$11,640,000 LEWIS COUNTY, WASHINGTON Limited Tax General

OFFICIAL STATEMENT DATED MARCH 16, 2021

NEW ISSUE – BOOK-ENTRY ONLY Moody’s Rating: Aa3 (See “RATING” herein)

In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and continuing compliance with certain covenants, interest on the Bonds (including any original issue discount properly allocable to the owner of a Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. For a more detailed description of such opinions of Bond Counsel see “TAX MATTERS” herein.

$11,640,000LEWIS COUNTY, WASHINGTON

Limited Tax General Obligation Bonds, Series 2021

Dated: As of the Delivery Date Due: December 1, as shown on inside cover

The Lewis County, Washington (the “County”), Limited Tax General Obligation Bonds, Series 2021 (the “Bonds”), will be issued in fully registered form only and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Individual purchases of interests in the Bonds will be made in book-entry form only, in the principal amount of $5,000 each or any integral multiple thereof within a maturity. Purchasers of such interests will not receive certificates representing their interests in the Bonds. Principal of and interest on the Bonds will be payable directly to DTC by the fiscal agent of the state of Washington (the “State”) currently, U.S. Bank National Association, Seattle, Washington, as paying agent and registrar (the “Registrar”).

Interest on the Bonds is payable semiannually on each June 1 and December 1, commencing June 1, 2021, to the maturity or earlier redemption of the Bonds. Upon receipt of payments of principal and interest, DTC will in turn remit such principal and interest to the DTC Participants for subsequent disbursement to the purchasers of beneficial interests in the Bonds, as described under the heading “DESCRIPTION OF THE BONDS” herein.

The Bonds are subject to optional redemption as described herein. See “DESCRIPTION OF THE BONDS – Redemption Provisions” herein.

The Bonds are limited tax general obligations of the County. The County has irrevocably pledged for as long as the Bonds are outstanding and unpaid, that it will levy taxes annually within the constitutional and statutory tax limitations provided by law without a vote of the electors of the County on all of the taxable property within the County in an amount that will be sufficient, together with other money of the County legally available and to be used for such purposes, to pay the principal of and interest on the Bonds as the same shall come due, and the full faith, credit and resources of the County have been pledged irrevocably for the annual levy and collection of such taxes and the prompt payment of the principal of and interest on the Bonds as the same shall become due. See “SECURITY” herein. The County’s ability to increase taxes is subject to certain limitations as described herein. The Bonds do not constitute a debt or indebtedness of the State, or any political subdivision thereof other than the County.

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.

The Bonds are offered when, as and if issued, subject to the approving opinion of Kutak Rock LLP, Bond Counsel and Disclosure Counsel to the County, and to certain other conditions. The fees of Bond Counsel and Disclosure Counsel are contingent upon the issuance of the Bonds. It is expected that the Bonds will be available for delivery through the facilities of DTC in New York New York, or to the Registrar on behalf of DTC by Fast Automated Securities Transfer on or about March 30, 2021.

$11,640,000 Lewis County, Washington

Limited Tax General Obligation Bonds, Series 2021

Due Interest CUSIP Dec. 1 Amount Rate Yield Price No. (1) 2025 $ 285,000 4.00% 0.45% 116.384% 527826 GM7 2026 300,000 4.00 0.58 119.046 527826 GN5 2027 310,000 5.00 0.75 127.596 527826 GP0 2028 680,000 5.00 0.90 130.316 527826 GQ8 2029 710,000 5.00 1.05 132.648 527826 GR6 2030 750,000 4.00 1.19 125.593 527826 GS4 2031 780,000 3.00 1.38 114.616(2) 527826 GT2 2032 800,000 2.00 1.50 104.484(2) 527826 GU9 2033 820,000 2.00 1.60 103.569(2) 527826 GV7 2034 835,000 2.00 1.65 103.115(2) 527826 GW5 2035 855,000 2.00 1.70 102.663(2) 527826 GX3 2036 865,000 2.00 1.75 102.214(2) 527826 GY1 2037 885,000 2.00 1.80 101.766(2) 527826 GZ8 2038 905,000 2.00 1.85 101.321(2) 527826 HA2 *** *** *** *** *** ***

2040 1,860,000 2.00 2.00 100.000 527826 HC8 (1) CUSIP data contained herein is provided by CUSIP Global Services, managed on behalf of the American Bankers

Association by S&P Global Market Intelligence. The CUSIP numbers are not intended to create a data base and do not serve in any way as a substitute for CUSIP service. CUSIP numbers have been assigned by an independent company not affiliated with the County and are provided solely for convenience of reference. The CUSIP numbers for a specific maturity are subject to change after the issuance of the Bonds. Neither the County nor any purchaser is responsible for the accuracy of the CUSIP numbers.

(2) Priced to call date of December 1, 2030.

No dealer, broker, salesperson or other person has been authorized by the County or the purchaser to give any information or to make any representation in connection with the offering of the Bonds other than those contained herein; and, if given or made, such other information or representations must not be relied upon as having been authorized by the County or the purchaser.

The information set forth herein has been furnished by the County and certain other sources that the County believes to be reliable but is not guaranteed as to accuracy or completeness by the County. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the County since the date hereof.

The County makes no representation regarding the accuracy or completeness of the information provided in Appendix D—Book-Entry System, which has been furnished by DTC.

This Official Statement is not be construed as a contract or agreement between the County and purchasers or owners of any of the Bonds.

The public offering prices set forth on pages i and ii of this Official Statement may be changed from time to time by the initial purchaser(s) of the Bonds. Purchasers of the Bonds may offer and sell such Bonds to certain dealers, unit investment trusts, or money market funds at prices lower than the public offering prices set forth on pages i and ii of this Official Statement.

The outbreak of the 2019 novel coronavirus (“COVID-19”) is a significant event that has had and will have ongoing, material effects on the finances, operations, and economy of the County. Historic information in this Official Statement about the finances and operations of the County predate the outbreak of COVID-19 and should be considered in light of the possible or probable negative effects the COVID-19 pandemic may have on the current and future finances, operations, and economy of the County and the state of Washington. See “RECENT DEVELOPMENTS – Response to COVID-19” for a discussion of the effects of COVID-19 on the operations of the County.

Certain statements contained in this Official Statement that are not historical information are forward-looking statements within the meaning of the federal securities laws. these forward-looking statements include the discussions of the County’s expectations regarding the operations of the County and other matters. in this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “forecast” and similar expressions are intended to identify forward-looking statements. although the County believes its expectations regarding future events are based on reasonable assumptions within the scope of its knowledge, the County can give no assurance that its goals will be achieved or that its expectations regarding future developments will be realized. the forward-looking statements in this official statement are subject to risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by these statements.

Information on website addresses set forth in this Official Statement is not incorporated into this Official Statement and cannot be relied upon to be accurate as of the date of this Official Statement, nor can it be relied upon in making investment decisions regarding the Bonds.

This page intentionally left blank.

LEWIS COUNTY, WASHINGTON 351 NW North Street

Chehalis, WA 98532-1900 www.lewiscountywa.gov *

BOARD OF COUNTY COMMISSIONERS

Gary Stamper Chair Dr. Lindsey R. Pollock Vice-Chair Sean D. Swope Commissioner Reiva Lester Clerk of the Board

OTHER COUNTY ELECTED OFFICIALS

Dianne Dorey Assessor Larry E. Grove, CPA Auditor Scott A. Tinney Clerk Warren McLeod Coroner Jonathan Meyer Prosecutor Robert A. Snaza Sheriff Arny Davis Treasurer

BOND AND DISCLOSURE COUNSEL

Kutak Rock LLP Spokane, Washington

(509) 747-4040

MUNICIPAL ADVISOR

Northwest Municipal Advisors Bellevue, Washington

(425) 452-9551

REGISTRAR

U.S. Bank National Association, N.A. Seattle, Washington

* The County’s website is not part of this Official Statement, and investors should not rely on information presented in the

County’s website in determining whether to purchase the Bonds. This inactive textual reference to the County’s website is not a hyperlink and does not incorporate the County’s website by reference.


TABLE OF CONTENTS Page

DESCRIPTION OF THE BONDS ............................................................................................................................... 1 General ...................................................................................................................................................................... 1 Authorization ............................................................................................................................................................. 1 Registration and Payment .......................................................................................................................................... 1 Redemption Provisions .............................................................................................................................................. 2 Purchase ..................................................................................................................................................................... 2

PURPOSE ..................................................................................................................................................................... 3 Sources and Uses of Funds ........................................................................................................................................ 3

SECURITY ................................................................................................................................................................... 3 General Obligations of the County ............................................................................................................................ 3 Defeasance ................................................................................................................................................................. 3 No Acceleration ......................................................................................................................................................... 4

SOURCES OF TAX REVENUE .................................................................................................................................. 4 Property Taxes ........................................................................................................................................................... 4 Sales and Use Taxes .................................................................................................................................................. 5 Real Estate Excise Taxes ........................................................................................................................................... 6

PROPERTY TAX COLLECTION PROCEDURES .................................................................................................... 7 ASSESSED VALUATION DETERMINATION ......................................................................................................... 8 COUNTY GENERAL OBLIGATION DEBT .............................................................................................................. 8

Direct Debt ................................................................................................................................................................ 8 DEBT LIMITATION OF THE COUNTY.................................................................................................................... 8 DIRECT AND ESTIMATED OVERLAPPING DEBT ............................................................................................... 9 DEBT SERVICE REQUIREMENTS ......................................................................................................................... 10

Contingent Obligations ............................................................................................................................................ 10 Future Financing ...................................................................................................................................................... 10 Debt Payment Record .............................................................................................................................................. 10

COUNTY FUNDS AND ACCOUNTING ................................................................................................................. 11 Auditing ................................................................................................................................................................... 11

COUNTY FINANCIAL AND BUDGETARY INFORMATION .............................................................................. 12 Statement of Revenues, Expenditures and Changes in Fund Balance ..................................................................... 12 General Fund Balances ............................................................................................................................................ 12 General Fund Budget ............................................................................................................................................... 13

THE COUNTY ........................................................................................................................................................... 13 GENERAL AND ECONOMIC INFORMATION ..................................................................................................... 17 RECENT DEVELOPMENTS ..................................................................................................................................... 19 APPROVAL OF COUNSEL ...................................................................................................................................... 20 LITIGATION .............................................................................................................................................................. 20 ENFORCEABILITY ................................................................................................................................................... 20 TAX MATTERS ......................................................................................................................................................... 20

In General ................................................................................................................................................................ 20 Backup Withholding ................................................................................................................................................ 21 Original Issue Premium ........................................................................................................................................... 21 Changes in Federal and State Tax Law ................................................................................................................... 21 Not Qualified Tax-Exempt Obligations ................................................................................................................... 21 Changes in Federal and State Tax Law ................................................................................................................... 21

COMMITMENT TO PROVIDE CONTINUING DISCLOSURE ............................................................................. 22 INITIATIVE AND REFERENDUM .......................................................................................................................... 22 CYBERSECURITY .................................................................................................................................................... 22 RATING...................................................................................................................................................................... 22 ADVISORS AND CONSULTANTS ......................................................................................................................... 23 PURCHASER OF THE BONDS ................................................................................................................................ 23 OFFICIAL STATEMENT .......................................................................................................................................... 23

i

APPENDICES:

FORM OF BOND COUNSEL OPINION ............................................................................................... APPENDIX A 2019 AUDITED FINANCIAL STATEMENTS ...................................................................................... APPENDIX B CONTINUING DISCLOSURE UNDERTAKING CERTIFICATE ....................................................... APPENDIX C BOOK-ENTRY SYSTEM ....................................................................................................................... APPENDIX D

ii

1

OFFICIAL STATEMENT

$11,640,000

LEWIS COUNTY, WASHINGTON Limited Tax General Obligation Bonds, Series 2021

This Official Statement of Lewis County (the “County”) in the state of Washington (the “State”), which includes the cover page and appendices, is provided for the purpose of setting forth information in connection with the issuance by the County of its Limited Tax General Obligation Bonds, Series 2021 (the “Bonds”). Capitalized terms not defined herein shall have the meanings assigned to them in the Resolution, as defined below.

DESCRIPTION OF THE BONDS

General

The Bonds will be dated as of their date of delivery, will be issued in denominations of $5,000 each or any integral multiple thereof within a single maturity, and will bear interest from their dated date (or the most recent date to which interest has been paid thereon). Interest on the Bonds will be payable semiannually on each June 1 and December 1, commencing June 1, 2021. The Bonds will bear interest at the rates and will mature on the dates and in the amounts set forth on the cover of this Official Statement. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Authorization

The Bonds are issued pursuant to chapters 36.67, 39.36 and 39.46 Revised Code of Washington (“RCW”), and Resolution No. 20-452 adopted by the Board of County Commissioners (the “Board”) at a regular meeting on December 14, 2020, providing for the issuance and sale of the Bonds and amended by Resolution No. 21-055, adopted by the Board on February 8, 2021 (collectively, the “Resolution”).

Registration and Payment

The Bonds will be issued only as fully registered bonds under a book-entry system and will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York, which will act as securities depository for the Bonds. Purchasers of such interests will not receive certificates representing their interests in the Bonds.

Principal and interest are payable directly to DTC by the State’s fiscal agent, currently U.S. Bank National Association in Seattle, Washington, as registrar, authenticating agent and paying agent (the “Registrar”). In order to meet payment requirements for interest on and principal of the Bonds as the same becomes due and payable, the County will remit money to the Registrar. The Registrar will make principal and interest payments to Cede & Co. which, in turn, will disburse such principal and interest payments to its participants (the “DTC Participants”) in accordance with DTC policies. Payments by such DTC Participants to the Beneficial Owners of the Bonds 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 DTC Participants and not of DTC, the Registrar or the County.

For so long as any Bonds are held in fully immobilized form, DTC, its nominee or a successor depository will be deemed to be the Registered Owner for all purposes under the Resolution and all references to Registered Owners will mean DTC or its nominee or a successor depository and will not mean the Beneficial Owners. Neither the County nor the Registrar has any responsibility or obligation to DTC Participants or to the persons for whom the DTC Participants act as nominees with respect to the Bonds regarding the accuracy of any records maintained by DTC or DTC Participants of any amount in respect of principal of or interest on the Bonds, or any notice that is permitted or required to be given to Registered Owners under the Resolution (except such notice as is required to be given by the Registrar to DTC or its nominee or a successor depository).

Beneficial ownership interests in the Bonds will be subject to transfer and exchange pursuant to the operational arrangements of DTC in effect from time to time. See Appendix C for additional information. As indicated therein, the information in Appendix C has been provided by DTC. The County makes no representation as to the accuracy or completeness thereof. Beneficial Owners of the Bonds should confirm its contents with DTC or DTC Participants.

2

For so long as all Bonds are in fully immobilized form, payments of principal and interest thereon shall be made as provided in accordance with the operational arrangements of DTC referred to in the Letter of Representations. In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds shall be paid by check or draft mailed to the Registered Owners at the addresses for such Registered Owners appearing on the Bond Register on the fifteenth day of the month preceding the interest payment date, or upon the written request of a Registered Owner of more than $1,000,000 of Bonds (received by the Registrar at least 15 days prior to the applicable payment date), such payment shall be made by the Registrar by wire transfer to the account within the continental United States designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation and surrender of such Bonds by the Registered Owners at the designated corporate trust office of the Registrar.

Redemption Provisions

Optional Redemption. The Bonds maturing on December 1, 2025 through 2030, are not subject to redemption prior to their stated maturity. The Bonds maturing on and after December 1, 2031, are subject to optional redemption, as a whole or in part (and if in part, with maturities to be selected by the County and randomly within a maturity), on any date on and after December 1, 2030, at a price of par plus accrued interest to the redemption date.

Mandatory Redemption. The Bonds maturing on December 1, 2040 (which are deemed to be Term Bonds), shall be redeemed prior to maturity (or paid at maturity), not later than December 1 in the years as shown below and in the principal amounts set forth below, without premium, together with the interest accrued to the date fixed for redemption.

Years Amounts 2039 $920,000 2040* 940,000

*Maturity Date.

To the extent the County redeems pursuant to optional redemption provisions or purchases for cancellation any Bonds that are subject to mandatory redemption, the County may reduce the mandatory redemption requirements of such Bonds of the same maturity, in like aggregate principal amount for the year specified by the County.

Selection of Bonds for Redemption. For as long as the Bonds are held in book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no longer held in uncertificated form, the selection of such Bonds to be redeemed and the surrender and reissuance thereof, as applicable, shall be made as provided in the Resolution. If the County redeems at any one time fewer than all of the Bonds having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be redeemed shall be selected randomly (or in such manner determined by the Registrar) in increments of $5,000. In the case of a Bond of a denomination greater than $5,000, the County and the Registrar shall treat each Bond as representing such number of separate Bonds each of the denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by $5,000. In the event that only a portion of the principal sum of a Bond is redeemed, upon surrender of such Bond at the principal office of the Registrar there shall be issued to the Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate in any of the denominations authorized in the Resolution.

Notice of Redemption. For so long as the Bonds are held in uncertificated form, notice of redemption (which notice may be conditional) shall be given in accordance with the operational arrangements of DTC as then in effect, and neither the County nor the Registrar will provide any notice of redemption to any Beneficial Owners. If the Bonds are no longer held in uncertificated form, notice of redemption shall be given as provided in the Resolution. Unless waived by any owner of Bonds to be redeemed, official notice of any such redemption (which redemption may be conditioned by the Registrar on the receipt of sufficient funds for redemption or otherwise) shall be given by the Registrar on behalf of the County by mailing a copy of an official redemption notice by first-class mail, postage prepaid, at least 20 days and not more than 60 days prior to the date fixed for redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown on the Register or at such other address as is furnished in writing by such Registered Owner to the Registrar.

Purchase

The County has reserved the right to purchase any of the Bonds offered to the County at any time at any price.

3

PURPOSE

The Bonds are being issued for the purpose of: (1) paying the costs of acquiring, constructing and installing capital improvements and betterments to the County’s Juvenile Justice Center and General Government Facility (as more particularly described in the Resolution); and (2) paying certain costs incurred in connection with the issuance of the Bonds.

Sources and Uses of Funds

Sources of Fund:

Par Amount of Bonds $11,640,000.00 Plus Premium 1,093,933.85 Total Sources of Funds $12,733,933.85

Uses of Funds:

Deposit to Project Funds 12,600,000.00 Estimated Costs of Issuance (1) 81,589.26 Underwriter’s Discount 51,274.94 Additional Proceeds 1,069.65 Total Uses of Funds $12,733,933.85

(1) Costs of issuance include legal fees, municipal advisor’s fees, rating agency fees and other costs incurred in connection with the issuance of the Bonds.

SECURITY

General Obligations of the County

The Bonds are general obligations of the County. The County has irrevocably pledged, for as long as the Bonds are outstanding, to include in its budget and to levy taxes annually upon all of the taxable property in the County within and as a part of the property taxes authorized by law to be levied by the County without a vote of the people, in amounts sufficient, together with other funds legally available therefor, to pay, when due, the principal of and interest on the Bonds. Any such tax levy is subject to certain limitations as described under the heading “SOURCES OF TAX REVENUE - Property Taxes” herein. The County does not anticipate tax levy rate increases will be needed to pay debt service on the Bonds.

The full faith, credit and resources of the County are irrevocably pledged for the annual levy and collection of the taxes and for the prompt payment of the principal of and interest of the Bonds. The Bonds do not constitute a debt or indebtedness of the State or any political subdivision thereof other than the County.

Defeasance

In the event that the County, in order to effect the payment, retirement or redemption of any Bond, sets aside in the Bond Fund or in another special account, cash or noncallable Government Obligations, or any combination of cash and/or noncallable Government Obligations, in amounts and maturities which, together with the known earned income therefrom, are sufficient to redeem or pay and retire such Bond in accordance with its terms and to pay when due the interest and redemption premium, if any, thereon, and such cash and/or noncallable Government Obligations are irrevocably set aside and pledged for such purpose, then no further payments need be made into the Bond Fund for the payment of the principal of and interest on such Bond. The registered owner of a Bond so provided for will cease to be entitled to any lien, benefit or security of the Resolution except the right to receive payment of principal, premium, if any, and interest from the Bond Fund or such special account, and such Bond will be deemed to be not outstanding under the Resolution.

“Government Obligations” is defined in the Resolution to have the meaning specified in RCW 39.53.010, as it may be amended from time to time, which currently means any of the following: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank system, the Export-Import Bank of the United States, Federal Land Banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, to the extent insured or to the extent guaranteed as permitted under any other provision of State law.

4

No Acceleration

The Bonds are not subject to acceleration upon the occurrence of a default. The County, therefore, would be liable only for principal and interest payments as they become due. In the event of multiple defaults in payment of principal of or interest on the Bonds, the registered owners would be required to bring a separate action for each such payment not made. This could give rise to a difference in interests between registered owners of earlier and later maturing Bonds.

SOURCES OF TAX REVENUE

The County has statutory authority to levy various taxes within its boundaries, including property taxes, local option sales and use taxes, and real estate excise tax (“REET”). As described below, some of these taxes can be imposed by the Board, and others are subject to affirmative vote of a majority of the electorate. State law specifies the purposes for which various taxes can be used. Some taxes are deposited to the County’s General Fund for general purposes and others, such as criminal justice sales taxes levied pursuant to RCW 82.14.340 and REET levied pursuant to RCW 82.46.010, are deposited to separate funds and used for specific purposes only.

The following table shows the tax revenue in the County’s General Fund, by source, for 2015 through 2019.

General Fund Tax Revenues by Source

Fiscal Year

Property Taxes

Retail Sales and Use Taxes

Miscellaneous Other Taxes (1)

Total Taxes

2019 $12,638,666 $8,056,058 $2,251,816 $22,946,540(2) 2018 13,242,717 6,526,437 2,269,160 22,138,314(3) 2017 12,083,052 5,982,304 1,875,144 19,940,500 2016 11,619,636 5,403,917 3,392,251 20,415,804(4) 2015 11,141,003 5,028,556 3,724,628 19,894,187(4)

(1) Miscellaneous Other Taxes include timber excise tax, 1/10 of one percent criminal justice funding, diverted road tax and interest and penalties on property taxes.

(2) The Department of Revenue issued a refund of $796,000 for a wind energy project; the refund was a direct impact to the General Fund in 2020.

(3) The Board authorized Levy Shift from the Road Fund to the General Fund to support General Fund operating expenditures. (4) Road Diversion which is now a reimbursement for services. Traffic policing is funded through the Road Fund for reimbursement

services. Prior to 2017, the County processed as a tax diversion from the Road Fund to the General Fund.

Property Taxes

The Bonds are to be paid, in part, by money received by the County from its regular property tax levy, which is the County’s largest source of General Fund revenue. The County’s regular property tax levy is subject to the limitations described below. Under existing circumstances, these limitations do not materially affect the ability of the County to levy property taxes at rates sufficient to pay the debt service on the Bonds. However, information relating to property tax limitations is based on existing statutes and constitutional provisions. Future changes in such laws could have an adverse effect on the County’s ability to levy property taxes or the amount collected.

Maximum Rate Limitation. Under State law (RCW 84.52.043(1)), a county may levy taxes at a maximum rate of $1.80 per $1,000 of assessed value against all the real and personal property in the county subject to taxation for general county purposes, including the payment of principal of and interest on bonds issued by the county without a vote of the people (limited tax general obligations, such as the Bonds). In addition, counties may levy taxes at a maximum rate of $2.25 per $1,000 of assessed value in the exercise of road powers, and a county may increase its levy from $1.80 to $2.475 per $1,000 of assessed value for general county purposes if the total levies for both county and road purposes do not exceed $4.05 per $1,000 of assessed value and no other taxing district has its levy reduced as a result of the increased county levy.

Property Tax Levy Limitations. Chapter 84.55 RCW imposes limitations on the ability of the County to increase tax levies each year. The regular property tax increase limitation limits the total dollar amount of regular property taxes levied by an individual local taxing district, such as the County, to the amount of such taxes levied in the highest of the three most recent years multiplied by a limit factor (generally, the lesser of inflation or 101 percent), plus an adjustment at the previous year’s levy rate to allow for taxes on new construction, improvements, increases in the assessed value of State-assessed property and electric generation wind turbine facilities classified as personal property and assessed as real property.

RCW 84.55.092 allows the property tax levy to be set at the amount that would be allowed if the tax levy for taxes due in each year since 1986 had been set at the full amount allowed under chapter 84.55 RCW. This is sometimes referred to as “banked” levy capacity. The County does not have any banked levy capacity.

5

With a majority vote of its electors, a taxing district may levy, within the overall rate limitations of chapter 84.52 RCW described above, more than what otherwise would be allowed by the tax increase limitation indefinitely or for a limited period or to satisfy a limited purpose, as allowed by RCW 84.55.050. This is known as a “levy lid lift.”

Since the regular property tax increase limitation of chapter 84.55 RCW applies to the total dollar amount levied rather than to levy rates, increases in the assessed value of all property in the taxing district (excluding new construction, improvements, increases in the assessed value of State-assessed property and electric generation wind turbine facilities classified as personal property and assessed as real property) which exceed the rate of growth in taxes allowed by the limit factor result in decreased regular tax levy rates, unless voters authorize a higher levy or the taxing district uses banked levy capacity. Decreases in the assessed value of all property in the taxing district (including new construction, improvements, increases in the assessed value of State-assessed property and electric generation wind turbine facilities classified as personal property and assessed as real property) or increases in assessed value that are less than the rate of growth in taxes imposed, among other events, may result in increased regular tax levy rates.

Special excess levies approved by a 60 percent majority of the voters and meeting minimum voter turnout requirements are not subject to the rate or amount limitations on regular levies described above.

One Percent Aggregate Regular Levy Limitation. Article VII, Section 2 of the State Constitution and RCW 84.52.050 limit the aggregate of all regular property tax levies by the State and all taxing districts, except port districts and public utility districts, to one percent of the true and fair value of real and personal property subject to taxation.

$5.90/$1,000 Aggregate Regular Levy Limitation. Within the one percent aggregate limitation described above, RCW 84.52.043(2) imposes an aggregate limitation on regular tax levies by all taxing districts other than the State, of $5.90/$1,000 of assessed valuation, except levies for any port or public utility district, excess levies authorized in Article VII, section 2 of the State Constitution and certain levies for acquiring conservation futures, for emergency medical services or care and to finance affordable housing.

Prioritization of Levies. RCW 84.52.010 provides that, if aggregate levies certified by all taxing districts exceed the one percent or $5.90 aggregate levy limitations described above, the levies of “junior” taxing districts are reduced or eliminated in order to bring the aggregate levy into compliance with the statutory maximums. The County is considered a “senior” taxing district; therefore its levy would not be subject to reduction under this statute.

Excess Levies Authorized. RCW 84.52.052 authorizes the levying of taxes in excess of the $5.90/$1,000 and one percent limits imposed by RCW 84.52.043 and 84.52.050, respectively, by any taxing district except school districts and fire protection districts, when a larger levy is necessary in order to prevent the impairment of the obligation of contracts. Any such taxing district may also levy taxes in excess of the rates specified by statute if such excess levy is approved by at least three-fifths of the taxing district’s qualified electors.

Current and Historical Levy Rates for the County. The following table shows current and historical property tax levy rates for the County. Levies for the following purposes are considered regular property taxes, subject to the limitations described above.

Historical Levy Rates for Lewis County ($ per $1,000 of Assessed Value)

Tax Year General Fund Road Fund (1) 2020 $1.39273 $1.88157 2019 1.51814 2.05205 2018 1.72167 2.02727 2017 1.63867 2.23181 2016 1.64266 2.22337

(1) A portion of revenue from the road fund levy, up to the amount expended on traffic enforcement activities, may be deposited to the County’s General Fund each year to cover such traffic enforcement costs.

Source: Lewis County Assessor.

Sales and Use Taxes

In accordance with State law, the State imposes a sales and use tax on the selling price of any retail sale or use of tangible personal property within the State. There are certain exemptions from the sales and use tax, including sales of groceries and prescription drugs, sales to nonresidents, sales to the federal government, sales of newspapers and sales of manufacturers’ machinery and equipment. Additionally, State law provides that certain local jurisdictions may impose an additional sales and use tax, based on the selling price on any retail sale or use of tangible personal property within the jurisdiction, upon which the State also imposes a sales and use tax. As described below, some sales and use tax authority is for general purposes and some is restricted as to use. Additionally, some sales and use tax authority is subject to approval of the voters within the local jurisdiction. Certain sales and use taxes imposed by the County are required to be shared with incorporated cities within the County.

6

The State sales and use tax rate is 6.5 percent. The County additionally imposes sales and use tax at a total rate of 1.3 percent. Certain portions of the County are included in a public transportation benefit area (“PTBA”) which imposes an additional 0.2 percent sales and use tax for PTBA purposes. Therefore, the total sales and use tax rate in the County is 7.8 percent in areas outside the PTBA and 8.0 percent in areas within the PTBA.

Basic and Optional Sales and Use Taxes. The County imposes a basic sales and use tax at a rate of 0.5 percent as provided by RCW 82.14.030(1), and an optional sales and use tax at a rate of 0.5 percent as provided by RCW 82.14.030(2). The revenue collected from the basic sales and use tax is not restricted, and therefore may be used for general County purposes. If a city within the County imposes the same tax as allowed for cities, then the County receives 15 percent of the tax collected within that city and the balance is transmitted to the city, and all of the tax collected in unincorporated portions of the County. Each city within the County has imposed the basic sales and use tax. Taxes from this source are part of the County’s General Fund, and therefore are available to support payments on the Bonds.

Criminal Justice Sales and Use Tax. The Criminal Justice Tax is an additional local sales and use tax of 0.1 percent for funding criminal justice programs, as provided in RCW 82.14.340. The criminal justice sales tax is levied only by the County and is imposed countywide, but a portion of the receipts are shared with the cities within the County. Ten percent of the revenue from this tax is distributed to the County and 90 percent to the cities and the County on a per capita basis, based on their estimated population as determined by the State Office of Financial Management as of April 1 each year. Money from this tax may only be used for criminal justice purposes.

Detention Facility Sales and Use Tax. The Detention Facility Sales and Use Tax is an additional local sales and use tax of 0.1 percent for funding construction, operation and maintenance of jail or juvenile detention facilities, as provided in RCW 82.14.350. This tax may only be enacted upon an affirmative vote of a majority of the electorate of the County, which voter approval was received in 1995. Taxes from this source are dedicated to jail and juvenile detention facilities.

Chemical Dependency, Mental Health Treatment Services and Therapeutic Court Programs and Services Sales and Use Tax. As provided in RCW 82.14.460, the County has imposed a local sales and use tax of 0.1 percent for funding of chemical dependency, mental health treatment and therapeutic court programs and services within the County. Revenue from the tax is to provide funding for the operation or delivery of chemical dependency or mental health treatment programs and services and for the operation or delivery of therapeutic court programs and services, including but not limited to, treatment services, case management services, and housing services that are a component of a coordinated chemical dependency or mental health treatment program or service.

Lodging Taxes-Hotel/Motel Taxes. A county may impose two types of lodging taxes, a basic lodging tax and an additional lodging tax. Use of the funds received from the lodging tax is restricted to promotion of tourism or construction and operation of tourism related facilities. The basic tax is a 2.0 percent tax on the furnishing of lodging under RCW 67.28.180. This tax is taken as a credit against the 6.5 percent state retail sales and use tax, so that the total tax that a taxpayer pays in retail sales tax plus the lodging tax combined is equal to the retail sales tax in the jurisdiction. Counties can levy the tax in unincorporated areas and within cities that do not levy the tax. Pursuant to RCW 67.28.181, 67.40.130 and 36.100.040, a county may also levy an additional lodging tax at a rate of up to 4.0 percent (unless a higher rate was previously authorized under prior state statute). Up to one-half or a maximum of 2.0 percent of this amount can be credited against the state sales tax. The remaining taxes are paid in addition to all other state and local sales taxes. The County levies the basic 2.0 percent for facilities with 25 or less units and 5.0 percent for facilities with 26 or more units. Timber Excise Tax. Counties are authorized to levy a timber excise tax on property with forest trees, standing or down, on privately or publicly owned land, which except as provided in RCW 84.33.170 includes Christmas trees and short-rotation hardwoods, in lieu of property taxes, at a rate of 4.0 percent. Receipts of the county timber excise taxes are deposited in the timber tax distribution account within the State treasury. Quarterly, the State Treasurer distributes the tax receipts, less the State’s collection costs, to counties and the State general fund. The county receipts are further distributed to local taxing districts by the county treasurers according to a formula set forth in RCW 84.33.081, which reflects the assessed value of forest land in the respective districts. Funds go first to districts that have approved special property tax levies for capital purposes. Next, school districts receive funds in relation to their special levy rates. Finally, all local taxing districts share in the distribution of any remaining funds in the county timber tax account.

Real Estate Excise Taxes

The County has imposed an excise tax which is levied on each sale of real property within the County, at the rate of 0.50 percent of the selling price, due at the time title to real property is transferred. The statutory authority for imposition of the REET limits the purposes for which revenue can be used to fund capital projects. Revenue from one-half of the tax (i.e., 0.25 percent) is limited to more narrow uses, all of which are various types of public works projects such as roads,

7

water, sewer, as well as parks. Revenue from the other one-half of the tax (0.25 percent) may be used for public works projects, as well as parks, recreational facilities, law enforcement facilities, fire protection facilities, trails, libraries and administrative and/or judicial facilities.

The County’s REET is in addition to the current State real estate excise of 1.28 percent. REET revenues are restricted to being used for “capital projects,” as that term is defined in the RCW 82.46.010. The REET collection for the County as of December 31, 2020 was $2,406,716.77.

Effective January 1, 2020, the flat 1.28 percent state real estate excise tax under chapter 82.45 RCW changed to a graduated tax scale based on the selling price of the property.

Year REET 2019 $1,724,132 2018 1,830,716 2017 1,681,263 2016 1,402,023 2015 1,966,301

PROPERTY TAX COLLECTION PROCEDURES

Property taxes are levied in specific amounts, and the rate for all taxes levied for all taxing districts in the County is determined, calculated, and fixed by the County Assessor (the “Assessor”), based upon the assessed valuation of the property within the various taxing districts. The Assessor extends the taxes to be levied within each taxing district upon a tax roll which contains the total amount of taxes to be so levied and collected. The tax roll is delivered to the Treasurer at the same time. The Treasurer creates a tax account for each taxpayer and is responsible for the collection of taxes due to each account. All taxes are due and payable on the 30th of April of each year, but if the amount due from a taxpayer exceeds $50, one-half may be paid then and the balance no later than October 31 of that year.

