335    13,852,736
      Restricted for:
          Debt service                                        3,972,903     4,362,521     6,578,854
          Capital projects                                    3,584,844    26,867,313     3,739,443
          Other purposes                                              -             -       367,286
          Inventories                                            63,482        52,671             -
          Unrestricted                                        1,514,851     1,750,182    12,204,591
          Total Net Assets                                   35,933,604    39,692,022    36,742,910

                Total Liabilities and Net Assets            $56,237,201   $73,997,671   $83,575,110


                                                       33
                                               LEGAL MATTERS

Legal matters incident to the authorization, issuance, sale and delivery of the Bonds are subject to the approval
of the New Mexico Attorney General and of Cuddy & McCarthy, LLP and McCall, Parkhurst & Horton L.L.P.,
as Co-Bond Counsel ("Co-Bond Counsel"). In connection with the transactions described in this Official
Statement, Co-Bond Counsel was engaged by, and only represents, the District. Except as noted below, Co-Bond
Counsel was not requested to participate, and did not take part, in the preparation of this Official Statement and
such firms have not assumed any responsibility with respect thereto or undertaken independently to verify any
of the information contained herein, except in their capacity as Co-Bond Counsel, such firms have reviewed the
information appearing under captions “THE BONDS” (except for “Book-Entry-Only System” and “Sources and
Uses of Funds”), “TAX MATTERS”, “LEGAL MATTERS” (except for the last sentence of the first paragraph)
and “CONTINUING DISCLOSURE OF INFORMATION” (except under subcaption “Compliance with Prior
Undertakings”) and such firms are of the opinion that the information relating to the Bonds and legal matters
contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues
addressed therein and, with respect to the Bonds, such information conforms to the Bond Resolution. The fee to
be paid to Co-Bond Counsel is contingent upon the sale and delivery of the Bonds. Certain legal matters will be
passed upon for the Underwriters by their counsel, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque,
New Mexico.

The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional
judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering
a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment,
of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the
rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

                                                TAX MATTERS

THE FOLLOWING DISCUSSION, WHICH WAS WRITTEN TO SUPPORT THE PROMOTION OR
MARKETING OF THE SALE OF THE BONDS, IS NOT INTENDED OR WRITTEN TO BE USED, AND
CANNOT BE USED BY ANY TAXPAYER, TO AVOID PENALTIES THAT MIGHT BE IMPOSED ON THE
TAXPAYER IN CONNECTION WITH THE MATTERS DISCUSSED THEREIN.

Certain U.S. Federal Income Tax Considerations – General

The following discussion is a summary of certain expected material federal income tax consequences of the
purchase, ownership and disposition of the Bonds and is based on the Internal Revenue Code of 1986, as
amended (the “Code”), the regulations promulgated thereunder, published rulings and pronouncements of the
Internal Revenue Service (“IRS”) and court decisions currently in effect. There can be no assurance that the IRS
will not take a contrary view, and no ruling from the IRS, has been, or is expected to be, sought on the issues
discussed herein. Any subsequent changes or interpretations may apply retroactively and could affect the opinion
and summary of federal income tax consequences discussed herein.

Th following discussion is not a complete analysis or description of all potential U.S. federal tax considerations
that may be relevant to, or of the actual tax effect that any of the matters described herein will have on, particular
holders of the Bonds and does not address U.S. federal gift or estate tax or the alternative minimum tax, state,
local or other tax consequences. This summary does not address special classes of taxpayers (such as
partnerships, or other pass-thru entities treated as a partnerships for U.S. federal income tax purposes, S
corporations, mutual funds, insurance companies, financial institutions, small business investment companies,
regulated investment companies, real estate investment trusts, grantor trusts, former citizens of the U.S., broker-
dealers, traders in securities and tax-exempt organizations, taxpayers who may be subject to or personal holding
company provisions of the Code) that are subject to special treatment under U.S. federal income tax laws, or
persons that hold Bonds as a hedge against, or that are hedged against, currency risk or that are part of hedge,
straddle, conversion or other integrated transaction, or persons whose functional currency is not the U.S. dollar.
This summary is further limited to investors who will hold the Bonds as “capital assets” (generally, property held
for investment) within the meaning of Section 1221 of the Code.


                                                         34
THIS SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND DOES NOT
DISCUSS ALL ASPECTS OF THE U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO
A PARTICULAR HOLDER OF BONDS IN LIGHT OF THE HOLDER’S PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION.

As used herein, the term “U.S. Holder” means a beneficial owner of a Bond who or which is: (i) an individual
citizen or resident of the United States, (ii) a corporation or partnership created or organized under the laws of
the United States or any political subdivision thereof or therein, (iii) an estate, the income of which is subject to
U.S. federal income tax regardless of the source; or (iv) a trust, if (a) a court within the U.S. is able to exercise
primary supervision over the administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust, or (b) the trust validly elects to be treated as a U.S. person for U.S.
federal income tax purposes. As used herein, the term “Non-U.S. Holder” means a beneficial owner of a Bond
that is not a U.S. Holder.

Certain U.S. Federal Income Tax Consequences to U.S. Holders

Periodic Interest Payments and Original Issue Discount. As described in “THE BONDS – Designation of the
Bonds as Qualified School Construction Bonds – Direct Subsidy” above, the District has made the proper
elections to treat the Bonds as Qualified School Construction Bonds and to receive direct subsidies thereby; thus,
the Bonds are not obligations described in Section 103(a) of the Code. Accordingly, the stated interest paid on
the Bonds or original issue discount, if any, accruing on the Bonds will be includable in “gross income” within
the meaning of Section 61 of the Code of each owner thereof and be subject to federal income taxation when
received or accrued, depending upon the tax accounting method applicable to such owner.

Disposition of Bonds. An owner will recognize gain or loss on the redemption, sale, exchange or other disposition
of a Bond equal to the difference between the redemption or sale price (exclusive of any amount paid for accrued
interest) and the owner's tax basis in the Bonds. Generally, a U.S. Holder's tax basis in the Bonds will be the
owner's initial cost, increased by income reported by such U.S. Holder, including original issue discount and
market discount income, and reduced, but not below zero, by any amortized premium. Any gain or loss generally
will be a capital gain or loss and either will be long-term or short-term depending on whether the Bonds have
been held for more than one year.

Defeasance of the Bonds. Defeasance of any Bond may result in a reissuance thereof, for U.S. federal income
tax purposes, in which event a U.S. Holder will recognize taxable gain or loss as described above.

Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders

A Non-U.S. Holder that is not subject to U.S. federal income tax as a result of any direct or indirect connection
to the U.S. in addition to its ownership of a Bond, will not be subject to U.S. federal income or withholding tax
in respect of a Bond, provided that such Non-U.S. Holder complies, to the extent necessary, with identification
requirements including delivery of a signed statement under penalties of perjury, certifying that such Non-U.S.
Holder is not a U.S. person and providing the name and address of such Non-U.S. Holder. Absent such
exemption, payments of interest, including any amounts paid or accrued in respect of accrued original issue
discount, may be subject to withholding taxes, subject to reduction under any applicable tax treaty. Non-U.S.
Holders are urged to consult their own tax advisors regarding the ownership, sale or other disposition of a Bond.

The foregoing rules will not apply to exempt a U.S. shareholder of a controlled foreign corporation from taxation
on the U.S. shareholder's allocable portion of the interest income received by the controlled foreign corporation.

Certain U.S. Federal Income Tax Information Reporting and Backup Withholding

Subject to certain exceptions, information reports describing interest income, including original issue discount,
with respect to the Bonds will be sent to each registered holder and to the IRS. Payments of interest and principal
may be subject to backup withholding under Section 3406 of the Code if a recipient of the payments fails to
furnish to the payor such owner's social security number or other taxpayer identification number (“TIN”),
furnishes an incorrect TIN, or otherwise fails to establish an exemption from the backup withholding tax. Any


                                                          35
amounts so withheld would be allowed as a credit against the recipient’s federal income tax. Special rules apply
to partnerships, estates and trusts, and in certain circumstances, and in respect of Non-U.S. Holders, certifications
as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof.

New Mexico Income Tax Opinion

On the date of initial delivery of the Bonds, Cuddy & McCarthy, LLP and McCall, Parkhurst & Horton L.L.P.
will render their opinions that interest on the Bonds will be excluded from base income for purposes of New
Mexico state income tax.

State, Local and Other Tax Consequences

Investors should consult their own tax advisors concerning the tax implications of holding and disposing of the
Bonds under applicable State or local laws, or any other tax consequence, including the application of gift and
estate taxes.

                                                  LITIGATION

At the time of the original delivery of the Bonds, the District will deliver a no-litigation certificate to the effect
that no litigation or administrative action or proceeding is pending or, to the knowledge of the appropriate
officials, threatened, restraining or enjoining, or seeking to restrain or enjoin, the issuance and delivery of the
Bonds, the effectiveness of the Bond Resolution, the levying or collecting of taxes to pay the principal of and
interest on the Bonds except as described below or contesting or questioning the proceedings and authority under
which the Bonds have been authorized and are to be issued, sold, executed or delivered, or the validity of the
Bonds.


                              CONTINUING DISCLOSURE UNDERTAKING

In the Bond Resolution, the District has made the following agreement for the benefit of the holders and
beneficial owners of the Bonds. The District is required to observe the agreement while it remains obligated to
advance funds to pay the Bonds. Under the agreement, the District will be obligated to provide certain updated
financial information and operating data annually, and timely notice of specified material events. This
information is available free of charge from the Municipal Securities Rulemaking Board (“MSRB”) via the
Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org.

Annual Reports

The District will provide certain updated financial information and operating data to the MSRB annually. The
information to be updated includes all quantitative financial information and operating data with respect to the
District of the general type included in this Official Statement under the headings "DEBT AND OTHER
FINANCIAL OBLIGATIONS - Outstanding Debt,” FINANCIAL DATA - Bonding Capacity,” "TAX BASE -
Assessed Valuation,” “TAX RATES,” "TAX COLLECTION HISTORY - SAN JUAN COUNTY,” and “THE
DISTRICT-Enrollment," and in Appendix C. The District will update and provide this information within nine
months after the end of each fiscal year ending in or after 2010.

The District may provide updated information in full text or may incorporate by reference certain other publicly
available documents, as permitted by SEC Rule 15c2-12 (the “Rule”). The updated information will include
audited financial statements, if the District commissions an audit and it is completed by the required time. If
audited financial statements are not available by the required time, the District will provide unaudited financial
statements by the required time, and will provide audited financial statements when and if an audit report
becomes available. Any such financial statements will be prepared in accordance with the accounting principles
described in Appendix B or such other accounting principles as the District may be required to employ from time
to time pursuant to State law or regulation.


                                                         36
The District’s current fiscal year end is June 30. Accordingly, it must provide updated information by the last day
of March in each year, unless the District changes its fiscal year. If the District changes its fiscal year, it will
notify the MSRB of the change.

Material Event Notices

The District will also provide timely notices of certain events to the MSRB. The District will provide notice of
any of the following events with respect to the Bonds, if such event is material within the meaning of the federal
securities laws: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3)
unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit
enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to
perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to
rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution, or sale of property
securing repayment of the Bonds; and (11) rating changes. Neither the Bonds nor the Bond Resolution make any
provision for debt service reserves, liquidity enhancement or credit enhancement. In addition, the District will
provide timely notice of any failure by the District to provide information, data, or financial statements in
accordance with its agreement described above under “Annual Reports”.

Availability of Information

The SEC has recently adopted amendments to the Rule which approve the establishment by the MSRB of EMMA
which is the sole nationally recognized municipal securities information repository. On and after the EMMA
Effective Date all information and documentation filing required to be made by the District will be made with
the MSRB in electronic format in accordance with MSRB guidelines. Access to such filings is provided, without
charge to the general public, by the MSRB.

Limitations and Amendments

The District has agreed to update information and to provide notices of material events only as described above.
The District has not agreed to provide other information that may be relevant or material to a complete
presentation of its financial results of operations, condition or prospects or agreed to update any information that
is provided, except as described above. The District makes no representation or warranty concerning such
information or concerning its usefulness to a decision to invest in or sell bonds at any future date. The District
disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its
continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of
Bonds may seek a writ of mandamus to compel the District to comply with its agreement.

This continuing disclosure agreement may be amended by the District from time to time to adapt to changed
circumstances that arise from a change in legal requirements, a change in law or a change in the identity, nature,
status or type of operations of the District, but only if (1) the provisions, as so amended, would have permitted
an underwriter to purchase or sell bonds in the primary offering of the Bonds in compliance with the Rule, taking
into account any amendments or interpretations of the Rule since such offering as well as such changed
circumstances and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater amount
required by any other provision of the Bond Resolution that authorizes such an amendment) of the outstanding
Bonds consent to such amendment or (b) a person that is unaffiliated with the District (such as nationally
recognized bond counsel) determined that such amendment will not materially impair the interest of the Holders
and beneficial owners of the Bonds. The District may also amend or repeal the provisions of this continuing
disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final
jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the
provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling bonds in the
primary offering of the Bonds.




                                                         37
Compliance with Prior Undertakings

The District has made annual filings in a timely manner for every year required.


                                              UNDERWRITING

The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the District at a price
equal to the initial offering prices as shown on the cover page of this official statement, at an underwriting
discount of $________. The Underwriters' obligation to purchase the Bonds is subject to certain conditions
precedent, and they will be obligated to purchase all of the Bonds if any of the Bonds are purchased. The District
has no control over the price at which the Bonds are subsequently sold and the initial yields at which the Bonds
will be priced and reoffered will be established by and will be the responsibility of the Underwriters.


                     SCHOOL DISTRICT CREDIT ENHANCEMENT PROGRAM

NMSA 1978, Section 22-18-13, provides that, for school district general obligation bonds issued on or after
March 30, 2007, whenever a paying agent has not received payment of principal or interest on school district
general obligation bonds on the business day immediately prior to the date on which it is due, the paying agent
shall notify the Department of Finance and Administration (“DFA”) , the Public Education Department and the
school district by telephone, facsimile or other similar communication, followed by written verification of the
payment status. If the school district indicates that it will not make the payment by the date on which it is due,
the DFA will forward the amount required to make the payment on the Bonds to the paying agent and shall
withhold an equal amount from the remaining State equalization guarantee (“SEG”) distributions, provided that,
the amount of undistributed SEG payments remaining in the current fiscal year are sufficient to repay any funds
so advanced. If the undistributed SEG payments are less than the required amount of payment due to the
registrar/paying agent, the DFA will immediately advance the amount of the remaining, undistributed SEG
payments and then advance the balance after the beginning of the next fiscal year on July 1. (See also “PUBLIC
SCHOOL FINANCING, State Sources, Equalization Guarantee Program,” herein.)

Considering all affected bonds of the District, the maximum debt service requirement of $4,828,775.00 occurs
on October 1, 2014. For the present fiscal year, the District’s monthly SEG payment is $1,619,081, and because
all of the District’s existing bonds are structured with principal payments only due in October and interest-only
payments in April, it is highly unlikely for conditions to exist where there would not be sufficient undistributed
SEG payments that would prevent the DFA from advancing the full amount of a payment due, given the present
Public School Finance Act, being NMSA 1978, Sections 22-8-1 through 22-8-45, the District’s enrollment, and
procedures of the New Mexico Public Education Department.

Moody’s Investors Service has assigned an “Aa1" rating to the New Mexico School District Credit Enhancement
Program, and all New Mexico school districts are eligible for the enhanced rating, provided that an independent,
third-party paying agent is appointed and maintained by the school district. However, due to recent legislative
revisions, Moody’s has placed the program on their “watch list” with negative implications, and a decision is
expected soon. The Bonds qualify for the enhanced rating from Moody’s Investors Service.


                                                   RATINGS

Moody's Investors Service, Inc. has rated the Bonds “___” based on the State of New Mexico’s guarantee under
the New Mexico Credit Enhancement Program (See “NEW MEXICO CREDIT ENHANCEMENT PROGRAM”
above). Moody's Investors Service, Inc. also confirmed the District’s underlying “__" rating. An explanation
of the significance of these ratings may be obtained from Moody's Investors Service, Inc. at 99 Church Street,
New York, New York 10007. There is no assurance that the ratings will be continued for any given period of
time or that they will not be revised downward or withdrawn entirely by the rating agency, if in its judgment,


                                                       38
circumstances so warrant. Any such downward revision or withdrawal of either such rating may have an adverse
effect on the market price of the Bonds.


                                       ADDITIONAL INFORMATION

All summaries of the statutes, resolutions, opinions, contracts, agreements, financial and statistical data and other
related reports described in this Official Statement are subject to the actual provisions of such documents. The
summaries do not purport to be complete statements of such provisions and reference is made to such documents,
copies of which are either publicly available or available for inspection during normal business hours at the
offices of the District located at the Aztec Municipal Schools Administration Office, 1118 W. Aztec Boulevard,
Aztec, NM 87410, or Casey Financial Consulting, 10908 Snowbird Drive NW, Albuquerque, NM 87114 or PO
Box 56635, Albuquerque, NM 87187-6635.

