2016 Comprehensive Annual Financial Report · 2016 Comprehensive Annual Financial Report City of Lacey, Washington 2016 Comprehensive . Annual Financial Report. For the Year Ended

2016 Comprehensive Annual Financial Report City of Lacey, Washington


2016 Comprehensive Annual Financial ReportFor the Year Ended December 31, 2016

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Prepared by the City of LaceyAccounting Division of

the Finance DepartmentTroy Woo - Finance Director

420 College St. SE, Lacey, WA 98503

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2016 Comprehensive Annual Financial ReportCity of Lacey, Washington

TABLE OF CONTENTSINTRODUCTORY SECTION PAGE

Letter of transmittal ............................................................................................................................ 1-1Certificate of Achievement for Excellence in Financial Reporting ...................................................... 1-5City of Lacey organizational chart ...................................................................................................... 1-6List of officials ................................................................................................................................... 1-7

FINANCIAL SECTIONIndependent auditor’s report ................................................................................................................... 2-1Management Discussion and Analysis .................................................................................................. 3-1

Financial Highlights ............................................................................................................................ 3-1Overview of Financial Statements ...................................................................................................... 3-2Government-wide Overall Financial Analysis ..................................................................................... 3-3Financial Analysis of Governmental Funds ........................................................................................ 3-8General Fund Budgetary Highlights ................................................................................................... 3-10Capital Assets and Debt Administration ............................................................................................. 3-11Requests for Information .................................................................................................................... 3-14

Basic Financial StatementsGovernment-wide Financial Statements: Statement of Net Position............................................................................................................ 4-1

Statement of Activities ................................................................................................................. 4-2Fund Financial Statements Governmental Fund Financial Statements Balance Sheet - Governmental Funds..................................................................................... 4-4 Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds . 4-5 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds ........................................................................................................... 4-6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities - Governmental Funds .... 4-7 Proprietary Fund Financial Statements Statement of Net Position - Proprietary Funds ........................................................................ 4-8 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds .......... 4-9 Statement of Cash Flows - Proprietary Funds ........................................................................ 4-10 Fiduciary Fund Statements Statement of Fiduciary Net Position ........................................................................................ 4-11 Notes to the Financial Statements ............................................................................................. 4-13

Required Supplementary Information Other Than MD&A .................................................................... 5-1Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual General Fund ............................................................................................................................. 5-2Schedule of the City’s Proportionate Share of the Net Pension Liability and

Asset and Related Ratios, as of June 30 ................................................................................... 5-3 Schedule of the City’s Employer Contributions, as of December 31 ................................................. 5-4 Schedule of Funding Progress Other Postemployment Benefits (OPEB) Plan

LEOFF 1 Police Officers .............................................................................................................. 5-5Notes to the Required Supplemental Information .............................................................................. 5-5

Combining & Individual Fund Statements & Schedules ....................................................................... 6-1Non-Major Funds - Other Governmental Funds ......................................................................................... 6-3Combining Balance Sheet - Other Governmental Funds.................................................................. 6-4Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Other Governmental Funds .......................................................... 6-6Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual Street Fund.................................................................................................................................. 6-8 Arterial Street Fund ..................................................................................................................... 6-9 Lodging Tax Fund ........................................................................................................................ 6-10 Community Development Block Grant Fund ............................................................................... 6-11 General Obligation Bond Fund .................................................................................................... 6-12 L.I.D. Redemption Fund .............................................................................................................. 6-13 Building Improvement Fund ........................................................................................................ 6-14

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Capital Expenditure Fund ............................................................................................................ 6-15 Parks & Open Space Fund.......................................................................................................... 6-16 Regional Athletic Complex Capital .............................................................................................. 6-17Internal Service Funds ....................................................................................................................... 6-18 Combining Statement of Net Position ......................................................................................... 6-19 Combining Statement of Revenues, Expenses and Changes in Fund Net Position ................... 6-20 Combining Statement of Cash Flows .......................................................................................... 6-21Fiduciary Funds - Agency Funds .................................................................................................................... 6-22 Combining Statement of Fiduciary Net Position-Agency Funds.................................................. 6-23 Combining Statement of Changes in Assets and Liabilities - Agency Funds .............................. 6-24