The method of giving notice of payment of taxes due, the Treasurer’s accounting for the money collected, the distribution of the taxes among the various taxing districts, notices of delinquency, and collection procedures are all covered by detailed statutes.

The lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation except for federal tax liens.

The State’s courts have not decided whether the Homestead Law (chapter 6.13 RCW) may give the occupying homeowner a right to retain the first $125,000 of proceeds of the forced sale of the family residence or other “homestead” property for delinquent general property taxes (see Algona vs. Sharp, 30 Wn. App. 837, 638 P.2d 627 (1982), holding the homestead right superior to the improvement district assessment). The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not.

Tax Collection Record - Current Expense Fund

Year

Amount Levied

Amount Collected Year of Levy

Percent Collected Year of Levy

Amount Collected As of 12/31/20

Percent Collected As of 12/31/20(1)

2020 $13,222,135 $13,050,922 98.71% $13,050,922 98.71% 2019 12,588,509 12,330,906 97.95 12,591,450 100.02 2018 13,309,324 12,997,414 97.66 13,398,214 100.67 2017 12,096,434 11,815,941 97.68 12,240,434 101.19 2016 11,667,996 11,667,996 97.36 11,827,525 101.37

(1) Taxes collected may be in excess of the original levy amount due to a change in property value causing the amount of taxes owned to either increase or decrease.

Source: Lewis County Treasurer’s Office.

8

Top Ten Taxpayers in Lewis County – 2021 Tax Year

Taxpayer

Type of Business

Assessed Valuation

% of Total A.V.(1)

UNFI (Exeter 4002 Galvin) Grocery Distribution $ 194,870,500 1.84% Transalta Centralia Generation LLC(2) Power Generation 176,074,764 1.66 Pacificorp Power Generation 141,792,985 1.34 Cardinal CG Company Float Glass Manufacturing 86,964,066 0.82 Sierra Pacific Industries Sawmill 84,700,000 0.80 Hardel Mutual Plywood Corp Plywood Manufacturing 80,323,591 0.76 Centralia North LLC Distribution Warehouse 74,800,000 0.71 BNSF Railway Company Railroad 74,633,940 0.71 Lineage Wa Centralia RE, LLC Food Processing 57,041,700 0.54 FM Retail Services Inc Distribution Warehouse 51,066,808 0.48 TOTAL: $1,022,268,354 9.66%

(1) Based on 2021 assessed valuation of $10,577,144,301. (2) In December 2020 the planned shutdown of one of the two coal-fired power plants in Lewis County occurred. Source: Lewis County Assessor’s Office.

ASSESSED VALUATION DETERMINATION

In the State, the Assessor determines the value of all real and personal property throughout the County that is subject to ad valorem taxation. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the Department of Revenue of the State. For tax purposes, the assessed value of property is 100 percent of its actual value. In accordance with State law, all property is subject to revaluation at least every four years. The Assessor’s determinations are subject to revision by the County Board of Equalization and, for certain property, subject to further revision by the State Board of Equalization. After all administrative procedures are completed; the Board receives the Assessor’s final certificate of assessed value of property within the County. The following table shows the assessed valuation within the County for the past five years.

Assessed Valuation

Tax Year Amount 2020 $9,444,856,944 2019 8,290,418,679 2018 7,686,783,999 2017 7,342,972,589 2016 7,043,651,629

Source: Lewis County Assessor’s Office.

COUNTY GENERAL OBLIGATION DEBT

Direct Debt

The following table sets forth the principal amount of general obligation debt of the County, including the Bonds, outstanding limited tax bonds, leases, bank loans or lines of credit, and other obligations backed by the full faith and credit of the County (the “Direct Debt”). The County does not have any outstanding debt that is authorized and unissued.

Outstanding General Obligation Bonds

Date of Issue

Date of Final

Maturity

Original Amount

Principal Amount Outstanding as of

12/31/2020 LTGO Refunding Bonds, Series 2020 07/30/2020 12/01/2024 $2,021,000 $ 1,717,429 LTGO and Refunding Bond, Series 2015 08/13/2015 12/01/2024 3,780,000 1,755,000 LTGO and Refunding Bond, Series 2012 06/14/2012 12/01/2027 8,680,000 4,560,000 Total Direct Debt of the County $8,032,429

DEBT LIMITATION OF THE COUNTY

Under statutory provisions for the State, counties may incur general obligation debt for general capital purposes in an amount not to exceed 2.5 percent of assessed valuation of all taxable property in the county. Within this limit, counties may incur general obligation indebtedness in an amount up to 1.5 percent of the assessed value without a vote of the people. Non-voted general obligation debt is payable from the County’s regular tax levy, which may be levied for general

9

purposes, and from other revenue sources that the County receives for general purposes. The Bonds are limited tax general obligation bonds.

To incur general obligation indebtedness in excess of 1.5 percent of the assessed valuation of a county, the county must receive approval from the voters (“unlimited tax debt”). Any election to validate general obligation debt must have a voter turnout of at least 40 percent of those who voted in the last general election, and of those voting, 60 percent must be in the affirmative. No combination of limited or unlimited tax debt may exceed 2.5 percent of the actual value of taxable property in a county. The debt service on unlimited tax debt is secured by excess tax levies, which are levied solely for the purpose of paying debt service on such voted debt, and are levied in addition to regular taxes.

Calculation of Debt Capacity As of December 31, 2020

Assessed Valuation (2020 tax year) $9,444,856,944

DEBT LIMIT: LIMITED TAX GENERAL OBLIGATION DEBT (1-1/2% of Assessed Valuation) $ 141,672,854

Outstanding Limited Tax General Obligation Debt (1) $ 8,032,429 This Issue: The Bonds 11,640,000

Total Limited Tax General Obligation Indebtedness (19,672,429)

Remaining Limited Tax General Obligation Debt Capacity $ 122,000,425

DEBT LIMIT: TOTAL GENERAL OBLIGATION DEBT (2-1/2% of Assessed Valuation) $ 236,121,423

Outstanding Unlimited Tax General Obligation Debt $ 0 Limited Tax General Obligation Debt 19,672,429 Total General Obligation Indebtedness (19,672,429)

Remaining General Obligation Debt Capacity $ 216,448,994 (1) Calculated above.

DIRECT AND ESTIMATED OVERLAPPING DEBT

The following table sets forth the Direct Debt of the County, including the Bonds, and the outstanding principal amount of general obligation debt incurred by other governmental entities whose taxing jurisdiction includes a part or all of the County and the estimated portion of that debt which is applicable to the property within the County (the “Overlapping Debt”). The estimate of the percentage of a governmental entity’s debt which is applicable to property within the County is based on a ratio of the assessed valuations of the County and such other governmental entity.

Direct and Estimated Overlapping Debt As of December 31, 2020

2020 Assessed Valuation for 2021 Collection - $9,444,856,944 2020 County Population – 80,250

Direct Debt (calculated above) $ 19,672,429

Estimated Overlapping Debt: Cities 7,467,881 Fire Districts 4,250,587 Port Districts 2,399,922 School Districts 130,878,383 Hospital Districts 10,105,600 Total Estimated Overlapping Debt $155,102,373

Total Estimated Direct and Overlapping Debt $174,774,802

Direct Debt to Assessed Valuation 0.21% Direct and Overlapping Debt to Assessed Valuation 1.85% Direct Debt per Capita $ 245 Direct and Overlapping Debt per Capita $ 2,178 Per Capita Assessed Valuation $ 117,693

10

DEBT SERVICE REQUIREMENTS

Schedule of General Obligation Bond Debt Service Limited Tax Bonds

Outstanding Bonds The Bonds Year Principal Interest Principal Interest Total Debt Service 2021 $1,430,795.00 $192,386.00 $ 213,084.16 $1,836,265.40 2022 1,475,255.00 161,323.00 318,300.00 1,954,878.32 2023 1,504,016.00 129,197.00 318,300.00 1,951,513.12 2024 1,537,363.00 96,271.00 318,300.00 1,951,934.04 2025 670,000.00 62,550.00 $ 285,000.00 318,300.00 1,335,850.00 2026 695,000.00 42,450.00 300,000.00 306,900.00 1,344,350.00 2027 720,000.00 21,600.00 310,000.00 294,900.00 1,346,500.00 2028 - - 680,000.00 279,400.00 959,400.00 2029 - - 710,000.00 245,400.00 955,400.00 2030 - - 750,000.00 209,900.00 959,900.00 2031 - - 780,000.00 179,900.00 959,900.00 2032 - - 800,000.00 156,500.00 956,500.00 2033 - - 820,000.00 140,500.00 960,500.00 2034 - - 835,000.00 124,100.00 959,100.00 2035 - - 855,000.00 107,400.00 962,400.00 2036 - - 865,000.00 90,300.00 955,300.00 2037 - - 885,000.00 73,000.00 958,000.00 2038 - - 905,000.00 55,300.00 960,300.00 2039 - - 920,000.00 37,200.00 957,200.00 2040 - - 940,000.00 18,800.00 958,800.00 Total $8,032,429.00 $611,419.00 $11,640,000.00 $3,805,784.16 $24,183,990.88

Contingent Obligations

The County entered into a Contingent Loan Agreement (the “CLA”) with the Lewis County Public Facilities District (the “PFD”), on February 25, 2019, and the PFD issued $6,855,000 of Limited Sales Tax Obligation and Refunding Bonds, Series 2019 (Taxable) (the “PFD Bonds”), to refund the PFD’s outstanding Limited Sales Tax Obligation Bonds (2010 (Taxable Build America Bonds – Direct Payment) on December 1, 2020, on a crossover basis, repaying a loan from the County’s “Distressed Counties Fund,” provide funds for capital projects, funding the 2019 Debt Service Reserve Account and paying the costs of issuing the PFD Bonds.

Pursuant to the CLA, upon the issuance of the PFD Bonds in 2020, the County has agreed to secure the payment of the principal of and interest on the PFD Bonds, as such amounts become due and payable. The PFD has agreed to borrow such amounts (each such amount, a “Loan”) from the County pursuant to the CLA for the purpose of meeting the PFD’s obligations under the PFD Bonds and its bond resolution. The County has irrevocably agreed to disburse all Loans directly to the PFD, and the PFD irrevocably agrees to immediately deposit all such amounts received by it in the Principal and Interest Account.

The County did not include the amount of its contingent obligation under the CLA as debt for purposes of the debt limitation calculations shown under the heading “DIRECT AND ESTIMATED OVERLAPPING DEBT,” as the County believes the obligations under the CLA do not constitute “debt” subject to constitutional or statutory limitations. The Washington State Supreme Court has accepted review of a superior court decision in another jurisdiction to consider whether a contingent loan obligation, such as the CLA, should be treated as debt for purposes of debt limitations. As of the date of this Official Statement, the County has sufficient debt capacity to include the potential obligation under the CLA in its calculation of non-voted debt subject to limitations.

Future Financing

The County does not plan to incur additional limited tax general obligation indebtedness during the next 12 to 24 months. The County periodically reviews its outstanding bonds for refunding opportunities and may issue bonds for refunding purposes if market conditions warrant.

Debt Payment Record

The County has always promptly met principal and interest payments on outstanding bonds, and other obligations when due. No debt has been incurred for the purpose of avoiding an impending default by the County.

11

COUNTY FUNDS AND ACCOUNTING

The County reports financial activity using the revenue and expenditure classifications, statements, and schedules contained in the Cash Basis Budgeting, Accounting and Reporting System (BARS) manual. This basis of accounting and reporting is an Other Comprehensive Basis of Accounting that is prescribed by the State Auditor’s Office under the authority of RCW 43.09.

The accounts of the County are organized on the basis of funds, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of single-entry accounts that comprises its cash, investments, revenues and expenditures, as appropriate. The County’s resources are allocated to and accounted for in individual funds depending on their intended purpose. The following are the fund types used by the County: General Fund, Special Revenue Fund, Debt Service Fund, Capital Projects Fund, Enterprise Fund, Internal Service Fund and Agency Fund.

Fund financial statements prepared by the County report balances and activities for the County’s larger and more significant funds, which are a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives. County operations are segregated into governmental, proprietary and fiduciary funds. The County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses enterprise funds to account for its Solid Waste, Solid Waste Disposal District, Water Sewer Utility, Packwood Airport and South County Airport operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the County’s various functions. The County uses internal service funds to account for its fleet of vehicles, insurance programs, County facilities and management information systems. Because all of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Fiduciary funds account for resources held by the County Treasurer as a trustee or agent for parties outside County government or for balances temporarily held in a suspense account. The resources of fiduciary funds are not used to support County operations and programs.

The County maintains budgetary control for all governmental and proprietary funds. The County adopts the General Fund budget at the department level. Budgetary control is adopted at the fund level for all other funds.

A summary of General Fund Statement of Revenues, Expenditures and Changes in Fund Balances for the past five years is shown on the following page.

Auditing

The State Auditor is required to examine the affairs of the County annually. By statute the audit must include, among other things, an examination of the County’s financial condition and resources, the County’s compliance with State law and the accuracy of the County’s accounts and reports. Reports of the State Auditor’s examination are required to be filed in the State Auditor’s office and in the County Auditor’s office. The County’s 2019 audited financial statements are included as Appendix B herein.

[Remainder of this page intentionally left blank.]

12

COUNTY FINANCIAL AND BUDGETARY INFORMATION

Statement of Revenues, Expenditures and Changes in Fund Balance General Fund (1)

Fiscal Years Ending December 31

2020 Estimate Unaudited

2/28/21 2019 2018 2017 2016

Revenues Taxes $24,034,104 $22,946,540 $22,138,316 $19,940,499 $20,415,804 Licenses and Permits 139,868 117,088 80,509 74,610 45,973 Intergovernmental 6,059,105 5,752,017 6,402,197 5,618,525 5,442,441 Charges for Services 3,474,879 3,929,461 3,862,491 4,624,667 4,907,045 Fines and Forfeits 1,787,195 1,766,547 1,770,437 1,685,829 1,657,484 Interest & Other Earnings 2,048,266 2,334,726 2,011,146 1,842,795 1,852,148 Miscellaneous 99,188 86,342 35,870 60,474 114,777 Total Revenues $37,642,605 $37,032,721 $36,300,966 $33,847,399 $34,435,672

Expenditures

Current: General Government $15,755,682 $15,876,336 $15,314,000 $15,183,704 $14,909,147 Security of Persons and Property 18,766,768 19,734,097 18,488,162 17,809,268 17,020,512 Natural and Economic Environment 486,882 523,502 682,328 614,364 593,518 Mental and Physical Health 705,228 630,721 596,507 465,692 458,104 Culture and Recreation 241,794 222,021 211,079 242,329 228,374 Debt Service: Principal 54,767 51,002 54,566 57,590 54,335 Interest & Other Debt Service 453 6,215 2,079 2,394 2,317 Capital Outlay 100,412 114,844 98,540 43,713 5,541 Total Expenditures $36,111,985 $37,158,738 $35,447,261 $34,419,054 $33,341,848

Excess of Revenues Over (Under) Expenditures $ 1,530,620 ($ 126,017) $ 853,705 ($ 571,655) $ 1,093,824

Other Financing Sources/(Uses) Lease Receipts - Capital - $ 107,649 $ 16,905 $ 43,713 $ 3,823 Insurance Recoveries - 150 - - - Proceeds from Sale of Capital Assets $ 1,595,347 1,846,655 1,175,749 817,219 848,499 Transfers-In 1,526,789 1,516,484 1,512,112 1,414,854 106,456 Transfers-Out (2,039,367) (2,518,615) (2,492,203) ( 1,857,624) (2,958,123) Total Other Financing Sources/(Uses) $ 1,082,769 $ 952,323 $ 212,563 $ 418,162 $ (1,959,435) Net Change in Fund Balance $ 2,613,389 $ 826,306 $ 1,066,268 $ (153,493) $ (865,521) Fund Balance as of January 1 $11,806,147 $10,979,841 $ 9,902,645 $10,056,138 $10,207,086 Fund Balance as of December 31 $14,419,536 $11,806,147 $10,968,913 $ 9,902,645 $ 9,341,565

(1) Information for the years 2016 through 2019 is based on audited financial statements of the County. Information for 2020 is preliminary, unaudited and is subject to change; which includes the 2020 Estimated Ending Fund Balances.

General Fund Balances

In the fund financial statements, governmental funds classify fund balance as Nonspendable, Restricted, Committed, Assigned or Unassigned.

(a) Nonspendable: Portion that cannot be spent due to form (prepaid items, inventories, long-term receivables) or must be maintained intact due to legal or contractual requirements.

(b) Restricted: Portion with externally enforceable limitations; such as those imposed by creditors,

grantors, or laws of other governments. (c) Committed: Portion with limitations imposed by formal action (Resolution) by the Board. (d) Assigned: Portion with limitations resulting from intended use as established by the Board of

County Commissioners or their designee(s). (e) Unassigned: Portion in the General Fund (Current Expense) in excess of Nonspendable,

Restricted, Committed and Assigned; deficit in Special Revenue Funds.

13

The following shows the amount of fund balance that was nonspendable, restricted or assigned for the years 2016 to 2019. A breakdown of 2020 is unavailable at this time.

Fund Balance (1) 2019 2018 2017 2016 Nonspendable $ 272,865 $ 216,639 $ 209,083 $ 920,955 Restricted 564,378 652,800 688,787 789,093 Committed - - - - Assigned 29,271 25,527 17,872 25,951 Unassigned 10,939,633 10,073,947 8,986,903 7,605,566 Total Ending Fund Balance $11,806,147 $10,968,913 $9,902,645 $9,341,565

(1) Information for the years 2016 through 2019 is based on audited financial statements of the County.

General Fund Budget

The following shows the County’s adopted budget for 2021, and comparative budget information for 2020.

General Fund Budget

Adopted 2021 Adopted 2020 Beginning Fund Balance (1) $12,247,082 $9,400,000 Revenues Taxes $24,078,696 $22,950,773 License and Permits 94,500 94,500 Intergovernmental Revenues 5,607,108 5,811,859 Charges for Service 3,476,508 3,483,870 Fines and Forfeits 1,651,240 1,775,200 Miscellaneous 1,675,725 2,053,805 Other Sources 2,427,831 2,327,931 Total Revenues $39,011,608 $38,497,938 Expenditures General Governmental Services $17,381,657 $16,449,170 Security of Persons and Property 21,265,684 21,036,127 Natural & Economic Environment 470,865 491,732 Social Services 778,023 605,658 Culture and Recreation 248,219 235,749 Redemption of Long-Term Debt 53,284 48,886 Interest & Other Debt Service Co 205 655 Capital Expenditures/Expenses 0 0 Transfer in/out 2,580,048 2,273,978

Total Expenditures $42,777,985 $41,141,955

Ending Fund Balance (1) $ 8,480,705 $ 6,755,983 (1) Year-end 2019 ended with revenue exceeding expenditures by $833,491 increasing the estimated beginning fund balance for 2020.

THE COUNTY

Governance

The Board is comprised of three members (the “Commissioners”), who serve as the executive and legislative body of the County. The Commissioners are elected by district to four-year terms. Other County elected officials are the Assessor, Auditor, Clerk, Coroner, Prosecutor, Sheriff and Treasurer, who are also elected for four-year terms.

14

Elected Official Position Current Term Expires

Gary Stamper Chair December 31, 2022 Dr Lindsey R. Pollock Vice-Chair December 31, 2024 Sean D. Swope Commissioner December 31, 2024 Dianne Dorey Assessor December 31, 2022 Larry E. Grove, CPA Auditor December 31, 2022 Scott A. Tinney Clerk December 31, 2022 Warren McLeod Coroner December 31, 2022 Jonathan Meyer Prosecutor December 31, 2022 Robert A. Snaza Sheriff December 31, 2022 Arny Davis Treasurer December 31, 2022

Brief resumes of the Commissioners follow:

Gary Stamper, Chair, Commissioner District 3, has served on the Board since January 1, 2015. Mr. Stamper has and is committed to serving the residents of the County and promoting responsible economic growth and family-wage jobs while maintaining the rural lifestyle that Lewis County residents and visitors expect. After graduating from Mossyrock High School, he went on to earn a Bachelor of Arts degree in Political Science from Central Washington University and a Master's degree in School Administration from Heritage University.

Lindsey R. Pollock, DVM, Vice-Chair, Commissioner District 2, was elected to the Board in the November 3, 2020, election and sworn in effective January 1, 2021. Dr. Pollock was raised in the Boistfort Valley and currently resides near Winlock. She is a graduate of Washington State University holding a doctorate in Veterinary Medicine.

Sean D. Swope, Commissioner District 1, was elected to the Board in the November 3, 2020, election and sworn in effective January 1, 2021. Mr. Swope graduated from Centralia High School and went on to earn a degree in Youth Ministry and Theology and served as a youth pastor in Washington and Missouri. He started and currently owns his own business doing graphic design, videography, web development and business marketing.

Arny Davis, Treasurer, was elected as Treasurer in 2015 and has been reelected. Prior to Mr. Davis’ election as Treasurer, he was Chief Deputy Treasurer from 2012 until 2015. Prior to becoming Chief Deputy Treasurer, Mr. Davis had over 25 years of commercial banking and business management experience. He is a lifetime resident of the County.

Employees

The numbers of persons employed by the County for the years 2016 through 2020 are listed below:

Year Full-Time 2020 560 2019 554 2018 552 2017 555 2016 548

[Remainder of this page intentionally left blank.]

15

Union and Bargaining Groups

The County has contracts with unions and bargaining groups representing approximately two-thirds of the County’s employees. All labor contracts are negotiated with the Board and contain provisions covering wages, hours and working conditions. All County employees, including management, receive similar benefit packages. The following provides information on unions and bargaining groups representing County employees as of December 31, 2020. The County considers its relations with all employees and bargaining units to be good.

Union or Bargaining Group Employees/Department Represented Number of Employees

Contract Expires

Teamsters 252 Facilities-Accounting/Clerical/Technical 64 12/31/2022 Teamsters 252 Assessor 15 12/31/2022 Teamsters 252 Communications 16 12/31/2022 Teamsters 252 Juvenile Probation Officers/Clerical 14 12/31/2022 Teamsters 252 Corrections Officers-Supervisors 7 12/31/2022 Teamsters 252 Juvenile-Detention 13 12/31/2022 Teamsters 252 Supervisors 19 12/31/2022 Teamsters 252 Prosecutors-Clerical 14 12/31/2022 AFSCME 1341 Public Works and Community Development 118 12/31/2022 Support Services Guild Sheriff-Clerical 18 12/31/2022 Sheriff-Guild Deputy Sheriff Ops 35 12/31/2021 Corrections-Guild Corrections Officers 35 12/31/2022 DPA Association Deputy Prosecutors 11 12/31/2022 Total 379

Source: Lewis County.

Risk Management

The County is a member of the Washington Counties Risk Pool. The pool allows members to establish a plan of self-insurance, jointly purchase excess or reinsurance and provide related services. All pool joint self-insurance liability coverage’s are on an “occurrence” basis. Members make an annual contribution to fund the pool, which acquires reinsurance from unrelated underwriters that are subject to a pool per-occurrence self-insured retention of $500,000. Members may elect deductible amounts ranging from $10,000 per occurrence to $500,000 and are responsible for the first deductible amounts of each claim, while the pool is responsible for the remaining difference up to the pool’s self-insured retention of $500,000. Since the pool is a cooperative program, there is a joint liability among the participating members.

The County maintains insurance against most normal hazards except for general liability, unemployment and worker’s compensation, where it has elected to become partially self-insured. Self-insurance is in effect for general liability losses up to $25,000, $100,000 or $250,000, dependent on the claim date, per occurrence, and those in excess of the retention are insured by the Washington Counties Risk Pool to $10,000,000. The County established its own Risk Management Fund in 1991, which is used to pay deductibles on general liability claims and unemployment claims. The County has elected to become self-insured for unemployment claims and utilizes an independent claims management firm to review and process claims, however, the Risk Management Department actively monitors the claims.

The County is self-insured for worker’s compensation and maintains the County Insurance Fund which is used to pay related claims costs. Claims are processed by an independent claims management firm. The County is required by the State Department of Labor and Industries to set aside a minimum of $100,000 in cash reserves, for protection of the Workers’ Compensation Fund. Additionally, the County has purchased statutory coverage for insurance for workers compensation claims, with the County’s aggregate self-insured retention of $500,000 for the current year policy period.

The County has purchased commercial insurance covering flood, property, auto and equipment physical damage, boiler and liability for Packwood, Chehalis/Centralia and Toledo/Winlock Airports.

Investments

The Treasurer has the authority to invest in a variety of securities specified by State law and the County’s investment policy. These securities include U.S. Government securities, certificates of deposit (with qualified banking institutions), repurchase agreements and bankers acceptances. The State’s Local Government Investment Pool (“LGIP”) is used daily to invest funds when deemed appropriate. The County does not derive funds for investments from reverse repurchase agreements. The following table shows cash and investments as of December 31, 2019.

16

Cash and Investments As of December 31, 2019

Money Market Accounts $ 33,897,970.61 Municipal Bonds 32,811,770.77 LGIP 16,176,553.38 Cash 28,149,688.50 Total Cash and Investments $111,035,983.26

Local Government Investment Pool. The Office of the State Treasurer administers the LGIP, a fund that invests money on behalf of more than 640 cities, counties, special taxing districts and State agencies. The LGIP had approximately $23.1 billion under investment as of December 2020. The LGIP’s investment objectives are, in priority order: (i) the safety of principal; (ii) maintaining adequate liquidity to meet cash flow demands; and (iii) to provide a competitive interest rate relative to the first two goals. Historically, the LGIP has had sufficient liquidity to meet all cash flow demands. The LGIP, authorized by chapter 43.250 RCW, is a voluntary pool which provides its participants the opportunity to benefit from the economies of scale inherent in pooling. It is also intended to offer participants increased safety of principal and the ability to achieve a higher investment yield than would otherwise be available to them. The LGIP is invested in securities with a maximum final maturity of 397 days except for floating-rate and variable-rate securities and securities that are used for repurchase agreements, and the average life typically is less than 90 days. Investments permitted under the LGIP’s guidelines generally include repurchase agreements, U.S. Treasury bills and notes, U.S. agency discount notes, coupons, floating-rate and variable-rate notes, reverse repurchase agreements and bank deposits.

Pension Plans

Substantially all of the County’s full-time and qualifying part-time employees participate in one of several statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems (the “DRS”), a department within the primary government of the State, issues a publicly available comprehensive annual financial report (a “CAFR”) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit, P.O. Box 48380, Olympia, WA 98504-8380, or by visiting the DRS website at www.wa.gov/DRS/drs.html. Information on such website is not a part of this Official Statement. Detailed information about the plans and contributions thereto are included in the Notes to Financial Statements contained in Appendix B hereto.

PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit plan with a defined contribution. PERS participants who joined the system by September 30, 1977, are Plan 1 members. Those who joined on or after October 1, 1977 and by either, February 28, 2002, for state and higher education employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercised an option to transfer their membership to Plan 3. PERS members joining the system on or after March 1, 2002, for state and higher education employees, or September 1, 2002, for local government employees have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. Notwithstanding, PERS Plan 2 and Plan 3 members may opt out of plan membership if terminally ill, with less than five years to live.

PERS Plan 1 and Plan 2 defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions.

LEOFF is a cost-sharing multiple-employer retirement system comprised of two separate defined benefit plans. LEOFF participants who joined the system by September 30, 1977, are Plan I members. Those who joined on or after October 1, 1977, are Plan 2 members. Membership in the system includes all fulltime, fully compensated, local law enforcement officers and firefighters and, as of July 24, 2005, those emergency medical technicians who were given the option and chose LEOFF Plan 2 membership. LEOFF is comprised primarily of non-state employees, with Department of Fish and Wildlife enforcement officers, who were first included prospectively effective July 27, 2003, being an exception.

Effective July 1, 2003, the LEOFF Plan 2 Retirement Board was established by Initiative 790 to provide governance of LEOFF Plan 2. The Board’s duties include adopting contribution rates and recommending policy changes to the Legislature for the LEOFF Plan 2 retirement plan.

17

LEOFF defined benefit retirement benefits are financed from a combination of investment earnings, employer and employee contributions, and a special funding situation in which the state pays through state legislative appropriations. LEOFF retirement benefit provisions are established in Chapter 41.26 RCW and may be amended only by the State Legislature.

LEOFF Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1 members are eligible for retirement with five years of service at the age of 50.

PSERS is a cost-sharing multiple-employer retirement system comprised of a single defined benefit plan, PSERS Plan 2. PSERS was created by the 2004 Legislature and became effective July 1, 2006. PSERS Plan 2 membership includes full-time employees of a covered employer on or before July 1, 2006, who met at least one of the PSERS eligibility criteria, and elected membership during the election period of July 1, 2006 to September 30, 2006; and those full-time employees, hired on or after July 1, 2006, by a covered employer, that meet at least one of the PSERS eligibility criteria.

PSERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. PSERS retirement benefit provisions are established in Chapter 41.37 RCW and may be amended only by the State Legislature.

The required contribution rates expressed as a percentage of covered payroll at December 31, 2020, were as follows:

Employee County PERS Plan I 6.00% 12.97% Plan II 7.90% 12.97% Plan III 5% to 15% 12.97% LEOFF Plan II 8.59% 5.33% PSERS Plan II 7.20% 12.25%

Other Post-Employment Benefits

In accordance with the LEOFF Act, the County provides certain health care benefits for retired full-time, fully compensated, law enforcement officers who established membership in the LEOFF I Plan. Substantially all of the County’s law enforcement officers in the LEOFF I Plan may become eligible for those benefits when they reach normal retirement age. The County’s Sheriff’s Department, in conjunction with the County’s Disability Board, reimburses retired LEOFF I law enforcement offices for reasonable medical charges as described in the LEOFF Act. In 2019, 15 retirees received benefits under this Act. As of December 31, 2019, there were no active LEOFF I officers.

The County’s annual Other Post-Employment Benefits (“OPEB”) cost is calculated based upon the annual required contribution (“ARC”), an amount actuarially determined in accordance with the parameters of Government Accounting Standards Board Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities over a period of 15 years as of January 1, 2020. The net OPEB obligation of $19,445,602 is reported as a non-current liability on the Statement of Net Assets year ending December 31, 2019.

GENERAL AND ECONOMIC INFORMATION

General

The County is located in the southwest portion of the State with its eastern border located within the Cascade Mountain range. It encompasses 2,423 square miles, has 1,053 miles of County roads, and is sixth in area among the State’s 39 counties. The County is located 30 miles south of Olympia, the State capitol, 85 miles south of Seattle and 85 miles north of Portland, Oregon. The County seat is located in the City of Chehalis, and is easily accessible from Interstate 5, which extends from the Canadian border to the north to the Mexican border to the south.

Population

The County ranks fifteenth in population of the State’s 39 counties, and 40 percent of the County’s population resides within its nine incorporated towns and cities. The percentage of residents in the unincorporated portion of the County has remained fairly constant over the past 10 years.

18

Historical and current population figures for the County and its two largest cities are indicated below:

Year

Lewis County

City of Centralia

City of Chehalis

2020 80,250 17,290 7,550 2019 79,480 17,170 7,535 2018 78,380 17,060 7,515 2017 77,440 16,940 7,500 2016 76,890 16,820 7,460

Source: Washington State Office of Financial Management.

Economy and Employment

While the County was historically influenced by agriculture and lumber, there have been significant increases in light industry and retail trade, according to the Washington State Employment Security Department. Trade and services have been in the forefront of recent economic expansion.

The County benefits from an active Economic Development Corporation (the “EDC”), a private non-profit corporation formed to create diversified investment throughout the County. The EDC serves as a marketing and legislative resource to three groups working on development of industrial property: the Port of Centralia, the Port of Chehalis and the Chehalis Industrial Commission (a non-profit organization). The Ports of Centralia and Chehalis own industrial property that is available for development of manufacturing, warehousing and distribution.

Lewis County Major Employers

Employer Business/Product Employees Providence Centralia Hospital Medical Care 900 Lewis County Government 579 Centralia School District Education 561 Centralia College Education 537 Centralia Factory Outlets Retail 441 Walmart Retail 435 Fred Meyer Distribution Center Distribution 429 Chehalis School District Education 411 UNFI (Exeter 4002 Galvin) Grocery Distribution 400 Hampton Lumber Mills Wood Products 300

Source: Centralia-Chehalis Chamber of Commerce 2020 Annual Report. Labor Force and Unemployment The following table shows labor force and employment data for the County from 2016 through 2020, as well as unemployment rates for the State and the United States for the same period.

Lewis County Unemployment

Year Labor Force Employment Lewis

County State of

Washington United States

2020 35,512 32,128 9.5% 8.4% 8.1% 2019 34,996 32,841 6.2 4.3 3.7 2018 33,941 31,756 6.4 4.5 3.9 2017 33,087 30,869 6.7 4.7 4.4 2016 31,866 29,375 7.8 5.3 4.9

Sources: Washington State Employment Security Department. U.S. Bureau of Labor Statistics

19

Economic Indexes for the County

Taxable Retail Sales

Median Household Income

Year

County

City of Centralia

City of Chehalis

County

2019* $657,242,588 $471,286,619 $571,156,998 $55,628 2018 444,166,208 410,816,437 574,190,728 54,096 2017 394,278,453 334,020,167 542,236,802 50,900 2016 366,030,269 337,257,952 479,438,517 47,893 2015 325,264,656 319,999,045 431,981,966 47,143

* Increase due to wind farm and various capital projects, including schools and a distribution center located within the County. Sources: Taxable Retail Sales - Washington State Department of Revenue.

Median Household Income - Washington State Office of Financial Management.

Lewis County Residential Building Permits

Year

Number of Permits

Value of Permits (000’s)

2020 315 $45,208,888 2019 280 39,361,902 2018 266 37,933,618 2017 228 27,815,279 2016 173 21,279,777

Source: Lewis County.