                                              MISCELLANEOUS

The financial data and other information contained herein have been obtained from the District’s records, audited
financial statements and other sources which are believed to be reliable. There is no guarantee that any of the
assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and
resolutions contained in this Official Statement are made subject to all of the provisions of such statutes,
documents and resolutions. These summaries do not purport to be complete statements of such provisions and
reference is made to such documents for further information. Reference is made to original documents in all
respects.

The Bond Resolution authorizing the issuance of the Bonds will also approve the form and content of this Official
Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of
the Bonds by the Underwriters.




                                                   By:
                                                              Superintendent




                                                         39
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                40
                                                                                       APPENDIX A
                                                                               Area Economic Information

The Aztec Municipal School District No. 2 is located in San Juan County in the northwest corner of New Mexico.
This area of the State is commonly known as the “four-corners area” because it is where the four states of New
Mexico, Colorado, Utah and Arizona meet at a common point. The City of Aztec is the major municipality in
the District and is approximately 12 miles northeast of the City of Farmington and seven miles north of the City
of Bloomfield.


Oil and Gas

The District embodies a large portion of the San Juan Basin, a large oil, natural gas and coal field. Oil and natural
gas are extracted from wells located throughout the basin, gathered, refined and transported to buyers in New
Mexico and in other western states. The methods of transporting these oil and gas products include trucking, rail
and pipeline. The District also overlaps a portion of the Bisti area which is replete with valuable coal deposits.


Agriculture and Tourism

Despite the obvious presence of the extractive industries, San Juan County’s economy is broadened and
diversified by the growing recreational and farming sectors. Recreation has become a stable source of revenue
for area merchants due to the utilization of Navajo Lake. This large, 36 mile long, 15,610 acre lake also serves
to provide water storage for New Mexico's share of the Upper Colorado River Watershed. The lake is fed by the
San Juan river which also provides water for the irrigation of the local farmlands. Additionally, a federally
developed system of canals, 71.4 miles in total length, provides water to the Navajo Indian Irrigation Project. The
project has enabled the cultivation of some 60,000 acres under the management of the Navajo Agricultural
Products Industry. Major farm crops include alfalfa, corn, pinto beans, potatoes, wheat, peaches, apples, and
apricots.


Electrical Generation

The District is the location of two major, coal-fired generating plants. The Four Corners Generating Plant consists
of five units with a total net accredited capacity of 2050 megawatts. Units 1, 2, and 3 were completed in the early
sixties and are entirely owned by the Arizona Public Service Company. Units four and five were completed in
1969 and 1970, are operated by the Arizona Public Service Company, but are jointly owned by Southern
California Edison Company (48%), Arizona Public Service Company (15%), Tucson Electric Power Company
(7%), and El Paso Electric Company (7%).

The San Juan Generating Station consists of four units with a total net accredited capacity of 1647 megawatts,
and the Public Service Company of New Mexico ("PNM") operates all units. The capacity of units one and two
is shared equally between PNM and Tucson Electric Power Company. Unit three's capacity is 50 percent owned
by PNM, 41.8 percent by Southern California Public Power Authority and 8.2 percent by Tri-State Generation
and Transmission Cooperative. Unit four’s capacity is 38.5 percent owned by PNM, 28.8 percent by M-S-R
Public Power Agency, 10 percent by the city of Anaheim, 8.5 percent by the city of Farmington, 7 percent by
Utah Associated Municipal Power Systems, and 7.2 percent by Los Alamos County.




                                                        A-1
Coal Mining

BHP Minerals, Inc. is the major coal producer in the County with mine-mouth plants at each power plant. The
Navajo Mine supplies coal to the Four Corners Plant and the San Juan Mine supplies the San Juan Generating
Station. BHP Minerals is also operating the La Plata Mine north of the plants near the Colorado border. La Plata
coal is then trucked to the power plants. By the end of 2002 BHP replaced the San Juan and La Plata surface
mines with underground, long-wall mines. This conversion was expected to increase the efficiency of the power
plants and reduce flyash generation by over 20 percent.

Consolidated Coal's Burnham Mine is located approximately 45 miles southwest of the City of Farmington and
supplies coal to the Coronado Station of the Salt River Project near St. Johns, Arizona. Coal from this mine is
either trucked directly to St Johns or trucked to a railroad siding and then shipped by rail.


POPULATION

                                                   POPULATION GROWTH

                  Year                                   San Juan County                                  New Mexico
                  1970 (Census)                                    52,517                                   1,017,055
                  1980 (Census)                                    81,433                                   1,308,400
                  1990 (Census)                                    91,605                                   1,515,069
                  2000 (Census)                                   113,801                                   1,819,046
                  2010 (Estimate)                                 123,293                                   2,016,306

Source: U.S. Department of Commerce Bureau of the Census (05/01), and the University of New Mexico, Bureau of Business and Economic Research
(03/10).



INCOME

                                            PER CAPITA PERSONAL INCOME

           Year                 San Juan County                           New Mexico                     United States
           2008                     $31,518                                $33,389                         $40,166
           2007                      29,172                                 32,093                          39,392
           2006                      27,391                                 30,513                          37,698
           2005                      24,963                                 28,876                          35,424
           2004                      23,011                                 27,263                          33,881
           2003                      21,517                                 25,049                          32,271
           2002                      20,528                                 24,790                          31,462
           2001                      20,961                                 22,751                          31,145
           2000                      18,999                                 21,461                          30,318



Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System(4/10 report)




                                                                   A-2
                                   TOTAL PERSONAL INCOME - San Juan County
                                               (Thousands $)

              Year                                San Juan County                   State of New Mexico
              2008                                  $3,858,024                         $66,336,940
              2007                                   3,567,508                          63,182,025
              2006                                   3,331,052                          59,274,213
              2005                                   3,043,283                          55,342,340
              2004                                   2,781,235                          51,576,450
              2003                                   2,577,309                          48,141,274
              2002                                   2,427,550                          44,986,517
              2001                                   2,413,154                          44,138,165
              2000                                   2,166,687                          40,318,443


Source: U.S Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System (4/10 report).




LABOR FORCE


                                   CIVILIAN LABOR FORCE--San Juan County

                                     2005             2006               2007            2008             2009          2010
  Labor Force                       54,332           55,675             56,335          57,973           57,250        57,045
  Employment                        51,412           53,280             54,536          55,834           52,913        51,586
  Unemployment                       2,920            2,395              1,799           2,139            4,337         5,459

Source: New Mexico Department of Workforce Solutions (04/10 report).




                                                    UNEMPLOYMENT RATE

                      Year               San Juan County           New Mexico          United States
                      2010                      9.6%                   8.1%                  9.9%
                      2009                      7.6                    7.2                   9.3
                      2008                      3.7                    4.2                   5.8
                      2007                      3.2                    3.5                   4.6
                      2006                      4.3                    4.2                   4.6
                      2005                      5.4                    5.2                   5.1
                      2004                      6.1                    5.8                   5.5
                      2003                      6.8                    5.9                   6.0
                      2002                      6.2                    5.5                   5.8
                      2001                      5.4                    4.9                   4.7


Source: New Mexico Department of Workforce Solutions (04/10 report).




                                                                       A-3
NON-AGRICULTURAL EMPLOYMENT-San Juan County

                                 COVERED WAGE AND SALARY EMPLOYMENT

The following data from New Mexico Department of Labor is presented on the North American Industry
Classification System or NAICS.


  Industry Sector                                2005           2006          2007            2008

  Agriculture                                     141            146           151             178
  Mining                                        5,096          5,592         5,796           6,012
  Utilities                                     1,289          1,275         1,293           1,299
  Construction                                  3,898          4,435         4,853           5,329
  Manufacturing                                 1,586          1,504         1,569           1,555
  Wholesale trade                               1,679          1,787         1,898           1,986
  Retail trade                                  6,104          6,316         6,389           6,436
  Transportation & warehousing                  1,334          1,293         1,412           1,468
  Information services                            318            323           308             286
  Finance & insurance                             853            898           937             937
  Real estate                                     537            545           601             641
  Professional & technical services             1,142          1,072         1,166           1,152
  Management of companies                         262            262           260             243
  Administrative & waste services               1,232          1,392         1,427           1,430
  Educational services                            352            381           379             330
  Healthcare & social services                  4,854          4,970         5,088           5,296
  Arts, entertainment & recreation                400            444           447             450
  Accommodations and food services              4,593          4,621         4,120           4,196
  Other services                                1,659          1,698         1,963           1,989
  Unclassified                                     10              9             *               *
  Government                                   10,920         11,104        11,007          11,097
         Total                                 48,260         50,066        51,070          52,310

Note: Sum of industry sectors may not add to total due to non-disclosure.
* Non-disclosure due to confidentiality.



AGRICULTURAL PRODUCTION

San Juan County ranked 10th in New Mexico in the total value of crop and livestock production in 2005. The
following table presents comparative figures for the last five years available.

                                                 (In Thousands)
                                       2004       2005           2006         2007           2008
All crops                            $42,431   $44,154        $43,278       $59,347        $69,033
All livestock                         16,495    23,738          19,721       20,794         16,337
Total Production                     $58,926    67,892        $62,999       $80,141        $85,370

Source: N.M. Department of Agriculture




                                                     A-4
                                        MAJOR EMPLOYERS - San Juan County


Employer                                                   Product/Service                           Employees

San Juan Regional Medical Center                           Regional hospital                               1,600
Farmington Municipal Schools                               Education                                       1,500
Central Consolidated Schools                               Education                                       1,200
BHP-Utah International                                     Mining-coal                                     1,031
San Juan College                                           Education                                         900
City of Farmington                                         Government                                        900
San Juan County                                            Government                                        758
Walmart                                                    Retail sales                                      726
Conoco-Phillips                                            Refining                                          610
Arizona Public Service                                     Power plant                                       573
Aztec Municipal Schools                                    Education                                         462
Bloomfield Municipal Schools                               Education                                         460
Public Service Co. of New Mexico                           Power plant                                       400
Basin Home Healthcare                                      Medical                                           350
Burlington Resources                                       Oil & gas                                         300
Presbyterian Medical Services                              Medical                                           300
El Paso Energy                                             Natural gas production/pipeline                   276
Navajo Agricultural Products Industry                      Agriculture                    seasonally, 255 to 400



Source: Farmington Chamber of Commerce and individual companies.




ECONOMIC SECTORS


                                 REPORTED GROSS RECEIPTS - San Juan County
                                             (Calendar Year)

                        Calendar                Retail                        Total
                         Year                   Trade                        Receipts
                          2009            $1,444,812,729                 $7,040,532,593
                          2008             1,546,137,446                  9,112,126,851
                          2007             1,535,482,162                  8,110,901,791
                          2006             1,367,018,692                  6,850,432,194
                          2005             1,228,795,670                  6,256,900,518
                          2004             1,126,609,849                  4,796,160,849
                          2003             1,088,219,934                  4,658,555,631
                          2002             1,061,485,076                  4,152,812,709
                          2001             1,079,462,852                  4,757,582,920
                          2000             1,031,763,293                  3,801,446,575


Source: New Mexico Department of Taxation and Revenue.




                                                                   A-5
OIL AND GAS

The oil and gas industry has been important to the San Juan County economy since the 1920's. Large scale
development began in 1950's and continues to be an important industry for the county and the State. The
following tables set forth the history of oil and gas production in the County and the State as reported to the State
Department of Taxation & Revenue by the Oil and Gas Accounting Division.

                                     OIL AND GAS SALES - SAN JUAN COUNTY

                                        Crude Oil                                            Natural Gas
          Year               Volume (bbls)    Value ($000s)                         Volume (MCF)      Value ($000s)
          2009                1,035,792           $51,514                            506,252,808       $2,106,517
          2008                1,019,049            90,361                            518,031,849         4,352,709
          2007                1,042,951            70,291                            559,345,341         3,898,696
          2006                1,065,382            65,280                            594,623,276         3,710,879
          2005                1,463,817            56,073                            608,607,372         4,260,960
          2004                1,261,506            45,833                            617,106,392         3,256,713
          2003                1,258,030            32,395                            598,361,865         2,645,419
          2002                1,286,253            27,628                            609,216,989         1,558,378
          2001                1,598,263            30,534                            648,550,081         2,465,986
          2000                1,393,960            37,128                            670,679,412         2,400,621




                                   CRUDE OIL SALES - COUNTY COMPARISON

                               2007                                   2008                                2009
County             Volume (bbls) Value ($000s)            Volume (bbls) Value ($000s)         Volume (bbls) Value($000s)
Lea                 35,416,510     $ 2,396,924              34,881,518     $3,353,641          34,063,575      $1,923,931
Eddy                21,752,420       1,468,427              22,882,523      2,174,463          24,453,898       1,409,542
Chaves                 571,623          33,024                 640,924         57,485            1,172,423         63,478
Rio Arriba           1,292,382          82,114               1,151,886        104,422            1,174,401         58,527
San Juan             1,042,951          70,291               1,019,049         90,361            1,035,792         51,514
Roosevelt              302,036          20,991                 281,019         27,281              238,885         13,131
Sandoval                72,209           4,890                  68,867          6,210               70,533          3,506
McKinley                19,262           1,277                  25,755          2,051               36,865          1,704


                                    NATURAL GAS SALES - COUNTY COMPARISON

                              2007                                    2008                                2009
County           Volume (MCF) Value($000s)               Volume (MCF)Value ($000s)            Volume (MCF) Value ($000s)
San Juan          559,345,341     $3,898,696              518,031,849     $4,352,709           506,252,808     $2,106,517
Rio Arriba        375,134,107      2,650,834              357,315,035      3,153,302           353,075,999      1,540,249
Eddy              261,726,575      1,791,069              252,494,772      2,099,419           220,561,613        931,968
Lea               208,357,396      1,553,651              204,484,816      1,796,655           204,869,316        923,197
Chaves              28,312,632       164,572               32,462,138        246,857             28,056,019        99,105
Colfax              25,600,941       159,274               25,961,331        190,114                 25,733        87,426
Roosevelt            2,518,771        16,376                2,451,657         19,194              2,147,071         8,888
Sandoval             1,146,080         9,627                1,197,109         11,275              1,284,141         6,031

Source: New Mexico Taxation and Revenue Department, Oil & Gas Accounting Division




                                                                  A-6
               APPENDIX B
FORM OF CO-BOND COUNSEL’S OPINIONS
This page intentionally left blank.
                                                               LAW OFFICES

                                        MC CALL, PARKHURST & HORTON L.L.P.
  717 N O RT H H A RW O O D                          600 CO N G RE SS A V E N U E               700 N . ST . M A R Y'S ST RE E T

          SU IT E 90 0                                       SU IT E 1800                                 SU IT E 1525

D A LLA S, TE XA S 75 20 1-6587                     AU S T IN, T E X A S 78701-3248        S A N A N T O NIO , T E X AS 7 8 20 5-3 50 3

  T ELEPHON E : 214 7 54 -9200                       T ELEPHON E : 512 478-3805                   T ELEPHON E : 210 2 25 -2 80 0

  T ELECOPY : 2 14 754-9 250                          T ELECOPY : 512 472-0871                     T ELECOPY : 210 2 25 -2 98 4




                         An opinion in substantially the following form will be delivered by McCall,
                            Parkhurst & Horton L.L.P., Bond Counsel, upon the delivery of the
                                   Bonds, assuming no material changes in facts or law.


                                        $12,200,000
                          AZTEC MUNICIPAL SCHOOL DISTRICT NO. 2
                GENERAL OBLIGATION QUALIFIED SCHOOL CONSTRUCTION BONDS,
                          (FEDERALLY TAXABLE - DIRECT SUBSIDY)
                                       SERIES 2010

             We have acted as Co-Bond Counsel in connection with the issuance by the Aztec Municipal
      School District No. 2 (the "Issuer"), of its General Obligation Qualified School Construction Bonds,
      (Federally Taxable - Direct Subsidy) Series 2010 in the aggregate principal amount of $12,200,000
      (the "Bonds"). We have examined those portions of the Constitution and laws of the State of New
      Mexico considered by us relevant to this opinion, certified copies of the proceedings of the Issuer and
      other documents authorizing and relating to the issuance of the Bonds, including the form of the
      Bonds approved by the Issuer.

              We have not been engaged nor have we undertaken to review the accuracy, completeness or
      sufficiency of the Official Statement provided to us or other offering material relating to the Bonds
      (except to the extent, if any, stated in the Official Statement) and we express no opinion relating
      thereto (excepting only the matters set forth as our opinion in the Official Statement), nor have we
      been requested to investigate or verify, nor have we independently investigated or verified any records,
      data or other material relating to the financial condition or capabilities of the Issuer and have not
      assumed any responsibility with respect thereto.

             As to questions of fact material to our opinion, we have relied upon the certified proceedings
      and other certifications of public officials furnished us without undertaking to verify the same by
      independent investigation.

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

              1.      The Bonds have been authorized, issued and delivered in accordance with the
      Constitution and laws of the State of New Mexico and constitute valid and legally binding general
      obligations of the Issuer.
        2.       All taxable property within the territory of the Issuer is subject to ad valorem taxation
without limitation as to rate or amount to pay the Bonds. The Issuer is required by law to include in
its annual tax levy the principal and interest coming due on the Bonds to the extent the necessary funds
are not provided from other sources.