Other Supplementary Information .......................................................................................................... 7-1Schedule of Operations - Budget to Actual Schedule of Operations - Water Fund ......................................................................................... 7-2 Schedule of Operations - Wastewater Fund ............................................................................... 7-3 Schedule of Operations - Stormwater Fund ................................................................................ 7-4 Schedule of Operations - Reclaimed Water Fund ....................................................................... 7-5 Schedule of Operations - Equipment Rental Fund ...................................................................... 7-6 Schedule of Operations - Information Management Services Fund............................................ 7-7Schedule of Expenditures of Federal Awards .................................................................................... 7-8Notes to the Schedule of Expenditures of Federal Awards ................................................................ 7-9Schedule of State and Local Financial Assistance ............................................................................. 7-10Debt Service Schedules City of Lacey General Obligation Bond Debt, Limited Tax 2007 ................................................. 7-11 City of Lacey General Obligation Bond Debt, Unlimited Tax 2010 Refunding ............................. 7-12 City of Lacey Local Option Capital Asset Lending Loan 2012 .................................................... 7-13 City of Lacey General Obligation Bond Debt, Unlimited Tax 2012 Refunding ............................. 7-14 City of Lacey Water and Sewer Revenue Bonds 2013 ............................................................... 7-15

City of Lacey General Obligation Bond Debt, Limited Tax 2015 Refunding ................................ 7-16 City of Lacey General Obligation Bond Debt, Unlimited Tax 2015 Refunding ............................. 7-17

STATISTICAL SECTIONStatistical Section ............................................................................................................................... 8-1 Table 1 - Net Position by Component .......................................................................................... 8-2 Table 2 - Changes in Net Position ............................................................................................... 8-3 Table 3 - Fund Balances of Governmental Funds ....................................................................... 8-4 Table 4 - Changes in Fund Balances of Governmental Funds .................................................... 8-5 Table 5 - Governmental Activities Tax Revenues by Source ....................................................... 8-6 Table 6 - Sales Tax Revenues by Type, Governmental Funds .................................................... 8-7 Table 7 - Assessed Value and Estimated Actual Value of Taxable Property ............................... 8-8 Table 8 - Property Tax Rates ....................................................................................................... 8-9 Table 9 - Principal Property Taxpayers ........................................................................................ 8-10 Table 10 - Property Tax Levies and Collections .......................................................................... 8-11 Table 11 - Ratio of Outstanding Debt by Type ............................................................................. 8-12 Table 12 - Ratios of General Bonded Debt Outstanding ............................................................. 8-13 Table 13 - Direct and Overlapping Government Activities Debt .................................................. 8-14 Table 14 - Legal Debt Margin Information ................................................................................... 8-15 Table 15 - Pledged-Revenue Coverage ...................................................................................... 8-16 Table 16 - Demographic and Economic Statistics ....................................................................... 8-17 Table 17 - Principal Employers .................................................................................................... 8-18 Table 18 - Full-time Equivalent City Government Employees by Function.................................. 8-19 Table 19 - Operating Indicators by Function................................................................................ 8-20 Table 20 - Capital Asset Statistics by Function............................................................................ 8-21

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Introductory Section 1-1

CITY COUNCIL

ANDY RYDERMayor

CYNTHIA PRATTDeputy Mayor

JASON HEARNJEFF GADMAN

LENNY GREENSTEINMICHAEL R. STEADMAN

VIRGIL S. CLARKSON

CITY MANAGERSCOTT H. SPENCE

July 01, 2017

Honorable Mayor and City CouncilmembersTo the Citizens of Lacey, Washington:

The Annual Financial Report of the City of Lacey for the fiscal year ended December 31, 2016, is submitted herewith. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

State statute requires an annual audit by the Washington State Auditor ’s Office. The independent auditor ’s report is located at the front of the financial section of this report.

The management’s discussion and analysis (MD&A) immediately follows the independent auditor ’s report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. Profile of the Government

The City of Lacey incorporated in 1966, and is the twenty-fifth largest of 281 cities in the state of Washington. It is located approximately 60 miles south of Seattle on Interstate 5 and encompasses an area of 17.4 square miles. The cities of Olympia and Tumwater are adjacent to Lacey, and together, the three cities constitute the major population center within Thurston County. Lacey has grown from a population of 7,650 in 1967 to a 2016 population of 47,540.

The City of Lacey is a non-charter code city, operating under Section 35A of the Revised Code of Washington. It has a Council/Manager form of government with the seven-member City Council, elected for staggered four-year terms. Councilmembers are elected on a non-partisan, at-large basis rather than by district. The City Council appoints a mayor from the seven-member Council. Policy-making and legislative authority are vested in the City Council. The Council appoints the City Manager, who acts as the City’s chief administrative officer responsible for carrying out the policies and direction set by the Council. This includes the enforcement of laws and ordinances, the execution of contracts and agreements, and maintenance of peace and order in the city. The City Manager appoints the heads of the various departments.