RECENT DEVELOPMENTS

Response to COVID-19

The COVID-19 pandemic currently is affecting many parts of the world, including the State and the County. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of COVID-19 a national emergency. On February 29, 2020, Washington’s Governor declared a state of emergency due to the number of confirmed cases of COVID-19 in the State, directing State agencies to use all resources necessary to prepare for and respond to the outbreak. The State Governor has issued a series of proclamations designed to limit social interactions, including orders requiring or encouraging individuals, governments and businesses to take certain precautionary measures designed to prevent the spread of COVID-19. On March 23, 2020, the State Governor issued a statewide “Stay Home, Stay Healthy” proclamation, requiring individuals to stay home except for essential activities, banning social and other gatherings, and closing all businesses with certain exceptions for essential businesses. The State currently is following a four phase re-opening approach. This phased-in approach has been applied on a county-by-county basis. Currently all counties are in the second phase. The current phase is subject to change and is dependent on public health indicators.

Lewis County Public Health and Social Services (LCPHSS) is the Local Health Jurisdiction leading the COVID-19 pandemic response and is supported by Lewis County Emergency Management (DEM). LCPHSS continues to coordinate the county response to the pandemic with the Washington State Department of Health. On March 5, 2020, DEM activated the Emergency Operations Center (EOC) to support LCPHSS’s response to the COVID-19 pandemic in Lewis County. The EOC coordinates requested resources supplied by the state to the medical community, local businesses, schools, and municipalities. DEM’s inter-local agreements, memorandums of understanding, and partner agencies support the countywide efforts to sustain organizations until normal operations resume.

While certain areas in the State and region have been significantly impacted by the COVID-19 pandemic, to date the County has experienced minimal financial or operational impact from the COVID-19 pandemic. After briefly working remotely, County staff has returned to working at the County Courthouse. While the County has not experienced an increase in delinquent accounts directly resulting from the COVID-19 pandemic, the balance of delinquent accounts is increasing. The County has also seen very little impact from the COVID-19 pandemic on its General Fund revenues. Tax revenues, for instance, have been received by the County at rates comparable to prior years.

20

The State has allocated $5.9 million to the County and $1.5 million to the Public Health Department in federal Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The County has used the funding for expenditures incurred due to the public health emergency with respect to the COVID-19, which include medical or public health needs, as well as providing economic support due to employment or business interruptions.

The COVID-19 pandemic and related orders are ongoing, and the County cannot predict the duration and extent of the COVID-19 public health emergency, or quantify the magnitude of the impact on the regional and local economy. The County will continue to monitor the evolving situation and respond as needed.

APPROVAL OF COUNSEL

Legal matters incident to the authorization, issuance and sale of Bonds by the County are subject to the approving bond counsel opinion of Kutak Rock LLP, Spokane, Washington, Bond Counsel and Disclosure Counsel to the County. The fees of Bond Counsel and Disclosure Counsel are payable solely from the proceeds of the Bonds; hence, such fees are necessarily contingent upon the issuance of the Bonds. A copy of the opinion of Bond Counsel in the form set forth as Appendix A hereto will be delivered upon the issuance of the Bonds.

LITIGATION

There is no controversy or litigation pending or, to the best knowledge of the County, threatened which will affect the issuance and delivery of the Bonds, the levy and collection of taxes or other revenues due to the County’s General Fund to pay the principal and interest thereon, the proceedings and authority under which the Bonds are issued or the validity of the Bonds.

The County is involved in Superior Court and Board of Tax Appeals litigation with Hampton Lumber Mills-Washington, Inc. (“Hampton”), concerning the real property tax valuation of Hampton’s properties in Lewis the County. If Lewis the County were held to have overvalued Hampton’s properties, Hampton would be entitled to a tax refund paid from future real property tax levies. Depending on its size, the refund could negatively affect Lewis the County’s future real property levy revenue to its general fund, from which bond payments are to be made. However, the amount of the potential refund at issue would not materially affect Lewis County’s ability to make bond payments due to the refund’s small size relative to Lewis County’s cash reserves. If this matter is decided adversely to the County, the County is of the opinion that it would not materially affect its ability to make debt service payments on the Bonds.

ENFORCEABILITY

The enforceability of the Resolution is subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors’ rights generally, the police powers of the State and the County, the exercise of judicial authority by state or federal courts and the exercise by the United States of the powers delegated to it by the federal constitution. All legal opinions with respect to the enforceability of the Resolution and the Bonds will be expressly subject to a qualification that enforceability thereof may be limited by bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws affecting the rights of creditors generally, and by general principles of equity. The form of the opinion of Bond Counsel with respect to the Bonds is attached as Appendix A. Prospective investors concerned with the impact of any bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws should consult with their own independent counsel before purchasing any Bonds.

TAX MATTERS In General

In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described above assumes compliance by the County with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Bonds. Failure to comply with such requirements could cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The County has covenanted to comply with such requirements. Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect to the Bonds.

The accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the owners of the Bonds. The extent of these other tax consequences will depend upon such owner’s particular tax status and other items of income or deduction. Bond Counsel has expressed no opinion regarding any such consequences. Purchasers of the Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers otherwise entitled to claim the earned income credit, taxpayers entitled to claim the refundable credit in Section 36B of the Code for coverage under a qualified health plan or taxpayers

21

who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Bonds.

Backup Withholding

As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments made after March 31, 2007, to any bondholder who fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. This reporting requirement does not in and of itself affect or alter the excludability of interest on the Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

Original Issue Premium

The Bonds are being sold at a premium. An amount equal to the excess of the issue price of a Bond over its stated redemption price at maturity constitutes premium on such Bond. An initial purchaser of a Bond must amortize any premium over such Bond’s term using constant yield principles, based on the purchaser’s yield to maturity (or, in the case of Bonds callable prior to their maturity, by amortizing the premium to the call date, based on the purchaser’s yield to the call date and giving effect to the call premium). As premium is amortized, the purchaser’s basis in such Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Bond prior to its maturity. Even though the purchaser’s basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Bonds should consult with their tax advisors with respect to the determination and treatment of amortizable premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Bond.

Changes in Federal and State Tax Law

From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading “TAX MATTERS” or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

Not Qualified Tax-Exempt Obligations

The County has not designated the Bonds as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code.

PROSPECTIVE PURCHASERS OF THE BONDS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS PRIOR TO ANY PURCHASE OF THE BONDS AS TO THE IMPACT OF THE CODE UPON THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS.

Changes in Federal and State Tax Law

From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading “TAX MATTERS” or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

22

COMMITMENT TO PROVIDE CONTINUING DISCLOSURE

Pursuant to Rule 15c2-12 (“Rule 15c2-12”) of the Securities and Exchange Commission (the “SEC”), the County has undertaken for the benefit of holders of the Bonds to provide certain financial information and operating data relating to the County by no later than nine months after the end of each fiscal year (the “Annual Financial Information”), and to provide notices of the occurrence of certain enumerated events. The Annual Financial Information will be filed by or on behalf of the County with the Municipal Securities Rulemaking Board (the “MSRB”) at its Electronic Municipal Market Access (“EMMA”) (currently accessible at www.emma.msrb.org). Notices of events will be filed by or on behalf of the County with EMMA. The County’s undertaking to provide ongoing disclosure will be substantially in the form set forth attached hereto as Appendix C.

The County has entered into written undertakings under Rule 15c2-12 with respect to all of its outstanding bonds. The County timely filed its CAFR for the years 2015 through 2017, inclusive, and 2019. For the year 2018, the County was late in filing the CAFR and required information, and filed a notice of late filing on September 17, 2019. The County has implemented post issuance compliance procedures to ensure timely filings in the future.

In addition, the County filed: (1) a failure to provide supplemental information for 2015 on July 7, 2017; (2) a correction to tax information and late filing for 2017 on February 22, 2019; (3) an event notice was filed on September 17, 2019, indicating the County’s implementation of a new Financial Accounting System would result in a late filing of the CAFR and required information; and (4) a reinstatement of the County’s Aa3 rating from Moody’s on September 22, 2020.

INITIATIVE AND REFERENDUM

Under the State Constitution, the voters of the State have the ability to initiate legislation through the power of initiative and referendum. Initiatives and referenda are submitted to the voters upon receipt of petitions signed by at least eight percent (initiatives) and four percent (referenda) of the number of voters registered and voting for the office of Governor at the preceding regular gubernatorial election. Qualifying initiatives to the voters are submitted at the next state general election and must be approved by a majority of voters to be enacted into law. Initiatives to the Legislature are submitted to the Legislature at its regular session each January. Once submitted, the Legislature must either adopt the initiative as proposed, reject the proposed initiative (in which case the initiative must be placed on the ballot at the next state general election) or approve an amended version of the proposed initiative (in which case both the amended version and the original proposal must be placed on the next state general election ballot). Any initiative approved by a majority of voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two–thirds of all the members elected to each house of the Legislature; after two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws.

Additional initiative petitions may be filed from time to time. The County cannot predict whether any initiatives affecting the County will qualify to be submitted to the people for vote or, if submitted, will be approved.

CYBERSECURITY

The County makes annual investments to enhance its multilayered cybersecurity defensive, detection and response platforms to safeguard personal and institutional data by monitoring, analyzing, and mitigating threats to its technology environment. These platforms includes a variety of next generation technologies which include active inspection of all inbound and outbound internet traffic, email messages, and real time event monitoring and analysis. All County systems are protected through comprehensive antimalware software and a regular application of software patches. End user cybersecurity training is required of all employees, complemented by a refresher program to enhance cybersecurity awareness. All external access is closely monitored, and access to any management system requires two factor authentication. The County scans all web environments weekly, and annually engages a professional cybersecurity consulting firm to thoroughly assess all cybersecurity defenses. Notwithstanding these and other cybersecurity measures, a cybersecurity breach could damage County systems and cause material disruption to operations and services. The cost to remedy such damage or protect against future attacks could be substantial and potentially exceed the limits of its cybersecurity insurance. Security breaches could expose the County to litigation and other legal risks, which could cause the County to incur costs related to claims. The County has obtained cybersecurity insurance.

RATING

The Bonds have been rated “Aa3” by Moody’s Investors Service (“Moody’s”). The rating was applied for by the County and certain information was supplied by the County to the rating agency to be considered in evaluating the Bonds. The rating reflects only the views of the rating agency and an explanation of the significance of the rating may be obtained from Moody’s, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, (212) 553-0300. There is no assurance that the rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by the rating agency if, in the judgment of the agency, circumstances so warrant. Any such downward revision or withdrawal of the rating would likely have an adverse effect on the market price of the Bonds.

23

ADVISORS AND CONSULTANTS

The law firm of Kutak Rock LLP has been retained to represent the County as Bond Counsel and Disclosure Counsel with respect to the authorization, issuance and sale of the Bonds.

The County has also retained Northwest Municipal Advisors as municipal advisor relative to the preparation of the Bonds for sale, timing of the sale and other factors relating to the Bonds (the “Municipal Advisor”) in connection with the issuance of the Bonds. The Municipal Advisor has not audited, authenticated or otherwise verified the information set forth in this Official Statement or other information provided relative to the Bonds. The Municipal Advisor makes no guaranty, warranty or other representation on any matter related to the information contained in the Official Statement. The Municipal Advisor is an independent municipal advisory firm and is not engaged in the business of underwriting, marketing, trading or distributing municipal securities. The Municipal Advisor’s compensation is contingent on the sale and delivery of the Bonds.

The County is not aware of the existence of any actual or potential conflict of interests, breach of duty or less than arm’s-length transaction the participants in the offering of the Bonds. Further, the County is not aware of any payments to obtain underwriting assignments and undisclosed agreements or arrangements, including fee splitting, between the purchaser and the Municipal Advisor with respect to the sale of the Bonds.

PURCHASER OF THE BONDS

The Bonds are being purchased by Hilltop Securities Inc., of Dallas, Texas, at a price of $12,682,658.91 and will be re-offered at a price of $12,733,933.85. The purchaser may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts) and others at prices lower than the initial offering prices set forth on cover hereof, and such initial offering prices may be changed from time to time by the purchaser. After the initial public offering, the public offering prices may be varied from time to time.

OFFICIAL STATEMENT

Statements in this Official Statement, including matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the County or the Underwriter and the registered owners of the Bonds. Distribution of this Official Statement has been authorized by the County.

Dated this 16th day of March, 2021.

LEWIS COUNTY, WASHINGTON

By:/s/ Arny Davis, Treasurer


A-1

APPENDIX A FORM OF BOND COUNSEL OPINION

Letterhead of Kutak Rock LLP

[Date of Issuance]

The Honorable Chair and Members of the Board of County Commissioners Lewis County 351 NW North Street Chehalis, Washington 98352

Re: Lewis County, Washington; Limited Tax General Obligation Bonds, Series 2021; Principal Amount of $11,640,000; Dated March 30, 2021

Honorable Chair and Members of the Board of County Commissioners:

We have acted as bond counsel in connection with the issuance by Lewis County, Washington (the “County”), of $11,640,000 principal amount of the above-captioned bonds (the “Bonds”). The Bonds are authorized pursuant to chapters 36.67, 39.36 and 39.46 RCW and Resolution No. 20-452, adopted by the Board of County Commissioners of the County (the “Board”), on December 14, 2020, amended by Resolution No. 21-055, adopted by the Board on February 8, 2021 (collectively, the “Resolution”), the Notice of Sale pertaining to the Bonds and the successful bid for the Bonds of Hilltop Securities Inc., of Dallas, Texas. The Bonds are being issued to: (1) provide funds to pay the Costs of the Project (as defined in the Resolution); and (2) pay costs incurred in connection with the issuance of the Bonds. Capitalized terms used herein shall have the meanings given to them in the Resolution.

In such connection, we have examined the record of proceedings submitted to us relative to the issuance of the Bonds including the Resolution and the tax compliance certificate of the County in connection with the Bonds dated the date of this opinion letter (the “Tax Certificate”). Although in doing so, we have not undertaken to verify independently the accuracy of the factual matters represented, warranted or certified therein; and we have assumed the genuineness of all signatures thereto.

The opinions expressed herein are based upon an analysis and interpretation of existing laws, regulations, rulings and court decisions. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have neither undertaken to determine nor to inform any person whether any such actions are taken or omitted or events do occur. Furthermore, we have assumed compliance with the agreements and covenants contained in the Resolution and the Tax Certificate, including (without limitation) agreements and covenants with which compliance is necessary to ensure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. We call attention to the fact that the rights and obligations under the Bonds, the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights; to the application of equitable principles; to the exercise of judicial discretion in appropriate cases; and to the limitations contained in the constitution and the laws of the state of Washington regarding legal remedies against the County.

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

1. The County has lawful authority for the issuance of the Bonds; and the Bonds constitute legal, valid and binding limited tax general obligations of the County, and as such, the full faith, credit and resources of the County have been pledged for the punctual and full payment of the principal of, premium, if any, and interest on the Bonds, within the appropriate constitutional and statutory limitations pertaining to nonvoted general obligations. The officers now or hereafter charged by law with the duty of levying taxes for the payment of the principal of and the interest on the Bonds shall, in the manner provided by law, make annual tax levies upon all of the taxable property within the County sufficient,

A-2

together with other legally available money, to pay the maturing principal of the Bonds and the interest accruing thereon, within the constitutional and statutory tax limitations pertaining to nonvoted general obligations.

2. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds is not a tax preference item for purposes of calculating the federal individual or corporate alternative minimum tax.

We express no opinion on whether any portion of the interest on the Bonds is excluded from adjusted current earnings when calculating corporate alternative minimum taxable income.

The County has not designated the Bonds as “Qualified Tax-Exempt Obligations” pursuant to Section 265(b) of the Code.

We are members of the bar of the state of Washington (the “State”). The foregoing opinion is limited to matters involving laws of the State and federal laws of the United States (subject to current interpretations, if any, of the Supreme Court of the United States and the United States Court of Appeals for the Ninth Circuit), and we do not express any opinion as to the laws of any other jurisdictions.

This opinion letter is given as of the date hereof. We assume no obligation to update, revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. As bond counsel, we are passing upon only those matters set forth in this opinion letter and not upon the accuracy or completeness of any statements made in connection with any sale of the Bonds or upon any federal tax consequences arising from the receipt or accrual of interest on or the ownership of the Bonds except those specifically addressed above.

Respectfully submitted,

KUTAK ROCK LLP

APPENDIX B 2019 AUDITED FINANCIAL STATEMENTS


Financial Statements and Federal Single Audit Report

Lewis County For the period January 1, 2019 through December 31, 2019

Published December 28, 2020

Report No. 1027575

B-1

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (564) 999-0950 [email protected]

Office of the Washington State Auditor Pat McCarthy

December 28, 2020

Board of Commissioners Lewis County Chehalis, Washington Report on Financial Statements and Federal Single Audit Please find attached our report on Lewis County’s financial statements and compliance with federal laws and regulations.

We are issuing this report in order to provide information on the County’s financial condition.

Sincerely,

Pat McCarthy

State Auditor

Olympia, WA

Americans with Disabilities

In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at [email protected].

B-2

Office of the Washington State Auditor

TABLE OF CONTENTS Schedule of Findings and Questioned Costs ................................................................................... 4

Summary Schedule of Prior Audit Findings .................................................................................... 6

Independent Auditor's 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..................................................................................................... 7

Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance ........................... 9

Independent Auditor's Report on Financial Statements ................................................................ 12

Financial Section ........................................................................................................................... 16

About the State Auditor's Office ..................................................................................................122

Page 3

B-3


SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Lewis County

January 1, 2019 through December 31, 2019

SECTION I – SUMMARY OF AUDITOR’S RESULTS The results of our audit of Lewis County are summarized below in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Financial Statements We issued an unmodified opinion on the fair presentation of the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information in accordance with accounting principles generally accepted in the United States of America (GAAP).

Internal Control over Financial Reporting:

Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies.

Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses.

We noted no instances of noncompliance that were material to the financial statements of the County.

Federal Awards Internal Control over Major Programs:

Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies.

Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses.

Page 4

B-4


We issued an unmodified opinion on the County’s compliance with requirements applicable to each of its major federal programs.

We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).

Identification of Major Federal Programs The following programs were selected as major programs in our audit of compliance in accordance with the Uniform Guidance.

CFDA No. Program or Cluster Title

20.205 Highway Planning and Construction Cluster – Highway Planning and Construction

97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters)

The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by the Uniform Guidance, was $750,000.

The County did not qualify as a low-risk auditee under the Uniform Guidance.

SECTION II – FINANCIAL STATEMENT FINDINGS None reported.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported.

Page 5

B-5


Larry E. Grove, CPA

AUDITOR SUZETTE SMITH, CPFO CHIEF ACCOUNTANT TOM STANTON CHIEF DEPUTY

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

Lewis County January 1, 2019 through December 31, 2019

This schedule presents the status of federal findings reported in prior audit periods.

Audit Period: January 1, 2018 – December 31, 2018

Report Ref. No.: 1026727

Finding Ref. No.: 2018-001

Finding Caption: The County’s internal controls over financial reporting were not adequate to ensure timely reporting.

Background: The County is responsible for designing, implementing and maintaining internal controls that provide reasonable assurance regarding the timeliness and reliability of financial reporting. The County did not submit the required annual report within 150 days after its 2018 fiscal year end.

Status of Corrective Action: (check one) ☒ Fully Corrected

☐ Partially Corrected

☐ Not Corrected ☐ Finding is considered no longer valid

Corrective Action Taken: In September 2019, the County Auditor’s Office successfully recruited additional key staff with knowledge and experience in implementing new GASB standards and compiling the Annual Financial Report. The 2019 Annual Financial Report was filed within the statutory requirements.

351 NW NORTH STREET

PO BOX 29

CHEHALIS, WA 98532-0029

PHONE: (360) 740-1156

TOLL-FREE WITHIN LEWIS

COUNTY:

1-800-562-6130

FAX: (360) 740-1421

Page 6

B-6


INDEPENDENT AUDITOR’S 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

Lewis County January 1, 2019 through December 31, 2019

Board of Commissioners Lewis County Chehalis, Washington

We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Lewis County, as of and for the year ended December 31, 2019, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements, and have issued our report thereon dated December 23, 2020.

As discussed in Note 15 to the financial statements, in February 2020, a state of emergency was declared that could have a negative financial effect on the County.

INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the County’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the County’s financial statements will not be prevented, or detected and

Page 7

B-7


corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the County’s financial statements are free from material misstatement, we performed tests of the County’s compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations.

Pat McCarthy State Auditor Olympia, WA

December 23, 2020

Page 8

B-8


INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON

INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE

Lewis County



REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited the compliance of Lewis County, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the County’s major federal programs for the year ended December 31, 2019. The County’s major federal programs are identified in the accompanying Schedule of Findings and Questioned Costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the County’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements

Page 9

B-9


referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination on the County’s compliance.

Opinion on Each Major Federal Program

In our opinion, the County complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2019.

REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program in order to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Page 10

B-10


Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Purpose of this Report

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations.

Pat McCarthy

State Auditor

Olympia, WA

December 23, 2020

Page 11

B-11


INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

Lewis County



REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Lewis County, as of and for the year ended December 31, 2019, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed on page 16.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,

Page 12

B-12


including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the County’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

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 business-type activities, each major fund and the aggregate remaining fund information of Lewis County, as of December 31, 2019, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General, Roads and Distressed Counties funds, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Matters of Emphasis

As discussed in Note 15 to the financial statements, in February 2020, a state of emergency was declared that could have a negative financial effect on the County. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information listed on page 16 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of

Page 13

B-13


management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary and Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). This schedule is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated December 23, 2020 on our consideration of the County’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 internal control over financial reporting or on compliance. That report is an

Page 14

B-14


integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control over financial reporting and compliance.

Pat McCarthy

State Auditor

Olympia, WA

December 23, 2020

Page 15

B-15


FINANCIAL SECTION

Lewis County


REQUIRED SUPPLEMENTARY INFORMATION Management’s Discussion and Analysis – 2019

BASIC FINANCIAL STATEMENTS Statement of Net Position – 2019 Statement of Activities – 2019 Governmental Funds Balance Sheet – 2019 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position –

2019 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental

Funds – 2019 Reconciliation of Governmental Funds Statement of Revenues, Expenditures and

Changes in Fund Balance to the Statement of Activities – 2019 Budget to Actual Comparison – General Fund Summary – 2019 Budget to Actual Comparison – General Fund Expenditure by Department – 2019 Budget to Actual Comparison – Special Revenue: Roads – 2019 Budget to Actual Comparison – Special Revenue: Distressed Counties – 2019 Statement of Net Position – Proprietary Funds – 2019 Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds

– 2019 Statement of Cash Flows – Proprietary Funds – 2019 Statement of Net Position – Fiduciary Funds – 2019 Notes to Financial Statements – 2019

REQUIRED SUPPLEMENTARY INFORMATION Schedule of Employer Contributions – PERS 1, PERS 2/3, LEOFF 2, PSERS 2 – 2019 Schedule of Proportionate Share of Net Pension Liability – PERS 1, PERS 2/3, LEOFF 1,

LEOFF 2, PSERS 2 – 2019 Schedule of Changes in Total OPEB Liability and Related Ratios – PEBB and LEOFF 1

– 2019

Page 16

B-16


SUPPLEMENTARY AND OTHER INFORMATION

Schedule of Expenditures of Federal Awards – 2019 Notes to the Schedule of Expenditures of Federal Awards – 2019

Page 17

B-17

Management’s Discussion and Analysis

As management of Lewis County, we offer readers of Lewis County’s financial statements this narrative overview and analysis of the financial activities of Lewis County for the fiscal year ended December 31, 2019. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our financial statements, and notes to the financial statements to analyze the county’s financial activities and condition.

Financial Highlights

Total assets and deferred outflows of resources exceeded the County’s liabilities anddeferred inflows of resources by $147.5 million (net position). Of this amount, $10.01million was reported as unrestricted net position, amounts which may be used to meet theCounty’s ongoing obligations to citizens and creditors.The County’s governmental funds reported a combined ending fund balance of $48.65million, an increase of 18% compared with the prior year.The County’s total net position (governmental and business-type combined) increased by$18.28 million over the prior year.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Lewis County’s basic financial statements. Lewis County’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of Lewis County’s finances, in a manner similar to a private-sector business.

The statement of net position presents information on all of Lewis County’s asset, liabilities, deferred outflows and inflows. The difference between the assets plus deferred outflows of resources and liabilities plus deferred inflows of resources is reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Lewis County is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences).

Both of the government-wide financial statements distinguish functions of Lewis County that are principally supported by taxes and intergovernmental revenues (governmental activities) from

Page 18

B-18

other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of Lewis County include general government, public safety, physical environment, economic environment/development, transportation, mental and physical health, and culture and recreation. The business-type activities of Lewis County include a solid waste utility, a solid waste disposal district, a water sewer activity and two airports.

The government-wide financial statements include not only Lewis County itself (known as the primary government), but also the Solid Waste Disposal District No. 1 of Lewis County. The Solid Waste Disposal District is a quasi-municipal corporation with an independent taxing authority and district for which Lewis County is financially accountable. Financial information for this blended component unit is reported as a major fund within the business-type activities and included within financial information presented for the primary government itself.

Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Lewis County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Lewis County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

Lewis County maintains 39 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the County’s four major funds. The General Fund, Roads Fund, Distressed Counties, and Capital Facilities Fund all are considered to be major funds. Pursuant to GASB Statement No. 54, four governmental funds were rolled into major funds for financial reporting purposes, three into the General Fund and one into the Roads Fund. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.

Page 19

B-19

A major fund is defined in the following manner: a. Total assets plus deferred outflows of resources, liabilities plus deferred inflows of resources,

revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least ten percent of the corresponding element total (assets, liabilities, etc.) for all funds of that category or type (either total governmental or total enterprise), and

b. The same element that met the above ten percent intention is at least five percent of the corresponding element total for all governmental and enterprise funds combined.

c. Any other governmental or enterprise fund the government’s officials believe is particularly important to financial statement users.

Lewis County adopts an annual appropriated budget for all county funds in accordance with state law, and are adopted at the fund level, except the General Fund, which is adopted at the department level. A budgetary comparison of revenues, expenditures, and changes in fund balances is provided for the General Fund and special revenue funds with statutorily mandated budgets. Major fund budgetary variance statements are included with the basic financial statements, while non-major fund budget variance schedules follow the combining fund statements. Proprietary funds. Lewis County maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Lewis County uses enterprise funds to account for its Solid Waste, Solid Waste Disposal District, Vader Water System Utility, Water Sewer Utility, Packwood Airport and South County Airport operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among Lewis County’s various functions. Lewis County uses internal service funds to account for its fleet of vehicles, insurance programs, county facilities, radio services, and management information systems. Because all of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Solid Waste Utility, the Solid Waste Disposal District, the Vader Water System Utility, and the Packwood Airport which are considered to be a major funds of Lewis County. Additionally, the following are non-major enterprise funds of the county: Water Sewer Utility and South County Airport. Conversely, nine internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found following the governmental fund financial statement in this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support Lewis County’s own programs. The accounting used for fiduciary funds is much like that used for governmental funds.

Page 20

B-20

Lewis County has one type of fiduciary fund: Agency Funds (clearing accounts for assets held by Lewis County in its role as custodian until the funds are distributed to government agencies, private parties, or organizations to which they belong). A combined summary Statement of Net Position for all of the fiduciary funds can be found following the proprietary fund financial statements of this report. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements in this report. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information, which can be found following the notes to the financial statements in this report. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. By far the largest portion of Lewis County’s net position (79.6 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure); less any related debt used to acquire those assets that is still outstanding. Lewis County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although Lewis County’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In the case of Lewis County, assets exceeded liabilities by $149.72 million at the close of the most recent fiscal year. The condensed financial information that follows is derived from the Government-Wide Statement of Net Position and presents a comparison of year-end 2019 to year-end 2018.

Page 21

B-21

A portion of Lewis County’s net position, $29.06 million, represents resources that are subject to external restrictions on how they may be used. The $10.01 million in unrestricted net position may be used to meet the government’s ongoing obligations to citizens and creditors. Deferred Outflows represent amounts related to the refunding of long-term debt, pension reporting required by GASB 68, and OPEB reporting required by GASB 75. Deferred Inflows represent amounts related to pension and OPEB reporting requirements as well as leases.

Assets 2019 2018 2019 2018 2019 2018Current and other assets 80,549,758$ 70,304,662$ 5,202,902$ 5,244,966$ 85,752,660$ 75,549,628$ Capital assets 108,513,427 104,984,970 9,528,116 9,387,253 118,041,543 114,372,223 Total assets 189,063,185 175,289,632 14,731,018 14,632,219 203,794,203 189,921,851

Deferred Outflows of Resources 5,458,174 2,975,757 232,567 81,519 5,690,741 3,057,276

LiabilitiesCurrent and other liabilities 9,090,859 8,257,111 702,004 762,020 9,792,863 9,019,131 Long-term liabilities 42,907,020 44,644,332 2,400,026 2,640,370 45,307,046 47,284,702 Total liabilities 51,997,879 52,901,443 3,102,030 3,402,390 55,099,909 56,303,833

Deferred Inflows of Resources 7,581,296 7,136,828 282,498 269,012 7,863,794 7,405,840

Net PositionNet investment in capital assets 99,967,559 94,508,219 8,512,085 8,445,818 108,479,644 102,954,037 Restricted 29,050,331 24,678,322 12,278 4,502 29,062,609 24,682,824 Unrestricted 6,953,776 (959,423) 3,054,694 2,592,016 10,008,470 1,632,593 Total net position 135,971,666$ 118,227,118$ 11,579,057$ 11,042,336$ 147,550,723$ 129,269,454$

Condensed Statement of Net PositionGovernmental Activities Business-Type Activities Total

Page 22

B-22

Lewis County’s Change in Net Position

Lewis County’s net position increased by $18.28 million during the 2019 fiscal year. The increase in net position is attributable to a 15.0 percent increase in governmental activities and 4.9 percent increase in business-type activities. Much of the increase can be attributed to governmental revenue which increased by 15.32 million over the prior year.

Governmental Activities In 2019, the three largest sources of revenue for governmental activities were taxes at $45.33 million (48.1 percent of revenues), operating grants and contributions at $18.36 million (19.5 percent of revenues), and charges for services at $19.09 million (20.3 percent of revenues). The remaining 12.1 percent of governmental revenues include capital grants and contributions, interest and investment earnings, and other general revenues.

Tax revenues increased by $2.47 million in 2019 reflecting positive growth in the economy. Grants and contributions increased by $7.42 primarily due to an increase in grant revenue in the Roads

Revenues 2019 2018 2019 2018 2019 2018Program revenues Charges for services 19,087,770$ 16,925,103$ 10,260,294$ 9,523,991$ 29,348,064$ 26,449,094$ Operating grants and contributions 18,359,065 16,125,402 - - 18,359,065 16,125,402 Capital grants and contributions 5,326,267 136,581 510,898 1,083,993 5,837,165 1,220,574

General revenues - - Taxes 45,330,756 42,856,873 - - 45,330,756 42,856,873 Interest and investment earnings 1,538,689 1,100,197 - - 1,538,689 1,100,197 Other 5,385,424 2,563,905 50,216 17,633 5,435,640 2,581,538

Total Revenues 95,027,971 79,708,061 10,821,408 10,625,617 105,849,379 90,333,678

Expenses General Government & Judicial 17,714,733 16,382,839 - - 17,714,733 16,382,839 Public Safety 24,742,772 23,269,854 - - 24,742,772 23,269,854 Utilities 21,802 124,560 - - 21,802 124,560 Transportation 22,712,008 22,232,641 - - 22,712,008 22,232,641 Natural & Economic Environment 3,368,263 3,126,012 - - 3,368,263 3,126,012 Social Services & Physical Health 6,446,855 6,027,152 - - 6,446,855 6,027,152 Culture & Recreation 1,742,799 1,762,131 - - 1,742,799 1,762,131 Interest on Long-Term Debt 323,591 351,340 15,848 9,227 339,439 360,567 Solid Waste - - 10,090,371 9,375,121 10,090,371 9,375,121 Airport - - 380,897 410,911 380,897 410,911 Water Sewer - - 345,732 435,585 345,732 435,585

Total Expenses 77,072,823 73,276,529 10,832,848 10,230,844 87,905,671 83,507,373

Excess (deficiency) of revenues over expenses before transfers 17,955,148 6,431,532 (11,440) 394,773 17,943,708 6,826,305 Transfers (210,600) (235,719) 210,600 235,719 - - Increase (decrease) in net position 17,744,548 6,195,813 199,160 630,492 17,943,708 6,826,305 Net position - Beginning, as restated 118,227,118 112,031,305 11,379,897 10,411,844 129,607,015 122,443,149 Net position - Ending 135,971,666$ 118,227,118$ 11,579,057$ 11,042,336$ 147,550,723$ 129,269,454$

Governmental Activities Business-Type Activities Total

Page 23

B-23

For the most part, the slight increases in expenses and revenues were the results of the outcomes of the current marginal up-tick in economic conditions. Although, overall conditions have required the county to maintain the previous cuts in various programs in most functions of the government due to the decline in revenues in the prior few years.

Business-type Activities In 2019, the largest source of revenue for business-type activities was charges for services at $10.26 million, or 94.8 percent of total business-type revenues.

Key changes for fiscal year 2019 include:

Capital grants and contributions decreased by $573 thousand due to the completion ofconstruction on the Vader Water System Utility fund new water reservoir.Total revenue increased by $196 thousand and total expenses increased by $602 thousandfor business-type activities in 2019.

Governmental Function Revenue Percent of Total Expenditures Percent of TotalGeneral Government & Judicial Services 12,056,226$ 28.19% 17,714,733$ 22.98%Public Safety 6,390,617 14.94% 24,742,772 32.10%Utilities - 0.00% 21,802 0.03%Transportation 16,577,688 38.76% 22,712,008 29.47%Natural & Economic Environment 1,883,184 4.40% 3,368,263 4.37%Social Services & Physical Health 4,756,780 11.12% 6,446,855 8.36%Culture & Recreation 1,108,607 2.59% 1,742,799 2.26%Interest on Long-Term Debt - 0.00% 323,591 0.42%Total 42,773,102$ 100.00% 77,072,823$ 100.00%

fund. Total revenues increased over the prior year by $15.32 million whereas total expenditures increased by $3.80 million.