       3.     The interest on the Bonds is excluded from base income for New Mexico state income
tax purposes.

         Except as stated above, we expressly state no other opinion herein with respect to the proper
federal, state or local tax treatment of any payments made with respect to the Bonds. Purchasers of
the Bonds should consult their own tax advisors as to the tax treatment which may be anticipated to
result from the purchase, ownership and disposition of the Bonds or the receipt of payments on the
Bonds before determining whether to purchase the Bonds.

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

        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 a result.

                                                        Respectfully,
                                                              JOHN F. MCCARTHY, JR.                   EVELYN A. PEYTON
                                                                    JOHN F. KENNEDY                 YOUNG-JUN (JUN) ROH
                                                                   M. KAREN KILGORE                  STEFEN WASSERMAN
                                                                    SANDRA J. BRINCK               MATTHEW L. CAMPBELL
                                                               PATRICIA SALAZAR IVES                    TILA F. HOFFMAN
                                                                       AARON J. WOLF                 KELLY HUDDLESTON
                                                                   REBECCA DEMPSEY
                                                     JACQUELYN ARCHULETA-STAEHLIN                       SPECIAL COUNSEL:
                                                             JULIE A. WITTENBERGER                C. EMERY CUDDY, JR., P.C.
                                                                CHERYL D. FAIRBANKS
                                                                     RAMON VIGIL, JR.                       OF COUNSEL:
                                                                 ANDREW M. SANCHEZ                    GREGORY V. PELTON
                                                                     PATRICK T. ORTIZ
                                                                   CHARLES V. GARCÍA
                                                                                               REPLY TO SANTA FE OFFICE



                                                  ________________, 2010



        An opinion in substantially the following form will be delivered by Cuddy & McCarthy,
        LLP, Bond Counsel, upon delivery of the Bonds, assuming no material changes in facts
        or law.

                                      $12,200,000
                         AZTEC MUNICIPAL SCHOOL DISTRICT NO. 2
                GENERAL OBLIGATION QUALIFIED SCHOOL CONSTRUCTION BONDS
                                      SERIES 2010

                We have acted as Bond Counsel in connection with the issuance by the Aztec
        Municipal School District No. 2, County of San Juan, State of New Mexico (“Issuer”), of
        its General Obligation Qualified School Construction Bonds, Series 2010 (“Bonds”) in
        the aggregate principal amount of $12,200,000. In addition to examining those portions
        of the Constitution and laws of the State of New Mexico considered by us to be relevant
        to this opinion, we have reviewed certified copies of the proceedings of the Issuer and
        documents authorizing the release of the Bonds, including the form of Bond approved
        by the Issuer. We have acted as Bond Counsel for the Issuer for the sole purpose of
        rendering an opinion with respect to the validity of the Bonds under the Constitution and
        laws of the State of New Mexico, as to which an opinion is rendered herein, and for no
        other reason or purpose.

                We have not been engaged nor have we undertaken to review the accuracy,
        completeness, or sufficiency of any offering material relating to the Bonds, and we
        express no opinion relating thereto. We have not been requested to investigate or
        verify, nor have we independently investigated or verified any records, data, or other
        material relating to the financial condition or capabilities of the Issuer, and we have not
        assumed and do not assume any responsibility with respect thereto.

                As to questions of fact material to our opinion, we have relied upon the certified
        proceedings and other certifications of public officials furnished us without undertaking
        to verify the same by independent investigation.



1701 OLD PECOS TRAIL, POST OFFICE BOX 4160                                                 7770 JEFFERSON N.E., SUITE 305
SANTA FE, NEW MEXICO 87502-4160                                                          ALBUQUERQUE, NEW MEXICO 87109
TEL: 505 988-4476; FAX 505 954-7373                                                     TEL: 505 888-1335; FAX 505 888-1369
                                         ___________, 2010
                                         Page 2


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

        1.    The Bonds have been authorized, issued, and delivered in accordance
with the Constitution and laws of the State of New Mexico, and constitute valid and
legally binding general obligations of the Issuer.

       2.     All taxable property within the territory of the Issuer is subject to ad
valorem taxation without limitation as to rate or amount to pay the Bonds. The Issuer is
required by law to include in its annual tax levy the principal and interest coming due on
the Bonds, to the extent the necessary funds are not provided from other sources.

       3.    The interest on the Bonds is excluded from base income for New Mexico
State income tax purposes.

      4.       We express no opinion as to any federal tax consequences resulting from
the ownership, carrying, or disposition of the Bonds, and in particular, no opinion is
expressed as to the excludability of interest on the Bonds from the gross income of the
holders, for federal tax purposes.

       Except as stated above, we express no opinion as to any other federal, state, or
local tax consequences of acquiring, carrying, owning, or disposing of the Bonds.
Further, we express no opinion as to the federal, state, or local tax consequences
arising from the enactment of any pending or future legislation.

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

       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 a result.



                                  Very truly yours,
                                                      APPENDIX C




Excerpt of the Audited Financial Statements
         (For the Fiscal Year Ending June 30, 2009)
This page intentionally left blank.
        STATE OF NEW MEXICO
      AZTEC MUNICIPAL SCHOOLS

 FINANCIAL STATEMENTS AND REQUIRED
     SUPPLEMENTAL INFORMATION
WITH ACCOMPANYING AUDITORS’ REPORTS

   FOR THE YEAR ENDED JUNE 30, 2009
(This page intentionally left blank.)




                 2
INTRODUCTORY SECTION




         3
                                       STATE OF NEW MEXICO
                                         Aztec Municipal Schools
                                            Table of Contents
                                              June 30, 2009

                                                                             Exhibit     Page
INTRODUCTORY SECTION
     Table of Contents                                                                    4-7
     Official Roster                                                                       9

FINANCIAL SECTION
     Independent Auditors’ Report                                                        12-13
     Management’s Discussion and Analysis                                                14-19

BASIC FINANCIAL STATEMENTS
          Government-wide Financial Statements:
             Statement of Net Assets                                           A-1       22-23
             Statement of Activities                                           A-2       24-25
          Fund Financial Statements:
             Balance Sheet – Governmental Funds                                B-1       26-27
                 Reconciliation of the Balance Sheet to the Statement
                 of Net Assets                                                            29
             Statements of Revenues, Expenditures, and Changes in
                 Fund Balances – Governmental Funds                            B-2       30-31
                 Reconciliation of the Statement of Revenues,
                 Expenditures and Changes in Fund Balances of
                 Governmental Funds to the Statement of Activities                        33
             Statement of Revenues, Expenditures, and Changes in
                 Fund Balance – Budget (Non-GAAP Budgetary Basis) and
                 Actual:
                    General Fund                                               C-1        34
             Statement of Fiduciary Assets and Liabilities – Agency Funds      D-1        35

NOTES TO THE FINANCIAL STATEMENTS                                                        36-58
                                                                            Statement/
SUPPLEMENTARY INFORMATION                                                    Schedule
     Nonmajor Fund Descriptions                                                          61-63
     Combining and Individual Fund Statements and Schedules
          Combining Balance Sheet – Nonmajor Governmental Funds                A-1       64-69
          Statement of Revenues, Expenditures and Changes
               in Fund Balances – Nonmajor Governmental Funds                  A-2       70-75
     Statement of Revenues, Expenditures, and Changes in
          Fund Balance – Budget (Non-GAAP Budgetary Basis)
          and Actual:
               Food Service Special Revenue Fund                              B-1         76
               Athletics Special Revenue Fund                                 B-2         77
               Title I IASA Special Revenue Fund                              B-3         78
               Entitlement IDEA-B Special Revenue Fund                        B-4         79
               Discretionary IDEA-B Special Revenue Fund                      B-5         80
               Competitive IDEA-B Special Revenue Fund                        B-6         81
               Preschool IDEA-B Special Revenue Fund                          B-7         82
               Title VI IASA Special Revenue Fund                             B-8         83
               Carl D. Perkins Tech Prep – Current Special Revenue Fund       B-9         84
               Class Size Reduction Special Revenue Fund                      B-10        85
               Title V Innovative Education Program Special Revenue Fund      B-11        86




                                                4
                                STATE OF NEW MEXICO
                                  Aztec Municipal Schools
                                     Table of Contents
                                       June 30, 2009
                                                                          Statement/
                                                                           Schedule     Page
Combining and Individual Fund Statements and Schedules (Continued)
Statement of Revenues, Expenditures, and Changes in
      Fund Balance – Budget (Non-GAAP Budgetary Basis)
      and Actual:
           Teacher/Principal Training & Recruiting Special Revenue Fund     B-12         87
           Safe & Drug Free Schools & Communities Special Revenue Fund      B-13         88
           Title I School Improvement Special Revenue Fund                  B-14         89
           Johnson O’Malley Special Revenue Fund                            B-15         90
           Indian Education Formula Grant Special Revenue Fund              B-16         91
           Wallace Foundation Grant Special Revenue Fund                    B-17         92
           Technology for Education PED Special Revenue Fund                B-18         93
           Incentives for School Improvement Act Special Revenue Fund       B-19         94
           Truancy Initiative PED Special Revenue Fund                      B-20         95
           Reading Improvement Initiatives Special Revenue Fund             B-21         96
           Beginning Teacher Mentoring Program Special Revenue Fund         B-22         97
           Schools in Need of Improvement Special Revenue Fund              B-23         98
           Libraries – SB 301 GO Bonds Special Revenue Fund                 B-24         99
           NM Arts Div Special Revenue Fund                                 B-25        100
           Medicaid HSD Special Revenue Fund                                B-26        101
           Resources for School Health Special Revenue Fund                 B-27        102
           Public School Capital Outlay Capital Projects Fund               B-28        103
           Special Capital Outlay State Capital Projects Fund               B-29        104
           Bond Building Capital Projects Fund                              B-30        105
           Capital Improvement SB-9 Capital Projects Fund                   B-31        106
           Debt Service Fund                                                B-32        107

General Fund Individual Fund Statements and Schedules
     Combining Balance Sheet – General Fund                                 C-1         110
     Combining Statement of Revenues, Expenditures and Changes
          in Fund Balances - General                                        C-2         111

     Statement of Revenues, Expenditures and Changes in Fund Balance -
     Budget (Non-GAAP Budgetary Basis)
     And Actual:
          Operating Fund                                                    C-3         112
          Pupil Transportation Fund                                         C-4         113
          Instructional Materials Fund                                      C-5         115

Component Unit Individual Fund Statements and Schedules
    Combining Balance Sheet                                                 D-1        118-119
    Combining Statement of Revenues, Expenditures and Changes
         in Fund Balances                                                   D-2        120-121

     Statement of Fiduciary Assets and Liabilities – Agency Funds           D-3         122




                                         5
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                 6
                                       STATE OF NEW MEXICO
                                         Aztec Municipal Schools
                                            Table of Contents
                                              June 30, 2009
                                                                                  Statement/
                                                                                   Schedule     Page
        Component Unit Individual Fund Statements and Schedules (Continued)

             Statement of Revenues, Expenditures, and Changes in
             Fund Balance – Budget (Non-GAAP Budgetary Basis)
             and Actual:
                  Operational Fund                                                  D-4         123
                  Instructional Materials Fund                                      D-5         124
                  Entitlement Special Revenue Fund                                  D-6         125
                  Charter Schools Fund Special Revenue Fund                         D-7         126
                  Microsoft Settlement Fund Special Revenue Fund                    D-8         127
                  Beginning Teacher Mentoring Program Special Revenue Fund          D-9         128
                  Library Book Fund Special Revenue Fund                            D-10        129
                  Libraries – SB 301 GO Bonds-Laws of 2006 Special Revenue Fund     D-11        130
                  Public School Capital Outlay Capital Projects Fund                D-12        131

SUPPORTING SCHEDULES
         Schedule of Deposit and Investment Accounts                                   I         135
         Cash Reconciliation                                                          II       136-139
         Schedule of Collateral Pledged by Depository For Public Funds               III         141
         Schedule of Changes in Fiduciary Assets and Liabilities–Agency Funds        IV        142-143

COMPLIANCE SECTION
     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                                                        146-147

FEDERAL FINANCIAL ASSISTANCE
     Report on Compliance with Requirements Applicable
           to Each Major Program and on Internal Control Over
           Compliance in Accordance with OMB Circular A-133                                    150-151
     Schedule of Expenditures of Federal Awards                                      V         152-153
     Schedule of Findings and Questioned Costs                                       VI        154-161
     Other Disclosures                                                                           162




                                                7
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                 8
                     STATE OF NEW MEXICO
                       Aztec Municipal Schools
                           Official Roster
                            June 30, 2009



     Name                                                   Title
                         Board of Education
Mitch Waggoner                                            President

  Roger Collins                                         Vice President

Christy Lillywhite                                        Secretary

  Wayne Ritter                                             Member

Leonard Tillman                                            Member

                          School Officials

 Kirk Carpenter                                        Superintendent

 Richard Vogal                                   Director, Federal Programs &
                                                          Curriculum

Kathleen Runnels                                     Director of Finance

  Riley Roland                                    Director of Transportation

 Nathan Holmes                                     Director of Technology

   Charlie Lee                                     Director of Maintenance




                                 9
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                 10
FINANCIAL SECTION




       11
                                              Independent Auditors’ Report



To the Board of Education
Aztec Municipal Schools
Aztec, New Mexico
The Office of Management and Budget
    and
Hector Balderas
New Mexico State Auditor

We have audited the accompanying financial statements of the governmental activities, the discretely presented component
unit, each major fund, the budgetary comparison for the general fund and the aggregate remaining fund information of Aztec
Municipal Schools (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. We also have audited the financial statements of each of the
District’s nonmajor governmental funds, the combining financial statements for the general fund, the component unit funds
and the respective budgetary comparisons for the bond building capital projects fund, the capital improvement SB-9 capital
projects fund, the debt service fund, the component unit funds, and the remaining nonmajor governmental funds presented as
supplementary information in the accompanying combining and individual fund financial statements as of and for the year
ended June 30, 2009 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 and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the District’s internal control over financial reporting. Accordingly, we express
no such opinion. 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, the discretely presented component unit, each major fund, and the aggregate
remaining fund information of Aztec Municipal Schools, as of June 30, 2009, and the respective budgetary comparison for
the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of each nonmajor governmental fund, the combining financial statements for the general fund,
and each component unit fund of the District, as of June 30, 2009, and the respective changes in financial position, thereof,
and the respective budgetary comparisons for the bond building capital projects fund, the capital improvement SB-9 capital
projects fund, the debt service fund, the nonmajor governmental funds and the component unit funds for the year then ended
in conformity with accounting principles generally accepted in the United States of America.




                                                           12
In accordance with Government Auditing Standards, we have also issued our report date November 6, 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 assessing the results of our
audit.

The Management’s Discussion and Analysis on pages 14 through 19 is not a required part of the basic financial statements
but is supplementary information required by accounting principles generally accepted in the United States of America. We
have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the required 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 financial statements that collectively comprise the
District’s basic financial statements, the combining and individual fund financial statements, and the budgetary comparisons.
The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required
by the U.S. Office of Management and Budget Circular A-133, Audits of State, Local Governments, and Non-Profit
Organizations, and is not a required part of the basic financial statements. The accompanying financial information listed as
Supporting Schedules I through IV in the table of contents is presented for purposes of additional analysis and is not a
required part of the financial statements of the District. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and each of the nonmajor governmental fund financial statements, and, in
our opinion, is fairly stated, in all material respects, in relation to the basic financial statements and the nonmajor
governmental fund financial statements taken as a whole. The introductory section has not been subjected to the auditing
procedures applied in the audit of the basic financial statements, and, accordingly, we express no opinion on it.




Accounting & Consulting Group, LLP
Albuquerque, NM
November 6, 2009




                                                            13
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                         Management’s Discussion and Analysis
                                              For the Fiscal Year Ended
                                                    June 30, 2009




The information presented in this section of the District’s annual financial report may be new to the reader. This
information aligns with requirements of the Governmental Accounting Standards Board (GASB) that establishes
accounting and reporting standards for governmental entities. With the issuance of GASB’s Statement 34, a written
narrative discussion and analysis of the financial performance of the District will be included. This section should
provide an objective and easily readable analysis of the District’s financial activities based on currently known facts,
decisions, or conditions. The financial managers of governments (in this case, the District) are knowledgeable about the
transactions, events, and conditions that are reflected in the District’s financial report and of the fiscal policies that
govern its operations. Management’s discussion and analysis provides financial managers with the opportunity to present
both a short- and a long-term analysis of the District’s activities. Requirements established by GASB 34 are general
rather than specific to encourage effective reporting by including only the most relevant information and, where
appropriate, refer to the accompanying financial statements. Management will explain the District’s financial position
and include the reasons the position is improved, deteriorated, or the same when compared to the prior year. The analysis
will be based on currently known facts as of the date of the auditors’ report.

Introduction

The financial performance of the Aztec Municipal Schools for the fiscal year ended June 30, 2009 will be the subject of
this discussion and analysis. The purpose is to look at the financial performance as a whole; however, readers may also
utilize the accompanying financial statements and notes for comprehensive information.