Overview of governmental revenues and expenditures:

Program Revenues and Expenditures - Governmental Activities

Revenue Percent of TotalTaxes 45,330,756$ 47.70%Charges for Services 19,087,770 20.09%Operating Grants and Contributions 18,359,065 19.32%Capital Grants and Contributions 5,326,267 5.60%Investment Earnings 1,538,689 1.62%Gain on Sale of Capital Assets 4,536,651 4.77%Miscellaneous Revenues 848,773 0.89%Total 95,027,971$ 100.00%

Revenues by Source - Governmental Activities

Page 24

B-24

Overview of business-type revenues and expenses:

Financial Analysis of the County’s Major Funds As noted earlier, Lewis County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds analysis. The focus of Lewis County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing Lewis County’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, Lewis County’s governmental funds, reported combined ending fund balances of $48.65 million, an increase of $7.45 million in comparison with the prior year. Approximately 47.2 percent of this total amount ($22.9 million) constitutes assigned and unassigned fund balance, which is available for spending at the government’s discretion; however, fund balances in special revenue, debt service and capital projects funds are dedicated to their specific purposes, which in some instances is prescribed by state law. The following are highlights related to each major fund in 2019: The General Fund is the chief operating fund of Lewis County. At the end of the current fiscal year, unassigned fund balance of the general fund was $10.94 million, while total fund balance reached $11.81 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. The change in total

Program Revenue Percent of Total Expenses Percent of TotalSolid Waste 9,973,028$ 92.59% 10,090,371$ 93.28%Airports 107,909 1.00% 380,897 3.52%Water-Sewer Utilities 690,255 6.41% 345,732 3.20%Total 10,771,192$ 100.00% 10,817,000$ 100.00%

Program Revenues and Expenses - Business-Type Activities

Revenue Percent of Total Charges for Services 10,260,294$ 93.00%Captial Grants and Contributions 510,898 4.63%Gain (Loss) on Sale of Capital Assets - 0.00%Miscellaneous Revenues 260,816 2.36%Total 11,032,008$ 100.00%

Revenues by Source - Business-Type Activities

Page 25

B-25

fund balance in 2019 was an increase of $826 thousand compared to an increase of $1.07 million in 2018. General fund expenditures are concentrated in the primary services and programs most vital to citizens, general government, judicial services, and public safety. These services account for 95.8 percent of total fund expenditures.

The Roads Fund provides road maintenance and construction services to the citizens of Lewis County. The Roads fund ended 2019 with a total fund balance of $5.34 million, an increase of $2.09 million over the previous year. Expenditures in the fund increased significantly, by $8.33 million, due to an increase in capital outlay. The increase is due to multiple infrastructure projects in 2019. Accordingly, revenues in the fund increased by $9.24 million due to an increase in grant funding related to the infrastructure projects. The Capital Facilities Plan Fund accounts for financial resources used for the acquisition or construction of major capital facilities. At the end of the current fiscal year, total fund balance in the Capital Facilities Plan Fund was $12.54 million, $10.96 million of which is classified as restricted fund balance, which is subject to externally enforceable legal restrictions. Restricted fund balance increased by $1.50 million due to an increase in revenues and decrease in expenditures of restricted funds. The Distressed Counties Fund was established in 2002 for the purpose of financing public facilities and infrastructure related to economic development using the .09% of the state sales tax

Revenues 2019 2018Increase

(decrease)Taxes 22,946,540$ 22,138,316$ 808,224$ Grants and contributions 5,752,017 6,402,197 (650,180) Charges for services 3,929,461 3,862,491 66,970 Other 4,404,703 3,897,962 506,741 Total 37,032,721 36,300,966 731,755

ExpendituresGeneral Government & Judicial 15,876,336 15,314,000 562,336 Security of Persons & Property 19,734,097 18,488,162 1,245,935 Other 1,548,305 1,645,099 (96,794) Total 37,158,738 35,447,261 1,711,477

Net transfers in (out) (1,002,131) (980,091) (22,040) Other financing sources 1,954,454 1,192,654 761,800 Net increase (decrease) in fund balance 826,306$ 1,066,268$ (239,962)$

General Fund

Page 26

B-26

the County receives. The Distressed Counties Fund ended 2019 with a total fund balance of $6.68 million. Revenue and expenditures increased slightly over the prior year. Proprietary funds analysis. Lewis County’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The Solid Waste Utility Fund, Solid Waste Disposal District No. 1, the Vader Water System Utility, and the Packwood Airport are categorized as major proprietary funds for 2019. The Solid Waste Utility Fund and the Solid Waste Disposal District No. 1 provide efficient disposal and recycling services to the residents and businesses of Lewis County. The Solid Waste Utility fund ended the fiscal year with a total net position of $920 thousand, an increase of $308 thousand from the prior year. The Solid Waste Disposal District No. 1 ended 2019 with a total net position of $3.39 million, an increase of $88 thousand over the prior year. Revenues remained consistent with the prior year while operating expenses increased slightly, by $708 thousand. The Vader Water System Utility Fund accounts for activity of the public water system serving the City of Vader and surrounding county lands. Previously in receivership, the court awarded the Vader Water System to Lewis County in 2015. The Vader Water System Utility fund is responsible for establishing, operating, and maintaining the supply, treatment, and distribution of water for the Vader-Enchanted Valley Water System. At the end of the current fiscal year, the net position of this fund was $3.01 million, an increase of $350 thousand over the prior year. The fund took on additional debt in 2018, $279 thousand, to finance the construction of a new drinking water supply storage facility. Capital grant revenue decreased in 2019 due to the completion of this project. The Packwood Airport Fund accounts for activity of the airport located in Packwood, WA. At the end of the current fiscal year, the net position of this fund was $2.77 million. Activity in the fund remained fairly consistent with the prior year, revenues decreasing slightly by $23 thousand due the close of a construction project. During the year, net position for all enterprise funds increased by $537 thousand. General Fund Budgetary Highlights Lewis County adopts an annual budget in December of the preceding year, with adjustments made throughout the year. The significant differences between the original budget and the final amended budget, as well as actual revenues and expenditures, are summarized in the table below.

Page 27

B-27

The general fund’s original and final budget were very similar, with an increase of $835 thousand in budgeted revenues and $1.80 million in budgeted expenditures.

Capital Asset and Debt Administration

Capital Assets. Lewis County’s capital assets for its governmental and business-type activities as of December 31, 2019, amounts to $119.07 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and systems, improvements, machinery and equipment, park facilities, and county road’s infrastructure (roads, bridges, culverts). Capital assets increased over the prior year by $4.70 million due to an increase in construction activity in the

Variance withOriginal Final Amended Actual Final Budget-Budget Budget Amounts Positive (Negative)

RevenuesTaxes 21,261,948$ 21,261,948 22,946,540$ 1,684,592$ Licenses & Permits 49,500 49,500 117,088 67,588Intergovernmental 5,226,715 5,666,744 5,751,816 85,072Charges for Services 3,303,611 3,516,692 3,923,461 406,769Fines & Forfeits 1,769,600 1,769,600 1,766,547 (3,053)Interest & Other Earnings 1,845,440 1,895,440 2,334,726 439,286Miscellaneous 32,325 163,896 186,342 22,446

Total Revenues 33,489,139 34,323,820 37,026,520 2,702,700

ExpendituresGeneral Government Services 15,998,050 17,042,365 15,876,336 1,166,029Security of Persons & Property 19,596,500 20,169,982 19,734,097 435,885Utilities & Environment - - - -Transportation - - - -Natural & Economic Environment 451,223 510,347 465,117 45,230Mental & Physical Health 541,244 637,039 630,721 6,318Culture & Recreation 223,143 241,583 222,021 19,562Debt Service 45,719 48,356 57,217 (8,861)Capital Outlays 550 7,750 114,844 (107,094)

Total Expenditures 36,856,429 38,657,422 37,100,353 1,557,069Excess of Revenues Over (Under) Expenditures (3,367,290) (4,333,602) (73,833) 4,259,769

Other Financing Sources (Uses) (303,044) (94,863) 907,323 1,002,186

Net Change in Fund Balance (3,670,334) (4,428,465) 833,490 5,261,955

Fund Balance - January 1 10,943,386 10,943,386 10,943,386 -Fund Balance - December 31 7,273,052$ 6,514,921$ 11,776,876$ 5,261,955$

General Fund Summary

Page 28

B-28

Roads fund. The Roads fund also received FEMA funding in 2019 allowing for the purchase of multiple fleet vehicles.

Lewis County’s Capital Assets (net of depreciation)

Additional information on Lewis County’s capital assets can be found in Note 5 within the Notes to the Financial Statements in this report. Long-term debt. At the end of the current fiscal year, Lewis County’s total long-term debt outstanding was $10.16 million. Of this amount, $897 thousand comprises debt other than General Obligation Bonds backed by the full faith and credit of the government. In 2018, the County issued new debt for the Vader Water System Utility fund in the amount of $279 thousand. This debt was issued to provide funds necessary for the acquisition, construction, and installation of a new drinking water supply storage facility at the water treatment plant of the Vader Water System Utility of the County. Reductions to the debt of the County were regularly scheduled debt service payments. Overall, the County’s total debt decreased by $1.35 million.

Lewis County’s Outstanding Debt

State statutes limit the amount of general obligation debt a governmental entity may issue to 2.5 percent of its total assessed valuation. To reach the 2.5 percent maximum it would require a vote of the people for any debt issued over the 1.5 percent limit that does not require a vote. The current debt limitation for Lewis County is $196.87 million and $113.97 million for the 2.5 percent and 1.5 percent maximums, respectively. Both are significantly in excess of Lewis County’s outstanding general obligation debt. This calculation does not include assets or liabilities related to GASB 68 pension or GASB 75 OPEB reporting requirements. Additional information on Lewis County’s long-term debt can be found in Note 11 within the Notes to the Financial Statements.

2019 2018 2019 2018 2019 2018

Land, Intangibles (Nondepreciable) 8,102,489$ 6,757,377$ 214,182$ 214,182$ 8,316,671$ 6,971,559$ Construction in Progress 8,732,749 1,924,228 583,705 1,807,594 9,316,454 3,731,822 Buildings & Structures 31,402,315 32,647,026 368,101 160,015 31,770,416 32,807,041 Improvements Other than Buildings 446,923 498,875 7,673,856 6,431,891 8,120,779 6,930,766 Machinery & Equipment 10,678,147 10,218,979 688,272 773,571 11,366,419 10,992,550 Infrastructure 50,180,288 52,938,487 - - 50,180,288 52,938,487 Total 109,542,911$ 104,984,972$ 9,528,116$ 9,387,253$ 119,071,027$ 114,372,225$

Governmental Activities Business-Type Activities Total

Beginning Balance 01/01/2019 Additions Reductions

Ending Balance 12/31/2019

General Obligation Bonds 10,570,000$ -$ 1,310,000$ 9,260,000$ Notes Payable 941,434 - 44,274 897,160 Total 11,511,434$ -$ 1,354,274$ 10,157,160$

Page 29

B-29

Economic Factors The unemployment rate for Lewis County is currently 5.8 percent, a decrease from the rate of 6.9 percent a year ago. This is higher than the current state’s average unemployment rate of 4.0 percent and the national average rate of 3.5 percent. Inflationary trends in the region are comparable to national indices. Requests for Information This financial report is designed to provide a general overview of Lewis County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Lewis County Auditor’s Office, Financial Services, PO Box 29, Chehalis, WA 98532.

Page 30

B-30

Statement of Net PositionDecember 31, 2019

Governmental Business-typeActivities Activities Total

Assets

Cash & Cash Equivalents 25,282,417$ 4,174,595$ 29,457,012$ Investments 35,827,964 12,278 35,840,242Receivables 5,181,800 775,182 5,956,982Interest Receivable 282,033 19 282,052Internal Balances 118,857 - 118,857Due from Other Governmental Units 8,706,395 226,786 8,933,181Inventories 1,081,609 - 1,081,609Prepayments 1,446,934 14,042 1,460,976Other Current Assets 1,000 - 1,000

Capital Assets Not Being Depreciated:Land, Intangibles, (Nondepreciable) 7,073,006 214,182 7,287,188Construction in Progress 8,732,749 583,705 9,316,454

Capital Assets Being Depreciated:Buildings & Structures 31,402,315 368,101 31,770,416Improvements Other than Buildings 446,923 7,673,856 8,120,779Machinery & Equipment 10,678,145 688,272 11,366,417Infrastructure 50,180,289 - 50,180,289Intangible Assets 1,029,482 - 1,029,482

Net Pension Asset 2,620,749 - 2,620,749Total Assets 190,092,667 14,731,018 204,823,685Deferred Outflow of Resources:

Deferred Outflows Related to Refunding of Debt 202,625 - 202,625Deferred Outflows Related to Pensions 2,861,597 86,795 2,948,392Deferred Outflows Related to OPEB 2,393,952 145,772 2,539,724

Total Deferred Outflow of Resources 5,458,174 232,567 5,690,741

LiabilitiesAccounts Payable & Other Current Liabilities 2,906,037 345,540 3,251,577Internal Balances - 118,858 118,858Due to Other Governmental Units 1,030,452 47,517 1,077,969Accrued Interest Payable 28,744 3,014 31,758Accrued Employee Benefits 2,009,471 71,772 2,081,243Unearned Revenue 111,603 - 111,603Custodial Accounts 1,219,837 37,134 1,256,971

Noncurrent Liabilities:Due Within One Year 1,784,715 78,169 1,862,884General Obligation Debt 7,915,000 - 7,915,000Unamortized Bond Premium 270,887 - 270,887Notes, Contracts, Leases Payable 171,878 849,656 1,021,534Compensated Absences 4,647,733 130,440 4,778,173Total OPEB Liability 18,424,025 681,432 19,105,457Incurred but Not Reported 1,684,823 - 1,684,823Net Pension Liability 9,792,674 374,138 10,166,812Landfill Closure and Postclosure Care Liability - 364,360 364,360

Total Liabilities 51,997,879 3,102,030 55,099,909Deferred Inflows of Resources:

Related to Leases - 4,000 4,000Related to Pensions 6,687,293 220,726 6,908,019Related to Other Postemployment Benefits 894,003 57,772 951,775

Total Deferred Inflow of Resources 7,581,296 282,498 7,863,794

Net PositionNet Investment in Capital Assets 99,967,559 8,512,085 108,479,644Restricted: Special Revenue/Debt Service 26,429,582 12,278 26,441,860Restricted: Pensions 2,620,749 - 2,620,749Unrestricted (Deficit) 6,953,776 3,054,694 10,008,470

Total Net Position 135,971,666$ 11,579,057$ 147,550,723$

See Accompanying Notes to Financial Statements

Primary Government

Page 31

B-31

Functions/Programs Expenses Charges for

Services

Operating Grants and

Contributions

Capital Grants and

Contributions Governmental

Activities Business-type

Activities Total Primary Government: General Government & Judicial Services 17,714,733 7,807,383 3,881,534 367,309 (5,658,507)$ - (5,658,507)$ Public Safety 24,742,772 5,136,580 1,214,567 39,470 (18,352,155) - (18,352,155) Utilities 21,802 - - - (21,802) - (21,802) Transportation 22,712,008 1,003,266 10,654,934 4,919,488 (6,134,320) - (6,134,320) Natural & Economic Environment 3,368,263 1,557,414 325,770 - (1,485,079) - (1,485,079) Social Services & Physical Health 6,446,855 2,538,456 2,218,324 - (1,690,075) - (1,690,075) Culture & Recreation 1,742,799 1,044,671 63,936 - (634,192) - (634,192) Interest on Long-Term Debt 323,591 - - - (323,591) - (323,591) Total Government Activities 77,072,823 19,087,770 18,359,065 5,326,267 (34,299,721) - (34,299,721)

Business-type activities: Solid Waste 10,090,371 9,845,729 - 127,299 - (117,343) (117,343) Airports 380,897 70,545 - 37,364 - (272,988) (272,988) Water Sewer 345,732 344,020 - 346,235 - 344,523 344,523 Total business-type activities 10,817,000 10,260,294 - 510,898 - (45,808) (45,808) Total primary government 87,889,823$ 29,348,064$ 18,359,065$ 5,837,165$ (34,299,721)$ (45,808)$ (34,345,529)$

General Revenues: Property Taxes 25,110,469 -$ 25,110,469$ Private Harvest Taxes 2,503,952 - 2,503,952 Sales Tax 15,941,530 - 15,941,530 Excise Tax 1,774,805 - 1,774,805 Interest & Investment Revenue (Expenses) 1,538,689 (15,848) 1,522,841 Miscellaneous 25,520 47,504 73,024 Grants/Contrib/Ins Proceeds not Program Specific 81,085 2,712 83,797 Gain on Sale of Capital Assets 4,536,651 - 4,536,651 Transfers (210,600) 210,600 - Extraordinary Item 742,168 - 742,168

Total General Revenues and Transfers 52,044,269 244,968 52,289,237 Change in Net Position 17,744,548 199,160 17,943,708 Net Position - Beginning 118,227,118 11,042,337 129,269,455 Prior Period Adjustment - Correction of errors - 337,560 337,560 Net Position - Restated 118,227,118 11,379,897 129,607,015 Net Position - Ending 135,971,666 11,579,057$ 147,550,723$


Statement of ActivitiesFor Year Ended December 31, 2019

Primary GovernmentNet (Expense) Revenue and Changes in Net PositionProgram Revenues

Page 32

B-32

Balance SheetGovernmental Funds

December 31, 2019

DistressedGeneral Roads Counties

Assets Current Assets:Cash & Cash Equivalents 7,335,236$ 3,205,393$ 4,356,533 Investments 3,461,209 146,968 1,023,985 Receivables, Net 611,929 845,840 - Interest Receivable 205,961 234 1,628 Interfund Loan Receivable 190,858 - - Due from Other Governmental Units 3,472,010 3,029,570 347,765 Inventories 1,382 76,466 - Prepayments 80,625 21,548 - Other Current Assets - - - Notes/Contracts Receivable 37,856 40,712 991,523

Total Assets 15,397,066 7,366,731 6,721,434

LiabilitiesLiabilities:Accounts/Vouchers Payable 340,599 949,466 41,250 Retainage Payable 6,281 250,098 - Interfund Loans payable - - - Due to Other Governmental Units 855,304 - - Accrued Employee Benefits 1,073,904 418,688 - Advanced Revenue - 15,954 - Custodial Accounts 932,102 7,680 -

Total Liabilities 3,208,190 1,641,886 41,250

Deferred InflowsUnavailable Revenue (Property Taxes/Asmnts) 382,729 382,574 -

Total Deferred Inflows of Resources 382,729 382,574 -

Fund Balances Nonspendable 272,865 138,726 991,523 Restricted: Special Revenue/Capital Projects 564,378 147,202 5,110,721 Restricted: Debt Service - - - Committed - - - Assigned 29,271 5,056,343 577,940 Unassigned 10,939,633 - -

Total Fund Balances 11,806,147 5,342,271 6,680,184

15,397,066$ 7,366,731$ 6,721,434


Total Liabilities, Deferred Inflows, and Fund Balances

Page 33

B-33

Balance SheetGovernmental Funds

December 31, 2019

Assets Current Assets:Cash & Cash EquivalentsInvestmentsReceivables, NetInterest ReceivableInterfund Loan ReceivableDue from Other Governmental UnitsInventoriesPrepaymentsOther Current AssetsNotes/Contracts Receivable

Total Assets

LiabilitiesLiabilities:Accounts/Vouchers PayableRetainage PayableInterfund Loans payableDue to Other Governmental UnitsAccrued Employee BenefitsAdvanced RevenueCustodial Accounts

Total Liabilities

Deferred InflowsUnavailable Revenue (Property Taxes/Asmnts)

Total Deferred Inflows of Resources

Fund Balances NonspendableRestricted: Special Revenue/Capital ProjectsRestricted: Debt ServiceCommittedAssignedUnassigned

Total Fund Balances


Total Liabilities, Deferred Inflows, and Fund Balances

Other TotalCapital Governmental Governmental

Facilities Plan Funds Funds

27,394$ 4,538,432$ 19,462,988$ 12,006,265 7,503,682 24,142,109

333 653,536 2,111,638 19,675 13,370 240,868

- - 190,858 592,235 1,223,238 8,664,818

- - 77,848 - 128,841 231,014

1,000 - 1,000 - - 1,070,091

12,646,902 14,061,099 56,193,232

23,263 804,081 2,158,659 - - 256,379 - 72,000 72,000

79,699 95,449 1,030,452 4,486 331,262 1,828,340

- 95,649 111,603 68 269,196 1,209,046

107,516 1,667,637 6,666,479

- 107,093 872,396 - 107,093 872,396

- 128,841 1,531,955 10,958,242 6,840,836 23,621,379

- 16,926 16,926 - 529,739 529,739

1,581,144 4,833,760 12,078,458 - (63,732) 10,875,901

12,539,386 12,286,369 48,654,357

12,646,902$ 14,061,099$ 56,193,232$

Page 34

B-34

Reconciliation of the Governmental Balance SheetsTo the Government-Wide Statement of Net Position - Governmental Funds

December 31, 2019

Fund balances - total governmental funds 48,654,357$

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

Deferred outflows related to refunding of debt, pensions, and other postemployment benefits are not financial resources and therefore not reported in the governmental funds 5,247,452

Capital and net pension assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. 99,394,691

Some receivable balances are not yet available and are not reported as revenue in the governmental funds. 1,993,597

Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. (31,931,984)

Net pension obligation is reported as a liability in the governmental activities and is not considered to represent a financial liability, therefore, it is not reported in the governmental funds. (8,797,343)

Internal service funds are used by management to charge the costs of certain activities such as insurance, fleet, facilities maintenance, radio, and information services to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. 27,480,217

Revenue, such as property taxes, are recorded as deferred inflows of resources in the governmental funds because they are not current financial resources are accrued under the economic resources basis of accounting and recorded on the statement of net position. 872,396

Deferred inflows related to pensions and other postemployment benefits not reported in the governmental funds are reported in the statement of net position. (6,941,717)

Net Position of government activities 135,971,666$


Page 35

B-35

Statement of Revenues, Expenditures, and Changes in Fund BalanceGovernmental Funds

For The Year Ended December 31, 2019

DistressedGeneral Roads Counties

RevenuesTaxes 22,946,540$ 13,623,849$ 1,736,123 Licenses & Permits 117,088 53,902 - Intergovernmental 5,752,017 15,574,423 - Charges for Services 3,929,461 888,424 - Fines & Forfeits 1,766,547 301 - Interest & Other Earnings 2,334,726 35,259 37,516 Miscellaneous 186,342 28,603 -

Total Revenues 37,032,721 30,204,761 1,773,639

ExpendituresCurrent:

General Government Services 15,876,336 - - Security of Persons & Property 19,734,097 - - Transportation - 18,930,716 - Natural & Economic Environment 523,502 115,903 1,003,033 Mental & Physical Health 630,721 - - Culture & Recreation 222,021 - -

Debt Service:Principal 51,002 9,829 - Interest & Other Debt Service 6,215 733 -

Capital Outlays 114,844 10,233,647 - Total Expenditures 37,158,738 29,290,828 1,003,033

Excess of Revenues Over (Under) Expenditures (126,017) 913,933 770,606

Other Financing Sources/(Uses)Lease Receipts - Capital 107,649 52,542 - Insurance Recoveries 150 - - Proceeds from Sale of Capital Assets 1,846,655 2,503,092 - Transfers-In 1,516,484 108,831 - Transfers-Out (2,518,615) (1,487,111) (78,770)

Total Other Financing Sources/(Uses) 952,323 1,177,354 (78,770)

Net Change in Fund Balance 826,306 2,091,287 691,836

Fund Balance - January 1 10,979,841 3,250,984 5,988,348 Fund Balance - December 31 11,806,147$ 5,342,271$ 6,680,184


Page 36

B-36

Statement of Revenues, Expenditures, and Changes in Fund BalanceGovernmental Funds


RevenuesTaxesLicenses & PermitsIntergovernmentalCharges for ServicesFines & ForfeitsInterest & Other EarningsMiscellaneous

Total Revenues


General Government ServicesSecurity of Persons & PropertyTransportationNatural & Economic EnvironmentMental & Physical HealthCulture & Recreation

Debt Service:PrincipalInterest & Other Debt Service

Capital OutlaysTotal Expenditures

Excess of Revenues Over (Under) Expenditures

Other Financing Sources/(Uses)Lease Receipts - Capital Insurance RecoveriesProceeds from Sale of Capital AssetsTransfers-InTransfers-Out

Total Other Financing Sources/(Uses)

Net Change in Fund Balance

Fund Balance - January 1Fund Balance - December 31


Other TotalCapital Governmental Governmental

Facilities Plan Funds Funds

3,554,957$ 3,558,020$ 45,419,489$ - 1,710,762 1,881,752

268,290 3,544,670 25,139,400 - 6,461,026 11,278,911 - 18,363 1,785,211

254,073 1,069,722 3,731,296 - 15,396 230,341

4,077,320 16,377,959 89,466,400

569,256 1,697,295 18,142,887 215,975 4,696,816 24,646,888

- - 18,930,716 - 1,765,478 3,407,916

579 5,942,440 6,573,740 16,537 1,427,158 1,665,716

- 1,322,514 1,383,345 - 320,051 326,999

135,521 481,720 10,965,732 937,868 17,653,472 86,043,939

3,139,452 (1,275,513) 3,422,461

- 45,639 205,830 - - 150 - 54,053 4,403,800 - 3,302,924 4,928,239

(1,173,455) (255,514) (5,513,465) (1,173,455) 3,147,102 4,024,554

1,965,997 1,871,589 7,447,015

10,573,389 10,414,780 41,207,34212,539,386$ 12,286,369$ 48,654,357$

Page 37

B-37

Reconciliation of the Statement of Revenues, Expenditures,and Changes in Fund Balance of Governmental Funds

Governmental FundsFor the Year Ended December 31, 2019

Net changes in fund balances - total governmental funds 7,447,015$

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets are depreciated over their estimated useful lives. 10,965,732

The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations) is to increase/decrease net position. (859,555)

Repayment of bond principal and accrued interest is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the governmental statement of net position. Issuance of debt in the governmental funds provides current financial resources to governmental funds, but is not included in the statement of activities. 1,180,923

Some revenues and expenditures reported in the statement of activities are not yet available or expensed and therefore are not reported as revenue or expenses in governmental funds. (3,375,204)

Internal service funds or activities are used by management to charge the cost of certain activities to individual funds. 2,385,637

Change in net position of governmental activities. 17,744,548$


To the Statement of Activities

Page 38

B-38

Budget-To-Actual Comparison StatementFor The Year Ended December 31, 2019


RevenuesTaxes 21,261,948$ 21,261,948 22,946,540$ 1,684,592$ Licenses & Permits 49,500 49,500 117,088 67,588Intergovernmental 5,226,715 5,666,744 5,751,816 85,072Charges for Services 3,303,611 3,516,692 3,923,461 406,769Fines & Forfeits 1,769,600 1,769,600 1,766,547 (3,053)Interest & Other Earnings 1,845,440 1,895,440 2,334,726 439,286Miscellaneous 32,325 163,896 186,342 22,446

Total Revenues 33,489,139 34,323,820 37,026,520 2,702,700


General Government Services 15,998,050 17,042,365 15,876,336 1,166,029Security of Persons & Property 19,596,500 20,169,982 19,734,097 435,885Natural & Economic Environment 451,223 510,347 465,117 45,230Mental & Physical Health 541,244 637,039 630,721 6,318Culture & Recreation 223,143 241,583 222,021 19,562

Debt Service:Principal 45,164 47,801 51,002 (3,201)Interest & Other Debt Service 555 555 6,215 (5,660)

Capital Outlays 550 7,750 114,844 (107,094)Total Expenditures 36,856,429 38,657,422 37,100,353 1,557,069

Excess of Revenues Over (Under) Expenditures (3,367,290) (4,333,602) (73,833) 1,145,631

Other Financing Sources/(Uses)Lease Receipts - Capital - - 107,649 107,649Insurance Recoveries - - 150 150Proceeds from Sale of Capital Assets 800,000 1,079,571 1,846,655 767,084Transfers-In 1,511,484 1,511,484 1,471,484 (40,000)Transfers-Out (2,614,528) (2,685,918) (2,518,615) 167,303

Total Other Financing Sources/(Uses) (303,044) (94,863) 907,323 1,002,186

Net Change in Fund Balance (3,670,334) (4,428,465) 833,490 5,261,955


11,776,876

3,343 15,000

Senior Services Fund 1990 10,928 11,806,147


General Fund Summary

Total Fund Balance - General Fund Balance

Flood Control Zone Fund 1250Cowlitz River Basin Subzone Fund 1260

Perspective Difference Reconciliation:Actual Fund Balance - Schedule of Revenues, Expenditures, And Changes in Fund Balance

The Following funds were budgeted as special revenue funds but do not meet the definition of such under GASB Statement No. 54 and; therefore, are accounted for within the General Fund:

Page 39

B-39

GENERAL FUND

Orginal BudgetFinal Amended

Budget Actual

Variance- Positive

(Negative)Commissioners - Legislative

General Government 817,236$ 822,310$ 745,577$ 76,733$ Principal 3,400 3,400 2,890 510 Interest & Other Debt Service - - 135 (135)

Total Commissioners - Legislative 820,636 825,710 748,602 77,108

AuditorGeneral Government 1,395,168 1,427,439 1,362,709 64,730 Principal 365 365 1,778 (1,413) Interest & Other Debt Service - - 3,186 (3,186)

Total Auditor 1,395,533 1,427,804 1,367,673 60,131

Auditor - ElectionsGeneral Government 306,323 343,623 317,548 26,075

Total Auditor - Elections 306,323 343,623 317,548 26,075

AssessorGeneral Government 1,872,194 1,944,291 1,815,090 129,201 Principal 3,100 3,100 3,022 78 Interest & Other Debt Service - - 73 (73)

Total Assessor 1,875,294 1,947,391 1,818,184 129,207

Board of EqualizationGeneral Government 11,651 11,673 9,877 1,796

Total Board of Equalization 11,651 11,673 9,877 1,796

TreasurerGeneral Government 865,624 907,945 886,966 20,979 Principal - - 2,090 (2,090) Interest & Other Debt Service - - 641 (641)

Total Treasurer 865,624 907,945 889,697 18,248

ClerkGeneral Government 1,257,152 1,272,962 1,227,002 45,960 Capital Outlay - - 7,195 (7,195) Principal 725 725 469 256 Interest & Other Debt Service - - 116 (116)

Total Clerk 1,257,877 1,273,687 1,234,783 38,904

Superior CourtGeneral Government 1,431,668 1,726,200 1,580,254 145,946 Principal - - 2,349 (2,349) Interest & Other Debt Service - - 45 (45)

Total Superior Court 1,431,668 1,726,200 1,582,649 143,551

District CourtGeneral Government 1,964,638 2,018,180 1,971,594 46,586 Principal 6,600 6,600 5,130 1,470 Interest & Other Debt Service - - 275 (275)

Total District Court 1,971,238 2,024,780 1,977,000 47,780

Expenditures by Department Budget-to-Actual Comparison StatementFor The Year Ended December 31, 2019

See Accompanying Notes to Financial StatementsPage 40

B-40

GENERAL FUND


Budget Actual

Variance- Positive

(Negative)


Prosecuting AttorneyGeneral Government 3,348,358 3,497,270 3,228,901 268,369 Principal 15,000 15,000 14,626 374 Interest & Other Debt Service - - 803 (803)

Total Prosecuting Attorney 3,363,358 3,512,270 3,244,329 267,941

Self InsuranceGeneral Government 238,933 240,743 211,212 29,531 Principal - - 851 (851) Interest & Other Debt Service - - 17 (17)

Total Self Insurance 238,933 240,743 212,079 28,664

Courts: Designated AccountsGeneral Government 1,561,832 1,882,389 1,696,725 185,664

Total Courts: Designated Accounts 1,561,832 1,882,389 1,696,725 185,664

Civil ServiceSecurity of Persons and Property 21,341 21,387 13,220 8,167

Total Civil Service 21,341 21,387 13,220 8,167

Disability BoardSecurity of Persons and Property 1,600 1,600 - 1,600

Total Disability Board 1,600 1,600 - 1,600

State ExaminerGeneral Government 70,000 70,000 24,537 45,463

Total State Examiner 70,000 70,000 24,537 45,463

Association DuesGeneral Government 25,950 25,950 24,722 1,228

Total Association Dues 25,950 25,950 24,722 1,228

Labor Relations/Human ResourcesGeneral Government 260,212 262,869 260,157 2,712 Security of Persons and Property 22,769 22,769 8,707 14,062 Principal - - 785 (785) Interest & Other Debt Service - - 17 (17)

Total Labor Relations/Human Resources 282,981 285,638 269,666 15,972

County AdministrationGeneral Government 342,979 355,589 328,317 27,272

Total County Administration 342,979 355,589 328,317 27,272

Boundary Review boardEconomic Environment 4,107 4,112 813 3,299

Total Boundary Review board 4,107 4,112 813 3,299

Central ServicesGeneral Government 13,937 13,937 12,504 1,433

Total Central Services 13,937 13,937 12,504 1,433

See Accompanying Notes to Financial Statements Page 41

B-41

GENERAL FUND


Budget Actual

Variance- Positive

(Negative)


SheriffSecurity of Persons and Property 8,092,928 8,469,032 8,198,718 270,314 Principal 5,168 5,168 4,743 425 Interest & Other Debt Service - - 425 (425)

Total Sheriff 8,098,096 8,474,200 8,203,886 270,314

JailSecurity of Persons and Property 8,182,794 8,327,568 8,162,760 164,808 Principal 6,406 6,406 5,847 559 Interest & Other Debt Service - - 269 (269)

Total Jail 8,189,200 8,333,974 8,168,876 165,098

JuvenileGeneral Government 300 300 - 300 Security of Persons and Property 3,490,068 3,554,626 3,523,334 31,292 Principal - - 1,953 (1,953) Interest & Other Debt Service - - 57 (57)

Total Juvenile 3,490,368 3,554,926 3,525,343 29,583

Air Pollution ControlEconomic Environment 23,933 24,333 24,332 1

Total Air Pollution Control 23,933 24,333 24,332 1

Animal ShelterEconomic Environment 422,683 480,402 439,972 40,430

Total Animal Shelter 422,683 480,402 439,972 40,430

Senior ServicesEconomic Environment 50,000 100,000 100,000 -

Total Senior Services 50,000 100,000 100,000 -

CoronerMental and Physical Health 491,744 538,539 530,722 7,817 Principal 2,400 2,400 1,678 722 Interest & Other Debt Service - - 92 (92)

Total Coroner 494,144 540,939 532,492 8,447

WSU ExtensionCulture and Recreation 223,143 241,583 222,022 19,561 Principal 2,000 2,000 2,792 (792) Interest & Other Debt Service - - 64 (64)

Total WSU Extension 225,143 243,583 224,879 18,704

Current Expense TransfersTransfers-Out 2,614,528 2,685,918 2,518,615 167,303

Total Current Expense Transfers 2,614,528 2,685,918 2,518,615 167,303


Page 42

B-42

GENERAL FUND


Budget Actual

Variance- Positive

(Negative)


Non-Budgetary ItemsCapital Outlay - - 107,649 (107,649)

Total Non-Budgetary Items - - 107,649 (107,649)

Total Expenditures 39,470,957 41,340,703 39,618,968 1,721,735

Totals By Function:General Government 15,784,155 16,823,670 15,703,692 1,119,978 Security of Persons and Property 19,811,500 20,396,982 19,906,739 490,243 Economic Environment 500,723 608,847 565,117 43,730 Mental and Physical Health 491,744 538,539 530,722 7,817 Culture and Recreation 223,143 241,583 222,022 19,561 Capital Outlay - - 114,844 (114,844) Principal 45,164 47,801 51,002 (5,838) Interest & Other Debt Service - - 6,215 (6,215) Transfers-Out 2,614,528 2,685,918 2,518,615 167,303

Total Expenditures 39,470,957 41,343,340 39,618,968 1,721,735


Page 43

B-43

Budget-to-Actual Comparison StatementFor The Year Ended December 31, 2019


RevenuesTaxes 13,415,000$ 13,415,000$ 13,623,849$ 208,849$ Licenses & Permits 43,000 43,000 53,902 10,902Intergovernmental 16,726,198 19,974,344 15,574,423 (4,399,921)Charges for Services 1,153,000 1,153,000 888,424 (264,576)Interest & Other Earnings 20,500 20,500 32,038 11,538Miscellaneous 500 500 28,603 28,103

Total Revenues 31,358,198 34,606,344 30,201,540 (4,404,804)

ExpendituresTransportation 21,509,672 21,871,375 18,930,716 2,940,659Economic Environment 116,790 116,790 115,903 887

Debt Service:Principal 6,729 6,729 9,829 (3,100)Interest & Other Debt Service 178 178 733 (555)

Capital Outlays 10,900,000 15,610,859 10,233,647 5,377,212Total Expenditures 32,533,369 37,605,931 29,290,828 8,315,103

Excess of Revenues Over (Under) Expenditures (1,175,171) (2,999,587) 910,712 3,910,299

Other Financing Sources/(Uses)Lease Receipts - Capital - 52,542 52,542Proceeds from Sale of Capital Assets 1,000,000 1,000,000 2,503,092 1,503,092Transfers-In 240,000 1,365,000 108,831 (1,256,169)Transfers-Out (1,501,522) (1,501,522) (1,487,111) 14,411

Total Other Financing Sources/(Uses) (261,522) 863,478 1,177,354 313,876

Net Change in Fund Balance (1,436,693) (2,136,109) 2,088,066 4,224,175

Fund Balance - January 1 3,107,003 3,107,003 3,107,003 -Fund Balance - December 31 1,670,310$ 970,894$ 5,195,069$ 4,224,175$

Beginning Balance was Restated to reflect Actual Fund Balance without Rolled Funds.

5,195,069

Paths & Trails Fund 1280 147,202

5,342,271


Perspective Difference Reconciliation:

Actual Fund Balance - Schedule of Revenues, Expenditures, And Changes in Fund Balance

The Following fund was budgeted as special revenue fund but does not meet the definition of such under GASB Statement No. 54 and; therefore, is accounted for within the Roads Fund:

Total Fund Balance - Roads Fund Balance Sheet

Special Revenue: Roads

Page 44

B-44

Budget-to-Actual Comparison StatementFor The Year Ended December 31, 2019

Variance withOriginal Final Amended Final Budget-Budget Budget Actual Amounts Positive (Negative)

RevenuesTaxes 1,470,000$ 1,470,000$ 1,736,123$ 266,123$ Interest & Other Earnings 45,000 45,000 37,516 (7,484)

Total Revenues 1,515,000 1,515,000 1,773,639 258,639


Economic Environment 1,225,000 3,475,000 1,003,033 2,471,967Total Expenditures 1,225,000 3,475,000 1,003,033 2,471,967

Excess of Revenues Over (Under) Expenditures 290,000 (1,960,000) 770,606 2,730,606

Other Financing Sources/(Uses)Transfers-Out (75,000) (75,000) (78,770) (3,770)

Total Other Financing Sources/(Uses) (75,000) (75,000) (78,770) (3,770)

Net Change in Fund Balance 215,000 (2,035,000) 691,836 2,726,836


Special Revenue: Distressed Counties


Page 45

B-45

Statement of Net PositionProprietary FundsDecember 31, 2019

Solid Waste Solid Waste Vader Water Packwood Utility Disposal District System Utility Airport

AssetsCurrent Assets:

Cash & Cash Equivalents 890,607$ 2,885,380$ 30,745$ 78,792$ Investments - - 12,278 -Receivables, Net 18 707,665 67,499 -Interest Receivable - - 19 -Due from Other Governmental Units 72,204 - 118,834 29,818Inventories - - - -Prepayments 4,537 - 1,013 2,749

Noncurrent Assets:Land 112,682 - 34,279 46,221Buildings & Structures, Net 303,067 - 50,502 887Other Improvements, Net 542,632 - 3,853,565 2,613,570Machinery & Equipment, Net 668,793 - 4,325 -Construction in Progress - - - -

Total Assets 2,594,540 3,593,045 4,173,059 2,772,037 Deferred Outflow of Resources:

Related to Pensions 78,015 - 6,833 -Related to OPEB 132,804 - 12,488 -

Total Deferred Outflow of Resources 210,819 - 19,321 -

LiabilitiesCurrent Liabilities:

Accounts/Vouchers Payable 61,403 198,441 63,299 4,929 Claims & Judgments Payable - - - -Retainage Payable 3,985 - - -Notes, Contracts, Leases Payable - - - -Interfund Loans Payable - - 49,858 -Due to Other Governmental Units - - 47,517 -Accrued Interest Payable - - 3,014 -Accrued Employee Benefits 58,701 - 7,042 -Custodial Accounts 2,054 1,739 25,201 57Landfill Closure and Postclosure Care Liability 74,300 - - -Total OPEB Liability 3,525 - 331 -

Noncurrent Liabilities:Compensated Absences 122,201 - 8,239 -Notes, Contracts, Leases Payable - - 849,656 -Incurred but Not Reported - - - -Landfill Closure and Postclosure Care Liability 364,360 - - -Net Pension Liability 327,371 - 38,634 -Total OPEB Liability 620,810 - 58,377 -

Total Liabilities 1,638,710 200,180 1,151,168 4,986 Deferred Inflow of Resources

Related to Leases - - - -Related to Pensions 193,789 - 21,364 -

52,633 - 4,949 -Total Deferred Inflow of Resources 246,422 - 26,313 -

Net PositionNet Investment in Capital Assets 1,627,174 - 2,995,640 2,660,678

- - 12,278 -Restricted for Special Assessments - - - -Unrestricted (706,947) 3,392,865 6,981 106,373

Total Net Position 920,227$ 3,392,865$ 3,014,899$ 2,767,051$


Business-type Activity-Enterprise Funds

Restricted for Debt Service, Risk Management & County Insurance

Related to Other Postemployment Benefits

Page 46

B-46

Statement of Net PositionProprietary FundsDecember 31, 2019

AssetsCurrent Assets:

Cash & Cash EquivalentsInvestmentsReceivables, NetInterest ReceivableDue from Other Governmental UnitsInventoriesPrepayments

Noncurrent Assets:LandBuildings & Structures, NetOther Improvements, NetMachinery & Equipment, NetConstruction in Progress

Total AssetsDeferred Outflow of Resources:

Related to PensionsRelated to OPEB

Total Deferred Outflow of Resources


Accounts/Vouchers PayableClaims & Judgments PayableRetainage PayableNotes, Contracts, Leases Payable Interfund Loans PayableDue to Other Governmental UnitsAccrued Interest PayableAccrued Employee BenefitsCustodial AccountsLandfill Closure and Postclosure Care LiabilityTotal OPEB Liability

Noncurrent Liabilities:Compensated AbsencesNotes, Contracts, Leases PayableIncurred but Not ReportedLandfill Closure and Postclosure Care LiabilityNet Pension LiabilityTotal OPEB Liability

Total LiabilitiesDeferred Inflow of Resources

Related to LeasesRelated to Pensions

Total Deferred Inflow of Resources

Net PositionNet Investment in Capital Assets

Restricted for Special AssessmentsUnrestricted

Total Net Position


Restricted for Debt Service, Risk Management & County Insurance

Related to Other Postemployment Benefits

GovernmentalActivities -

Other Internal ServiceEnterprise Funds Totals Funds

289,071$ 4,174,595$ 5,819,429$ - 12,278 11,685,855- 775,182 6,474 - 19 41,165

5,930 226,786 41,577 - - 1,003,761

5,743 14,042 1,197,250

21,000 214,182 1,624,866 13,645 368,101 3,236,306

664,089 7,673,856 134,876 15,154 688,272 7,772,918

583,705 583,705 -1,598,337 14,731,018 32,564,477

1,947 86,795 210,722 480 145,772 176,992

2,427 232,567 387,714

13,483 341,555 316,016 - - 174,983 - 3,985 -- - 3,181

69,000 118,858 -- 47,517 -- 3,014 -

6,029 71,772 181,131 8,083 37,134 10,791

- 74,300 - 13 3,869 4,698

- 130,440 457,077- 849,656 -- - 1,684,823- 364,360 -

8,133 374,138 995,331 2,245 681,432 827,372

106,986 3,102,030 4,655,403

4,000 4,000 - 5,573 220,726 569,434

190 57,772 70,1459,763 282,498 639,579

1,228,593 8,512,085 12,765,785

- 12,278 456,631- - -

255,422 3,054,694 14,434,793

1,484,015$ 11,579,057$ 27,657,209$

Business-type

Page 47

B-47

Statement of Revenues, Expenses, and Changes in Net PositionProprietary Funds


Solid Waste Solid Waste Vader Water PackwoodUtility Disposal Dist System Utility Airport

Operating RevenuesCharges for Services 2,471,285$ 7,324,742$ 344,020$ -$ Equipment Rental - - - -Insurance Premiums and Recoveries - - - -Other Operating Revenue 210 49,492 - 1,575

Total Operating Revenues 2,471,495 7,374,234 344,020 1,575

Operating Expenses - - - -Personnel - Salaries, Wages, Benefits 1,426,630 - 137,147 -Repairs and Maintenance 182,556 113 11,400 1,239Supplies & Expenses 68,038 - 15,854 101Services & Other Charges 1,001,422 7,291,835 59,004 28,509Depreciation, Amortization, & Depletion 119,777 - 122,327 138,768Risk Transfer payments - - - -Insurance Claims and Expenses - - - -

Total Operating Expenses 2,798,423 7,291,948 345,732 168,617Operating Income (Loss) (326,928) 82,286 (1,712) (167,042)

Non-Operating Revenues (Expenses)Interest and Investment Revenue (Expense) - - (15,848) -Grants/Contributions - 2,500 - 212Other Non-Operating Revenue (Expenses) 22,308 3,174 21,722 -Gain (Loss) on Disposal of Capital Assets - - - -

Total Non-Operating Revenues (Expenses) 22,308 5,674 5,874 212Income (Loss) Before Contributions and Transfers (304,620) 87,960 4,162 (166,830)

Capital Contrib. - Private/Local/Governmental - - - -Grants - Capital 127,299 - 346,235 31,458Transfer In (Out) 147,600 - - -Extraordinary Item - - - -

Change in Net Position (29,721) 87,960 350,397 (135,372)Net Position-Beginning 612,388 3,304,905 2,664,502 2,902,423Prior Period Adjustment - Correction of errors 337,560 -Net Position-Ending 920,227$ 3,392,865$ 3,014,899$ 2,767,051$


Page 48

B-48

Statement of Revenues, Expenses, and Changes in Net PositionProprietary Funds


Operating RevenuesCharges for ServicesEquipment RentalInsurance Premiums and RecoveriesOther Operating Revenue

Total Operating Revenues

Operating ExpensesPersonnel - Salaries, Wages, BenefitsRepairs and MaintenanceSupplies & ExpensesServices & Other ChargesDepreciation, Amortization, & DepletionRisk Transfer paymentsInsurance Claims and Expenses

Total Operating ExpensesOperating Income (Loss)

Non-Operating Revenues (Expenses)Interest and Investment Revenue (Expense)Grants/ContributionsOther Non-Operating Revenue (Expenses)Gain (Loss) on Disposal of Capital Assets

Total Non-Operating Revenues (Expenses)Income (Loss) Before Contributions and Transfers

Capital Contrib. - Private/Local/GovernmentalGrants - CapitalTransfer In (Out)Extraordinary Item

Change in Net PositionNet Position-BeginningPrior Period Adjustment - Correction of errorsNet Position-Ending


GovernmentalActivities -

Other Enterprise Enterprise-type Internal ServiceFunds Totals Funds

51,053$ 10,191,100$ 5,358,504$ - - 4,339,103 - - 2,142,227

17,917 69,194 - 68,970 10,260,294 11,839,834

19,043 1,582,820 4,066,892 - 195,308 274,517

45,999 129,992 2,295,009 29,417 8,410,187 2,139,678

117,821 498,693 1,360,766 - - 1,053,730 - - 701,288

212,280 10,817,000 11,891,880 (143,310) (556,706) (52,046)

- (15,848) 222,026 - 2,712 2,701

300 47,504 22,820 - - 128,757

300 34,368 376,304 (143,010) (522,338) 324,258

- - 918,962 5,906 510,898 25,622

63,000 210,600 374,627 - - 742,168

(74,104) 199,160 2,385,637 1,558,119 11,042,337 25,271,572

- 337,560 -1,484,015$ 11,579,057$ 27,657,209$

Page 49

B-49

Statement of Cash FlowsProprietary Funds


Solid Waste Utility

Solid Waste Disposal Dist

Vader Water System Utility

Packwood Airport

Cash Flows from Operating Activities:Cash Received from Customers 2,303,369$ 6,999,433$ 307,433$ 1,575$ Cash Received from Premiums/Recoveries - - - - Cash Paid to Employees (1,372,069) - (176,154) - Cash Paid for Goods & Services (1,329,325) (7,256,112) (116,799) (30,424) Cash Paid for Risk Transfer - - - -Cash Paid for Claims - - - -Other Non-Operating Revenues 22,308 3,174 21,722 211

Net Cash Provided (Used) by Operating Activities (375,717) (253,505) 36,202 (28,638)

Cash Flows from Non-Capital Financing Activities:Proceeds from Interfund Loan - - 42,000 -Operating Grants/Contributions Received 150,281 2,500 - -Transfers-In 147,600 - - -

Cash Provided (Used) by Financing Activities 297,881 2,500 42,000 -

Cash Flows from Capital and Related Financing Activities:

Payments of Interfund Loan & Interest - - - -Principal Paid on Capital Debt - - (44,262) -Interest Paid on Capital Debt - - (15,831) -Proceeds from Sale/Disposal of Capital Assets - - - -Acquisition/Construction of Capital Assets (235,261) - (403,028) (200)Capital Grants Received 127,299 - 422,938 11,560

Net Cash Provided (Used) by Capital and Related Financing Activities (107,962) - (40,183) 11,360

Cash Flows from Investing Activities:Receipt of Interest - - 202 -Sale of Investment Securities 631,933 1,839,950 4,502 56,401Purchase of Investment Securities - - (12,278) -

Cash Provided by Investing Activities 631,933 1,839,950 (7,574) 56,401

Net Increase (Decrease) in Cash & Cash Equivalents 446,135 1,588,945 30,445 39,123Cash & Cash Equivalents at Beginning of Year 444,472 1,296,435 300 39,669Cash & Cash Equivalents at End of Year 890,607$ 2,885,380$ 30,745$ 78,792$


Page 50

B-50



Solid Waste Utility

Solid Waste Disposal Dist

Vader Water System Utility

Packwood Airport

Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities:

Net Operating Income (Loss) (326,928)$ 82,286$ (1,712)$ (167,042)$

Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Used by Operations:

Depreciation Expense 119,777 - 122,327 138,768Operating Grants (168,145) - - -Prior period adjustment 337,560Other Non-Operating Revenue 22,308 3,174 21,722 211Change in Assets and Liabilities:

(Increase) Decrease in Receivables 19 (375,246) 3,939 -(Increase) Decrease in Inventories - - - -(Increase) Decrease in Prepaids (722) 113 1,614 (532)Increase (Decrease) in Payables (236,124) 36,168 (95,531) (43)

Change in Deferred Inflows and Outflows:(Increase) Decrease in Deferred Outflows-Pensions and OPEB (140,272) - (11,467) -Increase (Decrease) in Deferred Inflows-Pensions and OPEB 16,810 - (4,690) -

Total Adjustments (48,789) (335,791) 37,914 138,404

Net Cash Provided (Used) by Operating Activities (375,717)$ (253,505)$ 36,202$ (28,638)$

Noncash Investing, Capital, & Financing Activities:Contributions of Capital Assets -$ -$ -$ -$

Contributions of Non-Capital Assets from Local Sources - - - - Gain (Loss) on Disposal of Capital Assets - - - -


Page 51

B-51



Cash Flows from Operating Activities:Cash Received from CustomersCash Received from Premiums/RecoveriesCash Paid to EmployeesCash Paid for Goods & ServicesCash Paid for Risk TransferCash Paid for ClaimsOther Non-Operating Revenues

Net Cash Provided (Used) by Operating Activities

Cash Flows from Non-Capital Financing Activities:Proceeds from Interfund LoanOperating Grants/Contributions ReceivedTransfers-In

Cash Provided (Used) by Financing Activities

Cash Flows from Capital and Related Financing Activities:

Payments of Interfund Loan & InterestPrincipal Paid on Capital DebtInterest Paid on Capital DebtProceeds from Sale/Disposal of Capital AssetsAcquisition/Construction of Capital AssetsCapital Grants Received

Net Cash Provided (Used) by Capital and Related Financing Activities

Cash Flows from Investing Activities:Receipt of InterestSale of Investment SecuritiesPurchase of Investment Securities

Cash Provided by Investing Activities

Net Increase (Decrease) in Cash & Cash EquivalentsCash & Cash Equivalents at Beginning of YearCash & Cash Equivalents at End of Year

Other Enterprise

Funds Totals

Governmental Activities - Internal

Service Funds

71,777$ 9,683,587$ 9,668,316$ - - 2,165,644

(29,343) (1,577,566) (4,579,457)(64,249) (8,796,909) (4,858,710)

- - (1,120,733) - - (699,928)

300 47,715 764,989 (21,515) (643,173) 1,340,121

- 42,000 - - 152,781 2,701

63,000 210,600 374,627 63,000 405,381 377,328

- - (49,442) - (44,262) (12,618) - (15,831) (128) - - 152,524

(6,218) (644,707) (617,739) 118,323 680,120 25,622

112,105 (24,680) (501,781)

- 202 221,463 79,538 2,612,324 13,487,818

- (12,278) (11,685,855) 79,538 2,600,248 2,023,426

233,128 2,337,776 3,239,094 55,943 1,836,819 2,580,335289,071$ 4,174,595$ 5,819,429$


Page 52

B-52



Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities:

Net Operating Income (Loss)

Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Used by Operations:

Depreciation ExpenseOperating GrantsPrior period adjustmentOther Non-Operating RevenueChange in Assets and Liabilities:

(Increase) Decrease in Receivables(Increase) Decrease in Inventories(Increase) Decrease in PrepaidsIncrease (Decrease) in Payables

Change in Deferred Inflows and Outflows:(Increase) Decrease in Deferred Outflows-Pensions and OPEBIncrease (Decrease) in Deferred Inflows-Pensions and OPEB

Total Adjustments

Net Cash Provided (Used) by Operating Activities

Noncash Investing, Capital, & Financing Activities:Contributions of Capital Assets

Contributions of Non-Capital Assets from Local Sources Gain (Loss) on Disposal of Capital Assets


Other Enterprise

Funds Totals

Governmental Activities - Internal

Service Funds

(143,310)$ (556,706)$ (52,046)$

117,821 498,693 1,360,766- (168,145) -

337,560 - 300 47,715 764,989

- - (371,288) (5,874) - - (27,921)

(749) (276) (232,068) 6,366 (289,164) (297,479)

691 (151,048) (188,355) (2,634) 9,486 18,109

121,795 (86,467) 1,392,167

(21,515)$ (643,173)$ 1,340,121$

-$ -$ 918,962$ - - - - - (23,767)

Page 53

B-53

Statement of Net PositionFiduciary FundsDecember 31, 2019

FundsAssets

Current Assets:Cash & Cash Equivalents 23,675,593$ Investments 108,777,856Taxes Receivable-Current 2,544,375Interest Receivable 172,621

Total Assets 135,170,445$


Warrants Payable -Accounts/Vouchers Payable -Custodial Accounts 135,170,445

Total Liabilities 135,170,445$


Page 54

B-54

NOTES TO FINANCIAL STATEMENTS December 31, 2019

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Lewis County have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described below. A. Reporting Entity

Lewis County was created on December 19, 1845, under the control of the Provisional Government of Oregon and operates under the laws of the state of Washington applicable to a Third Class County. Lewis County is a general purpose government and provides the following services according to the Constitution and laws of the State of Washington: public safety, road improvement, parks, judicial administration, health and social services, and general administrative services. Lewis County is governed by an elected board of three county commissioners. These financial statements include the financial position and results of operations for all fund types and its component unit. The blended component unit, although a legally separate entity is, in substance, part of the County’s operations and so data from this unit is combined with data of the primary government. The blended component unit has a December 31 year-end. Blended Component Unit The Solid Waste Disposal District No. 1 of Lewis County is a quasi-municipal corporation, and an independent taxing authority and district, which is responsible for implementation of a comprehensive solid waste management plan for the County and other incorporated cities and towns within the county. In order to implement the plan and related goals, the County and the incorporated cities and towns within the county have agreed, through an interlocal agreement to the formation of the District and transfer of certain responsibilities to the District. Among obligations transferred to the District is the obligation to make funds available for the closure, post-closure and remediation activities at the Centralia Landfill. The District has the authority to provide for disposal of solid wastes within the boundaries of Lewis County. The District is governed by a three-member board, which consists of the three county commissioners. The District is reported as an enterprise fund.

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component unit. 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 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. Our policy is not to allocate indirect costs to 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 or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function of segment. Internally dedicated resources are reported as general revenues rather than program revenues. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Page 55

B-55


Separate financial statements are provided for governmental funds and proprietary funds. Fiduciary funds are reported in aggregate and are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise 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 are the proprietary fund financial statements. 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, licenses, and interest associated within the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the county. The county reports the following major governmental funds:

The General Fund (Current Expense) is the county’s primary operating fund. It accounts for all financial resources of the general government, except those required or elected to be accounted for in another fund. The Road Fund accounts for the design, construction and maintenance of county roads. The main sources of revenue for the Road Fund include taxes and intergovernmental grants and contributions. The Distressed Counties Fund is used to account for .09% of the state sales tax for the purpose of financing public facilities and infrastructure related to economic development.

The Capital Facilities Plan Fund is used to account for the ½ of 1% real estate excise tax to be used to finance capital improvements and capital projects including debt service for the capital facilities plan. This fund is also used to account for the one-tenth of 1% sales and use tax to be used for the jail and juvenile detention facilities.

The county reports the following major proprietary funds:

The Solid Waste Utility Fund is used to account for the activities of the solid waste transfer station located in Centralia. Activities include waste disposal and transfer, code compliance, and recycling, including education. The main source of revenue for the utility is from contractual services with the Solid Waste Disposal District No. 1. The Solid Waste Disposal District Fund is used to account for activity of Lewis County Solid Waste Disposal District No. 1 and operation of the solid waste transfer station in Centralia. The main source of revenue for the District is from charges to customers for garbage removal services (tipping fees).

Page 56

B-56


The Vader Water System Utility Fund is used to account for activity of the public water system serving 369 customers (commercial and residential). The 1,160-acre service area includes the City of Vader, their UGA, and surrounding county lands. The Utility is supported by water sales revenue. Effective May 1, 2015, the water system was transferred to Lewis County per Superior Court Order No. 10-2-01449-5. The Packwood Airport Fund accounts for activity of the airport located in Packwood, WA. The main source of revenue for the airport is from capital grants.

Additionally, the county reports the following fund types:

Internal service funds account for operations that provide goods and services to other departments or funds of the county or to other government units on a cost-reimbursement basis. The County’s internal service funds include the following intergovernmental services: equipment rental, risk management, pits and quarries, facilities, county insurance, radio services, and information technology services. The agency funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. These funds account for deposits that are temporarily held for other entities prior to disbursement. Disbursement is per instructions and approval by the respective agency’s authoritative body.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the county’s enterprise funds and of the county’s internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. D. Budgetary Information

1. Scope of Budget Annual appropriated budgets are adopted for all funds on a basis consistent with generally accepted accounting principles. Annual budgets are adopted by the legislative authority, being the Board of County Commissioners (BOCC), at the fund level, except in the general fund, where expenditures may not exceed appropriations at the department level. The budget sets legal authority for expenditures at these levels. Funds that do not qualify as Special Purpose Funds per GASB Statement No. 54 are included in a reconciliation on the respective budget to actual statement. All annual appropriations lapse at fiscal year-end. The County does not employ encumbrance accounting. 2. Adoption of the Original Budget The County’s budget is adopted according to the procedures mandated by Washington State law in the Revised Code of Washington (RCW) title/chapter 36.40. After two public hearings, the 2019 budget was adopted by the BOCC on Monday, December 3, 2018. 3. Amending the Budget

Page 57

B-57


The budget, as adopted, constitutes the legal authority for expenditures. Any revisions that alter the total expenditures of a fund or that affect the number of authorized employee positions, salary ranges, or other conditions of employment must be approved by the BOCC.

When the county commission determines that it is in the best interest of the county to increase or decrease the appropriation for a particular fund or department, it may do so by resolution approved by a simple majority after holding one public hearing. The financial statements contain the original and final budget information for the general and major funds. The original budget is the first complete appropriated budget. The final budget is the original budget adjusted by all reserves, transfers, allocations, supplemental appropriations, and other legally authorized changes applicable for the fiscal year. The budget amounts shown in the combined financial statements are the final authorized amounts as revised during the year. 4. Excess of Expenditures Over Appropriations During the year there were no instances of overspending in the General Fund or annually budgeted Special Revenue Funds. 5. Deficit Fund Balance/Net Position During fiscal year 2019, the Facilities internal service fund incurred an ending deficit in net position in the amount of $505,865, a decrease over the prior year’s deficit of $749,996. The deficit in the fund is primarily due to the implementation of GASB 68 and GASB 75 in prior years. In 2019, a net pension liability of $301,954 and a total OPEB liability of $57,579 were allocated to the fund, however these are non-cash entries. The fund’s actual, cash expenditures did not exceed revenue. E. Assets, Liabilities, Fund Balance, Net Position 1. Cash and Cash Equivalents It is the County’s policy to invest all temporary cash surpluses. At December 31, 2019, all cash and cash equivalents were cash on hand and demand deposits with average maturities as noted in Note 3. This amount is classified on the balance sheet as cash and cash equivalents in various funds. Income on pooled investments is allocated pursuant to county Resolution No. 14-289. Cash applicable to a particular fund is readily identifiable. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing securities and summarized by fund type in the combined balance sheet.

The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balances maintained during 2019 were $5,934,125. For purposes of the statement of cash flows, the proprietary fund types consider all highly liquid investments, including restricted assets, with a maturity of three months or less when purchased to be cash equivalents, except for certificates of deposit and deposits with fiscal agents. 2. Investments Investments for the county are reported at amortized cost. The State Treasurer’s Local Government Investment Pool (LGIP) operates in accordance with appropriate state laws and regulations (See Deposits and Investments Note No. 3).

Page 58

B-58


3. Receivables

Taxes receivable consist of property taxes and related interest and penalties (See Property Taxes Note No. 4). Accrued interest receivable consists of amounts earned on investments, notes, and contracts at the end of the year. Special assessments are recorded when levied. Special assessments receivable consist of current and delinquent assessments and related interest and penalties. Deferred assessments on the fund financial statements consist of unbilled special assessments that are liens against the property benefited. As of December 31, 2019, $194 of special assessments receivable were delinquent. Customer accounts receivable consist of amounts owed from private individuals or organizations for goods and services including amounts owed for which billings have been prepared by not paid by the end of the fiscal year. Notes and contracts receivable consist of amounts owed on open accounts from private individuals, organizations, or other governmental entities for goods and services rendered or loans. 4. Amounts Due to and from Other Funds and Governments, Interfund Loans and Advances Receivable Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “interfund loans receivable/payable” or “advance to/from other funds.” All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” A separate schedule of interfund loans receivable and payable is furnished in Note 13 – Interfund Balances and Transfers. 5. Inventories and Prepaid Items

Inventories in governmental funds consist of expendable supplies held for consumption. With the exception of receipt books and banking deposit bags in the general fund and excess culverts purchased in the Roads fund, the cost is recorded as expenditure at the time individual inventory items are purchased. These items in the general and roads funds are valued at cost using the first-in/first-out (FIFO) method, which approximates the market value. The Nonspendable portion of fund balance includes the ending value of inventory to indicate that a portion of fund balance is not available for future expenditures. A comparison to market value is not considered necessary. Inventories in the Equipment Rental and Revolving Fund 501 are valued at cost using the first-in/first-out (FIFO) method. All other proprietary funds are valued by the weighted average method which approximates the market value. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 6. Restricted Net Position

Restricted net position in the County Insurance fund contains resources for self-insurance programs held in internal service funds. In the internal service funds, restricted cash and investments at year-end were:

Fund Cash InvestmentsCounty Insurance -$ 456,631$

Page 59

B-59


7. Capital Assets

Capital assets, which include land, buildings, improvements to land and buildings, machinery and equipment, infrastructure, construction in progress, and intangible assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets, other than infrastructure assets, are defined by the county as assets with an initial, individual cost of more than $5,000. Accordingly, the amounts spent for the construction or acquisition of infrastructure assets are capitalized and reported in the government-wide financial statements for amounts greater than $50,000. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Costs for additions or improvements to capital assets are capitalized when they increase the effectiveness or efficiency of the asset. All land, including land use rights with indefinite lives acquired with the purchase of the underlying land, and ancillary costs is capitalized regardless of cost or value. The costs for normal maintenance and repairs are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant, and equipment of the primary government, is depreciated using the straight-line method over the following estimated useful lives:

Machinery and equipment purchased on capital leases are treated as capital assets, indicating a constructive or actual transfer of the benefits and risks of ownership to the county, and are valued at the present value of the minimum lease payments required by contract.

8. Compensated Absences

Compensated absences are absences for which employees will be paid, such as vacation and sick leave. Vacation pay, which may accumulate up to 240 or 360 hours depending on the collective bargaining agreement, is payable upon resignation, retirement, or death. Sick leave may accumulate up to 1,320 hours. Fifty percent of outstanding sick leave to a maximum of 360 hours is payable upon resignation, retirement, or death. 9. Other Accrued Liabilities These accounts consist of accrued wages and accrued employee benefits. 10. Long-term Debt: See Long-term Debt Note No. 11 In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the straight-line interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing

Assets YearsAutos, Computers, Office Equipment 3 - 7Heavy Equipment 8 -20Buildings, Land Improvements 40Infrastructure 15 - 60

Page 60

B-60


uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 11. Unearned Revenues This account includes amounts recognized as receivables, including amounts due from other governments, which cannot be classified as revenues and amounts collected prior to recognition criteria being met. 12. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of all state sponsored pension plans and additions to/deductions from those plans’ fiduciary net position have been determined on the same basis as they are reported by the Washington State Department of Retirement Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 13. Fund Balance Classification In the fund financial statements, governmental funds classify fund balance as Nonspendable, Restricted, Committed, Assigned, or Unassigned. 14. Fund Balance Details

a) Nonspendable: Portion that cannot be spent due to form (prepaid items, inventories, long-term receivables) or must be maintained intact due to legal or contractual requirements.

b) Restricted: Portion with externally enforceable limitations; such as those imposed by creditors, grantors, or laws of other governments.

c) Committed: Portion with limitations imposed by formal action (Resolution) by the Board of County Commissioners.

d) Assigned: Portion with limitations resulting from intended use as established by the Board of County Commissioners or their designee(s).

e) Unassigned: Portion in the General Fund (Current Expense) in excess of Nonspendable, Restricted, Committed, and Assigned; deficit in Special Revenue Funds.

Lewis County has not adopted a spending policy; therefore, it is presumed that the order of spending is restricted fund balance then, committed fund balance then, assigned fund balance, and last unassigned fund balance.

Page 61

B-61


15. Fund Balances

16. Accounting and Reporting Changes In 2019 the Senior Services Fund No. 1990 was rolled to the General Fund for financial reporting purposes. This fund no longer qualifies as a special revenue fund per GASB Statement No. 54. The General Fund’s beginning fund balance was restated in the Statement of Revenues, Expenditures, and Changes in Fund Balance to include the Senior Services fund.