Financial Highlights

Key events for the fiscal year 2009 are:

         The District maintained a strong A3 rating from Moody’s Investor Services for the sale of General Obligation
         Bonds. During the fiscal year ending June 30, 2009, the District’s debt management program produced a tax
         rate for debt at $8,351 per thousand dollars of assessed valuation. This rate increased from $8,113 in the prior
         year.
         Total Assets of Governmental Activities was $83,575,110 (Ex. A-1)
         Total Liabilities of Governmental Activities was $46,832,200 (Ex. A-1)
         Net Assets of Governmental Activities was $36,742,910 (Ex. A-1)
         General Fund expenditures exceeded revenues by $103,403 resulting in a year-end fund balance of $1,471,626
         (Ex. B-2)
         Requirements of GASB 34 required changes to the fixed asset accounting of the District. All assets, including
         real estate and buildings, were recorded and accumulated depreciation on these assets was also recorded in the
         conversion to this requirement. Capital assets of $95,829,308 with accumulated depreciation of $38,651,572
         were recorded. (Note 6)
          The District implemented the State mandates for the minimum $50,000 salary for Level 3-A teachers; and the
         0.75% increase in the employer’s contribution to the Educational Retirement Fund.

Basic Financial Statement This annual report introduces the District’s basic financial statements. The basic financial
statements include: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial
statements.

The Statement of Net Assets and Statement of Activities are district-wide (government) information that presents both an
aggregate view of the District’s finances and a longer-term view of trends. The next level of information is in the fund
level financial statements. A fund is an accountability unit used to maintain control over resources for specified activities
or objectives. The fund financial statements will look at the District’s most significant funds while combining al other
non-major funds into a single summary.




                                                        14
                                             STATE OF NEW MEXICO
                                               Aztec Municipal Schools
                                          Management’s Discussion and Analysis
                                               For the Fiscal Year Ended
                                                     June 30, 2009

Government Wide Financial Statements

Statement of Net Assets – This is a District-wide statement including all assets and liabilities using an accrual basis of
accounting. This basis of accounting, similar to private sector business, includes all of the current year’s revenues and
expenses regardless of when actual cash was received or paid. Differences between assets and liabilities are reported as
net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position
of the District as a whole is improving or deteriorating.

                                            Summary of Statement of Net Assets

                                        June 30, 2009              June 30, 2008                June 30, 2007
    Assets
Current assets                          $ 21,764,639               $ 24,198,510                 $     9,786,926
Capital asset                             95,829,308                  88,114,421                     83,466,510
Accumulated depreciation                 (38,651,572)                (38,420,619)                   (37,044,056)
Other noncurrent assets                    4,632,735                     105,359                         27,751

         Total assets                   $ 83,575,110               $ 73,997,671                 $ 56,237,201

    Liabilities
Accounts payable                        $ 2,037,903                $    1,418,907               $      345,078
Accrued interest                            429,689                       358,004                      227,422
Other current liabilities                 3,962,979                     2,428,738                    2,431,097
Long-term liabilities                    40,401,629                    30,100,000                   17,300,000

         Total liabilities               46,832,200                    34,305,649                   20,303,597

    Net Assets
Invested in capital assets               13,852,736                     6,659,335                   26,797,524
Restricted: Debt service                  6,578,854                     4,362,521                    3,972,903
Restricted: Capital projects              3,739,443                    26,867,313                    3,584,844
Restricted: Other Purpose                   367,286                        52,671                       63,482
Unrestricted                             12,204,591                     1,750,182                    1,514,851

         Total net assets           $    36,742,910                $ 39,692,022                 $ 35,933,604

Statement of Activities – This is a District-wide statement that reports how the District’s net assets changed during the
fiscal year. This report compliments the Statement of Net Assets by being designed to show the financial reliance on
various sources of revenue used for the functions or activities provided by the District.

Both of these statements, Net Assets and Activities, include activity of the District that may be classified in three distinct
types:
         Governmental Activities – All of the District’s programs and services are considered governmental and include
         the instructional program, support services, operation and maintenance of plant, pupil transportation, and
         activities.
         Component Unit Activities – Activities for which financial reporting is required within the primary unit (the
         District) but for which governance and oversight is assigned to the component unit. The Mosaic Charter School
         is defined as a component unit of the District.




                                                        15
                                           STATE OF NEW MEXICO
                                             Aztec Municipal Schools
                                        Management’s Discussion and Analysis
                                             For the Fiscal Year Ended
                                                   June 30, 2009

                                               Summary of Statement of Activities

                                    June 30, 2009                 June 30, 2008                June 30, 2007
    Revenues
Program revenues:
    Charges for services            $       617,923               $      548,139               $          668,348
    Operating grants                      4,069,315                    5,677,106                        4,264,689
    Capital grants                          573,304                      667,148                          346,356
General revenues:
    Property taxes                       1,742,816                     7,405,565                        5,881,191
    Federal and state aid               21,620,379                    20,893,140                       19,599,865
    Other                                4,771,602                        88,405                          142,211

         Total revenues                 33,395,339                    35,279,503                       30,902,660

     Expenses
Instruction                             16,569,286                    16,212,978                       14,473,330
Support services                        15,650,067                    12,941,006                       11,770,368
Food service                             1,236,734                     1,213,364                        1,100,921
Depreciation, unallocated                        -                             -                        2,294,935
Interest on long term debt               1,584,310                     1,363,411                          911,678

         Total expenses                 35,040,397                    31,730,759                       30,551,232

         Changes in net assets      $    (1,645,058)              $    3,548,744                   $     351,428

Fund Financial Statements

The District uses funds to ensure and demonstrate compliance with finance-related laws and regulations. The District
uses many funds to account for a multitude of various transactions. Within the basic financial statements, fund financial
statements focus only on the District’s most significant funds rather than the District as a whole. Major funds are
separately reported while all others are combined; individual non-fund data are presented in later sections of this report.
The District’s major governmental funds, as defined in GASB 34, are the General Fund, Bond Building, Capital
Improvement SB-9, and Debt Service Fund.

Governmental Funds

Governmental funds encompass most of the District’s activities and are reported in fund financial statements. These
statements focus on short-term periods on how resources flow into and out of those funds and the resources available at
the end of the fiscal period. These funds are reported in the modified accrual accounting method that recognizes cash and
any other financial assets that can be readily converted. Governmental fund statements and government-wide reporting
focus on two different perspectives, short-term and long-term impact, thus the relationship or differences can be
understood by reconciling the two different financial statements.

Governmental Activities

This statement of activity reports the cost of program services and the charges of services, and the revenues that are
received to perform these services. The Statement of Activities (Exhibit A-2) for governmental activities, reports the
total cost of services and the net cost of services.

It becomes apparent that dependence upon revenues from the State of New Mexico for governmental activities is
significant. The New Mexico Legislature and the operation of the Equalization Guarantee Formula for operational
funding by the New Mexico Department of Education have minimized local tax support for public education. This fund
pays for teaching staff, instructional support staff, administrative staff and maintenance staff. This represents 64% of the
budgeted total revenue received in fiscal year 2009.


                                                       16
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                         Management’s Discussion and Analysis
                                              For the Fiscal Year Ended
                                                    June 30, 2009

The State of New Mexico through the Public Education Department establishes annually a “Unit Value” that is used,
along with student membership and the Equalization Guarantee Formula factors, to determine the amount of State
support to be received by individual districts. The Unit Value has increased over the past several years; coupled with the
District slowly declining student membership, funding from the State of New Mexico has been stable.

School District Funds

The District’s total governmental funds had revenues of $33,426,151, bond proceeds and other sources of $13,225,000
and $149,985 and expenditures of $46,011,954. The net change in the governmental fund balance for the fiscal year
decreased $789,182. These governmental funds are accounted for using the modified accrual basis of accounting as
required by the New Mexico Public Education Department. An adjustment was made for governmental capital assets that
were overstated in the amount of $1,304,054 (see Financial Statements Note 14) as a result of removing assets that were
incorrectly included in the prior year cumulative capital assets roll forward.

General Fund Budgeting Highlights

The State of New Mexico school budget process is defined in the New Mexico Statutes (Section 22) and the New
Mexico Administrative Code (Section 6). Specific items are further defined in the New Mexico Manual of Procedures
for Public School Accounting and Budgeting. The District follows an internal process of budgeting by recognizing the
Educational Plan for Student Success and the priorities defined. District management and the Board of Education utilize
a continuous improvement model for student success and district improvement. The General Fund is the most significant
budgeted fund; other major funds, as defined in GASB 34 are the Bond Building, Capital Improvement SB-9, and Debt
Service Fund.

The General Fund had final budgeted revenues of $24,197,567 and actual cash basis revenue of $24,282,594.
Expenditures were budgeted at $25,239,676 and actual cash basis expenditures were $23,132,810. The difference
between budget and actual expenditures was due to budgetary savings/requirements within the budget and the amount of
budgeted emergency reserve and allowable cash balance. General Fund balance at year end was $1,471,626.

Capital Asset and Debt Administration

Capital Assets

GASB 34 rules now require the District to depreciate capital assets. This is a significant change from prior fiscal periods.
As of June 30, 2009 the District had $95,829,308 invested in capitalized assets and had accumulated depreciation of
$38,651,572 (Notes to Financial Statements Note 6). The beginning capitalized value of assets was adjusted to add the
historical cost or appraised value of buildings and land. A systematic process is in place that adds newly acquired capital
assets, deletes capital assets that are disposed of and requires local school sites to verify possession of capital assets at
individual locations.

The State of New Mexico provides public school capital funding through the Public School Capital Outlay Council
(PSCOC). Current legislation that regulates distribution of funds calls for “matching” of capital funds between the
district and State. The District match is 17% that is matched by State resources of 83% for capital awards from the
PSCOC. The District intends to actively pursue grant awards for capital outlay from this source; awards are based upon
the condition index of each facility, and the District has many facilities in the upper condition of need. During the fiscal
year the major capital activity was the building of additional student instruction facilities.




                                                        17
                                           STATE OF NEW MEXICO
                                             Aztec Municipal Schools
                                        Management’s Discussion and Analysis
                                             For the Fiscal Year Ended
                                                   June 30, 2009

Long Term Debt

The District may incur general obligation debt under the terms of Article IX, Section 11 of the New Mexico
Constitution. The approval of such general obligation is dependent upon local voter approval and is limited to 6% of the
assessed valuation of taxable property within the District. As of June 30, 2009 the District had outstanding General
Obligation bonds in the amount of $43,325,000 that included the sale of $13,225,000 during the year. The District is
bonded to 55.87% of the legal limit of $77,552,282 based on assessed property value of $1,292,538,033

The District has another $13,000,000 of voter authorized bonds remaining to be issued. The District expects to issue the
remaining bonds later in fiscal year 2010.


FUTURE TRENDS

In September 2003, the voters of the State of New Mexico approved two Constitutional amendments that effect public
school education. The provision that increases the percentage of interest distribution from the Public School
Permanent Fund is designed to fund public school reforms. Since the State uses an Equalization Guarantee Formula, the
additional distributions should increase the support for operational funding within the General Fund. The focus of the
increased funding is to be the classroom rather than other functions.

Capital funding from State sources was not defined in a formula such as the operational fund prior to 1999. A State
District Court monitors the State’s performance in this funding; a status hearing regarding the State’s progress toward
uniform and sufficient capital funding may occur at the order of the Court. Capital funding is expected to continue at
current levels to assist the District in replacement, renovation and construction of school buildings. Separately, the
District’s long-range debt plan, anticipates a General Obligation debt above 90% to coordinate with State capital outlay
funds and the required match of funds by the District.

The Public Education Department, under Legislative action, directed New Mexico School Districts to implement a
Uniform Chart of Accounts (UCOA). The implementation will take place beginning July 1, 2006 and may change the
comparison of financial statements for June 30, 2009 to prior periods. The implemented UCOA in New Mexico will
allow alignment with reporting received by the National Center for Education Statistics (NCES) which compiles
statistics to comply with No Child Left Behind (NCLB).

The District completed and approved a five (5) year facilities master plan (FMP) in September, 2007. This plan is
compliant with the Public School Facilities Authority (PSFA) guidelines and serves as a working document for
future facility needs within the School District. The total estimated cost of capital improvement projects established
to address needs in schools via the district’s FMP is $41,220,325 in 2007 dollars. The District plans no immediate
growth related projects based upon current enrollment projects. The District plans to actively apply for future Public
School Capital Outlay awards in order to bring substandard facilities up to adequacy standards.
The State of New Mexico provides public school capital funding through the Public School Capital Outlay Council
(PSCOC). Current legislation regulates distribution of funds calls for “matching” of capital funds between the
District and State. The District’s match is 90% which in turn is matched by State resources in the amount of 10% for
capital awards from the PSCOC. The District intends to actively pursue grant awards for capital outlay from this
source based upon the condition index of district facilities as established by the PSFA.

An extensive study was conducted in 2006 by a state-appointed, independent Funding Formula Task Force to determine
whether our public schools were being provided sufficient funding. New Mexico’s Constitution requires that a “uniform
system of free public schools sufficient for the education of and open to all children of school age in the state shall be
established and maintained”. The outcome of the study was clear – virtually every New Mexico school district, whether
small or large, is not operating with sufficient funding, which is the mandate of the New Mexico Constitution. The
upcoming 2009 New Mexico Legislative session is expected to receive an education bill that proposes to dramatically
change the 35 year old public education funding formula; statewide, an additional $350,000,000 would be recommended
to address sufficiency. The District would be a major beneficiary of the new formula and the accompanying funds.




                                                      18
                                          STATE OF NEW MEXICO
                                            Aztec Municipal Schools
                                       Management’s Discussion and Analysis
                                            For the Fiscal Year Ended
                                                  June 30, 2009

CONTACTING THE DISTRICT

This financial report is designed to provide the reader, citizens, taxpayers, investors and other patrons with a general
overview of the Aztec Municipal Schools financial condition and to provide accountability for the funds the District
receives. Questions about this financial report or the operations of the District may be directed to:

Kathleen Runnels, CPA                                           Kirk Carpenter
Director of Finance                                             Superintendent
Aztec Municipal Schools                                         Aztec Municipal Schools
1118 W. Aztec Blvd                                              1118 W. Aztec Blvd
Aztec, NM 87410                                                 Aztec, NM 87410
krunnels@aztec.k12.nm.us                                        adcarpki@aztec.k12.nm.us
505-334-9474                                                    505-334-9474

Other District information may be accessed at:

www.aztecschools.com




                                                      19
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                 20
        BASIC
FINANCIAL STATEMENTS




         21
                                                STATE OF NEW MEXICO
                                                  Aztec Municipal Schools
                                                  Statement of Net Assets
                                                       June 30, 2009




                                                                               Primary Government
                                                                                  Governmental
                                                                                    Activities         Component Unit
Assets
 Current assets
  Cash and cash equivalents                                                   $          20,679,625    $     372,946
  Property taxes receivable                                                                  90,746                -
  Other taxes receivable                                                                    146,158                -
  Due from other governments                                                                834,758           64,369
  Other receivables                                                                           4,266                -
  Inventory                                                                                   9,086                -

    Total current assets                                                                 21,764,639          437,315

 Noncurrent assets
  Restricted cash and cash equivalents                                                    4,477,306                -
  Bond issuance costs (net of
   amortization of $48,938)                                                                 155,429                -
  Capital assets                                                                         95,829,308          337,164
  Less: accumulated depreciation                                                        (38,651,572)         (26,230)

     Total noncurrent assets                                                             61,810,471          310,934

Total assets                                                                  $          83,575,110    $     748,249




                           The accompanying notes are an integral part of these financial statements

                                                              22
                                                                                   Exhibit A-1




                                                         Primary Government
                                                            Governmental
                                                              Activities      Component Unit
Liabilities
 Current liabilities
  Accounts payable                                       $        2,037,903   $       7,536
  Accrued payroll                                                   747,667          30,644
  Due to PED                                                         12,621               -
  Accrued interest                                                  429,689               -
  Deferred revenue                                                   32,450               -
  Current portion of accrued compensated absences                    70,241               -
  Current portion of bonds payable                                3,100,000               -

    Total current liabilities                                     6,430,571          38,180

 Noncurrent liabilities

  Accrued compensated absences                                       36,018               -
  Bond underwriter premiums (net of
   amortization of $9,374)                                          140,611               -
  Bonds payable                                                  40,225,000               -

    Total noncurrent liabilities                                 40,401,629               -

Total liabilities                                                46,832,200          38,180

Net assets
 Invested in capital assets, net of related debt                 13,852,736         310,934
 Restricted for:
   Debt service                                                   6,578,854               -
   Capital projects                                               3,739,443           4,056
   Other purposes                                                   367,286          44,214
 Unrestricted                                                    12,204,591         350,865

Total net assets                                                 36,742,910         710,069

Total liabilities and net assets                         $       83,575,110   $     748,249




                                                    23
                                                STATE OF NEW MEXICO
                                                   Aztec Municipal Schools
                                                    Statement of Activities
                                              For the Year Ended June 30, 2009



                                                                                                        Program Revenues



                                                                               Charges for         Operating Grants
             Functions/Programs                         Expenses                Services           and Contributions
Primary government:
Governmental Activities:
 Instruction                                        $     16,569,286       $           47,736       $           1,182,718
 Support services - students                               2,491,562                    7,179                     177,848
 Support services - instruction                              669,696                    1,929                      47,803
 Support services - general administration                 1,077,479                    3,104                      76,911
 Support services - school administration                  1,919,480                    5,530                     137,013
 Central services                                            646,806                    1,863                      46,169
 Operation & maintenance of plant                          6,722,274                   19,367                     479,837
 Student transportation                                    2,122,770                        -                   1,342,177
 Food services operations                                  1,236,734                  531,215                     578,839
 Interest on long-term debt                                1,584,310                        -                           -

   Total governmental activities                    $     35,040,397       $          617,923       $           4,069,315

Component Unit Activities:
 Charter school                                     $      1,547,733       $                 -      $            163,089

                                                                           General Revenues:
                                                                            Taxes
                                                                             Property taxes, levied for operating programs
                                                                             Property taxes, levied for debt services
                                                                             Property taxes, levied for capital projects
                                                                             Oil and gas taxes
                                                                            State equalization guarantee
                                                                            Federal and state aid
                                                                            Interest and investment earnings
                                                                            Miscellaneous
                                                                            Loss on disposition of assets

                                                                               Subtotal, general revenues

                                                                           Changes in net assets

                                                                           Net assets - beginning
                                                                           Restatement (Note 14)
                                                                           Net assets - beginning as restated

                                                                           Net assets - ending




                       The accompanying notes are an integral part of these financial statements


                                                              24
                                                             Exhibit A-2




                 Net (Expense) Revenue
                  and Changes in Net
                        Assets

                 Primary Government       Component Unit
Capital Grants
     and             Governmental
Contributions         Activities          Charter School


$      315,625   $        (15,023,207)    $             -
        47,461             (2,259,074)                  -
        12,757               (607,207)                  -
        20,525               (976,939)                  -
        36,564             (1,740,373)                  -
        12,321               (586,453)                  -
       128,051             (6,095,019)                  -
             -               (780,593)                  -
             -               (126,680)                  -
             -             (1,584,310)                  -

$      573,304            (29,779,855)                  -


$      169,693                                 (1,214,951)




                              127,705                  -
                              997,603                  -
                              617,508                  -
                            4,563,265                  -
                           21,202,120          1,371,568
                              418,259                  -
                              158,634                  -
                               66,520                  1
                              (16,817)                 -

                           28,134,797            156,618

                            (1,645,058)          156,618

                           39,692,022            543,442
                           (1,304,054)            10,009
                           38,387,968            553,451

                 $         36,742,910     $      710,069




                                                 25
                                                      STATE OF NEW MEXICO
                                                        Aztec Municipal Schools
                                                             Balance Sheet
                                                         Governmental Funds
                                                             June 30, 2009


                                                                                                       Capital
                                                      General Fund            Bond Building       Improvement SB-9

                   ASSETS
Current assets
 Cash and cash equivalents                        $       1,625,212       $      13,314,453       $     5,498,198
 Property taxes receivable                                    5,702                       -                50,798
 Other taxes receivable                                      13,312                       -                53,248
 Due from other governments                                  14,758                       -                 3,508
 Other receivables                                                -                       -                     -
 Inventory                                                        -                       -                     -
 Due from other funds                                       607,001                       -                     -

     Total assets                                 $       2,265,985       $      13,314,453       $     5,605,752

  LIABILITIES AND FUND BALANCES
Current liabilities
 Accounts payable                                 $          91,581       $       1,946,322       $             -
 Accrued payroll                                            698,847                       -                     -
 Due to PED                                                       -                       -                     -
 Deferred revenue                                             3,931                       -                40,342
 Due to other funds                                               -                       -                     -

    Total liabilities                                       794,359               1,946,322                40,342

Fund balances
Reserved for
 Inventory                                                           -                        -                 -
Unreserved
 Undesignated, reported in
   General fund                                           1,471,626                       -                     -
   Special revenue funds                                          -                       -                     -
   Debt service funds                                             -                       -                     -
   Capital projects funds                                         -              11,368,131             5,565,410

    Total fund balances                                   1,471,626              11,368,131             5,565,410

Total liabilities and fund balances               $       2,265,985       $      13,314,453       $     5,605,752




                               The accompanying notes are an integral part of these financial statements


                                                                     26
                                                             Exhibit B-1
                                                             Page 1 of 2




                           Other
                        Governmental
Debt Service Fund          Funds             Total



$      4,477,306    $         241,762    $   25,156,931
          34,246                    -            90,746
          79,598                    -           146,158
               -              816,492           834,758
               -                4,266             4,266
               -                9,086             9,086
               -              156,940           763,941

$      4,591,150    $        1,228,546   $   27,005,886




$              -    $               -    $    2,037,903
               -               48,820           747,667
               -               12,621            12,621
          18,818               32,450            95,541
               -              763,941           763,941

          18,818              857,832         3,657,673



               -                 9,086               9,086


               -                    -         1,471,626
               -              361,574           361,574
       4,572,332                    -         4,572,332
               -                   54        16,933,595

       4,572,332              370,714        23,348,213

$      4,591,150    $        1,228,546   $   27,005,886




                                             27
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                 28
                                                STATE OF NEW MEXICO                                        Exhibit B-1
                                                  Aztec Municipal Schools                                   Page 2 of 2
                                                    Governmental Funds
                             Reconciliation of the 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:

        Fund balances - total governmental funds                                                      $   23,348,213

        Capital assets used in governmental activities are not financial resources
         and, therefore, are not reported in the funds                                                    57,177,736

        Delinquent property taxes not collected within sixty days after year end are
         not considered "available" revenues and are considered to be deferred
         revenue in the fund financial statements, but are considered revenue in the
         Statement of Activities                                                                              63,091

        Other long-term assets are not available to pay for current period
         expenditures and therefore, are deferred in the funds:

        Bond issuance costs, including original issue discounts and premiums are not
         financial resources and, therefore, are not reported in the funds

          Bond issuance cost (net of amortization)                                                           155,429
          Bond underwriter premiums (net of amortization)                                                   (140,611)

        Accrued interest is not due and payable with current financial resources
         therefore is not reported in the funds                                                             (429,689)

        Certain liabilities, including bonds payable, are not due and payable in
        the current period and, therefore, are not reported in the funds

        Bonds payable                                                                                     (43,325,000)
        Current portion of accrued compensated absences                                                       (70,241)
        Long term portion of accrued compensated absences                                                     (36,018)

        Total net assets - governmental activities                                                    $   36,742,910




                          The accompanying notes are an integral part of these financial statements

                                                              29
                                                    STATE OF NEW MEXICO
                                                       Aztec Municipal Schools
                                  Statements of Revenues, Expenditures and Changes in Fund Balances
                                                         Governmental Funds
                                                  For the Year Ended June 30, 2009

                                                                                                                Capital
                                                                General Fund           Bond Building       Improvement SB-9
Revenues
 Property taxes                                             $         123,774      $                   -   $        654,252
 Oil and gas taxes                                                    416,271                          -          1,665,074
 Intergovernmental revenue
   Federal flowthrough                                                 17,658                      -                      -
   Federal direct                                                       1,157                      -                      -
   Local sources                                                            -                      -                      -
   State flowthrough                                               21,304,484                      -                129,892
   State direct                                                       790,257                      -                      -
   Transportation distribution                                        889,645                      -                      -
 Charges for services                                                  86,708                      -                      -
 Interest                                                              28,838                 70,855                 41,402
 Miscellaneous                                                         60,624                      -                      -
    Total revenues                                                 23,719,416                 70,855              2,490,620

Expenditures
 Current
  Instruction                                                      14,043,375                      -                      -
  Support services - students                                       2,054,513                      -                      -
  Support services - instruction                                      433,037                      -                      -
  Support services - general administration                           310,698                      -                686,870
  Support services - school administration                          1,718,406                      -                      -
  Central services                                                    571,045                      -                      -
  Operation & maintenance of plant                                  2,863,460              3,770,309                      -
  Student transportation                                            1,828,285                      -                      -
  Food services operations                                                  -                      -                      -
 Capital outlay                                                             -              8,824,290              1,607,559
 Debt service
   Principal                                                                -                      -                      -
   Interest                                                                 -                      -                      -
   Bond issuance costs                                                      -                 67,592                      -
    Total expenditures                                             23,822,819             12,662,191              2,294,429

  Excess (deficiency) of revenues over expenditures                  (103,403)            (12,591,336)              196,191

Other financing sources (uses)
 Bond proceeds                                                                 -          13,225,000                      -
 Bond premiums                                                                 -                   -                      -
   Total other financing sources (uses)                                        -          13,225,000                      -

Net change in fund balances                                          (103,403)               633,664                196,191

Fund balances - beginning of year                                   1,575,029             10,734,467              5,369,219

Fund balances - ending of year                              $       1,471,626      $      11,368,131       $      5,565,410




                                 The accompanying notes are an integral part of these financial statements



                                                                    30
                                                              Exhibit B-2
                                                              Page 1 of 2




                           Other
                        Governmental
Debt Service Fund          Funds               Total

$        978,785    $                  -   $    1,756,811
       2,481,920                       -        4,563,265

               -             2,097,579          2,115,237
               -               101,693            102,850
               -                79,377             79,377
               -               304,153         21,738,529
               -               547,103          1,337,360
               -                     -            889,645
               -               531,215            617,923
          16,902                   637            158,634
               -                 5,896             66,520
       3,477,607             3,667,653         33,426,151



               -             1,317,218         15,360,593
               -               295,639          2,350,152
               -                33,635            466,672
           9,800                25,995          1,033,363
               -               155,455          1,873,861
               -                 9,536            580,581
               -                     -          6,633,769
               -                15,218          1,843,503
               -             1,222,130          1,222,130
               -               443,412         10,875,261

       2,200,000                     -          2,200,000
       1,504,477                     -          1,504,477
               -                     -             67,592
       3,714,277             3,518,238         46,011,954

        (236,670)             149,415          (12,585,803)


               -                       -       13,225,000
         149,985                       -          149,985
         149,985                       -       13,374,985

         (86,685)             149,415             789,182

       4,659,017              221,299          22,559,031

$      4,572,332    $         370,714      $   23,348,213




                                                        31
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                 32
                                               STATE OF NEW MEXICO                                          Exhibit B-2
                                                  Aztec Municipal Schools                                   Page 2 of 2
                          Reconciliation of the Statement of Revenues, Expenditures and Changes
                          in Fund Balances of Governmental Funds to the Statement of Activities
                                              For the year Ended June 30, 2009




Amounts reported for governmental activities in the statement of activities
 are different because:

          Net change in fund balances - total governmental funds                                      $      789,182

          Governmental funds report capital outlays as expenditures. However, in
           the statement of activities, the cost of those assets is allocated over their
           estimated useful lives and reported as depreciation expense:

              Capital expenditures reported as capital outlay expenditures                                10,875,261
              Depreciation expense                                                                        (2,070,456)

          In the statement of activities, only the loss on the disposition of capital assets
              is reported, whereas in the governmental funds, the proceeds from the
              disposition increase financial resources. Thus, the change in net assets
              differs from the change in fund balance by the cost of the capital assets
              disposed.                                                                                       (16,817)

          Revenues in the statement of activities that do not provide current financial
           resources are not reported as revenue in the funds:

              Change in deferred revenue related to property taxes receivable                                 (13,995)

          The issuance of long-term debt (e.g. bonds, notes, leases) provides current financial
           resources to governmental funds, while the repayment of the principal of long-term
           debt consumes the current financial resources of governmental funds. Neither
           transaction, however, has any effect on net assets. Also, governmental funds
           report the effect of issuance costs, premiums, discounts, and similar items when
           debt is first issued, whereas these amounts are deferred and amortized in the
           statement of activities:

              Bond issuance cost                                                                               67,592
              Bond premium                                                                                   (149,985)
              Amortization of bond issuance cost                                                              (17,522)
              Amortization of bond premiums                                                                     9,374
              Increase in compensated absences                                                                (21,007)
              Increase in accrued interest                                                                    (71,685)
              Bond proceeds                                                                               (13,225,000)
              Principal payments on bonds                                                                   2,200,000


              Change in net assets of governmental activities                                         $    (1,645,058)




                          The accompanying notes are an integral part of these financial statements

                                                                33
                                                    STATE OF NEW MEXICO                                                   Exhibit C-1
                                                       Aztec Municipal Schools
                                                            General Fund
                                   Statement of Revenue, Expenditures, and Changes in Fund Balance
                                          Budget (Non-GAAP Budgetary Basis) and Actual
                                                  For the Year Ended June 30, 2009
                                                                                                                       Variances
                                                                                                                       Favorable
                                                           Budgeted Amounts                                          (Unfavorable)
                                                     Original                 Final                 Actual       Final to Actual
Revenues
 Property taxes                                  $        126,006         $     126,006       $        124,643   $           (1,363)
 Oil and gas taxes                                        503,093               503,093                489,547              (13,546)
 Intergovernmental
   Federal flowthrough                                     10,000                 10,000                17,658               7,658
   Federal direct                                           1,000                  1,000                 1,157                 157
   Local sources                                                -                      -                     -                   -
   State flowthrough                                   21,339,833             21,250,694            21,297,550              46,856
   State direct                                            25,996                841,213               790,053             (51,160)
   Transportation distribution                          1,403,843              1,274,360             1,393,436             119,076
 Charges for services                                      74,000                 74,000                78,884               4,884
 Interest                                                  90,000                 90,000                28,838             (61,162)
 Miscellaneous                                             27,201                 27,201                60,828              33,627
   Total revenues                                      23,600,972             24,197,567            24,282,594              85,027
Expenditures
 Current
  Instruction                                          14,203,211             14,522,106            13,349,801            1,172,305
  Support services - students                           2,386,793              2,385,697             2,059,032              326,665
  Support services - instruction                          516,151                532,051               446,212               85,839
  Support services - general administration               364,199                363,145               313,110               50,035
  Support services - school administration              1,789,253              1,787,646             1,720,446               67,200
  Central services                                        574,399                574,399               573,315                1,084
  Operation & maintenance of plant                      3,101,197              3,062,087             2,825,034              237,053
  Student transportation                                1,435,434              1,845,876             1,845,860                   16
  Other support services                                  274,552                166,669                     -              166,669
   Total expenditures                                  24,645,189             25,239,676            23,132,810            2,106,866
Excess (deficiency) of revenues over
expenditures                                           (1,044,217)            (1,042,109)            1,149,784            2,191,893
Other financing sources (uses)
  Designated cash                                       1,044,217              1,042,109                     -           (1,042,109)
Total other financing sources (uses)                    1,044,217              1,042,109                     -           (1,042,109)

Net change in fund balances                                      -                      -            1,149,784            1,149,784

Fund balances - beginning of year                                -                      -            1,082,429            1,082,429
Fund balances - end of year                      $               -        $             -     $      2,232,213   $        2,232,213

Net change in fund balances (Budget Basis)                                                                       $        1,149,784
Adjustments to revenues for oil and gas taxes, transportation distribution, and state flowthrough                          (563,178)
Adjustments to expenditures for salaries, general supplies and material, and other contract services                       (690,009)
Net changes in fund balances (GAAP Basis)                                                                        $         (103,403)



                                 The accompanying notes are an integral part of these financial statements

                                                                     34
                                    STATE OF NEW MEXICO                                      Exhibit D-1
                                       Aztec Municipal Schools
                              Statement of Fiduciary Assets and Liabilities
                                             Agency Funds
                                             June 30, 2009




Assets
  Cash                                                                                 $      348,909

      Total assets                                                                     $      348,909


Liabilities
  Due to student organizations                                                         $      348,909

    Total liabilities                                                                  $      348,909




                 The accompanying notes are an integral part of these financial statements


                                                    35
                                              STATE OF NEW MEXICO
                                                Aztec Municipal Schools
                                              Notes to Financial Statements
                                                      June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies

          Aztec Municipal Schools (“District”) is a special purpose government corporation governed by an elected five-member
          Board of Education. The Board of Education is the basic level of government, which has oversight responsibility and
          control over all activities related to the public school education of the City of Aztec, New Mexico. The District is
          responsible for all activities related to public elementary and secondary school education within its jurisdiction. The
          District receives funding from local, state, and federal government sources and must comply with the requirements of
          these funding source entities.

          The summary of significant accounting policies of the District is presented to assist in the understanding of the District’s
          financial statements. The financial statements and notes are the representation of the District’s management who is
          responsible for their integrity and objectivity. The financial statements and notes of the District have been prepared in
          conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to
          government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
          establishing governmental accounting and financial reporting principles. The GASB periodically updates its codification
          of the existing governmental Accounting and Financial Reporting Standards which, along with subsequent GASB
          pronouncements (Statements and Interpretations), constitutes GAAP for the governmental units. The financial statements
          have incorporated all applicable GASB pronouncements as well as Financial Accounting Standards Board (FASB)
          Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the
          Committee on accounting procedures issued on or before November 30, 1989 unless those pronouncements conflict with
          or contradict GASB pronouncements. The government-wide financial statements have incorporated all applicable
          GASB pronouncements as well as Financial Accounting Standards Board (FASB) Statements and Interpretations,
          Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedures
          issued after November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements.
          Governments also have the option of following subsequent private-sector guidance for their government-wide financial
          statements, subject to this same limitation. The District has elected not to follow subsequent private-sector guidance.
          The more significant of the District’s accounting policies are described below.