General Fund Roads

Distressed Counties

Capital Projects

Special Revenue Debt Service

Capital Facilities Plan Total Funds

Fund Balances:Nonspendable:

Loans Receivable 190,858 40,712 991,523 - - - - 1,223,093 Inventory 1,382 76,466 - - - - - 77,848 Prepaids 80,625 21,548 - - 128,841 - - 231,014 Total Nonspendable 272,865 138,726 991,523 - 128,841 - - 1,531,955

Restricted:Debt Service - - - - - 16,926 - 16,926 General Government & Judicial 241,496 - - - 864,137 - 10,958,242 12,063,875 Public Safety 278,949 - - - 263,143 - - 542,092 Transportation - 147,202 - - - - - 147,202 Natural & Economic Environment 43,933 - 5,110,721 130,000 1,172,135 - - 6,456,789 Social Services & Physical Health - - - - 2,179,670 - - 2,179,670 Public Services - - - - 2,231,751 - - 2,231,751 Total Restricted 564,378 147,202 5,110,721 130,000 6,710,836 16,926 10,958,242 23,638,305

Committed:General Government Services - - - - 33,680 - - 33,680 Security of Persons & Property - - - - - - - - Utilities & Environment - - - - - - - - Transportation - - - - - - - - Natural & Economic Environment - - - 496,059 - - - 496,059 Mental & Physical Health - - - - - - - - Culture & Recreation - - - - - - - - Public Services - - - - - - - - Capital Projects - - - - - - - - Total Committed - - - 496,059 33,680 - - 529,739

Assigned:General Government & Judicial - - - - 71,960 - - 71,960 Public Safety - - - - 865,032 - - 865,032 Utilities - - - - - - - - Transportation - 5,056,343 - - - - - 5,056,343 Natural & Economic Environment 18,343 - 577,940 - 139 - - 596,422 Social Services & Physical Health - - - - 374,854 - - 374,854 Culture & Recreation 10,928 - - - 90,264 - - 101,192 Public Services - - - - 1,285,016 - - 1,285,016 Capital Projects - - - 2,146,495 - - 1,581,144 3,727,639 Total Assigned 29,271 5,056,343 577,940 2,146,495 2,687,265 - 1,581,144 12,078,458

Unassigned: 10,939,633 (63,732) 10,875,901 Total Fund Balances: 11,806,147 5,342,271 6,680,184 2,772,554 9,496,889 16,926 12,539,386 48,654,357

Page 62

B-62


NOTE 2 - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position.

The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. The details of the difference between fund balance and net position are as follows:

Fund balances - total governmental funds 48,654,357$

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

Deferred outflows related to refunding of debt, pensions, and other postemployment benefits are not financial resources and therefore not reported in the governmental funds 5,247,452

Capital and net pension assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. 99,394,691

Some receivable balances are not yet available and are not reported as revenue in the governmental funds. 1,993,597

Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. (31,931,984)

Net pension obligation is reported as a liability in the governmental activities and is not considered to represent a financial liability, therefore, it is not reported in the governmental funds. (8,797,343)

Internal service funds are used by management to charge the costs of certain activities such as insurance, fleet, facilities maintenance, radio, and information services to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. 27,480,217

Revenue, such as property taxes, are recorded as deferred inflows of resources in the governmental funds because they are not current financial resources are accrued under the economic resources basis of accounting and recorded on the statement of net position. 872,396 Deferred inflows related to pensions and other postemployment benefits not reported in the governmental funds are reported in the statement of net position. (6,941,717)

Net Position of government activities 135,971,666$

Page 63

B-63


B. Explanation of Certain Differences Between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-Wide Statement of Activities

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. The details of the difference between the net changes in fund balances and net position are as follows:

NOTE 3 – DEPOSITS AND INVESTMENTS

A. Deposits The County’s deposits and certificates of deposit are entirely covered by Federal Depository Insurance Corporation (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). B. Investments The county maintains an internal cash pool for idle cash that has not been invested for the benefit of specific funds. All interest earnings from this pool are credited to the General Fund. Cash balances of the individual funds constitute a portion of the Local Government Investment Pool and are reported on the balance sheet as Cash and Cash Equivalents or

Net changes in fund balances - total governmental funds 7,447,015$

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

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets are depreciated over their estimated useful lives. 10,965,732

The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations) is to increase/decrease net position. (859,555)

Repayment of bond principal and accrued interest is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the governmental statement of net position. Issuance of debt in the governmental funds provides current financial resources to governmental funds, but is not included in the statement of activities. 1,180,923

Some revenues and expenditures reported in the statement of activities are not yet available or expensed and therefore are not reported as revenue or expenses in governmental funds. (3,375,204)

Internal service funds or activities are used by management to charge the cost of certain activities to individual funds. 2,385,637

Change in net position of governmental activities. 17,744,548$

Page 64

B-64


Investments depending on the maturity of the underlying investments. In addition, certain investments are held separately by several county funds and reported accordingly. As of December 31, 2019, the county had the following investments:

Of the investments listed above, $35,840,242, are investments held by County funds. The remainder of the investments are held in fiduciary funds for outside agencies and invested in the Local Government Investment Pool along with County funds. The calculation of realized gains and losses is independent of a calculation of the net change in the fair value of investments. The difference between the carrying value and market value is the unrealized gain (loss) on investments. The County is a participant in the Local Government Investment Pool was authorized by Chapter 294, Laws of 1986, and is managed and operated by the Washington State Treasurer. The State Finance Committee is the administrator of the statute that created the pool and adopts rules. The State Treasurer is responsible for establishing the investment policy for the pool and reviews the policy annually and proposed changes are reviewed by the LGIP advisory Committee. Investments in the LGIP, a qualified external investment pool, are reported at amortized cost which approximates fair value. The LGIP is an unrated external investment pool. The pool portfolio is invested in a manner that meets the maturity, quality, diversification and liquidity requirements set forth by the GASBS 79 for external investments pools that elect to measure, for financial reporting purposes, investments at amortized cost. The LGIP does not have any legally binding guarantees of share values. The LGIP does not impose liquidity fees or redemption gates on participant withdrawals. The Office of the State Treasurer prepares a stand-alone LGIP financial report. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at http://www.tre.wa.gov. Interest Rate Risk In accordance with its investment policy, the county manages its exposure to declines in fair values by limiting the maximum maturity of an individual investment in its investment portfolio to less than sixty months.

Investment Type:Carrying Amount Fair Value

U.S. Gov't Securities 12,800,429$ 12,915,242$ Municipal Bonds 2,776,633 2,777,038 Subtotal - Investments Subject to Credit Risk Classification 15,577,062 15,692,280

State Treasurer's Investment Pool 10,817,196 10,817,196 Bank Deposits 118,223,840 118,223,840 Subtotal - Investments Not Subject To Credit Risk Classification 129,041,036 129,041,036

Total Investments 144,618,098$ 144,733,316$

Page 65

B-65


Credit Risk Washington State statutes and county investment policy authorize the county to invest in obligations of the U.S. Treasury, U.S. Government agencies and instrumentalities, banker’s acceptances, primary certificates of deposit issued by qualified public depositories, the state treasurer’s Local Government Investment Pool (LGIP), municipal bonds issued by Washington State or its local governments, and repurchase agreements collateralized by any previously authorized investments. Accordingly, credit risk, if any, is extremely limited. The ratings of debt securities as of December 31, 2019 are:

Investments Measured at Fair Value The County measures and reports investments at fair value using the valuation input hierarchy established by generally accepted accounting principles, as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities; Level 2: These are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets

or liabilities in markets that are not active, or other than quoted prices that are not observable; Level 3: Unobservable inputs for an asset or liability.

Investments Subject to Credit Risk Classification (U.S. Gov't Securities and Municipal Bonds) are Level 1 inputs and are valued using quoted market prices. Investments Not Subject to Credit Risk Classification (State Treasurer's Investment Pool, Bank Deposits and Time Deposits) are not subject to fair value level disclosure. NOTE 4 – PROPERTY TAXES The county treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. Collections are distributed as collected and those collections requiring remittance are distributed to other jurisdictions after the end of each month.

Property Tax Calendar January 1 Taxes are levied and become an enforceable lien against properties. February 14 Tax bills are mailed. April 30 First of two equal installment payments is due. May 31 Assessed value of property is established for next year's levy at 100% of market value. October 31 Second installment is due.

Property tax is recorded as a receivable and revenue when levied. Property tax collected in advance of the fiscal year to which it applies is recorded as deferred inflow and recognized as revenue of the period to which it applies. The balance of taxes receivables includes related interest and penalties. No allowance for uncollectible tax is established because delinquent taxes are considered fully collectible. Prior year tax levies were recorded using the same principal, and delinquent taxes are evaluated annually.

Municipal Bonds RatingColumbus OH GO LTD TXBL SER C AAA S&PConnecticut State UNLTD TXBL GO AA- S&PNew York City GO AA S&POregon St School Boards Assn AA- S&PStratford CT ULTD TXBL GO AA S&P

Page 66

B-66


The county may levy up to $1.80 per $1,000 of assessed valuation for general governmental services.

The county is also authorized to levy $2.25 per $1,000 of assessed valuation in unincorporated areas for road construction and maintenance. This levy is subject to the same limitations as the levy for general governmental services. The county road levy for 2019 was $2.05205 per $1,000 on an assessed valuation of $5,907,374,799 or a total road tax of $12,122,236. The county's total regular levy for 2019 was $1.56254 per $1,000 on an assessed valuation of $8,290,418,679 for a total regular tax of $12,954,133. The components of the regular levy are:

Levy TaxGeneral Fund 1.5181461 12,586,067 Veterans' Relief 0.0197318 163,585 Social Services 0.0246647 204,481 Total 1.5625427 12,954,133$

Page 67

B-67


NOTE 5 – CAPITAL ASSETS Capital asset activity for the year ended December 31, 2019 was as follows:

Beginning EndingGOVERNMENTAL TYPE ACTIVITIES Balance Balance

1/1/2019 Increases Decreases 12/31/2019

Capital Assets, not being depreciated:Land 5,684,264$ 310,561 -$ 5,994,825$ Intangible assets - land use rights 201,658 5,069 - 206,727 Intangible assets - wetland mitigation credits 871,455 - - 871,455 Construction in Progress 1,924,228 7,838,003 1,029,482 8,732,749 Total Capital Assets, not being depreciated 8,681,605 8,153,633 1,029,482 15,805,756

Capital Assets being depreciated:Buildings 65,100,327 - - 65,100,327 Improvements other than buildings 3,649,281 7,761 - 3,657,042 Machinery & Equipment 28,325,702 2,154,529 946,763 29,533,468 Intangible Assets - 1,029,482 - 1,029,482 Infrastructure 119,035,625 380,060 - 119,415,685

Total Capital Assets, being depreciated 216,110,935 3,571,832 946,763 218,736,004

Less Accumulated Depreciation for:Buildings 32,453,301 1,244,711 - 33,698,012 Improvements other than buildings 3,150,406 59,713 - 3,210,119 Machinery & Equipment 18,106,723 1,671,594 922,996 18,855,321 Infrastructure 66,097,138 3,138,259 - 69,235,397 Total Accumulated Depreciation 119,807,568 6,114,277 922,996 124,998,849

Total Capital Assets being depreciated, net 96,303,367 (2,542,445) - 93,737,155 Governmental Type Activities Capital Assets, net 104,984,972$ 5,611,188$ 1,029,482$ 109,542,911$

Depreciation Expense was charged to functions as follows:General Government 378,862$ Public Safety 878,449 Utilities 123,868 Transportation 3,212,637 Natural and Economic Environment 12,247 Social Services 32,082 Culture and Recreation 115,365

4,753,510$ In addition, depreciation on capital assets held bythe County's internal service funds is charged tothe various functions based upon their usage ofthe assets. 1,360,767

Total Governmental Activities Depreciation Expense 6,114,277$

Page 68

B-68


NOTE 6 – PENSION PLANS

The following table represents the aggregate pension amounts for all plans for the year 2019:

State Sponsored Pension Plans Substantially all Lewis County’s full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing, multiple-employer public employee defined benefit and defined contribution retirement plans. The

Beginning EndingBUSINESS TYPE ACTIVITIES Balance Balance

1/1/2019 Increases Decreases 12/31/2019

Capital Assets, not being depreciated:Land 209,568$ -$ -$ 209,568$ Land Use Rights (Intangible Assets) 4,614 - - 4,614 Construction in Progress 1,807,595 409,551 1,633,441 583,705 Total Capital Assets, not being depreciated 2,021,777 409,551 1,633,441 797,887

Capital Assets being depreciated:Buildings 1,279,979 228,767 - 1,508,746 Improvements other than buildings 9,194,812 1,634,678 - 10,829,490 Machinery & Equipment 1,493,772 - - 1,493,772

Total Capital Assets, being depreciated 11,968,563 1,863,445 - 13,832,008

Less Accumulated Depreciation for:Buildings 1,119,964 20,681 - 1,140,645 Improvements other than buildings 2,762,922 392,712 - 3,155,634 Machinery & Equipment 720,201 85,299 - 805,500 Total Accumulated Depreciation 4,603,087 498,692 - 5,101,779

Total Capital Assets being depreciated, net 7,365,476 1,364,753 - 8,730,229 Business Type Activities Capital Assets, net 9,387,253$ 1,774,304$ 1,633,441$ 9,528,116$

Depreciation Expense was charged to functions as follows:

Solid Waste 119,777$ Water Utilities 122,327 Airport 256,588 Total 498,692$

Pension liabilities (10,166,813)$ Pension assets 2,620,749$ Deferred outflows of resources 2,948,393$ Deferred inflows of resources (6,908,019)$ Pension expense/expenditures 256,386$

Aggregate Pension Amounts - All Plans

Page 69

B-69


state Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. The Department of Retirement Systems (DRS), a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems Communications Unit P.O. Box 48380 Olympia, WA 98540-8380 Or the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov. Public Employees’ Retirement System (PERS) PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior Courts; employees of the legislature; employees of district and municipal courts; employees of local governments; and higher education employees not participating in higher education retirement programs. PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component. PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is the average of the member’s 24 highest consecutive service months. Members are eligible for retirement from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977. Contributions The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer contribution rate is developed by the Office of the State Actuary and includes an administrative expense component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered payroll) for 2019 were as follows:

Page 70

B-70


PERS Plan 1 Actual Contribution Rates

Employer Employee*

January – June 2019 PERS Plan 1 7.52% 6.00% PERS Plan 1 UAAL 5.13% Administrative Fee 0.18%

Total 12.83% 6.00% July – December 2019 PERS Plan 1 7.92% 6.00% PERS Plan 1 UAAL 4.76% Administrative Fee 0.18%

Total 12.86% 6.00%

* For employees participating in JBM, the contribution rate was 12.26%. PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the member’s average final compensation (AFC) times the member’s years of service for Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid consecutive service months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire under one of two provisions:

With a benefit that is reduced by three percent for each year before age 65; or

With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to-work rules.

PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of five percent for each year of retirement before age 65. This option is available only to those who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options.

Page 71

B-71


Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan. Contributions The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll) for 2019 were as follows:

PERS Plan 2/3 Actual Contribution Rates

Employer 2/3 Employee 2*

January – June 2019 PERS Plan 2/3 7.52% 7.41% PERS Plan 1 UAAL 5.13% Administrative Fee 0.18% Employee PERS Plan 3 Varies

Total 12.83% 7.41% July – December 2019 PERS Plan 2/3 7.92% 7.90% PERS Plan 1 UAAL 4.76% Administrative Fee 0.18% Employee PERS Plan 3 Varies

Total 12.86% 7.90%

* For employees participating in JBM, the contribution rate was 18.53% to 19.75%. The County’s actual PERS plan contributions were $1,280,068 to PERS Plan 1 and $1,945,397 to PERS Plan 2/3 for the year ended December 31, 2019. Public Safety Employees’ Retirement System (PSERS) PSERS Plan 2 was created by the 2004 Legislature and became effective July 1, 2006. To be eligible for membership, an employee must work on a full time basis and:

Have completed a certified criminal justice training course with authority to arrest, conduct criminal

investigations, enforce the criminal laws of Washington, and carry a firearm as part of the job; or

Have primary responsibility to ensure the custody and security of incarcerated or probationary individuals; or

Page 72

B-72


Function as a limited authority Washington peace officer, as defined in RCW 10.93.020; or

Have primary responsibility to supervise eligible members who meet the above criteria. PSERS membership includes:

PERS 2 or 3 employees hired by a covered employer before July 1, 2006, who met at least one of the PSERS eligibility criteria and elected membership during the period of July 1, 2006 to September 30 2006; and

Employees hired on or after July 1, 2006 by a covered employer, that meet at least one of the PSERS eligibility criteria.

PSERS covered employers include:

Certain State of Washington agencies (Department of Corrections, Department of Natural Resources, Gambling Commission, Liquor and Cannabis Board, Parks and Recreation Commission, and Washington State Patrol),

Washington State Counties,

Washington State Cities (except for Seattle, Spokane, and Tacoma),

Correctional entities formed by PSERS employers under the Interlocal Cooperation Act. PSERS Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the average final compensation (AFC) for each year of service. The AFC is based on the member’s 60 consecutive highest creditable months of service. Benefits are actuarially reduced for each year that the member’s age is less than 60 (with ten or more service credit years in PSERS), or less than 65 (with fewer than ten service credit years). There is no cap on years of service credit. Members are eligible for retirement at the age of 65 with five years of service; or at the age of 60 with at least ten years of PSERS service credit; or at age 53 with 20 years of service. Retirement before age 60 is considered an early retirement. PSERS members who retire prior to the age of 60 receive reduced benefits. If retirement is at age 53 or older with at least 20 years of service, a three percent per year reduction for each year between the age at retirement and age 60 applies. PSERS Plan 2 retirement benefits are actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. PSERS Plan 2 members are vested after completing five years of eligible service. Contributions The PSERS Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The Plan 2 employer rates include components to address the PERS Plan 1 unfunded actuarial accrued liability and administrative expense currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates.

Page 73

B-73


The PSERS Plan 2 required contribution rates (expressed as a percentage of current-year covered payroll) for 2019 were as follows:

PSERS Plan 2 Actual Contribution Rates

Employer Employee

January – June 2019 PSERS Plan 2 7.07% 7.07% PERS Plan 1 UAAL 5.13% Administrative Fee 0.18%

Total 12.38% 7.07% July – December 2019 PSERS Plan 2 7.20% 7.20% PERS Plan 1 UAAL 4.76% Administrative Fee 0.18%

Total 12.14% 7.20% The County’s actual plan contributions were $255,799 to PSERS Plan 2 and $177,088 to PERS Plan 1 for the year ended December 31, 2019. Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) LEOFF membership includes all full-time, fully compensated, local law enforcement commissioned officers, firefighters, and as of July 24, 2005, emergency medical technicians. LEOFF is comprised of two separate defined benefit plans. LEOFF Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined per year of service calculated as a percent of final average salary (FAS) as follows:

20+ years of service – 2.0% of FAS 10-19 years of service – 1.5% of FAS 5-9 years of service – 1% of FAS

The FAS is the basic monthly salary received at the time of retirement, provided a member has held the same position or rank for 12 months preceding the date of retirement. Otherwise, it is the average of the highest consecutive 24 months’ salary within the last ten years of service. Members are eligible for retirement with five years of service at the age of 50. Other benefits include duty and non-duty disability payments, a cost-of living adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 1 members were vested after the completion of five years of eligible service. The plan was closed to new entrants on September 30, 1977.

Page 74

B-74


Contributions Starting on July 1, 2000, LEOFF Plan 1 employers and employees contribute zero percent, as long as the plan remains fully funded. The LEOFF Plan I had no required employer or employee contributions for fiscal year 2019. Employers paid only the administrative expense of 0.18 percent of covered payroll. LEOFF Plan 2 provides retirement, disability and death benefits. Retirement benefits are determined as two percent of the final average salary (FAS) per year of service (the FAS is based on the highest consecutive 60 months). Members are eligible for retirement with a full benefit at 53 with at least five years of service credit. Members who retire prior to the age of 53 receive reduced benefits. If the member has at least 20 years of service and is age 50, the reduction is three percent for each year prior to age 53. Otherwise, the benefits are actuarially reduced for each year prior to age 53. LEOFF 2 retirement benefits are also actuarially reduced to reflect the choice of a survivor benefit. Other benefits include duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries. LEOFF 2 members are vested after the completion of five years of eligible service. Contributions The LEOFF Plan 2 employer and employee contribution rates are developed by the Office of the State Actuary to fully fund Plan 2. The employer rate includes an administrative expense component set at 0.18 percent. Plan 2 employers and employees are required to pay at the level adopted by the LEOFF Plan 2 Retirement Board. Effective July 1, 2017, when a LEOFF employer charges a fee or recovers costs for services rendered by a LEOFF 2 member to a non-LEOFF employer, the LEOFF employer must cover both the employer and state contributions on the LEOFF 2 basic salary earned for those services. The state contribution rate (expressed as a percentage of covered payroll) was 3.44% as of July 1, 2019. The LEOFF Plan 2 required contribution rates (expressed as a percentage of covered payroll) for 2019 were as follows:

LEOFF Plan 2 Actual Contribution Rates

Employer Employee

January – June 2019 State and local governments

5.25% 8.75%

Administrative Fee 0.18% Total 5.43% 8.75%

Ports and Universities 8.75% 8.75% Administrative Fee 0.18%

Total 8.93% 8.75% July – December 2019 State and local governments

5.15% 8.59%

Page 75

B-75


Administrative Fee 0.18% Total 5.33% 8.59%

Ports and Universities 8.59% Administrative Fee 0.18%

Total 8.77% 8.59% The County’s actual contributions to the plan were $160,427 for the year ended December 31, 2019. The Legislature, by means of a special funding arrangement, appropriates money from the state General Fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. For the state fiscal year ending June 30, 2019, the state contributed $72,959,897 to LEOFF Plan 2. The amount recognized by the County as its proportionate share of this amount is $102,057. Actuarial Assumptions The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial valuation completed in 2019 with a valuation date of June 30, 2018. The actuarial assumptions used in the valuation were based on the results of the Office of the State Actuary’s (OSA) 2007-2012 Experience Study and the 2017 Economic Experience Study. Additional assumptions for subsequent events and law changes are current as of the 2018 actuarial valuation report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2019. Plan liabilities were rolled forward from June 30, 2018, to June 30, 2019, reflecting each plan’s normal cost (using the entry-age cost method), assumed interest and actual benefit payments.

Inflation: 2.75% total economic inflation; 3.50% salary inflation

Salary increases: In addition to the base 3.50% salary inflation assumption, salaries are also expected to grow by promotions and longevity.

Investment rate of return: 7.4% Mortality rates were based on the RP-2000 report’s Combined Healthy Table and Combined Disabled Table, published by the Society of Actuaries. The OSA applied offsets to the base table and recognized future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational basis; meaning, each member is assumed to receive additional mortality improvements in each future year throughout his or her lifetime. There were changes in methods and assumptions since the last valuation.

OSA updated modeling to reflect providing benefit payments to the date of the initial retirement eligibility for terminated vested members who delay application for retirement benefits.

Page 76

B-76


OSA updated COLA programming to reflect legislation signed during the 2018 legislative session that provides PERS and TRS Plan 1 annuitants who are not receiving a basic minimum, alternate minimum, or temporary disability benefit with a one-time permanent 1.5% increase to their monthly retirement benefit, not to exceed a maximum of $62.50 per month.

Discount Rate The discount rate used to measure the total pension liability for all DRS plans was 7.4 percent. To determine that rate, an asset sufficiency test included an assumed 7.5 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. (All plans use 7.5 percent except LEOFF 2, which has assumed 7.4 percent). Consistent with the long-term expected rate of return, a 7.4 percent future investment rate of return on invested assets was assumed for the test. Contributions from plan members and employers are assumed to continue being made at contractually required rates (including PERS 2/3, PSERS 2, SERS 2/3, and TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on these assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.4 percent was used to determine the total liability. Long-Term Expected Rate of Return The long-term expected rate of return on the DRS pension plan investments of 7.4 percent was determined using a building-block-method. In selecting this assumption, the Office of the State Actuary (OSA) reviewed the historical experience data, considered the historical conditions that produced past annual investment returns, and considered capital market assumptions and simulated expected investment returns provided by the Washington State Investment Board (WSIB). The WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns over various time horizons. Estimated Rates of Return by Asset Class Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of June 30, 2019, are summarized in the table below. The inflation component used to create the table is 2.2 percent and represents the WSIB’s most recent long-term estimate of broad economic inflation.

Asset Class

Target

Allocation

% Long-Term Expected Real Rate

of Return Arithmetic

Fixed Income 20% 2.20% Tangible Assets 7% 5.10% Real Estate 18% 5.80% Global Equity 32% 6.30% Private Equity 23% 9.30% 100%

Page 77

B-77


Sensitivity of the Net Pension Liability/(Asset) The table below presents the County’s proportionate share of the net pension liability calculated using the discount rate of 7.4 percent, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.4 percent) or 1-percentage point higher (8.4 percent) than the current rate.

1% Decrease (6.4%)

Current Discount Rate

(7.4%)

1% Increase (8.4%)

PERS 1 9,950,156 7,945,388 6,205,988 PERS 2/3 17,037,451 2,221,425 (9,936,103) PSERS 2 1,015,799 (98,393) (973,685) LEOFF 1 (461,484) (564,125) (652,745) LEOFF 2 (364,118) (1,958,231) (3,259,392)

Pension Plan Fiduciary Net Position Detailed information about the State’s pension plans’ fiduciary net position is available in the separately issued DRS financial report. Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2019, the County’ reported a total pension liability of $10,166,813 for its proportionate share of the net pension liabilities as follows:

The amount of the asset reported above for LEOFF Plans 1 and 2 reflects a reduction for State pension support provided to the County. The amount recognized by the County as its proportionate share of the net pension asset, the related State support, and the total portion of the net pension asset that was associated with the County were as follows:

PERS 1 7,945,388$ PERS 2/3 2,221,425 PSERS 2 (98,393) LEOFF 1 (564,125) LEOFF 2 (1,958,231)

Liability (or Asset)

Page 78

B-78


At June 30, the County’s proportionate share of the collective net pension liabilities was as follows:

Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30 are used as the basis for determining each employer’s proportionate share of the collective pension amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1. LEOFF Plan 1 allocation percentages are based on the total historical employer contributions to LEOFF 1 from 1971 through 2000 and the retirement benefit payments in fiscal year 2019. Historical data was obtained from a 2011 study by the Office of the State Actuary (OSA). In fiscal year 2019, the state of Washington contributed 87.12 percent of LEOFF 1 employer contributions and all other employers contributed the remaining 12.88 percent of employer contributions. LEOFF 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. The allocation method the plan chose reflects the projected long-term contribution effort based on historical data. In fiscal year 2019, the state of Washington contributed 39.57 percent of LEOFF 2 employer contributions pursuant to RCW 41.26.725 and all other employers contributed the remaining 60.43 percent of employer contributions. The collective net pension liability (asset) was measured as of June 30, 2019, and the actuarial valuation date on which the total pension liability (asset) is based was as of June 30, 2018, with update procedures used to roll forward the total pension liability to the measurement date. Pension Expense For the year ended December 31, 2019, the County recognized pension expense as follows:

LEOFF 1 Asset LEOFF 2 Asset

Employer's proportionate share (564,125) (1,958,231) State's proportionate share of the net pension asset associated with the employer (3,815,726) (1,282,379)TOTAL (4,379,851) (3,240,610)

ProportionateShare 6/30/18

PERS 1 0.218719% 0.206623% -0.012096%PERS 2/3 0.236534% 0.228697% -0.007837%PSERS 2 0.844415% 0.756636% -0.087779%LEOFF 1 0.030079% 0.028540% -0.001539%LEOFF 2 0.088097% 0.084527% -0.003570%

Proportionate Share 6/30/19

Change in Proportion

Page 79

B-79


Deferred Outflows of Resources and Deferred Inflows of Resources At December 31, 2019, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Pension ExpensePERS 1 (194,105)$ PERS 2/3 238,696 PSERS 2 162,650 LEOFF 1 (3,891) LEOFF 2 53,036 TOTAL 256,386

PERS 1 Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience

$ - $ -

Net difference between projected and actual investment earnings on pension plan investments

- (530,819)

Changes of assumptions - - Changes in proportion and differences between contributions and proportionate share of contributions

- -

Contributions subsequent to the measurement date 710,930 -

TOTAL $ 710,930 $ (530,819)

PERS 2/3 Deferred Outflows of Resources



$ 636,444 $ (477,594)


- (3,233,491)

Changes of assumptions 56,884 (932,036)Changes in proportion and differences between contributions and proportionate share of contributions

- (743,523)

Contributions subsequent to the measurement date 1,008,281 -

TOTAL $ 1,701,608 $ (5,386,644)

Page 80

B-80


PSERS 2 Deferred Outflows of Resources



$ 83,091 $ (8,702)


- (170,864)

Changes of assumptions 792 (52,880)Changes in proportion and differences between contributions and proportionate share of contributions

13,901 (21,014)


TOTAL $ 229,880 $ (253,460)

LEOFF 1 Deferred Outflows of Resources



$ - $ -


- (58,483)

Changes of assumptions - - Changes in proportion and differences between contributions and proportionate share of contributions

- -

Contributions subsequent to the measurement date - -

TOTAL $ - $ (58,483)

LEOFF 2 Deferred Outflows of Resources



$ 140,912 $ (35,214)


- (401,499)

Changes of assumptions 3,226 (220,364)Changes in proportion and differences between contributions and proportionate share of contributions

80,402 (21,534)


TOTAL $ 305,975 $ (678,610)

Page 81

B-81


Deferred outflows of resources related to pensions resulting from the County’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2020. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

ALL PLANS Deferred Outflows of Resources



$ 860,447 $ (521,511)


- (4,395,155)

Changes of assumptions 60,901 (1,205,279)Changes in proportion and differences between contributions and proportionate share of contributions

94,303 (786,071)

Contributions subsequent to the measurement date 1,932,741 -

TOTAL $ 2,948,392 $ (6,908,015)

2020 (117,181) 2021 (277,569) 2022 (99,053) 2023 (37,016) 2024Thereafter

TOTAL (530,819)

PERS 1Year ended

December 31

2020 (1,146,938) 2021 (1,802,542) 2022 (878,988) 2023 (536,896) 2024 (291,324) Thereafter (36,630)

TOTAL (4,693,316)

Year ended December 31 PERS 2/3

Page 82

B-82


NOTE 7 - OTHER POST-EMPLOYMENT BENEFITS (HEALTH CARE) The County provides other post-employment benefits (OPEB) in addition to the pension benefits described in Note 6. The following table represents the aggregate OPEB amounts for all plans subject to the requirements of GASB Statement 75 for the year 2019:

OPEB liabilities 19,445,602$ Deferred outflows of resources related to OPEB 2,539,724 Deferred inflows of resources related to OPEB 951,775 OPEB expense/expenditures 1,094,656

Aggregate OPEB Amounts - All Plans

2020 (28,935) 2021 (55,803) 2022 (35,134) 2023 (18,690) 2024 (2,901) Thereafter (14,214)

TOTAL (155,676)

Year ended December 31 PSERS

2020 (13,584) 2021 (29,940) 2022 (10,864) 2023 (4,094) 2024Thereafter

TOTAL (58,483)

Year ended December 31 LEOFF 1

2020 (88,407) 2021 (189,358) 2022 (87,623) 2023 (45,044) 2024 (12,873) Thereafter (30,766)

TOTAL (454,070)

Year ended December 31 LEOFF 2

Page 83

B-83


The County implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions for fiscal year 2018 financial reporting. In addition to the pension benefits as described in Note 6, the County participates in two Other Postemployment Benefit (OPEB) plans. OPEB is provided through the Public Employees’ Benefits Board (PEBB) and the Law Enforcement and Fire Fighters Retirement System Plan 1 (LEOFF 1).

Public Employees’ Benefits Board

Plan Description

Per RCW 41.05.065, the Public Employees’ Benefits Board (PEBB), created within the Washington State Health Care Authority (HCA), is authorized to design benefits and determine the terms and conditions of employee and retired employee participation and coverage. PEBB establishes eligibility criteria for both active employees and retirees. Benefits purchased by PEBB include medical, dental, life, and long-term disability.

The PEBB OPEB plan is funded on a pay-as-you-go basis and there are no assets accumulated in a qualifying trust. The plan is reported in governmental funds using the modified accrual basis and the current financial resources measurement focus. For all proprietary funds the OPEB plan is reported using the economic resources measurement focus and the accrual basis of accounting. The PEBB OPEB plan is a single-employer, defined benefit plan.

Employees covered by benefit terms

At December 31, 2019, the following employees were covered by the PEBB plan benefit terms:

Active employees 279

Inactive employees or beneficiaries currently receiving benefits

11

Total 290

Benefits Provided

Eligible retirees and spouses are entitled to subsidies associated with postemployment medical benefits provided through PEBB. The subsidies provided by PEBB include:

Explicit medical subsidy for post-65 retirees and spouses Implicit medical subsidy Implicit dental subsidy

The explicit subsidies are monthly amounts paid per post-65 retiree and spouse. As of the valuation date, the explicit subsidy for post-65 retirees and spouses is the lesser of $150 or 50% of the monthly premiums. As of January 1, 2020, the subsidy will be increased to $183 per month. The retirees and spouses currently pay the premium minus $150 when the premium is over $300 per month and pay half the premium when the premium is lower than $300.

The implicit medical subsidy is the difference between the total cost of medical benefits and the premiums. For pre-65 retirees and spouses, the retiree pays the full premium amount, but that amount is based on a pool that includes active employees. Active employees will tend to be younger and healthier than retirees on average, and therefore can be expected to have lower average health costs. For post-65 retirees and spouses, the retiree does not pay the full premium due to the subsidy discussed above.

Page 84

B-84


Contribution Information

Administrative costs as well as implicit and explicit subsides are funded by contributions required by RCW 41.05.050. The subsidies provide monetary assistance for medical benefits. Contribution rates are set each biennium by the State. The benefits are funded on a pay-as-you-go basis. The County’s contributions were $48,894 for the year ending December 31, 2019.

Actuarial Assumptions and Other Inputs

The total OPEB liability was determined using the following methodologies:

Actuarial valuation date 6/30/2018

Actuarial measurement date 12/31/2019

Actuarial cost method Entry age

Amortization method The recognition period for the experience and assumption changes is 10.5 years. This is equal to the average expected remaining service lives of all active and inactive members.

Asset valuation method N/A – No assets

December 31, 2019 is the measurement date for the financial reporting date. The beginning of year total OPEB liability is based on a measurement date of December 31, 2018.

GASB 75 permits a one-year lag between the measurement date and report date without adjustment.

The total OPEB liability was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Inflation rate 2.75%

Projected salary changes 3.50% plus service-based salary increases

Healthcare trend rates Trend rate assumptions vary slightly by medical plan. Initial rate is approximately 6.80%, decreasing to rate of approximately 4.30% in 2095

Demographic assumptions regarding retirement, mortality, disability mortality, turnover, and marriage are based on assumptions used in the 2018 Actuarial Valuation for the Washington State retirement systems, and modified for the County.