          A.       Financial Reporting Entity

                   In evaluating how to define the District, for financial reporting purposes, management has considered all
                   potential component units. The decision to include any potential component units in the financial reporting
                   entity was made by applying the criteria set for the in GASB Statements No. 14 and No. 39. Blended
                   component units, although legally separate entities, are in substance part of the government’s operations. Each
                   discretely presented component unit is reported in a separate column in the government-wide financial
                   statements to emphasize that it is legally separate from the government.

                   The basic-but not the only-criterion for including a potential component unit within the reporting entity is the
                   governing body’s ability to exercise oversight responsibility. The most significant manifestation of this ability
                   is financial interdependency. Other manifestations of the ability to exercise oversight responsibility include, but
                   are not limited to, the selection of governing authority, the designation of management, the ability to
                   significantly influence operations, and accountability for fiscal matters. A second criterion used in evaluating
                   potential component units for inclusion or exclusion from the reporting entity is the existence of special
                   financing relationships, regardless of whether the government is able to exercise oversight responsibilities.
                   Finally, the nature and significance of a potential component unit to the primary government could warrant its
                   inclusion in the reporting entity. Based upon the application of these criteria, the District has one component
                   unit and is not a component unit of another government agency.

                   Mosaic Academy was established in 2006 under the Charter School Act and serves to provide public education
                   to the community of Aztec, New Mexico. The charter school is deemed to be fiscally dependent upon the
                   District and has been deemed to be a separate legal entity based on state statute and is presented as a discrete
                   component unit.




                                                             36
                                             STATE OF NEW MEXICO
                                               Aztec Municipal Schools
                                             Notes to Financial Statements
                                                     June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          B.      Government-wide and fund financial statements

                  The government-wide financial statements (i.e., the statement of net assets and the statement of activities)
                  report information on all of the nonfiduciary activities of the primary government. For the most part, the effect
                  of interfund activity has been removed from these statements. Governmental activities, which normally are
                  supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which
                  rely to a significant extent on fees and charges for support. The District does not have any business-type
                  activities.

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

                  When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted
                  resources first, then unrestricted resources as they are needed.

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

          C.      Measurement focus, basis of accounting, and financial statement presentation

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

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

                  Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered
                  to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Property tax
                  receivables are recognized in the period for which the taxes are levied, net of estimated refunds and
                  uncollectible amounts. Sales and use taxes are classified as derived tax revenues and are recognized as revenue
                  when the underlying exchange takes place and the revenues are measurable and available. All other revenue
                  items are considered to be measurable and available only when cash is received by the government.




                                                            37
                                             STATE OF NEW MEXICO
                                               Aztec Municipal Schools
                                             Notes to Financial Statements
                                                     June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          C.      Measurement focus, basis of accounting, and financial statement presentation (continued)

                  The government reports the following major governmental funds:

                           The General Fund is the District’s primary operating fund. It accounts for all financial resources of
                           the general government, except those required to be accounted for in another fund. Revenues are
                           provided by School tax levy, state equalization and transportation funds, state instructional material
                           allocations, and earnings from investments. Expenditures include all costs associated with the daily
                           operations of the schools except for those items included in other funds.

                           Bond Building Capital Projects Fund is used to account for bond proceeds plus any income earned
                           thereon. The proceeds are restricted for the purpose of making additions to and furnishing of school
                           buildings, or purchasing or improving school grounds or any combination thereof, as approved by the
                           voters of the District.

                           The Capital Improvements SB-9 Capital Projects Fund is used to provide financing for purchase of
                           equipment and capital improvements to School District property. Funding is received from a 2 mill
                           property tax levy and interest earned on investments, under New Mexico Senate Bill 9.

                           The Debt Service Fund is used to account for the accumulation of resources for, and the payment of,
                           general long-term debt principal, interest and related costs.

                  Additionally, the government reports the following agency fund:

                           The Fiduciary Funds account for assets held by the Schools in a trustee capacity or as an agent for
                           individuals, private organizations, other governments and/or other funds.

                  As a general rule the effect of interfund activity has been eliminated from the government-wide financial
                  statements. Exceptions to this general rule are payments-in-lieu of taxes. Elimination of these charges would
                  distort the direct costs and program revenues reported for the various functions concerned.

                  Deposits and Investments: 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.

                  State statutes authorize the District to invest in Certificates of Deposit, obligations of the U.S. Government, and
                  the Local Government Investment Pool. The Local Government Investment Pool operates in accordance with
                  appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool
                  shares. As of June 30, 2009 the District does not have any investments.

                  Restricted Assets: Certain proceeds of the District’s revenue bonds and general obligation bonds are
                  classified as restricted assets on the balance sheet because their use is limited by the applicable bond covenants.

                  Receivables and Payables: Interfund activity is reported as loans, services provided, reimbursements or
                  transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination
                  upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues
                  and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate
                  benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as
                  transfers.

                  All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion
                  that is expected to be uncollectible.




                                                           38
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          D.      Assets, Liabilities and Net Assets or Equity

                  The District receives monthly income from a tax levy from San Juan County. The funds are collected by the
                  County Treasurer and are remitted to the District the following month. Under the modified accrual method of
                  accounting, the amount remitted by the County Treasurer in July and August 2009 is considered ‘measurable
                  and available’ and, accordingly, is recorded as revenue in the governmental fund statements during the year
                  ended June 30, 2009. Period of availability is deemed to be sixty days subsequent to year end.

                  Certain Special Revenue funds are administered on a reimbursement method of funding; other funds are
                  operated on a cash advance method of funding. The funds incurred the cost and submitted the necessary
                  request for reimbursement or advance, respectively.

                  Prepaid Items: Certain payments to vendors reflect costs applicable to future accounting periods and are
                  recorded as prepaid items in both the government-wide and fund financial statements.

                  Instructional Materials: The New Mexico Public Education Department (PED) receives federal mineral
                  leasing funds from which it makes annual allocations to the various schools for the purchase of educational
                  materials. Of each allocation, seventy percent is restricted to the requisition of materials listed in the New
                  Mexico Public Education Department “State Adopted Instructional Material” list, while thirty percent of each
                  allocation is available for purchases directly from vendors. The District are allowed to carryforward unused
                  allocations from year to year.

                  Inventory: The District method of accounting for inventory is the consumption method. Under the
                  consumption approach, governments report inventories they purchase as an asset and defer recognition of the
                  expenditures until the period in which the inventories actually are consumed. Inventory in the Food Service
                  Special Revenue Fund consists of U.S.D.A. commodities and other purchased food and non-food supplies. The
                  cost of purchased food is recorded as an expenditures at the time individual inventory items are consumed.

                  Capital Assets: Capital assets, which include property, plant, and equipment, are reported in the applicable
                  governmental column in the government-wide financial statements. Capital assets are defined by the
                  government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an
                  estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical
                  cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date
                  of donation. Information Technology equipment including software is being capitalized and included in
                  furniture, fixtures and equipment in accordance with NMAC 2.20.1.9 C (5). The District does not have any
                  infrastructure.

                  The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset
                  lives are not capitalized. Library books are deemed to have useful lives of one year and are not capitalized.

                  Major outlays for capital assets and improvements are capitalized as projects are constructed. No interest was
                  included as part of the cost of capital assets under construction. Construction projects paid for by the Public
                  School Capital Outlay Council are included in the District’s capital assets.

                  Property, plant, and equipment of the primary government are depreciated using the straight line method over
                  the following estimated useful lives:

                            Assets                                                Years
                            Buildings/ building improvements                      20-40
                            Furniture, fixtures, and equipment                     3-7




                                                          39
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          D.      Assets, Liabilities and Net Assets or Equity

                  Deferred Revenues: There are two sets of circumstances in which the District accrues deferred revenue.
                      • Unearned revenue - Under both the accrual and the modified accrual basis of accounting, revenue
                          may be recognized only when it is earned. If assets are recognized in connection with a transaction
                          before the earnings process is complete, those assets must be offset by a corresponding liability for
                          deferred revenue.
                      • Unavailable revenue – Under the modified accrual basis of accounting, it is not enough that revenue
                          has been earned if it is to be recognized as revenue of the current period. Revenue must also be
                          susceptible to accrual (it must be both measureable and available to finance expenditures of the
                          current fiscal period). If assets are recognized in connection with a transaction, but those assets are
                          not yet available to finance expenditures of the current fiscal period, then the assets must be offset by
                          a corresponding liability for deferred revenue.

                  Compensated Absences: Twelve-month employees are entitled to accumulate annual leave up to 15 days per
                  year, depending on length of service, and the employee’s hire date and the employee’s employment status
                  (administrator or classified). Annual leaved is supposed to be taken in the year earned or the succeeding fiscal
                  year; however, a maximum of 24 days, depending on the employment status of the employee, may be carried
                  over to the succeeding year or put into the employees annual leave bank The employee’s annual leave bank
                  may accumulate up to a maximum of 20 working days and then any days over the 20 are paid out at a rate of
                  $10 per day. Once days are banked they may not be withdrawn. If an employee retires from the District,
                  employees are paid out at their hourly rate for unused vacation and $10 per day for unused sick leave.
                  Qualified employees are entitled to accumulate sick leave. If an employee accumulates more than 90 days of
                  sick leave they are paid out at a rate of $10 per day.

                  Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial
                  resources is reported as expenditure and a fund liability of the governmental fund that will pay it. In prior
                  years, substantially all of the related expenditures have been liquidated by the general fund. Amounts of vested
                  or accumulated vacation leave that are not expected to be liquidated with expendable available financial
                  resources are reported in the government-wide statement of net assets.

                  Long-term Obligations: In the government-wide financial statements, long-term debt and other long-term
                  obligations are reported as liabilities in the applicable governmental activities statement of net assets. Bond
                  premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using
                  the effective interest method or straight line method if the difference is inconsequential.

                  In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as
                  bond issuance costs, during the current period. The face amount of the debt issued is reported as other
                  financing sources. Premiums received on debt issuances are reported as other financing sources while
                  discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from
                  the actual debt proceeds received, are reported as debt service expenditures.

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




                                                           40
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          D.      Assets, Liabilities and Net Assets or Equity (continued)

                  Net Assets or Fund Equity. Equity is classified as net assets and displayed in three components:

                  a.       Net assets invested in capital assets, net of accumulated depreciation and reduced by the outstanding
                           balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition,
                           construction, or improvement of those assets.

                  b.       Restricted Net Assets: Consist of net assets with constraints placed on the use either by (1) external
                           groups such as creditors, grantors, contributors, or laws or regulation of other governments; or (2) law
                           through constitutional provisions or enabling legislation. Descriptions for the related restrictions for
                           net assets restricted for “special revenue, debt service, and capital projects” are described on pages
                           61-63. The government-wide statement of net assets reports $10,685,583 of restricted net assets, of
                           which $4,106,729 is restricted by enabling legislation.

                  c.       Unrestricted Net assets: All other net assets that do not meet the definition of “restricted” or
                           “invested in capital assets, net of related debt.”

                  Estimates: The preparation of financial statements in conformity with accounting principles generally
                  accepted in the United States of America requires management to make estimates and assumptions that affect
                  certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

          E.      Revenues

                  State Equalization Guarantee: School districts in the State of New Mexico receive a ‘state equalization
                  guarantee distribution’ which is defined as “that amount of money distributed to each school district to insure
                  that the school district’s operating revenue, including its local and federal revenues as defined (in Chapter 22,
                  Section 825, NMSA 1978) is at least equal to the school district’s program costs.

                  A school district’s program costs are determined through the use of various formulas using ‘program units’
                  which take into consideration 1) early childhood education; 2) basic education; 3) special education; 4)
                  bilingual-multicultural education; 5) size, etc. Payment is made from the public school fund under the authority
                  of the Director of Public School Finance. The District received $21,202,120 in state equalization guarantee
                  distributions during the year ended June 30, 2009.

                  Tax Revenues: The District receives mill levy and ad-valorem tax revenues primarily for debt service and
                  capital outlay purposes. Property taxes are assessed on January 1st of each year and are payable in two equal
                  installments, on November 10th of the year in which the tax bill is prepared and April 10th of the following
                  year with the levies becoming delinquent 30 days (one month) thereafter. The District recognizes tax revenues
                  in the period for which they are levied in the government-wide financial statements. The District records only
                  the portion of the taxes considered ‘measurable’ and ‘available’ in the governmental fund financial statements.
                  The District recognized $1,756,811 in property tax revenues in the governmental fund financial statements
                  during the year ended June 30, 2009. Descriptions of the individual debt service and capital outlay funds
                  contained in these financial statements include information regarding the authority for the collection and use of
                  these taxes.

                  Transportation Distribution: School districts in the State of New Mexico receive student transportation
                  distributions. The transportation distribution is allocated to each school district in accordance with formulas
                  developed by the State Transportation Director and the Director of Public School Finance. The funds shall be
                  used only for the purpose of making payments to each school district for the to-and-from school transportation
                  costs of students in grades K through twelve attending public school within the school district. The District
                  received $889,645 in transportation distributions during the year ended June 30, 2009.




                                                           41
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 1.   Summary of Significant Accounting Policies (continued)

          E.      Revenues (continued)

                  Instructional Materials: The Public Education Department (Department) receives federal mineral leasing
                  funds from which it makes annual allocations to the various school districts for the purchase of educational
                  materials. Of each allocation, seventy percent is restricted to the requisition of materials listed in the State
                  Board of Education “State Adopted Instructional Material” list, while thirty percent of each allocation is
                  available for purchases directly from vendors. The District received $338,644 in instructional materials
                  revenue from the State for the year ended June 30, 2009.

                  SB-9 State Match: The Director shall distribute to any school district that has imposed a tax under the Public
                  School Capital Improvements Act (22-25-1 to 22-25-10 NMSA 1978) an amount from the public school capital
                  improvements fund that is equal to the amount by which the revenue estimated to be received from the imposed
                  tax as specified in Subsection B of Section 22-25-3 NMSA 1978, assuming a one hundred percent collection
                  rate, is less than an amount calculated by multiplying the product obtained by the rate imposed in the District
                  under the Public School Capital Improvements Act. The distribution shall be made by December 1 of each year
                  that the tax is imposed in accordance with Section 22-25-3 NMSA 1978. However, in the event that sufficient
                  funds are not available in the public school capital improvement funds to make the state distribution provided
                  for in this section, the dollar per program unit figure shall be reduced as necessary.

                  The District received $129,892 in SB-9 matching revenue during the year ended June 30, 2009.

                  Capital Outlay: The public school capital outlay fund was created under the provisions of Chapter 22, Article
                  24, NMSA 1978. The money in the fund may be used for: capital expenditures deemed by the public school
                  capital outlay council to be necessary for an adequate education program per Section 22-24-4(B); core
                  administrative function of the public school facilities authority and for project management expense upon
                  approval of the council per Section 22-24-4(G); and for the purpose of demolishing abandoned school district
                  facilities, upon application by a school district to the council, per Section 22-24-4(L).

                  Money in the fund shall be disbursed by warrant of the Department of Finance and Administration on vouchers
                  signed by the Secretary of Finance and Administration following certification by the council that the
                  application has been approved.

                  During the year ended June 30, 2009, the District received $443,412 in state special capital outlay fund.

                  Federal Grants: The District receives revenues from various Federal departments (both direct and indirect),
                  which are legally restricted to expenditures for specific purposes. These programs are reported as Special
                  Revenue Funds. Each program operates under its own budget, which has been approved by the Federal
                  Department or the flowthrough agency (usually the New Mexico Public Education Department). The various
                  budgets are approved by the Local School Board and the New Mexico Public Education Department. For this
                  purpose, the government considers reimbursement grant revenues to be available if they are collected within
                  120 days of the end of the current fiscal period.

                  The District also receives reimbursement under the National School Lunch and Breakfast for its food services
                  operations, and the distribution of commodities through the New Mexico Human Services Department. These
                  items are recorded as intergovernmental income.




                                                          42
                                             STATE OF NEW MEXICO
                                               Aztec Municipal Schools
                                             Notes to Financial Statements
                                                     June 30, 2009

NOTE 2.   Stewardship, Compliance and Accountability

          Budgetary Information

          Budgets for the General, Special Revenue, Debt Service, and Capital Projects are prepared by management and are
          approved by the local Board of Education and the School Budget and Planning Unit of the Department of Education.
          Auxiliary student activity accounts are not budgeted.

          These budgets are prepared on the Non-GAAP cash basis, excluding encumbrances, and secure appropriation of funds
          for only one year. Carryover funds must be re-appropriated in the budget of the subsequent fiscal year.

          Actual expenditures may not exceed the budget at the function (or “series”) level. Budgets may be amended in two
          ways. If a budget transfer is necessary within a major category called a ‘series’ this may be accomplished with only
          local Board of Education approval. If a transfer between ‘series’ or a budget increase is required, approval must also be
          obtained from Public School Finance Division.

          The budgetary information presented in these financial statements has been amended in accordance with the above
          procedures.

          The District follows these procedures in establishing the budgetary data reflected in the financial statements:

          1.       In April or May, the superintendent submits to the Board of Education a proposed operating budget of the fiscal
                   year commencing the following July. The operating budget includes proposed expenditures and the means of
                   financing them, and has approval by the Department of Education.

          2.       In May or June, the budget is approved by the Board of Education.

          3.       The school board must certify the budget. The school board meeting is open for the general public unless a
                   closed meeting has been called.

          4.       The superintendent is authorized to transfer budgeted amounts between departments within any fund; however,
                   any revisions that alter the total expenditures of any fund must be approved by the school board and the State of
                   New Mexico Department of Education.

          5.       Formal budgetary integration is employed as a management control device during the year for the General
                   Fund, Special Revenue Funds, Debt Service Fund, and Capital Projects Funds.

          6.       Budgets for the General, Special Revenue, Debt Service, and Capital Projects are adopted on a basis not
                   consistent with generally accepted accounting principles (GAAP). Budget basis expenditures exclude
                   encumbrances.

          The School Board may approve amendments to the appropriated budget, which are required when a change is made
          affecting budgeted ending fund balance. New Mexico Administrative Code 6.20.2.9 prohibits a District from exceeding
          budgetary control at the function level.




                                                            43
                                              STATE OF NEW MEXICO
                                                Aztec Municipal Schools
                                              Notes to Financial Statements
                                                      June 30, 2009

NOTE 2.   Stewardship, Compliance and Accountability (continued)

          Budgetary Information (continued)

          The appropriated budget for the year ended June 30, 2009, was properly amended by the District’s Board of Education
          throughout the year. These amendments resulted in no changes in the budget.

                                                                              Excess (deficiency)
                                                                         of revenues over expenditures
                                                                     Original                       Final
                                                                     Budget                        Budget
           Budgeted Funds:
             General Fund                                   $           (1,044,217 )        $           (1,042,109 )
             Bond Building                                  $          (10,190,189 )        $          (23,415,189 )
             Capital Improvement SB-9                       $           (4,232,049 )        $           (4,232,049 )
             Debt Service                                   $           (3,932,239 )        $           (3,932,239 )
             Nonmajor Funds                                 $             (176,712 )        $           (1,430,875 )

          The District is required to balance its budgets each year. Accordingly, amounts that are excess or deficient are presented
          as changes in cash designated for expenditures, not as an excess or deficiency of revenues over expenditures.

NOTE 3.   Deposits and Investments

          State statutes authorize the investment of District funds in a wide variety of instruments including certificates of deposit
          and other similar obligations, state investment pool, money market accounts, and United States Government obligations.
          All invested funds of the District properly followed State investment requirements as of June 30, 2009.

          Deposits of funds may be made in interest or non-interest bearing checking accounts in one or more banks or savings and
          loan associations within the geographical boundaries of the District. The financial institution must provide pledged
          collateral for 50% of the deposit amount in excess of the deposit insurance

          The rate of interest in non-demand interest-bearing accounts shall be set by the State Board of Finance, but in no case
          shall the rate of interest be less than one hundred percent of the asked price on United States treasury bills of the same
          maturity on the day of deposit.

          Excess of funds may be temporarily invested in securities which are issued by the State or by the United States
          government, or by their departments or agencies, and which are either direct obligations of the State or the United States
          or are backed by the full faith and credit of those governments.

          According to the Federal Deposit Insurance Corporation, public unit deposits are funds owned by the public unit. Time
          deposits, savings deposits and interest bearing NOW accounts of a public unit in an institution in the same state will be
          insured up to $250,000 in aggregate and separate from the $250,000 coverage for public unit demand deposits at the
          same institution.




                                                             44
                                               STATE OF NEW MEXICO
                                                 Aztec Municipal Schools
                                               Notes to Financial Statements
                                                       June 30, 2009

NOTE 3.   Deposits and Investments (continued)

          Custodial Credit Risk – Deposits Custodial credit risk 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 deposit policy for custodial credit risk, other than following state
          statutes as put forth in the Public Money Act (Section 6-10-1 to 6-10-63, NMSA 1978). At June 30, 2009, $12,576,329
          of the District’s bank balance of $13,076,329 was exposed to custodial credit risk. $8,219,674 was uninsured and
          collateralized by collateral held by bank’s trust department, not in the District’s name. $4,356,655 was uninsured and
          uncollateralized at June 30, 2009.


                                                                            Wells Fargo
                                                                              Bank              Citizens Bank               Total

          Amount of deposits                                            $      4,884,604       $     8,191,725        $    13,076,329
          FDIC Coverage                                                         (250,000)             (250,000)              (500,000)

          Total uninsured public funds                                         4,634,604             7,941,725             12,576,329

          Collateralized by securities held by pledging
          institutions or by its trust department or agent in
          other than the District's name                                       2,652,501             5,567,173              8,219,674

          Uninsured and uncollateralized                                $      1,982,103       $     2,374,552        $     4,356,655

          Collateral requirement
            (50% of uninsured funds)                                    $      2,317,302       $     3,970,863        $     6,288,165
          Pledged Collateral                                                   2,652,501             5,567,173              8,219,674

          Over (Under) collateralized                                   $        335,199       $     1,596,310        $     1,931,509


          The collateral pledged is listed on Schedule III on this report. The types of collateral allowed are limited to direct
          obligations of the United States Government and all bonds issued by any agency, District or political subdivision of the
          State of New Mexico.

          Custodial Credit Risk – Investments For an investment, custodial credit risk is the risk that, in the event of the failure of
          the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the
          possession of an outside party. The District does not have an investment policy for custodial risk. New Mexico State
          Statutes require collateral pledged to be delivered for securities underlying an overnight repurchase agreement, or a joint
          safekeeping receipt be issued to the District for at least one hundred two percent of the fair value of the securities
          underlying overnight repurchase accounts invested with the institution. At June 30, 2009, the entire District’s investment
          balance in repurchase agreements of $13,005,842 was exposed to custodial credit risk because it was uninsured and the
          collateral was held by the counterparty and not in the District’s name.




                                                              45
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 3.   Deposits and Investments (continued)


                                                                       Wells Fargo
                                                                         Bank

          Repurchase agreements                                    $     13,005,842
          FDIC Coverage                                                           -

          Total uninsured public funds                                   13,005,842

          Securities underlying an overnight repurchase
          agreement                                                      13,005,842


          Total Investments subject to custodial credit risk       $                 -


          Collateral requirement for repurchase agreements         $     13,265,959
          Pledged Collateral                                             13,265,959

          Over (Under) collateralized                              $                 -


          The District utilizes pooled accounts for some of their programs and funds. Negative cash balances in individual funds
          that were part of the pooled accounts were reclassified as due to/from accounts in the combining balance sheets as of
          June 30, 2009. Funds 24000 through 25000 are federal funds and 26000 through 31700 are nonfederal funds. The
          following individual funds had negative cash balances as of June 30, 2009:

          Special Revenue Funds:
                    24101             Food Service                                       $    19,241
                    24106             Entitlement IDEA-B                                     101,904
                    24107             Discretionary IDEA B                                    30,302
                    24109             Preschool IDEA-B                                        12,631
                    24154             Teacher/Principal Training & Recruiting                 14,496
                    24162             Title I School Improvement                               3,180
                    25184             Indian Education Formula Grant                          12,341
                    26125             Wallace Foundation                                       9,404
                    27141             Truancy Initiative PED                                   5,900
                    27163             Schools in Need of Improvement                          68,686
                                                                                         $   278,085




                                                           46
                                               STATE OF NEW MEXICO
                                                 Aztec Municipal Schools
                                               Notes to Financial Statements
                                                       June 30, 2009

NOTE 3.   Deposits and Investments (continued)

          Reconciliation to the Statements of Net Assets

          The carrying amount of deposits and investments shown above are included in the District’s Statement of Net Assets as
          follows:

          Reconciliation to the Statement of Net Assets:

            Cash and cash equivalents- Governmental Activities Exhibit A-1                              $ 20,679,625
            Restricted cash and cash equivalents- Governmental Activities Exhibit A-1                      4,477,306
            Fiduciary Funds - Exhibit D-1                                                                    348,909

          Total cash and cash equivalents                                                                   25,505,840

          Add: deposits in transit and other reconciling items                                                 576,331
          Less: Repurchase agreements                                                                      (13,005,842)

          Bank balance of deposits                                                                      $ 13,076,329

          Custodial Credit Risk – Deposits Custodial credit risk 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 deposit policy for custodial credit risk, other than following state
          statutes as put forth in the Public Money Act (Section 6-10-1 to 6-10-63, NMSA 1978). At June 30, 2009, $217,634 of
          the District’s bank balance of $467,634 was exposed to custodial credit risk. $365,60 was uninsured and collateralized
          by collateral held by bank’s trust department, not in the District’s name. $0 was uninsured and uncollateralized at June
          30, 2009. At June 30, 2009, cash shown on the statement of net assets at Exhibit A-1 is $372,946 and the amount shown
          in the fiduciary funds at Schedule IV is $11,970.

          Component Unit Activities:

                                                                         Citizens Bank

          Amount of deposits                                            $       467,634
          FDIC Coverage                                                        (250,000)
          Total uninsured public funds                                          217,634


          Collateralized by securities held by pledging
          institutions or by its trust department or agent in
          other than the School's name                                          365,600
          Uninsured and uncollateralized                                $             -


          Collateral requirement
            (50% of uninsured funds)                                    $       108,817
          Pledged Collateral                                                    365,600
          Over (Under) collateralized                                   $       256,783




                                                              47
                                                STATE OF NEW MEXICO
                                                  Aztec Municipal Schools
                                                Notes to Financial Statements
                                                        June 30, 2009

NOTE 3.   Deposits and Investments (continued)

          Reconciliation to the Statements of Net Assets

          The carrying amount of deposits and investments shown above are included in the District’s statements of net assets as
          follows:

          Reconciliation to the Statement of Net Assets:

            Cash and cash equivalents- Component Unit Exhibit A-1                                    $        372,946
            Fiduciary funds - Component Unit Statement D-3                                                     11,970

          Total cash and cash equivalents                                                                     384,916

          Add: deposits in transit and other reconciling items                                                 82,718

          Bank balance of deposits                                                                   $        467,634

NOTE 4.   Accounts Receivable

          Primary Government:

          Accounts receivable as of June 30, 2009, are as follows:
                                                                                    Capital
                                                General             Bond          Improvement        Debt
                                                 Fund              Building          SB-9           Service

          Property taxes receivable         $        5,702    $               -   $    50,798   $      34,246
          Other taxes receveivable
            Oil and gas taxes                      13,312                     -        53,248          79,598
          Due from other governments
             Federal sources                            -                     -             -                 -
             State sources                         14,758                     -         3,508                 -
          Other receivables                             -                     -             -                 -

                                            $      33,772     $               -   $   107,554   $    113,844

                                             Other
                                          Governmental
                                             Funds                  Total

          Property taxes receivable         $             -   $       90,746
          Other taxes receveivable
            Oil and gas taxes                             -          146,158
          Due from other governments
             Federal sources                      688,550            688,550
             State sources                        127,942            146,208
          Other receivables                         4,266              4,266

                                            $     820,758     $ 1,075,928

          The above receivables are deemed 100% collectible.




                                                              48
                                               STATE OF NEW MEXICO
                                                 Aztec Municipal Schools
                                               Notes to Financial Statements
                                                       June 30, 2009

NOTE 4.   Accounts Receivable (continued)

          Component Unit Activities:

          Accounts receivable as of June 30, 2009, are as follows:

          Property taxes receivable        $            -
          Due from other governments
             Federal sources                           -
             State sources                        64,369
          Other receivables                            -

                                           $      64,369

NOTE 5.   Interfund Receivables, Payables, and Transfers

          The District records temporary interfund receivables and payables to enable the funds to operate until grant monies are
          received.

          The composition of interfund balances during the year ended June 30, 2009 is as follows:

          Primary Government

               Due from other fund                                   Due to Other fund                             Amount
          General Fund                            Title I IASA                                                $       159,930
          General Fund                            Entitlement IDEA-B                                                  316,121
          General Fund                            Preschool IDEA-B                                                     15,349
          General Fund                            Teacher/Principal Training & Recruiting                              30,600
          General Fund                            Safe & Drug Free Schools & Communities                                3,117
          General Fund                            Johnson O'Malley                                                      4,090
          General Fund                            Indian Education Formula Grant                                       14,970
          General Fund                            Wallace Foundation                                                   17,447
          General Fund                            Truancy Initiative PED                                               26,136
          General Fund                            Food Service                                                         19,241
          Technology for Education PED            Discretionary IDEA-B                                                 30,302
          Technology for Education PED            Preschool IDEA-B                                                     12,631
          Technology for Education PED            Teacher/Principal Training & Recruiting                              14,496
          Technology for Education PED            Title I School Improvement                                            3,180
          Technology for Education PED            Indian Education Formula Grant                                       12,341
          Technology for Education PED            Wallace Foundation                                                    9,404
          Technology for Education PED            Truancy Initiative PED                                                5,900
          Technology for Education PED            Schools in Need of Improvement                                        1,563
          Medicaid HSD                            Schools in Need of Improvement                                       67,123

          Total                                                                                               $        763,941

          Component Unit

               Due from other fund                                 Due to Other fund                               Amount
          General Fund                            Entitlement IDEA-B                                          $       13,101
          General Fund                            Public School Capital Outlay                                        33,183

          Total                                                                                               $         46,284

          All interfund balances are to be repaid within one year. There were no operating transfers for the year ended June 30,
          2009.



                                                            49
                                                     STATE OF NEW MEXICO
                                                       Aztec Municipal Schools
                                                     Notes to Financial Statements
                                                             June 30, 2009

NOTE 6.           Capital Assets

                  A summary of capital assets and changes occurring during the year ended June 30, 2009, including those changes
                  pursuant to the implementation of GASB Statement No. 34, follows. Land and construction in progress are not subject
                  to depreciation.

                  Governmental Activities:

                                                     Balance                                                                        Balance
                                                  June 30, 2008             Additions        Deletions           Adjustments     June 30, 2009
Governmental activities:
Capital assets not being depreciated:
 Land                                            $     5,895,514        $            -   $               -   $              -    $ 5,895,514
 Construction in progress                              2,024,142             6,355,276                   -         (1,420,759)     6,958,659


Total capital assets not being depreciated             7,919,656             6,355,276                   -         (1,420,759)     12,854,173

Capital assets being depreciated:
 Land improvements                                        22,649                     -               -                      -          22,649
 Buildings and improvements                           71,727,064             3,785,171               -                939,329      76,451,564
 Furniture, fixtures, and equipment                    8,445,052               734,814         736,288             (1,942,656)      6,500,922

Total capital assets being depreciated                80,194,765             4,519,985         736,288             (1,003,327)     82,975,135

Less accumulated depreciation:
 Land improvements                                         1,227                 1,132               -                      -           2,359
 Buildings and improvements                           33,039,257             1,607,346               -                105,073      34,751,676
 Furniture, fixtures, and equipment                    5,380,135               461,978         719,471             (1,225,105)      3,897,537

Total accumulated depreciation                        38,420,619             2,070,456         719,471             (1,120,032)     38,651,572

Total capital assets, net of depreciation        $ 49,693,802           $    8,804,805   $      16,817       $     (1,304,054)   $ 57,177,736

                  Depreciation expense for the year ended June 30, 2009 was charged to the following functions and funds:

                  Governmental Activities
                          Instruction                                                        $ 1,149,421
                          Support services-students                                              136,570
                          Support services-instruction                                           282,816
                          Support services-general administration                                 43,382
                          Support services-school administration                                  35,018
                          Central services                                                        62,695
                          Operations and maintenance of plant                                     76,699
                          Student transportation                                                 269,251
                          Food services operations                                                14,604
                                                                                             $ 2,070,456




                                                                   50
                                                       STATE OF NEW MEXICO
                                                         Aztec Municipal Schools
                                                       Notes to Financial Statements
                                                               June 30, 2009

NOTE 6.           Capital Assets (continued)

      Component Unit:

                                                                 Balance                                                       Balance
                                                              June 30, 2008          Additions              Deletions       June 30, 2009
          Component unit:
          Capital assets not being depreciated:
           Construction in progress                          $        96,192     $                -     $      96,192       $               -


          Total capital assets not being depreciated                  96,192                      -            96,192                       -

          Capital assets being depreciated:
           Buildings and improvements                               167,541              123,882                        -         291,423
           Furniture, fixtures, and equipment                             -               45,741                        -          45,741

          Total capital assets being depreciated                    167,541              169,623                        -         337,164

          Less accumulated depreciation:
           Buildings and improvements                                 11,163              11,738                        -          22,901
           Furniture, fixtures, and equipment                              -               3,329                        -           3,329

      Total accumulated depreciation                                  11,163              15,067                        -          26,230

      Total capital assets, net of depreciation              $      252,570      $       154,556        $      96,192       $     310,934

                  Depreciation expense for the year ended June 30, 2009 was charged to the following functions and funds:

                   Component Unit
                           Instruction                                                        $        1,831
                           Central services                                                            1,748
                           Operations and maintenance of plant                                        11,488
                                                                                              $       15,067


NOTE 7.           Long-term Debt

                  The District issues general obligation bonds to provide funds for the acquisition and construction of major capital
                  facilities. The original amount of general obligation bonds issued in prior years was $48,925,000. During the year,
                  general obligation bonds for the same purpose totaling $13,225,000 were issued.