The assumed rates of disability under PERS Plans 1, 2, and 3 from the 2018 actuarial valuation are less than 0.1% for ages 50 and below and continue to be low after that. A 0% disability rate for all ages for those plans.

Page 85

B-85


For service retirement, the assumptions for PERS Plans 1, 2 and 3 from the 2018 Actuarial Valuation for Washington State retirement systems were used. The service requirements for these plans vary based on hire date and years of service.

For mortality, the assumptions from the 2018 actuarial valuation for Washington State retirement systems were used, adjusted for the County. For all healthy members, the RP-2000 base mortality table was used, adjusted by -1 year for both males and females, with generational mortality adjustments using projection scale BB. For disabled retirees across all plans, the RP-2000 Disabled Retiree mortality table was used, with generational mortality adjustments using projection scale BB.

For other termination of employment, the assumptions by plan from the 2018 actuarial valuation for Washington State retirement systems were used.

Since OPEB benefits are funded on a pay-as-you-go basis, the discount rate used to measure the total OPEB liability was set equal to the Bond Buyer General Obligation 20-Bond Municipal Bond Index, or 4.10% for the December 31, 2018 measurement date and 2.74% for the December 31, 2019 measurement date.

Sensitivity of the Total Liability to Changes in the Discount Rate

The following presents the total OPEB liability of the county, calculated using the discount rate of 2.74%, as well as what the county's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (1.74%) or 1 percentage point higher (3.74%) than the current rate.

1% Decrease Current Discount Rate 1% Increase

14,066,128 11,289,965 9,160,820

Sensitivity of Total OPEB Liability to Changes in the Health Care Cost Trend Rates

The following presents the total OPEB liability of the county, calculated using the current healthcare cost trend rates as well as what the county's total OPEB liability would be if it were calculated using trend rates that are 1 percentage point lower or 1 percentage point higher than the current trend rates.

1% Decrease Current Trend Rates 1% Increase

8,732,362 11,289,965 14,814,547

Total OPEB Liability

As of December 31, 2019, the County reported a total OPEB liability of $11,289,965.

Changes in Total OPEB Liability

The following table presents the change in the total OPEB liability as of December 31, 2019:

Page 86

B-86


Total OPEB liability - Beginning 7,862,335$ Changes for the year: Service cost 481,118 Interest 341,090 Changes of benefit terms - Differences between expected and actual experience - Changes of assumptions 2,654,316 Benefit payments (48,894) Net change in total OPEB liability 3,427,630 Total OPEB liability - Ending 11,289,965$

PEBB OPEB Plan

OPEB Expense, Deferred Outflows of Resources, Deferred Inflows of Resources Related to OPEB

For the year ending December 31, 2019, the County recognized OPEB expense of $963,026.

On December 31, 2019, the County reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows of Resources


Difference between expected and actual experience

- -

Changes of assumptions 2,401,524 (951,775)Transactions subsequent to the measurement date

- -

Total $ 2,401,524 $ (951,775)

Contributions made subsequent to the measurement date are zero because the measurement date and the reporting date are the same. Per paragraph 159 of GASB 75, deferred outflows of resources should be reported for benefits that come due subsequent to the measurement date, but prior to the reporting date.

Amounts currently reported as deferred outflows of resources and deferred inflows of resources related to other postemployment benefits will be recognized in OPEB expense below.

2020 140,818 2021 140,818 2022 140,818 2023 140,818 2024 140,818

Thereafter 745,659

Measurement period ending December 31:

Page 87

B-87


Law Enforcement and Fire Fighters Retirement System Plan 1

Plan Description

In accordance with the Washington Law Enforcement Officers and Fire Fighters Retirement System (LEOFF) Act (RCW 41.26), the county provides certain lifetime health care benefits for retired full-time, fully compensated, law enforcement officers who established membership in the LEOFF 1 retirement system on or before September 30, 1977. Substantially all of the county's law enforcement officers who established membership in the LEOFF 1 retirement system may become eligible for those benefits when they reach normal retirement age. The Lewis County Sheriff's Department, in conjunction with the Lewis County Disability Board, reimburses retired LEOFF 1 law enforcement officers for reasonable medical charges as described in the LEOFF act. The LEOFF 1 plan is closed to new entrants. The LEOFF 1 OPEB plan is a single-employer, defined benefit plan.

Funding Policy

Funding for LEOFF retiree healthcare costs is provided entirely by the County as required by state law. The County’s funding policy is based upon pay-as-you-go basis and there are no assets accumulated in a qualifying trust.

The cost of retiree health care benefits are recognized as claims are paid. In 2019, the County’s actual costs totaled $280,499.

Employees covered by benefit terms

At December 31, 2019, the following employees were covered by the LEOFF 1 plan benefit terms:

Active employees 0

Inactive employees or beneficiaries currently receiving benefits

16

Total 16

Actuarial Assumptions and Other Inputs

The total OPEB liability was determined using the following methodologies:

Actuarial valuation date 6/30/2019

Actuarial measurement date 6/30/2019

Actuarial cost method Entry age

Amortization method Recognized immediately

Asset valuation method N/A – No assets

The total OPEB liability was determined using the following actuarial assumptions:

Page 88

B-88


Inflation rate 2.75%

Discount rate 3.50%

Healthcare trend rates – medical costs Initial rate is approximately 6%, decreasing to rate of approximately 5% in 2080

Healthcare trend rates – long-term care 4.50%

Healthcare trend rates – Medicare Part B Premiums Approximately 5%, varies by year

Base mortality table* RP-2000 mortality table

Age setback +1 year healthy/-2 years disabled

Blended 50%/50% healthy/disabled

Mortality improvements 100% Scale BB

Projection period Generational

Medicare participation rate 100%

*Mortality rates assume a 100% male population.

Since OPEB benefits are funded on a pay-as-you-go basis, the discount rate used to measure the total OPEB liability was set equal to the Bond Buyer General Obligation 20-Bond Municipal Bond Index.

Changes in assumptions resulted from an increase in the Bond Buyer General Obligation 20-Bond Municipal Bond Index discount rate resulting in an overall decrease in total OPEB liability for the measurement date of June 30, 2019.

Sensitivity of the Total Liability to Changes in the Discount Rate

The following presents the total OPEB liability of the county, calculated using the discount rate of 3.50%, as well as what the county's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.50%) or 1 percentage point higher (4.50%) than the current rate.

1% Decrease Current Discount Rate 1% Increase

9,317,187 8,155,637 7,193,078

Sensitivity of Total OPEB Liability to Changes in the Health Care Cost Trend Rates

The following presents the total OPEB liability of the county, calculated using the current healthcare cost trend rates as well as what the county's total OPEB liability would be if it were calculated using trend rates that are 1 percentage point lower or 1 percentage point higher than the current trend rates.

1% Decrease Current Trend Rates 1% Increase

7,225,748 8,155,637 9,251,185

Page 89

B-89


Total OPEB Liability

For the year ending December 31, 2019, the County reported a total OPEB liability of $8,155,637.

Changes in Total OPEB Liability

The following table presents the change in the total OPEB liability for the year ending December 31, 2019:

Total OPEB liability - Beginning 8,304,506$ Changes for the year: Service cost - Interest 316,008 Changes in experience data and assumptions (184,378) Changes in benefit terms - Estimated benefit payments (280,499) Net change in total OPEB liability (148,869) Total OPEB liability - Ending 8,155,637$

LEOFF 1 OPEB Plan

The County used the Office of the State Actuary (OSA) Alternative Measurement Method (AMM) online tool in place of an actuarial valuation. GASB 75 permits employers who cover fewer than 100 LEOFF 1 members and do not have a dedicated trust to use an AMM. The AMM tool relies upon the 2018 LEOFF 1 Medical Benefits Actuarial Valuation Report issued by OSA and uses measurement date of June 30, 2019. The total OPEB liability is also reported as of the beginning of the measurement period. This calculation is based on a roll backward of the actuarial valuation results, with an adjustment made to the estimated assumed interest and expected benefit payments.

OPEB Expense, Deferred Outflows of Resources, Deferred Inflows of Resources Related to OPEB

For the year ending December 31, 2019, the County recognized OPEB expense of $131,630.

On December 31, 2019, the County reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows of Resources


Difference between expected and actual experience

- -

Changes of assumptions - - Payments subsequent to the measurement date

138,200 -

Total $ 138,200 $ -

Deferred outflows of resources of $138,200 resulting from payments subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ended December 31, 2020.

Page 90

B-90


NOTE 8 - LEASES A. Operating Leases The County leases office space and radio sites under operating leases. Lease terms of office space range from annual leases to a multi-year lease that extends to 2021. Lease terms of radio sites are multi-year with one extending to 2022. Operating lease expenditures for the year ended December 31, 2019 were $60,951. The future minimum lease payments for these leases are:

B. Capital Leases The County has entered into the transactions that are recorded as capital lease purchases to account for copier and mailing system leases. These long-term contracts incorporate some or all of the benefits and risks of ownership. The leased assets and related obligations are accounted for in the statement of net position. The net capital lease amount shown below reflects the assets continuing to be financed through the capital lease. These lease agreements qualify as capital leases for accounting purposes, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date. The assets acquired through capital lease are as follows:

The future minimum lease obligations and net present value of minimum lease payments for assets acquired through capital leases as of December 31, 2019 were as follows:

Year Ending December 31 Amount2020 46,224$ 2021 34,261$ 2022 3,741$ 2023 -$ 2024 -$ Total 84,226$

Asset Governmental Activities Business-Type ActivitiesMachinery & Equipment 439,852$ -$ less: Accumulated Depreciation (195,256)$ -$ Total 244,596$ -$

Year Ending December 31 Governmental Activities Business-Type Activities2020 79,570$ -$ 2021 63,301 - 2022 52,372 - 2023 45,739 - 2024 16,224 - Total Minimum Lease Payments 257,206$ -$ Less: Interest (10,118)$ -$ Present Value of Minimum Lease Payments 247,088$ -$

Page 91

B-91


NOTE 9 - DEFERRED COMPENSATION PLAN The county offers its employees deferred compensation plans created in accordance with Internal Revenue Code Section 457. Two plans are available, one with State of Washington Department of Retirement Systems Deferred Compensation Program and a second with Nationwide Retirement Solutions. The plans, available to all eligible employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. Plan assets for both the State of Washington Deferred Compensation Program and Nationwide Retirement Solutions plans reside in trust held for exclusive benefit of participants and their beneficiaries. Pursuant to Governmental Accounting Standards Board (GASB) Statement 32, since Lewis County is no longer the owner of these assets, as of December 31, 1998, the plan assets and liabilities are no longer reported as an Agency Fund. NOTE 10 - RISK MANAGEMENT Lewis County is a participating member of the Washington Counties Risk Pool (WCRP). Chapter 48.62 RCW authorizes the governing body of one or more governmental entities to join together for the joint purchasing of insurance, and/or joint self-insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self-insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The Pool was formed in August of 1988 when 15 counties in the state of Washington joined together by signing an Interlocal Governmental Agreement to pool their self-insured losses and jointly purchase insurance and administrative services. As of December 31, 2019, 26 counties participate in the WCRP. The Pool allows members to jointly establish a plan of self-insurance, and provides related services, such as risk management and claims administration. Members enjoy occurrence-based, jointly purchased and/or jointly self-insured liability coverage for bodily injury, personal injury, property damage, errors and omissions, and advertising injury caused by a covered occurrence during an eligible period and occurring anywhere in the world. Total coverage limits are $25 million per occurrence and each member selects its occurrence deductible amount for the ensuing coverage year from these options: $10,000, $25,000, $50,000, $100,000, $250,000 or $500,000. For losses occurring in 2019, Lewis County selects a per-occurrence deductible of $100,000. Members make an annual contribution to fund the Pool. The Pool acquires excess and reinsurance for further protection from larger losses. For the first $10,000,000 of coverage, the Pool acquires reinsurance. The reinsurance agreements are written with self-insured retentions (“SIRs”) equal to the amount of the layer of coverage below. For 2018-19, the Pool’s SIR was $1,000,000 (for 2019-20, the Pool’s SIR increased to $2,000,000). More recent years’ reinsurance programs have included “corridor deductibles” with aggregated stop losses which have the effect of increasing the Pool’s SIR. For 2018-19, the “corridor” increased the SIR to $2,000,000, with losses between $1,000,000 and $2,000,000 having an annual aggregated stop loss of $2.5 million. The other reinsurance agreements respond up to the applicable policy limits and the agreements contain aggregate limits for the maximum annual reimbursements to the Pool of $20 million (lowest reinsured layer), $30 million, (second layer), and $50 million (third layer). The Pool purchases excess coverage for the additional $10,000,000 with an aggregate limit of $100,000,000. Since the Pool is a cooperative program, there

Page 92

B-92


is a joint liability among the participating members. Sixteen of the Pool’s 26 member counties group purchase an additional $5,000,000 policy in excess of the pooled $20,000,000. New members may be asked to pay modest fees to cover the costs to analyze their loss data and risk profiles, and for their proportional shares of the entry year’s assessments. New members contract under the Interlocal Agreement to remain in the Pool for at least five years. Following its initial 60-month term, any member may terminate its membership at the conclusion of any Pool fiscal year, provided the county timely files the required advance written notice. Otherwise, the Interlocal Agreement and membership automatically renews for another year. Even after termination, former members remain responsible for reassessments by the Pool for the members’ proportional shares of any unresolved, unreported, and in-process claims for the periods that the former members were signatories to the Interlocal Agreement. The Pool is fully funded by its member participants. Claims are filed directly with the Pool by members and adjusted by one of the six staff members responsible for evaluating each claim for coverage, establishing reserves, and investigating for any risk-shared liability. The Pool does not contract with any third party administrators for claims adjustment or loss prevention services. During 2018-19, Lewis County was also one of twenty-six (26) counties which participated in the Washington Counties Property Program (WCPP). Property losses are covered under the WCPP to the participating counties’ buildings and contents, vehicles, mobile/contractor equipment, EDP and communication equipment, etc. that have been scheduled. The WCPP includes ‘All Other Perils (“AOP”)’ coverage limits of $500 million per occurrence as well as Flood and Earthquake (catastrophe) coverages with separate occurrence limits, each being $200 million. There are no AOP annual aggregate limits, but the flood and earthquake coverages include annual aggregate limits of $200 million each. Each participating county is solely responsible for paying their selected deductible, ranging between $5,000 and $50,000. Higher deductibles apply to losses resulting from catastrophe-type losses. Lewis County also participates in the jointly purchased cyber risk and security coverage from a highly-rated commercial insurer. The Pool is governed by a board of directors which is comprised of one designated representative from each participating member. The Board of Directors generally meets three-times each year with the Annual Meeting of the Pool being held in summer. The Board approves the extent of risk-sharing, approves the Pool’s self-insuring coverage documents, approves the selection of reinsurance and excess agreements, and approves the Pool’s annual operating budget. An 11-member executive committee is elected by and from the WCRP Board for staggered, 3-year terms. Authority has been delegated to the Committee by the Board of Directors to, a) approve all disbursements and reviews the Pool’s financial health, b) approve case settlements exceeding the applicable member’s deductible by at least $50,000, c) review all claims with incurred loss estimates exceeding $100,000, and d) evaluate the Pool’s operations, program deliverables, and the Executive Director’s performance. Committee members are expected to participate in the Board’s standing committees (finance, personnel, risk management, and underwriting) which develop or review/revise proposals for and/or recommendations to the association’s policies and its coverages for the Board to consider and act upon.

Page 93

B-93


During 2018-19, the WCRP’s assets increased to $60.6 million while its liabilities increased to $40.6 million. The Pool’s net position remained at $19.8 million. The Pool more than satisfies the State Risk Manager’s solvency requirements (WAC 200.100.03001). The Pool is a cooperative program with joint liability amongst its participating members. Deficits of the Pool resulting from any fiscal year are financed by reassessments of the deficient year’s membership in proportion with the initially levied and collected deposit assessments. The Pool’s reassessments receivable balance as of December 31, 2019 was zero ($0). As such, there were no known contingent liabilities at that time for disclosure by the member counties. Risk Management Funds: - The County established its own Risk Management fund in 1991, which is used to pay deductibles on general liability claims and unemployment claims. The county has elected to become self-insured for unemployment claims. Based on Washington Counties Risk Pool and county management estimates, the county's estimated liability for probable losses at December 31, 2019, which includes estimates for Incurred But Not Reported claims (IBNR) were as follows:

In addition, the following shows changes in the balances of claims liabilities during the past year:

As of December 31, 2019, cash and investments in the Risk Management funds were $8,283,807, which includes $6,095,849 for LEOFF 1 post-retirement benefits. County Insurance Fund: - The County has elected to become self-insured for worker's compensation and maintains the County Insurance Fund which is used to pay related claims costs. A third party administrator processes these claims. Based on the county’s claims management firm, historical estimates, and Washington State Department of Labor & Industries data, the county's estimated reserve for probable losses at December 31, 2019 was $174,982:

2019 2018General Liability Claims 1,500,000$ 1,500,000$ Unemployment Claims 184,823 184,823 Total 1,684,823$ 1,684,823$

2019 2018Unpaid Claims, Beginning of Fiscal Year 1,684,823$ 1,684,823$ Incurred Claims 154,334 328,426 Changes In Estimates - - Claim Payments (154,334) (328,426) Unpaid Claims, End of Fiscal Year 1,684,823$ 1,684,823$

Page 94

B-94


The county has two fully funded pension obligations held by the State of Washington Department of Labor and Industries with a cash value of $164,536 at December 31, 2019. The county has met the SIR payable under the excess coverage for the claims. The county is required by Washington State Department of Labor and Industries to set aside, for protection to the Workers' Compensation Fund, a minimum of $100,000 in cash reserves. Additionally, the county has purchased $1 million of excess coverage insurance for workers' compensation claims. The policy has a $600,000 SIR for individual claims. As of December 31, 2019, cash and investments were $3,456,629 including $456,631 restricted for minimum cash reserves. Total net position at December 31, 2019 was $3,253,104. Other Insurance: - The County has purchased coverage for property insurance (including computers), flood, and equipment physical damage, boiler, and liability for the Packwood and South County Airports. In addition, the County has purchased a cyber-liability policy through WCRP. For the past five fiscal years, there were no settlements that exceeded insurance coverage. NOTE 11 - LONG-TERM DEBT The County may issue general obligation and revenue bonds to finance the purchase of major capital items, the acquisition or construction of major capital facilities and other major items. The general obligation bonds have been issued for the general government and are being repaid from applicable resources. The County is also liable for notes that were entered into for various reasons stated below in the description of each note. These notes are considered obligations of the general government and are being repaid with general governmental revenue sources. A. Disclosures About Each Significant Debt Incurred

Outstanding General Obligation Bonds 12/31/2019 $3,780,000 – Issued August 2015, to defease, pay, redeem, and retire the 2005 General Obligation bonds. Interest is paid at 2.13% with annual principal installments of $400,000 to $450,000 through December 1, 2024. $2,170,000 $8,680,000 – Issued May 2012, to defease, pay, redeem, and retire the 2003 General Obligation bonds. Interest is paid at 2.00% to 3.00% with annual principal installments of $475,000 to $720,000 through December 1, 2027. $5,125,000 $4,925,000 – Issued September 2, 2009, to defease, pay, redeem, and retire the 1999 refunded bonds. Interest is paid at 2.50% to 4.25% with annual principal installments of $395,188 to $442,000 through December 1, 2024. $1,965,000

2019 2018Unpaid Claims, Beginning of Fiscal Year 174,982$ 174,982$ Adjusted Claims Cost (Payments by Administrator) (323,103) 147,840 Claim Payments (230,897) (119,885) Other - Cash Pension Adjustment 542,168 (30,467) Accrued/Timing (with IBNR estimate) 11,832 2,512 Claims Liability, End of Fiscal Year 174,982$ 174,982$

Page 95

B-95


Notes Payable Washington State, Drinking Water State Revolving Fund - Dept. of Community Development – $467,143 – assumed June 2014, for the purpose of financing the City of Vader Water Treatment Plan upgrade and raw water improvements; whereby, the County by court order became owner of the Vader Water System and also assumed loan responsibility. All principal and interest payments made by the Vader Water System Utility are paid by water revenue. Interest is paid at 1.50% on annual principal installments of $29,196 through October 1, 2033. $325,217 Washington State, Drinking Water State Revolving Fund - Dept. of Community Development – $357,337 – assumed October 2015, for the purpose of financing the City of Vader Water Distribution Systems Improvement project, which consists of improvements to reduce the exposure to public health, to decrease lost and unaccounted water usage, and to improve system efficiency. The original terms of this loan stated a principal of $721,822, however per the contract terms upon completion of the project 50% shall be forgiven. Interest is paid at 1.00% on annual principal installments of $11,927 through October 1, 2044. $298,188 U.S. Department of Agriculture - $199,000 – Issued September 2018, provide funds necessary for the acquisition, construction, and installation of a new drinking water supply storage facility at the water treatment plant of the Vader Water System Utility of the County. The interest rate for each draw on Loan 16 bears interest at the rate of 2.750% per annum, computed on the basis of the actual number of days elapsed in a 365-day year. Principal and interest payments are due in semi-annual installments each May and November 15 for a scheduled repayment period of 30 years. $195,738 U.S. Department of Agriculture - $80,000 – Issued September 2018, to provide funds necessary for the acquisition, construction, and installation of a new drinking water supply storage facility at the water treatment plant of the Vader Water System Utility of the County. The interest rate for each draw on Loan 16 bears interest at the rate of 2.750% per annum, computed on the basis of the actual number of days elapsed in a 365-day year. Principal and interest payments are due in semi-annual installments each May and November 15 for a scheduled repayment period of 30 years. $78,017 Total Outstanding Debt $10,157,160 B. Debt Service Requirements to Maturity Annual debt service requirements to maturity for governmental general obligation bonds and notes payable for business-type activities are as follows:

Page 96

B-96


C. Changes in Government-wide Long-Term Liabilities

The following is a summary of the County's Long-Term Liabilities transactions for the year ended December 31, 2019:

Internal service funds predominantly serve the governmental funds. Accordingly, internal service fund long-term liabilities are included as part of the above totals for governmental activities. At year end, $457,077 of internal service funds compensated absences, $832,070 total OPEB liability, and $3,181 of capital lease liability are included in the above amounts. Additionally, for the governmental activities, claims and judgments and compensated absences are generally liquidated by the responsible fund.

Year EndingDecember 31 Principal Interest Principal Interest

2020 1,345,000$ 278,571$ 47,505$ 16,058$ 2021 1,385,000 238,181 47,687 15,314 2022 1,440,000 196,579 47,875 14,562 2023 1,480,000 153,214 48,069 13,805 2024 1,525,000 108,635 48,268 13,043 2025-2029 2,085,000 126,599 244,559 54,003 2030-2034 - - 132,286 36,163 2035-2039 - - 109,680 25,778 2040-2044 - - 117,766 14,710 2045-2049 - - 53,465 3,639 Total 9,260,000$ 1,101,779$ 897,160$ 207,075$

Business-Type ActivitiesGovernmental Activities

Governmental Activities:General Obligation Bonds 10,570,000$ -$ 1,310,000$ 9,260,000$ 1,345,000$ Capital Leases 131,316 205,831 90,059 247,088 75,210 OPEB Liability 15,710,961 3,049,340 - 18,760,301 336,276 Net Pension Liability 13,296,623 - 3,503,949 9,792,674 - Compensated Absences 4,742,491 66,530 4,675,961 28,228 Total Governmental Activities 44,451,391$ 3,255,171$ 4,970,538$ 42,736,024$ 1,784,714$ Business-Type Activities:Notes Payable 941,434$ -$ 44,274$ 897,160$ 47,505$ Landfill Closure/Postclosure Care Liability 336,897 101,763 - 438,660 74,300 OPEB Liability 455,880 229,421 - 685,301 3,869 Net Pension Liability 520,512 - 146,374 374,138 - Compensated Absences 141,395 - 10,955 130,440 - Total Business-type Activities 2,396,118$ 331,184$ 201,603$ 2,525,699$ 125,674$ *The beginning balance of the Landfill Closure/Postclosure Care Liability has been restated by $337,560

Due Within One YearAdditions

Beginning Balance 01/01/2019* Reductions

Ending Balance 12/31/2019

Page 97

B-97


D. Assets Available for Long-Term Debt At December 31, 2019, the county had $16,926 available in the debt service funds. The general fund and other county funds will transfer assets as required to service the general obligation bonded debt. Other debt is serviced by assets within the responsible fund. E. Prior Years’ Debt Defeasance In prior years, the county defeased four bond issues by creating separate irrevocable trust funds. New debt has been issued and the proceeds used to purchase U.S. government securities that were placed in the trust funds. The investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting purposes, the debt has been considered defeased and therefore removed as a liability from the County’s government wide financial statements. As of December 31, 2019, the amount of defeased debt outstanding but removed for the Governmental Long Term Debt amounted to $14,230,000. F. Arbitrage Governments may incur a liability to the federal government for arbitrage rebate if they earn more interest on the reinvested proceeds of tax-exempt debt than they incur on the underlying debt itself. The County has a review of potential arbitrage rebate conducted every five years on each outstanding bond issue. Based on the results of these periodic reviews, there is no arbitrage rebate on any of the County’s outstanding debt issue. G. Conduit Debt To provide for the construction of an event center and sports complex that constitutes a “regional center”, the county has provided credit support for the Lewis County Public Facilities District (PFD) to issue limited sales tax obligation bonds. These bonds are limited obligations of the PFD authorized by RCW 36.100.060, payable from and secured by a pledge of sales tax and use tax revenue as authorized to be imposed by RCW 82.14.390. The bonds do not constitute county debt subject to constitutional or statutory limitations, and accordingly have not been reported in the accompanying financial statements. At December 31, 2019, the Public Facilities District limited sales tax obligations bonds outstanding amounted to $4,690,000. NOTE 12 - JUDGMENTS AND CONTINGENCIES The county has recorded in its financial statements all material liabilities, including an estimate for situations, which are not yet resolved, but where, based on available information, management believes it is probable that the county will have to make payment. In the opinion of management, the county's insurance policies and/or self-insurance reserves are adequate to pay all known or pending claims. The county participates in a number of federal and state assisted programs. These grants are subject to audit by the grantors or their representative. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. Management believes that such disallowances, if any, will be immaterial. NOTE 13 - INTERFUND BALANCES AND TRANSFERS A. Interfund Loans

Periodically, there is a business need to authorize loans between funds, usually for cash flow requirements for the smaller funds. The following table displays interfund loan activity during 2019:

Page 98

B-98


B. Interfund Transfers On an annual basis interfund transfers are used to move resources between funds for authorized purposes. Transfers from the General Fund to other funds; such as Public Health, Social Services, Senior Services, and Community Development, are to subsidize program costs not otherwise funded by grants, taxes, or charges for services. Transfers from the General Fund to the South County and Packwood Airports, business type funds, are matching funds for FAA Grants and operational costs not funded by charges for services. Transfers from the General Fund to the Solid Waste Utility are for future capital costs. Transfers from the Distressed Counties Fund to the Roads fund are for the North County Industrial Access project authorized by Resolution 14-286. Transfers from the Capital Facilities Fund to the Debt Service Funds are to cover bond redemption payments. The following table displays interfund transfers during 2019:

NOTE 14 - CLOSURE AND POSTCLOSURE CARE COST The County operates the Centralia Landfill site located at 1411 South Tower Road in Centralia. The Landfill operated as an unlined landfill from 1958 until 1994. A total of 55 acres of the 87-acre site received solid waste. The Lewis County Central Transfer Station facility has been operating on the north end of the site since 1994. On August 28, 1990, pursuant to Chapter 70.105D RCW, the Model Toxics Control Act, and WAC 173-340-330, placed the Centralia Landfill on the Washington State Hazardous Sites List. On August 30, 1990, the Landfill was added to the Federal National Priorities List (NPL) pursuant to 42 U.S.C. Section 9605 of the Comprehensive Environment Response, Compensation, and Liability Act (CERCLA or Superfund), requiring remediation of the site. In April of 1994, with 100 percent of the Landfill space at capacity, it closed and a final cover subsequently installed in the summer of 1994. The County along with other identified parties, entered into a Consent Decree (Decree) with the Washington State Department of Ecology (Ecology) initially to perform a remedial investigation and feasibility study. This later led to

Borrowing Fund Lending FundBalance

12/31/2018 New Loans PaymentsBalance

12/31/2019Equipment Rental & Revolving Capital Facilities 49,396 - 49,396 - Flood Authority General Fund 72,000 - - 72,000 Vader Water System Utility General Fund 7,858 42,000 - 49,858 South County Airport General Fund 69,000 - - 69,000 Total 198,254 42,000 49,396 190,858

Interfund Loans

Fund Transfer In Transfer OutGeneral Fund 1,471,484$ 2,518,615$ Roads Fund 108,831 1,487,111 Distressed Counties Fund - 78,770 Capital Facilities Fund - 1,173,455 Nonmajor Governmental Funds 1,719,244 255,515 Internal Service Funds 374,627 - Debt Service Funds 1,628,680 - Business-Type Funds 210,600 - Total 5,513,466$ 5,513,466$

Page 99

B-99


another Decree with Ecology in 2000 to prescribe a Cleanup Action Plan. The landfill is at 100% of capacity, closed, and capped and five years remaining for post closure monitoring. The Landfill Closure Fund or “special revenue fund” of the City of Centralia accounted for the revenues and expenditures of the closure and post closure care. Lewis County Solid Waste Disposal District #1 (District) took over the special revenue fund in May of 2017, when the City of Centralia and Lewis County signed the, “Agreement Regarding Transfer Of Certain Assets and Responsibilities Concerning the Centralia Landfill Between City of Centralia and Lewis County, Washington”. This agreement moved responsibilities to Lewis County, with funding coming from the District. Existing reserves and revenue generated by the District are adequate to satisfy actual revenue requirements to maintain post-closure care as prescribed by the Ecology. As required by WAC 173-340-420(2), Ecology conducted a 5-year review of the site and held a public comment period for the Periodic Review Draft Report in October 2015. Ecology reviews cleanups at least every five years to ensure they protect human health and the environment. There is no expectation to increase rates for the ongoing maintenance of the Landfill above those already projected. Ecology has determined only biannual sampling and annual reporting of sampling data would be needed given the status of the Landfill. As of December 31, 2019, the County reported $438,660 as landfill post-closure care liability based on 100% use of the total capacity of the Centralia Landfill. Actual care costs may be higher or lower due to inflation, changes in technology, or changes in regulations. The County will be responsible for the costs of additional work if migration of pollutants from the site is not completely controlled by current remedial actions. NOTE 15 – SUBSEQUENT EVENTS In February 2020, the Governor of the state of Washington declared a state of emergency in response to the spread of a deadly new virus. In the weeks following the declaration, precautionary measures to slow the spread of the virus have been ordered. These measures include closing schools, colleges and universities, cancelling public events, prohibiting public and private gatherings, and requiring people to stay home unless they are leaving for an essential function. The Lewis County Board of County Commissioners (BOCC) has created a COVID Financial Impact Team that includes the Budget Administrator, County Manager, Auditor, Treasurer, Human Resources and Risk Director and the County Prosecutor. The Team will evaluate current and projected revenues, expenditures, cash flow, review county investments and evaluate financial sustainability strategies. At this time all offices and departments have been asked to identify savings to offset revenue losses, stop spending on all non-essential operating costs, hold on the hiring of personnel for vacant positions unless critical to operations and to begin looking for potential savings when planning for the 2021 Budget. The COVID Financial Impact Team has reviewed county finances as well as possible reductions. A budget memo was sent to the Executive Steering Committee on April 29th to address initial guidance and recommendations. Further reductions would be based on the source of reduced revenue and implemented according to guidelines from the BOCC on allowable use of reserves. When reserve limits are met reductions would be made based on a tiered structure as needed. The actual decrease of sales and use tax for March over 2019 was not significant and the estimate from DOR for April shows about the same, but as mentioned this is an estimate at this point. The County is anticipating there will be a further and possibly more significant decreases in the summer months due to canceled events and festivals, this will not only impact sales and use tax but our tourism promotion funding as well. Other decreases have been noted in the Roads Fund, the decrease for Motor Vehicle Fuel tax was significant for March and the same is expected for April. The Public Works Director and County Engineer are addressing shortfalls and managing projects as needed to maintain an appropriate cash balance.

Page 100

B-100


The County was informed recently of a refund of sales and use tax paid on a local wind energy project, the impact to the county is a reduction in sales and use tax of approximately $900K. The County is working with the Department of Revenue to establish a repayment plan to best manage our cash balance over the next several months. The BOCC has directed that all 2021 interfund rates start with a 0% increase. Internal service rates impact all Funds, including the General Fund. Departments will analyze expenditures and identify reductions while looking for departmental efficiencies that would result in savings and/or better service to users. The County is also utilizing Coronavirus Relief Funds for all COVID-19 response activities as allowable under the US Treasury guidelines. The COVID Financial Impact Team has developed a well thought out process and internal controls to capture all COVID-19 expenditures. These expenditures and grant funds have been segregated in a Special Revenue Fund established on April 13th 2020. NOTE 16 - OTHER DISCLOSURES A. Changes to Funds Funds created during fiscal year 2019: Noxious Weed Control Fund No. 1120 B. Prior Period Adjustments The County reported a prior period adjustment in the amount of $337,560 in the Solid Waste Utility Fund. The prior period adjustment was due to a miscalculation of the landfill post-closure care liability in 2018. C. Extraordinary/Special Items The Risk Management General Liability Fund No. 5120 reported an extraordinary item in the amount of $200,000. The revenue was related to a cost recovery assistance agreement the County entered into in 2019. The vendor undertook an insurance recovery action against insurers who owe the County duties of defense and indemnification for the costs of environmental investigation and remediation pursuant to insurance policies, and/or a cost recovery/contribution action against third parties who have caused, contributed to, or exacerbated the contamination, and are liable to the County for some or all of the costs of environmental investigation and remediation. The County Insurance/Workers’ Compensation Fund No. 5100 reported an extraordinary item in the amount of $542,168. This amount was a refund on a bonded pension held with the State of Washington Department of Labor and Industries for a deceased law enforcement officer. Due to life events, the recipient of the pension is no longer receiving benefit and the liability has been released.