                  General obligation bonds are direct obligations and pledge the full faith and credit of the District. These bonds are issued
                  with varying terms and varying amounts of principal maturing each year. All general obligation bonds as of June 30,
                  2009 are for governmental activities.




                                                                     51
                                                     STATE OF NEW MEXICO
                                                       Aztec Municipal Schools
                                                     Notes to Financial Statements
                                                             June 30, 2009

NOTE 7.           Long-term Debt (continued)

                  Bonds outstanding at June 30, 2009, are comprised of the following:

                                                    Series             Series              Series
                                                    2000               2001                2002

                  Original Issue:            $     3,000,000 $     4,500,000 $   13,200,000
                  Maturity Date                     10/1/2011       10/1/2011      10/1/2015
                  Principal                  $     1,900,000 $     3,600,000 $   10,800,000
                  Interest Rate               5.00% to 5.75%  4.50% to 4.75% 3.50% to 5.50%

                                                    Series             Series
                                                    2007               2008

                  Original Issue:            $    15,000,000 $    13,225,000
                  Maturity Date                     10/1/2020       10/1/2020
                  Principal                  $    13,800,000 $    13,225,000
                  Interest Rate               3.63% to 4.00%  3.00% to 4.00%

                  Governmental Activities:

                                               Balance                                                     Balance          Due Within
                                            June 30, 2008         Additions           Retirements       June 30, 2009        One Year

          General obiligations bonds
               Series 2000              $        2,300,000   $                -   $      400,000    $      1,900,000    $      600,000
          General obiligations bonds
               Series 2001                       3,700,000                    -          100,000           3,600,000         1,000,000
          General obiligations bonds
               Series 2002                   11,300,000                       -          500,000         10,800,000            500,000
          General obiligations bonds
               Series 2007                   15,000,000                       -         1,200,000        13,800,000            500,000
          General obiligations bonds
               Series 2008                            -           13,225,000                    -        13,225,000            500,000
                                             32,300,000           13,225,000            2,200,000        43,325,000          3,100,000

          Compensated absences                     85,252              91,248             70,241            106,259             70,241

                Total Long-Term Debt    $    32,385,252      $    13,316,248      $     2,270,241   $    43,431,259     $    3,170,241


                  Compensated Absences – Administrative employees of the District are able to accrue a limited amount of vacation and
                  other compensatory time during the year. During fiscal year June 30, 2009, compensated absences increased $21,007
                  from the prior year accrual.




                                                                  52
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 7.   Long-term Debt (continued)

          The annual requirements to amortize the General Obligation Bonds as of June 30, 2009, including interest payments are
          as follows:

               Fiscal Year                                                          Total
             Ending June 30,             Principal             Interest          Debt Service

                 2010                $      3,100,000    $       1,654,330   $       4,754,330
                 2011                       2,725,000            1,529,968           4,254,968
                 2012                       3,100,000            1,402,280           4,502,280
                 2013                       3,500,000            1,268,190           4,768,190
                 2014                       3,800,000            1,129,700           4,929,700
               2015-2019                   17,600,000            3,236,375          20,836,375
               2020-2024                    9,500,000              312,100           9,812,100

                                     $     43,325,000    $      10,532,943   $      53,857,943


          The annual requirements to amortize the March 9, 2000 Series general obligation bonds outstanding as of June 30, 2009,
          including interest payments are as follows:

               Fiscal Year                                                          Total
             Ending June 30,             Principal             Interest          Debt Service

                  2010               $        600,000    $          82,575   $         682,575
                  2011                        650,000               50,538             700,538
                  2012                        650,000               16,900             666,900

                                     $      1,900,000    $         150,013   $       2,050,013


          The annual requirements to amortize the December 14, 2000 Series general obligation bonds outstanding as of June 30,
          2009, including interest payments are as follows:

               Fiscal Year                                                          Total
             Ending June 30,             Principal             Interest          Debt Service

                  2010               $      1,000,000    $         144,000   $       1,144,000
                  2011                      1,200,000               92,500           1,292,500
                  2012                      1,400,000               32,375           1,432,375

                                     $      3,600,000    $         268,875   $       3,868,875




                                                          53
                                            STATE OF NEW MEXICO
                                              Aztec Municipal Schools
                                            Notes to Financial Statements
                                                    June 30, 2009

NOTE 7.   Long-term Debt (continued)

          The annual requirements to amortize the November 21, 2002 Series general obligation bonds outstanding as of June 30,
          2009, including interest payments are as follows:

              Fiscal Year                                                          Total
            Ending June 30,              Principal            Interest          Debt Service

                 2010                $        500,000   $         424,800   $         924,800
                 2011                         500,000             407,050             907,050
                 2012                         500,000             388,675             888,675
                 2013                       2,200,000             335,300           2,535,300
                 2014                       2,300,000             245,300           2,545,300
               2015-2019                    2,300,000             152,150           2,452,150
               2020-2024                    2,500,000              52,500           2,552,500

                                     $    10,800,000    $       2,005,775   $      12,805,775


          The annual requirements to amortize July 13, 2007 Series general obligation bonds outstanding as of June 30, 2009,
          including interest payments are as follows:

              Fiscal Year                                                          Total
            Ending June 30,              Principal            Interest          Debt Service

                 2010                $        500,000   $         521,455   $       1,021,455
                 2011                         250,000             507,755             757,755
                 2012                         250,000             498,580             748,580
                 2013                         800,000             479,140           1,279,140
                 2014                       1,000,000             445,650           1,445,650
               2015-2019                    8,000,000           1,430,100           9,430,100
               2020-2024                    3,000,000              99,600           3,099,600

                                     $    13,800,000    $       3,982,280   $      17,782,280


          The annual requirements to amortize the October 14, 2008 Series general obligation bonds outstanding as of June 30,
          2009, including interest payments are as follows:

              Fiscal Year                                                          Total
            Ending June 30,              Principal            Interest          Debt Service

                 2010                $        500,000   $         481,500   $         981,500
                 2011                         125,000             472,125             597,125
                 2012                         300,000             465,750             765,750
                 2013                         500,000             453,750             953,750
                 2014                         500,000             438,750             938,750
               2015-2019                    7,300,000           1,654,125           8,954,125
               2020-2024                    4,000,000             160,000           4,160,000

                                     $    13,225,000    $       4,126,000   $      17,351,000




                                                         54
                                              STATE OF NEW MEXICO
                                                Aztec Municipal Schools
                                              Notes to Financial Statements
                                                      June 30, 2009

NOTE 8.   Risk Management

          The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and
          omissions; and natural disasters. Therefore, the District is a member of the New Mexico Public School Insurance
          Authority (NMPSIA). The Authority was created to provide comprehensive core insurance programs by expanding the
          pool of subscribers to maximize cost containment opportunities for required insurance coverage. The District pays an
          annual premium to the NMPSIA based on claim experience and the status of the pool. The Risk Management Program
          includes Workers Compensation, General and Automobile Liability, Automobile Physical Damage, and Property and
          Crime coverage. Also included under the risk management program are Boiler, Machinery and Student Accident
          Insurance.

          The NMPSIA provides coverage for up to a maximum of $500,000,000 for each property damage claim with a $750
          deductible to each building. General liability coverage is afforded to all employees, volunteers and school board
          members and the limit is subject to the NMSA Tort Claims Act on a per occurrence basis. The automobile and property
          liability limit is subject to the provisions of the Tort Claims Act. The crime limit is $250,000 per occurrence for Faithful
          Performance. A limit of $250,000 applies to Depositor’s Forgery, Credit Card Forgery, and Money Orders. A limit of
          $100,000 applies to Money and Securities, which include a $750 deductible.

          In case the NMPSIA’s assets are not sufficient to meet its liability claims, the agreement provides that subscribers,
          including the District, cannot be assessed additional premiums to cover the shortfall. No settlements exceeded insurance
          coverage for 2009.

NOTE 9.   Deficit Fund Balances and Budget Noncompliance Issues

          Generally accepted accounting principles require disclosures of certain information concerning individual funds
          including:

          A. Deficit fund balance of individual funds. The following funds reflected a deficit fund balance as of June 30, 2009:

          Primary Government:

                    Food Service Special Revenue Fund                       $      5,889
                    Wallace Foundation Special Revenue Fund                        4,526

                    Total                                                   $     10,415

          Component Unit:
                None




                                                             55
                                             STATE OF NEW MEXICO
                                               Aztec Municipal Schools
                                             Notes to Financial Statements
                                                     June 30, 2009

NOTE 9.   Deficit Fund Balances and Budget Noncompliance Issues (continued)

          B.       Excess of expenditures over appropriations. The following funds exceeded approved budgetary authority for
                   the year ended June 30, 2009:

          Primary Government:

                   Food Service
                     Food services operations                             $    83,285
                   Wallace Foundation Grant
                     Support services                                     $        273
                   Medicaid HSD
                     Support services                                     $      1,865
                   Bond Building
                    Capital outlay                                        $ 1,854,222
                   Capital Improvement SB-9
                     Support services                                     $   678,495
                   Debt Service
                     Support services                                     $      1,294

          The District’s reason for these excess of expenditures over appropriations is due to the change in personnel in mid-June,
          we did not have time to address all the transfers needed at year end to make sure our budgets were in balance at the
          function level. We failed to submit BARS to show additional revenues for Food Service and Medicaid. The remaining
          funds were not overspent in total, but were overspent at the function level. Transfers need to be made and approved by
          the State Department of Education and the Board of Education before the end of the fiscal year. Management will
          review the budget on a timely basis to insure the budget is properly maintained.

          Component Unit:
                None

          C.       In the beginning budget designated cash appropriations exceeded prior year available balances. The following
                   funds exceeded approved budgetary authority for the year ended June 30, 2009:

          Primary Government:

                   Entitlement IDEA-B                                     $   288,163
                   Preschool IDEA-B                                            25,399

                     Total                                                $   313,562

          Component Unit:

                   Charter Schools Fund                                   $    47,181
                   Public School Capital Outlay                               165,637

                     Total                                                $   212,818

          The District’s reason for these deficits is inadequate monitoring of cash available to be rebudgeted. To correct this
          problem the District plans to implement a process through the Performance Budget Analysis Team to consider an
          estimate of designated cash when budgets are established.




                                                           56
                                               STATE OF NEW MEXICO
                                                 Aztec Municipal Schools
                                               Notes to Financial Statements
                                                       June 30, 2009

NOTE 10.   ERB Pension Plan

           Plan Description. Substantially all of the District’s full-time employees participate in a public employee retirement
           system authorized under the Educational Retirement Act (ERA) (Chapter 22, Article 11, NMSA 1978). The
           Educational Retirement Board is the administrator of the plan, which is a cost-sharing multiple-employer defined
           benefit retirement plan. The plan provides for retirement benefits, disability benefits, survivor benefits and cost-of-
           living adjustments to plan members and beneficiaries. ERB issues a separate, publicly available financial report that
           includes financial statements and required supplementary information for the plan. That report may be obtained by
           writing to ERB, P.O. Box 26129, Santa Fe, NM 87502. The report is also available on ERB’s website at
           www.nmerb.org.

           Funding Policy. Plan members are required to contribute 7.90% of their gross salary. The District is required to
           contribute 11.65% of the gross covered salary. The employer contribution will increase .75% each year until July 1,
           2011 when the employer contribution will be 13.9%. The contribution requirements of plan members and the
           District are established in State statute under Chapter 22, Article 11, NMSA 1978. The requirements may be
           amended by acts of the legislature. The District’s contributions to ERB for the fiscal years ending June 30, 2009,
           2008 and 2007 were $1,825,443, $1,734,943, and $1,554,853, respectively.

NOTE 11.   Post-Employment Benefits – Retiree Health Care Plan

           Plan Description. The District contributes to the New Mexico Retiree Health Care Fund, a cost-sharing multiple-
           employer defined benefit postemployment healthcare plan administered by the New Mexico Retiree Health Care
           Authority (RHCA). The RHCA provides health care insurance and prescription drug benefits to retired employees of
           participating New Mexico government agencies, their spouses, dependents, and surviving spouses and dependents. The
           RHCA Board was established by the Retiree Health Care Act (Chapter 10, Article 7C, NMSA 1978). The Board is
           responsible for establishing and amending benefit provisions of the healthcare plan and is also authorized to designate
           optional and/or voluntary benefits like dental, vision, supplemental life insurance, and long-term care policies.

           Eligible retirees are: 1) retirees who make contributions to the fund for at least five years prior to retirement and whose
           eligible employer during that period of time made contributions as a participant in the RHCA plan on the person’s behalf
           unless that person retires before the employer’s RHCA effective date, in which the event the time period required for
           employee and employer contributions shall become the period of time between the employer’s effective date and the date
           of retirement; 2) retirees defined by the Act who retired prior to July 1, 1990; 3) former legislators who served at least
           two years; and 4) former governing authority members who served at least four years.

           The RHCA issues a publicly available stand-alone financial report that includes financial statements and required
           supplementary information for the postemployment healthcare plan. That report and further information can be obtained
           by writing to the Retiree Health Care Authority at 4308 Carlisle NE, Suite 104, Albuquerque, NM 87107.

           Funding Policy. The Retiree Health Care Act (Section 10-7C-13 NMSA 1978) authorizes the RHCA Board to establish
           the monthly premium contributions that retirees are required to pay for healthcare benefits. Each participating retiree
           pays a monthly premium according to a service based subsidy rate schedule for the medical plus basic life plan plus an
           additional participation fee of five dollars if the eligible participant retired prior to the employer’s RHCA effective date
           or is a former legislator or former governing authority member. Former legislators and governing authority members are
           required to pay 100% of the insurance premium to cover their claims and the administrative expenses of the plan. The
           monthly premium rate schedule can be obtained from the RHCA or viewed on their website at www.nmrhca.state.nm.us.

           The Retiree Health Care Act (Section 10-7C-15 NMSA 1978) is the statutory authority that establishes the required
           contributions of participating employers and their employees. The statute requires each participating employer to
           contribute 1.3% of each participating employee’s annual salary; each participating employee is required to contribute
           .65% of their salary. Employers joining the program after 1/1/98 are also required to make a surplus-amount
           contribution to the RHCA based on one of two formulas at agreed-upon intervals.

           The RHCA plan is financed on a pay-as-you-go basis. The employer, employee and retiree contributions are required to
           be remitted to the RHCA on a monthly basis. The statutory requirements for the contributions can be changed by the
           New Mexico State Legislature.



                                                              57
                                               STATE OF NEW MEXICO
                                                 Aztec Municipal Schools
                                               Notes to Financial Statements
                                                       June 30, 2009

NOTE 11.   Post-Employment Benefits – Retiree Health Care Plan (continued)

           The District’s contributions to the RHCA for the years ended June 30, 2009 and 2008 were $206,322 and $206,912
           respectively which equaled the required contributions each year.

NOTE 12.   Contingent Liabilities
           Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any
           disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount,
           if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the District
           expects such amount, if any, to be immaterial.

           The District is involved in various claims and lawsuits arising in the normal course of business. Although the outcome
           of these lawsuits is not presently determinable, it is the opinion of the District’s legal counsel that resolution of these
           matters will not have a material adverse effect on the financial condition of the District.

NOTE 13.   Commitments

           The District’s commitments as of June 30, 2009 are as follows:

           Construction Projects                          Contract Amount                       Remaining Amount

           Vista Nueva Alternative High School            $           472,753                   $           472,753
           Park Avenue Elementary School                  $         2,021,422                   $         2,021,422
           Koogler Middle School                          $        12,254,912                   $        12,254,912


NOTE 14.   Net Assets Restatement

           The Districts capital assets and depreciation did not properly roll forward in the prior year so adjustments were needed in
           the amount of $1,304,054 to restate prior year net assets. Adjustments were made for capital assets that were overstated
           in the amount $2,424,086, as a result of the client removing assets that were incorrectly included in the prior year
           cumulative capital asset roll forward. Updates to the cumulative capital assets roll forward were made from a physical
           inventory count performed in 2008-2009 fiscal year by the District. Accumulated depreciation was understated in the
           amount of 1,120,032 in the prior year, as a result of depreciation being miscalculated. Beginning net assets were
           decreased in the amount of $1,304,054. No funds were affected by this adjustment.

           The Component unit’s erroneously recorded accrued compensated absences in the prior year so adjustments were needed
           in the amount of $10,009 to restate prior year net assets. Adjustments were made for accrued compensated absences that
           were overstated in the amount of $10,009 in the prior year. Beginning net assets were increased in the amount of
           $10,009. No funds were affected by this adjustment.




                                                              58

				
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