Page 101

B-101

2019 2018 2017 2016 2015

Statutorily or contractually required contributions 1,452,217$ 1,464,442$ 1,423,425$ 1,228,795$ 1,238,861$

Contributions in relation to the statutorily or contractually required contributions* (1,457,156)$ (1,465,524)$ (1,420,802)$ (1,226,376)$ (1,239,579)$

Contribution deficiency (excess) (4,939)$ (1,082)$ 2,623$ 2,419$ (718)$

Lewis County's covered payroll 29,051,638$ 28,435,229$ 28,344,911$ 24,809,092$ 24,584,887$

Contributions as a percentage of covered payroll 5.02% 5.15% 5.01% 4.94% 5.04%

* This schedule is to be built prospectively until it contains ten years of data.

Last 10 Fiscal Years*

PERS 1As of December 31, 2019

Lewis County Schedule of Employer Contributions

2019 2018 2017 2016 2015

Statutorily or contractually required contributions 1,937,064$ 1,848,794$ 1,692,422$ 1,500,205$ 1,333,973$

Contributions in relation to the statutorily or contractually required contributions* (1,945,397)$ (1,850,726)$ (1,690,801)$ (1,497,044)$ (1,334,914)$

Contribution deficiency (excess) (8,333)$ (1,932)$ 1,621$ 3,161$ (941)$





PERS 2/3As of December 31, 2019


Page 102

B-102

2019 2018 2017 2016 2015

Statutorily or contractually required contributions 255,599$ 231,534$ 215,001$ 188,533$ 157,654$

Contributions in relation to the statutorily or contractually required contributions* (255,799)$ (234,187)$ (214,147)$ (191,740)$ (157,652)$

Contribution deficiency (excess) (199)$ (2,653)$ 854$ (3,207)$ 2$





PSERS 2As of December 31, 2019


2019 2018 2017 2016 2015

Statutorily or contractually required contributions 160,377$ 155,005$ 145,760$ 133,400$ 133,396$

Contributions in relation to the statutorily or contractually required contributions* (160,427)$ (155,068)$ (145,657)$ (133,400)$ (133,397)$

Contribution deficiency (excess) (50)$ (62)$ 103$ (0)$ (1)$





LEOFF 2As of December 31, 2019


Page 103

B-103

2019 2018 2017 2016 2015

Lewis County's proportion of the net pension liability (asset) 0.20662% 0.21872% 0.22697% 0.23630% 0.24672%

Lewis County's proportionate share of the net pension liability 7,945,388$ 9,768,065$ 10,769,666$ 12,690,369$ 12,905,646$


Lewis County's proportionate share of the net pension liability as a percentage of covered payroll 27.72% 34.26% 38.58% 51.08% 52.87%

Plan fiduciary net position as a percentage of the total pension liability 67.12% 63.22% 61.24% 57.03% 59.10%



PERS 1As of June 30, 2019

Lewis CountySchedule of Proportionate Share of the Net Pension Liability

2019 2018 2017 2016 2015


Lewis County's proportionate share of the net pension liability 2,221,425$ 4,038,608$ 8,564,245$ 12,834,920$ 9,329,573$


Lewis County's proportionate share of the net pension liability as a percentage of covered payroll 8.93% 16.33% 35.29% 53.47% 40.17%




PERS 2/3As of June 30, 2019

Lewis CountySchedule of Proportionate Share of the Net Pension Liability

Page 104

B-104

2019 2018 2017 2016 2015


Lewis County's proportionate share of the net pension liability (asset) (98,393)$ 10,462$ 171,174$ 332,480$ 148,277$


Lewis County's proportionate share of the net pension liability as a percentage of covered payroll -2.81% 0.31% 5.54% 13.09% 6.21%



Lewis CountySchedule of Proportionate Share of the Net Pension Liability (Asset)

PSERS 2As of June 30, 2019


2019 2018 2017 2016 2015


Lewis County's proportionate share of the net pension liability (asset) (564,125)$ (546,085)$ (483,720)$ (334,276)$ (408,196)$

State's proportionate share of the net pension liability (asset) associated with the employer (3,815,726)$ (3,693,705)$ (3,271,871)$ (2,261,037)$ (2,761,030)$

TOTAL (4,379,851)$ (4,239,790)$ (3,755,591)$ (2,595,313)$ (3,169,226)$

Lewis County's covered payroll -$ -$ -$ -$ -$

Lewis County's proportionate share of the net pension liability (asset) as a percentage of covered payroll 0.00% 0.00% 0.00% 0.00% 0.00%

Plan fiduciary net position as a percentage of the total pension liability (asset) 148.78% 144.42% 135.96% 123.74% 127.36%


Schedule of Proportionate Share of the Net Pension Liability (Asset)Lewis County

LEOFF 1As of June 30, 2019


Page 105

B-105

2018 2017 2016 2015


Lewis County's proportionate share of the net pension liability (asset) (1,958,231)$ (1,788,561)$ (1,188,517)$ (508,967)$ (957,077)$

State's proportionate share of the net pension liability (asset) associated with the employer (1,282,379)$ (1,158,060)$ (770,969)$ (331,809)$ (632,820)$

TOTAL (3,240,610)$ (2,946,621)$ (1,959,486)$ (840,776)$ (1,589,897)$


Lewis County's proportionate share of the net pension liability (asset) as a percentage of covered payroll -65.72% -60.90% -44.22% -19.20% -35.55%

Plan fiduciary net position as a percentage of the total pension liability (asset) 119.43% 118.50% 113.36% 106.04% 111.67%


Schedule of Proportionate Share of the Net Pension Liability (Asset)Lewis County

LEOFF 2As of June 30, 2019


Page 106

B-106

2019 2018Total OPEB Liability - Beginning 7,862,335$ 8,200,986$ Changes for the year:Service cost 481,118 567,784 Interest 341,090 301,103 Difference between expected and actual experience - - Changes in benefit terms - - Change in assumptions or inputs 2,654,316 (1,175,723) Expected benefit payments (48,894) (31,815) Net Changes in Total OPEB Liability 3,427,630 (338,651) Total OPEB Liability - Ending 11,289,965 7,862,335

Covered-employee payroll 16,679,796 15,802,203

Total OPEB liability as a % of covered payroll 67.69% 49.75%

Notes to Schedule:*Until a full 10-year trend is compiled, only information for those years available is presented.No assets are accumulated in a trust that meet the criteria in paragraph 4 of GASB 75.

2019 2018Total OPEB Liability - Beginning 8,304,506$ 8,610,431$ Changes for the year:Service cost - - Interest cost 316,008 302,581 Changes in experience data and assumptions (184,378) (288,785) Changes in benefit terms - - Estimated benefit payments (280,499) (319,721) Other - - Net Changes in Total OPEB Liability (148,869) (305,925) Total OPEB Liability - Ending 8,155,637 8,304,506

Covered-employee payroll - -

Total OPEB liability as a % of covered payroll 0% 0%

Notes to Schedule:*Until a full 10-year trend is compiled, only information for those years available is presented.No assets are accumulated in a trust that meet the criteria in paragraph 4 of GASB 75.

Lewis County

Lewis CountySchedule of Changes in Total OPEB Liability and Related Ratios - LEOFF 1

For the year ended December 31 Last 10 Fiscal Years*

Schedule of Changes in Total OPEB Liability and Related Ratios - PEBBFor the year ended December 31


Page 107

B-107

From Pass-Through Awards

From Direct Awards Total

FOOD AND NUTRITION SERVICE, AGRICULTURE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF AGRICULTURE)

National School Lunch Program

10.555 N/A 16,059 - 16,059 -

16,059 - 16,059 -

FOOD AND NUTRITION SERVICE, AGRICULTURE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF HEALTH)

WIC Special Supplemental Nutrition Program for Women, Infants, and Children

10.557 CLH18251 447,124 - 447,124 -



10.557 CLH18251 22,103 - 22,103 -



10.557 CLH18251 3,440 - 3,440 -

472,667 - 472,667 -


State Administrative Matching Grants for the Supplemental Nutrition Assistance Program

10.561 CLH18251 25,814 - 25,814 -

25,814 - 25,814 -


WIC Farmers' Market Nutrition Program (FMNP)

10.572 CLH18251 914 - 914 -

Child Nutrition Cluster

Total Child Nutrition Cluster:

Total CFDA 10.557:SNAP Cluster

Total SNAP Cluster:

Lewis CountySchedule of Expenditures of Federal Awards

For the Year Ended December 31, 2019

Federal Agency (Pass-Through Agency) Federal Program

CFDA Number

Other Award Number

Expenditures

Passed through to Subrecipients Note

The accompanying notes are an integral part of this schedule.

Page 108

B-108






CFDA Number

Other Award Number

Expenditures



WIC Grants To States (WGS)

10.578 CLH18251 275 - 275 -

RURAL UTILITIES SERVICE, AGRICULTURE, DEPARTMENT OF

Water and Waste Disposal Systems for Rural Communities

10.760 N/A - 444,316 444,316 - 3

NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION, COMMERCE, DEPARTMENT OF (via WASHINGTON STATE RECREATION AND CONSERVATION OFFICE)

Pacific Coast Salmon Recovery Pacific Salmon Treaty Program

11.438 15-1087 PLAN 9,142 - 9,142 -



11.438 16-1803 PLAN 3,104 - 3,104 -



11.438 17-1157 R 14,883 - 14,883 -

27,129 - 27,129 -

ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF COMMERCE)

Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii

14.228 15-622110-026 34,573 - 34,573 -

Total CFDA 11.438:


Page 109

B-109






CFDA Number

Other Award Number

Expenditures


ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF

Continuum of Care Program

14.267 HRCMC1718 (AMEND 1)

- 40,072 40,072 39,716

ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT, HOUSING AND URBAN DEVELOPMENT, DEPARTMENT OF

Continuum of Care Program

14.267 HRCMC1718 (AMEND B)

- 99,460 99,460 95,620

- 139,532 139,532 135,336

U.S. FISH AND WILDLIFE SERVICE, INTERIOR, DEPARTMENT OF THE

Fish and Wildlife Management Assistance

15.608 F17AC00342 - 93,992 93,992 -

OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF COMMERCE)

Crime Victim Assistance 16.575 19-31101-519 31,395 - 31,395 -

OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF COMMERCE)

Crime Victim Assistance 16.575 20-31101-519 28,541 - 28,541 -

59,936 - 59,936 -

OFFICE ON VIOLENCE AGAINST WOMEN (OVW), JUSTICE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF COMMERCE)

Violence Against Women Formula Grants

16.588 F18-31103-055 4,375 - 4,375 -

OFFICE ON VIOLENCE AGAINST WOMEN (OVW), JUSTICE, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF COMMERCE)

Violence Against Women Formula Grants

16.588 F18-31103-054 6,350 - 6,350 -

10,725 - 10,725 -

Total CFDA 14.267:

Total CFDA 16.575:

Total CFDA 16.588:


Page 110

B-110






CFDA Number

Other Award Number

Expenditures


OFFICE OF JUSTICE PROGRAMS, JUSTICE, DEPARTMENT OF

State Criminal Alien Assistance Program

16.606 FY 2018 SCAAP - 5,152 5,152 -


State Criminal Alien Assistance Program

16.606 FY 2019 SCAAP - 4,662 4,662 -

- 9,814 9,814 -


Bulletproof Vest Partnership Program

16.607 2018BYBX18095513

- 4,633 4,633 -


Bulletproof Vest Partnership Program

16.607 2019BUBX19099341

- 2,952 2,952 -

- 7,585 7,585 -

OJP BUREAU OF JUSTICE ASSISTANCE, JUSTICE, DEPARTMENT OF (via WASHINGTON STATE PATROL)

Paul Coverdell Forensic Sciences Improvement Grant Program

16.742 K14404 4,642 - 4,642 -

FEDERAL AVIATION ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF

Airport Improvement Program

20.106 3-53-0156-006-2015 DOT-FA15NM-0078

- 19,667 19,667 -

FEDERAL AVIATION ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF

Airport Improvement Program

20.106 3-53-0078-009-2017 DOT-FA17NM-0071

- 5,596 5,596 -

- 25,263 25,263 -

FEDERAL HIGHWAY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF TRANSPORTATION)

Highway Planning and Construction

20.205 LA-8707 90,963 - 90,963 -

Total CFDA 16.607:

Total CFDA 20.106:Highway Planning and Construction Cluster

Total CFDA 16.606:


Page 111

B-111






CFDA Number

Other Award Number

Expenditures




20.205 LA-8987 3,316 - 3,316 -



20.205 LA-9264 107,604 - 107,604 -



20.205 LA-9265 780,791 - 780,791 -



20.205 LA-9268 25,087 - 25,087 -



20.205 LA-9274 14,454 - 14,454 -



20.205 LA-9275 53,993 - 53,993 -


Page 112

B-112






CFDA Number

Other Award Number

Expenditures




20.205 LA-9450 29,178 - 29,178 -



20.205 LA-9551 730,992 - 730,992 -

1,836,378 - 1,836,378 -

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WASHINGTON ASSOCIATION OF SHERIFFS & POLICE CHIEFS)

State and Community Highway Safety

20.600 N/A 11,603 - 11,603 - 3

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WASHINGTON ASSOCIATION OF SHERIFFS & POLICE CHIEFS)


20.600 N/A 1,000 - 1,000 - 3

NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, TRANSPORTATION, DEPARTMENT OF (via WASHINGTON TRAFFIC SAFETY COMMISSION)


20.600 2019-HVE-REGION 3 TARGET ZERO MANAGER

2,031 - 2,031 -



20.600 2020-HVE-3765-WA TRAFFIC SAFETY COMMISSION

1,565 - 1,565 -

Total Highway Planning and Construction Cluster:Highway Safety Cluster


Page 113

B-113






CFDA Number

Other Award Number

Expenditures




20.600 Region 3 HVE Agency IAA

475 - 475 -

16,674 - 16,674 -


National Priority Safety Programs

20.616 2019-HVE-REGION 3 TARGET ZERO MANAGER

4,215 - 4,215 -



20.616 2019-SUB-GRANTS-3557-LEIWS COUNTY SHERIFFS OFFICE MOTORCYCLES PROGRAM

17,770 - 17,770 -



20.616 Region 3 HVE Agency IAA

462 - 462 -

22,447 - 22,447 -

39,121 - 39,121 -

IMMED OFFICE OF THE SECRETARY OF HEALTH AND HUMAN SERVICES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via NATIONAL ASSOCIATION OF COUNTY AND CITY HEALTH OFFICIALS)

Medical Reserve Corps Small Grant Program

93.008 MRC 15-1760 125 - 125 -

Total CFDA 20.600:

Total CFDA 20.616:

Total Highway Safety Cluster:


Page 114

B-114






CFDA Number

Other Award Number

Expenditures


CENTERS FOR DISEASE CONTROL AND PREVENTION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF HEALTH)

Public Health Emergency Preparedness

93.069 CLH18251 59,510 - 59,510 -


Public Health Emergency Preparedness

93.069 CLH18251 25,336 - 25,336 -

84,846 - 84,846 -

FOOD AND DRUG ADMINISTRATION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via NATIONAL ASSOCIATION OF FOOD AND DRUG OFFICIALS)

Food and Drug Administration Research

93.103 G-SP-1810-06809

2,500 - 2,500 -

SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES ADMINISTRATION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF SOCIAL & HEALTH SERVICES)

Substance Abuse and Mental Health Services Projects of Regional and National Significance

93.243 1763-94259 16,220 - 16,220 414


Substance Abuse and Mental Health Services Projects of Regional and National Significance

93.243 K3925 34,792 - 34,792 -

51,012 - 51,012 414

Total CFDA 93.069:

Total CFDA 93.243:


Page 115

B-115






CFDA Number

Other Award Number

Expenditures



Immunization Cooperative Agreements

93.268 CLH18251 44,551 - 44,551 -

ADMINISTRATION FOR CHILDREN AND FAMILIES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF

Child Support Enforcement

93.563 2110-81382 - 110,047 110,047 - 4

ADMINISTRATION FOR CHILDREN AND FAMILIES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF SOCIAL & HEALTH SERVICES)


93.563 1663-67383 6,871 - 6,871 - 4

ADMINISTRATION FOR CHILDREN AND FAMILIES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF


93.563 2110-81382 - 214,189 214,189 - 4

6,871 324,236 331,107 -

CENTERS FOR DISEASE CONTROL AND PREVENTION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via THURSTON COUNTY)

Preventive Health and Health Services Block Grant funded solely with Prevention and Public Health Funds (PPHF)

93.758 GREENIE/AGRMNT

4,999 - 4,999 -

CENTERS FOR DISEASE CONTROL AND PREVENTION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via THURSTON COUNTY)

Preventive Health and Health Services Block Grant funded solely with Prevention and Public Health Funds (PPHF)

93.758 GREENIE/AGRMNT

1,007 - 1,007 -

6,006 - 6,006 -

CENTERS FOR MEDICARE AND MEDICAID SERVICES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE HEALTH CARE AUTHORITY)

Medical Assistance Program

93.778 K1409 10,074 - 10,074 - 5

Total CFDA 93.563:

Total CFDA 93.758:Medicaid Cluster


Page 116

B-116






CFDA Number

Other Award Number

Expenditures


CENTERS FOR MEDICARE AND MEDICAID SERVICES, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE HEALTH CARE AUTHORITY)

Medical Assistance Program

93.778 K1409 24,280 - 24,280 - 5

34,354 - 34,354 -


Opioid STR 93.788 1763-94259 17,889 - 17,889 15,000


Opioid STR 93.788 K3925 43,620 - 43,620 -

61,509 - 61,509 15,000


Block Grants for Prevention and Treatment of Substance Abuse

93.959 1763-94259 51,367 - 51,367 5,251


Block Grants for Prevention and Treatment of Substance Abuse

93.959 K3925 28,294 - 28,294 391

79,661 - 79,661 5,642Total CFDA 93.959:

Total Medicaid Cluster:

Total CFDA 93.788:


Page 117

B-117






CFDA Number

Other Award Number

Expenditures


HEALTH RESOURCES AND SERVICES ADMINISTRATION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF HEALTH)

Maternal and Child Health Services Block Grant to the States

93.994 CLH18251 53,794 - 53,794 -

HEALTH RESOURCES AND SERVICES ADMINISTRATION, HEALTH AND HUMAN SERVICES, DEPARTMENT OF (via WASHINGTON STATE DEPARTMENT OF HEALTH)

Maternal and Child Health Services Block Grant to the States

93.994 CLH18251 32,720 - 32,720 -

86,514 - 86,514 -

U.S. COAST GUARD, HOMELAND SECURITY, DEPARTMENT OF (via WASHINGTON STATE PARKS AND RECREATION COMMISSION)

Boating Safety Financial Assistance

97.012 3316FAS160153 13,923 - 13,923 -

FEDERAL EMERGENCY MANAGEMENT AGENCY, HOMELAND SECURITY, DEPARTMENT OF (via WASHINGTON STATE MILITARY DEPARTMENT)

Disaster Grants - Public Assistance (Presidentially Declared Disasters)

97.036 D16-603 33,949 - 33,949 -



97.036 D16-603 8,089 - 8,089 -



97.036 D16-706 11,726 - 11,726 - 6

Total CFDA 93.994:


Page 118

B-118






CFDA Number

Other Award Number

Expenditures




97.036 D16-706 70,613 - 70,613 -



97.036 D16-706 289,195 - 289,195 - 6



97.036 D16-706 17,344 - 17,344 -



97.036 D16-706 197,065 - 197,065 -



97.036 D17-150 694,142 - 694,142 -



97.036 E07-717 155,477 - 155,477 -



97.036 E08-731 279,608 - 279,608 -


Page 119

B-119






CFDA Number

Other Award Number

Expenditures




97.036 D16-706 42,576 - 42,576 -

1,799,784 - 1,799,784 -


Hazard Mitigation Grant 97.039 D17-004 16,080 - 16,080 -


Emergency Management Performance Grants

97.042 E19-166 39,470 - 39,470 -

FEDERAL EMERGENCY MANAGEMENT AGENCY, HOMELAND SECURITY, DEPARTMENT OF

Homeland Security Grant Program

97.067 E19-101 - 25,622 25,622 -


Homeland Security Grant Program

97.067 E18-155 Revised 28,076 - 28,076 -

28,076 25,622 53,698 -

4,883,515 1,070,360 5,953,875 156,392

Total CFDA 97.036:

Total CFDA 97.067:

Total Federal Awards Expended:


Page 120

B-120

Lewis County, Washington Notes to the Schedule of Expenditures of Federal Awards

For the Year Ended December 31, 2019 Note 1 – Basis of Accounting The Schedule of Expenditures of Federal Awards is prepared on the same basis of accounting as the county’s financial statements. The county uses the accrual basis of accounting for all funds except governmental funds, which use the modified accrual basis of accounting.

Note 2 – Program Costs The amounts shown as current year expenditures represent only the federal grant portion of the program costs. Entire program costs, including the county’s portion, may be more than shown. Such expenditures are recognized following, as applicable, either the cost principles in the OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Note 3 – Not Available (N/A) The county was unable to obtain another identification number.

Note 4 – Indirect Cost Rate The county has elected to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance.

The amount expended for "Child Support Enforcement" (CFDA 93.563) includes $623 from Contract Number 1663-67383, and $29,185 from Contract Number 2110-81382 claimed as an indirect cost recovery using the de minimis indirect cost rate.

Note 5 – Medical Assistance Program Reimbursement provided by contract # K1409 is determined by an in-depth billing process using data from the entire region. As a result, the billings are often delayed while the data is being compiled and reviewed. The amount reported on the 2019 Schedule of Expenditures of Federal Awards for contract #K1409 is based on data occurring from the second, third, and fourth quarter of 2017 and the first quarter of 2018. Due to the length of time needed to prepare the billing information, the amount of expenditures associated with prior years was not determined in time to be included in the Financial Statements for each of those years. Note 6 – FEMA Projects Some of the expenditures reported under CFDA #97.036 “Disaster Grants - Public Assistance (Presidentially Declared Disasters)” on the 2019 Schedule of Expenditures of Federal Awards were incurred in prior years. Due to the uncertainty of funding status in the prior years, the expenditures were not reported on the Schedule of Expenditures of Federal Awards in the years in which they were incurred. Contract Number D16-706 includes prior year expenditures that became eligible for reimbursement in 2019. Note 7 – Under-Reported 2018 Expenditures The following 2018 expenditures were erroneously omitted from the 2018 Schedule of Expenditures of Federal Awards. These expenditures have been included in the expenditure amounts reported on the 2019 Schedule of Expenditures of Federal Awards.

A) An amount of $113.03 expended in 2018 under CFDA 10.555 “USDA-WSDA School Lunch”. Page 121

B-121


ABOUT THE STATE AUDITOR’S OFFICE The State Auditor’s Office is established in the state’s Constitution and is part of the executive branch of state government. The State Auditor is elected by the citizens of Washington and serves four-year terms.

We work with our audit clients and citizens to achieve our vision of government that works for citizens, by helping governments work better, cost less, deliver higher value, and earn greater public trust.

In fulfilling our mission to hold state and local governments accountable for the use of public resources, we also hold ourselves accountable by continually improving our audit quality and operational efficiency and developing highly engaged and committed employees.

As an elected agency, the State Auditor’s Office has the independence necessary to objectively perform audits and investigations. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal, state, and local laws.

Our audits look at financial information and compliance with state, federal and local laws on the part of all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits of state agencies and local governments as well as fraud, state whistleblower and citizen hotline investigations.

The results of our work are widely distributed through a variety of reports, which are available on our website and through our free, electronic subscription service.

We take our role as partners in accountability seriously, and provide training and technical assistance to governments, and have an extensive quality assurance program.

Contact information for the State Auditor’s Office

Public Records requests [email protected]

Main telephone (564) 999-0950

Toll-free Citizen Hotline (866) 902-3900

Website www.sao.wa.gov

Page 122

B-122

C-1

APPENDIX C CONTINUING DISCLOSURE UNDERTAKING CERTIFICATE

(a) Limitation of Rights. Lewis County, Washington (the “County”) intends that this Continuing Disclosure Certificate constitutes the County’s undertaking to provide the information and notices described by 17 CFR § 240.15c2-12(b)(5) with respect solely to the County’s Limited Tax General Obligation Bonds, Series 2021 (the “Bonds”), (the “Undertaking”). Notwithstanding any other provision of Resolution No. 20-452, adopted by the Board of County Commissioners (the “Board”) on December 14, 2020, and amended by Resolution No. 21-055, adopted by the Board on February 8, 2021 (collectively, the “Resolution”), to the contrary, neither the registered owner or holder of bonds of any series other than the Bonds, nor any trustee acting on their behalf, shall be entitled to any right or to exercise any remedy provided to the Holders under this Undertaking based upon the County’s failure to observe, or refusal to comply with, the covenants contained in this Undertaking.

(b) Definitions for Purposes of this Undertaking. Solely for the purposes of this Undertaking, the following terms shall have the following meanings unless the context otherwise requires:

“Annual Financial Information” shall mean an annual update of:

(i) the financial information and operating data of the type set forth in the Official Statement in the tables entitled “Top Ten Tax Taxpayers in Lewis County,” “Receipt of Major Taxes” and “General Fund Tax Revenues by Source;”

(ii) the assessed valuation of taxable property in the County of the type set forth in the Official Statement in the tables entitled “Assessed Valuation” and “Property Taxes;”

(iii) the ad valorem taxes levied and percentage of taxes collected by the County of the type set forth in the Official Statement in the table entitled “Property Taxes;”

(iv) the County’s property tax levy rates per $1,000 of assessed valuation of the type set forth in the Official Statement in the table entitled “Historical Levy Rates for Lewis County for the 2020 Tax Year”;

(v) the County’s outstanding general obligation debt of the type set forth in the Official Statement in the tables entitled “Calculation of Debt Capacity” and “Direct and Estimated Overlapping Debt;” and

(vi) the funding balances for the pension plans of the County set forth in the County’s Annual Financial Statements for the year ending December 31, 2019.

“Audited Financial Statements” shall mean, with respect to the County, financial statements prepared and audited pursuant to the laws of the State (presently RCW 43.09.200 through 43.09.285), as such laws may be amended from time to time.

“Debt Obligation” shall include: (1) any short-term or long-term debt obligation of the County or Obligated Person under the terms of an indenture, loan agreement, lease or similar contract; (2) a direct purchase of municipal securities by an investor; (3) a direct loan by a bank; and (4) generally, lease arrangements entered into by the County and Obligated Persons that operate as vehicles to borrow money.

“EMMA” shall mean the MSRB’s Electronic Municipal Market Access system, which shall receive all required filings under Rule 15c2-12.

“Financial Obligation” means a: (1) Debt Obligation; (2) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned Debt Obligation; or (3) guarantee of (1) or (2). The term “Financial Obligation” does not include municipal

C-2

securities as to which a final official statement has been provided to the MSRB consistent with Rule 15c2-12.

“Holder” shall mean any Registered Owner of a Bond and any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares:

(i) voting power which includes the power to vote, or to direct the voting of, a Bond; and/or

(ii) `investment power which includes the power to dispose, or direct the disposition of, a Bond.

“MSRB” shall mean the Municipal Securities Rulemaking Board or any successor in functions thereto.

“Obligated Person” shall have the meaning specified in Rule 15c2-12.

“Official Statement” shall mean the County’s final official statement relating to the Bonds, together with any amendments thereto.

“Required Filings” shall mean any filing made pursuant to subsections C, D, E and F of this Undertaking.

“Rule 15c2-12” shall mean Rule 15c2-12 of the SEC, as amended.

“SEC” shall mean the Securities and Exchange Commission or any successor in functions thereto.

(c) Annual Financial Information. The County will provide to EMMA within nine months after the end of each fiscal year, commencing on or before September 30, 2019, Annual Financial Information for the County in an electronic format as prescribed by the MSRB, accompanied by identifying information as prescribed by the MSRB. Presently, the County’s fiscal year commences on January 1. All or any portion of the Annual Financial Information may be incorporated in the Annual Financial Information by cross reference to any other documents which have been filed with EMMA or the SEC.

Annual Financial Information for any fiscal year containing any modified operating data or financial information for such fiscal year shall explain, in narrative form, the reasons for such modification and the effect of such modification on the Annual Financial Information being provided for such fiscal year. If a change in accounting principles is included in any such modification, the initial Annual Financial Information after such modification shall present a comparison between the financial statements or information prepared on the basis of the modified accounting principles and those prepared on the basis of the former accounting principles. The County will provide notice of the modification of operating data or financial information or change in accounting principles to EMMA.

(d) Audited Financial Statements. To the extent the County’s Audited Financial Statements are not submitted as part of the Annual Financial Information under subsection C of this Undertaking, the County will provide to EMMA the Audited Financial Statements of the County (commencing with the audited financial statements for the fiscal year ending December 31, 2019), when and if such Audited Financial Statements are available. Although the County may submit a comprehensive annual financial report (a “CAFR”) together with its Audited Financial Statements, there is no requirement to do so hereunder, and the dissemination of a CAFR in any year shall not be construed as a requirement to disseminate a CAFR in any subsequent year.

(e) Event Notices.

(i) The County will provide to EMMA, within 10 business days of the occurrence, notice of any of the following events with respect to the Bonds: (A) principal and interest payment delinquencies; (B) unscheduled draws on debt service reserves reflecting financial difficulties; (C) unscheduled draws on credit enhancements reflecting financial difficulties; (D) substitution of credit or liquidity providers, or their failure to perform; (E) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final

C-3

determinations of taxability or Notices of Proposed Issue (IRS Form 5701-TEB); (F) tender offers; (G) defeasances; (H) rating changes; (I) bankruptcy, insolvency, receivership or similar proceeding of the County or any other Obligated Person; (J) appointment of a successor or additional trustee; and (K) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the County or any other Obligated Person, any of which reflect financial difficulties.

(2) The County will provide to EMMA, within 10 business days of the occurrence, notice of any of the following events with respect to the Bonds, if material: (A) non-payment related defaults; (B) notices or determinations with respect to the tax status of the Bonds; (C) events affecting the tax status of the Bonds; (D) modifications to rights of Holders; (E) bond calls (optional, contingent or unscheduled Bond calls other than scheduled sinking fund redemptions for which notice is given pursuant to Exchange Act Release 34 23856); (F) release, substitution, or sale of property securing repayment of the Bonds; (G) consummation of a merger, consolidation, or acquisition involving the County or any other Obligated Person or the sale of all or substantially all of the assets of the County or any other Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; (H) the change of name of a trustee; and (I) the incurrence of a Financial Obligation of the County or any other Obligated Person, or agreement or covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the County or any other Obligated Person, any of which affect Holders.

(f) Notice of Late Filing. The County will provide to EMMA in a timely manner, notice of a failure of the County to provide the required Annual Financial Information on or before the date set forth in subsection C of this Undertaking.

(g) Term of this Undertaking. The term of this Undertaking shall commence on the date of closing and initial delivery of the Bonds to the Registered Owners and shall terminate when the Bonds shall have been paid in full or defeased in accordance with the Resolution. The County shall provide notice of such defeasance to EMMA; provided, such notice shall not be a condition to such defeasance.

(h) Amendments. Notwithstanding any provision of the Resolution to the contrary, the County may amend this Undertaking in conformity with Rule 15c2-12, as interpreted from time to time by the courts, the SEC, or the SEC staff. Upon the adoption of any amendment to Rule 15c2-12, this Undertaking shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations of the County and all Holders under this Undertaking shall thereafter be determined, exercised and enforced thereunder, subject in all respects to such modification and amendments, and all terms and conditions of any such amendment shall be deemed to be part of the terms and conditions of this Undertaking for any and all purposes. If the consent of Holders is necessary for such amendment, only the Holders of the Bonds shall be considered for purposes of determining whether such consent has been rendered.

(i) Additional Information. Nothing in this Undertaking shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Undertaking or any other means of communication, or including any other information in any Required Filing, in addition to that which is required by this Undertaking. If the County chooses to include any information in any Required Filing in addition to that which is specifically required by this Undertaking, the County shall have no obligation under this Undertaking to update such information or include it in any future Required Filing.

C-4

(j) Defaults of this Undertaking. If the County shall fail to comply with any provision of this Undertaking, then any Holder may enforce, for the equal benefit and protection of all Holders similarly situated, by mandamus or other suit or proceeding at law or in equity, such provision against the County and any of the officers, agents and employees of the County, and may compel the County or any such officers, agents or employees to perform and carry out their duties under this Undertaking; provided, that the sole and exclusive remedy for breach of this Undertaking shall be an action to compel specific performance of the obligations of the County hereunder and no person or entity shall be entitled to recover monetary damages hereunder under any circumstances.

(k) Rescission Rights. The County hereby reserves the right to rescind this Undertaking without the consent of the Holders in the event Rule 15c2-12 is repealed by the SEC or is ruled to be invalid by a federal court and the time to appeal from such decision has expired. In the event of a partial repeal or invalidation of Rule 15c2-12, the County hereby reserves the right to rescind those provisions of this Undertaking that were required by those parts of Rule 15c2-12 that are so repealed or invalidated.

(l) EMMA. Any filing under this Undertaking may be made solely by transmitting such filing to EMMA as provided at http://emma.msrb.org.

DATED this ___ day of ________, 2021.

LEWIS COUNTY, WASHINGTON __________________________________________ _____________________

D-1

APPENDIX D BOOK-ENTRY SYSTEM

APPENDIX D BOOK-ENTRY SYSTEM

T H E D E P O S I T O R Y T R U S T C O M P A N Y

SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE

(Prepared by DTC--bracketed material may apply only to certain issues)

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities 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 Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.]

2. 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 3.6 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 a Standard & Poor’s rating of: AA+. 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.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will

receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“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 Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities 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 Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

D-2

5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.]

[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed,

DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities

unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or 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.

[9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its

Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.]

10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving

reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor

securities depository). In that event, Security certificates will be printed and delivered to DTC. 12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from

sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

LE

WIS

CO

UN

TY

, WA

SH

ING

TO

N • L

ImIT

Ed T

Ax G

EN

Er

AL O

bL

IGA

TIO

N bO

Nd

S, SE

rIE

S 2021

Documents

$11,640,000 LEWIS COUNTY, WASHINGTON Limited Tax General