The City of Lacey provides a full range of municipal services either directly or through contracts. The City provides police, parks and recreation, planning and zoning, building



inspection, street maintenance and construction, engineering and general administrative services. The City also operates enterprise funds for water, wastewater services, storm water management, and reclaimed water. By agreement with Thurston County, Olympia, and Tumwater, Lacey provides administrative support services to Joint Animal Services and the Thurston County Narcotics Task Force. The City also entered into an agreement with the Capital Area Regional Public Facilit ies District to provide administrative support services and distribute public facilities district revenues to the cities of Olympia and Lacey for their agreed upon projects.

The Council is required to adopt a final budget by no later than the close of the fiscal year. This annual budget serves as the foundation for the City of Lacey financial planning and control. The budget is prepared by fund, department (e.g., Police), and program (e.g., protection and enforcement patrol). Periodic amendments to the adopted budget are approved by the City Council.

Local Economy

Lacey’s economy remains predominately retail/commercial and service oriented. State government is the single largest employer in the region. Other major employers include St. Peter ’s Hospital (regional), North Thurston Public Schools, Xerox, Panorama City, Target Stores import/distribution center, Home Depot distribution center, Econet, Costco, Fred Meyer, Wal-Mart, Safeway, Ostrom Mushroom Company, Il luminet, Callisons, Shipwreck Beads, Cabelas, Sunset Air, St. Martin’s University, and Port of Olympia (regional). Economic influence of nearby Joint Base Lewis-McChord has been present for many years in the Lacey area. Lacey is also the home to Panorama, a large full-service retirement community, and St. Martin’s University and abbey/seminary.

It has been Lacey’s policy to encourage and facil i tate diversif ication in the region’s employment base. The development of Lacey’s northeast area has been the major key to success in this goal. Lacey continues to facilitate the development of the northeast area. Recently, Lacey has begun to focus its development efforts on the Woodland and Depot Districts.

Lacey’s population growth continues to place significant demands on services. During the past five years, authorized general government staffing has decreased 4.3 percent (207.0 to 197.5 FTE’s), and authorized util ity or enterprise funds staffing has increased slightly (45.5 to 46.5 FTE’s). Vacant positions are analyzed to ensure workloads are justified and the positions can be sustained long-term. Lacey’s population increased 9.0 percent during this same period. The staffing levels have declined, despite population growth, and is an indication of the city’s continued conservative and responsible fiscal approach.

Sales tax col lect ions exceeded project ions during 2016. New construct ion act ivi ty contributed was the most significant reason for the increase. Due to the cyclical nature of construction activity, the City maintains a conservative approach to reliance on sales tax generated from construction. For example, a significant portion of recent construction activity has come from the North Thurston Public Schools voter-approved bond capital improvements. These improvements will be substantially complete at the end of 2017. There are no indications that there will be other significant and sustained construction projects to replace the school district’s capital improvements.

Property tax, one of the General Fund’s largest single sources of revenues, continues to experience healthy growth due strong construction activity. However the growth rate is considerably lower than pre-recessionary levels. New construction activity is a critical component of property tax growth because it is exempt from the one percent property tax growth limit.



Long-term Financial Planning

The City formally adopts long-term capital improvement plans such as the Capital Facilities Plan, Six-Year Transportation Improvement Plan, and util ity fund comprehensive plans. Recognizing the benefits of a financial plan, the City developed the first of its kind Six-Year Strategic Financial Plan. The purpose of the plan is to provide a six-year outlook on the financial condition of the City’s major budget funds. The plan will serve as a tool that will provide information to make short-term budgetary decisions as well as the foresight for long-term policy decision impacts. While the Six-Year Strategic Financial Plan has not been formally adopted, components of the plan have already been implemented.

Relevant Financial Policies

It is the City of Lacey’s policy that “one-time” revenue inflows not be used for operating purposes. As a result, Lacey has been able to construct several public buildings, enhance its capital improvement program, retire debt early, and fund an economic development strategic investment program. In addition to allowing the City to address much needed capital needs, this policy has helped the City weather economic downturns. By applying “one-time” revenues to capital needs, the operating expenses have been contained to sustainable levels.

Major Initiatives

Current transportation projects include the Hogum Bay Road improvements, College Street and 22nd Avenue roundabout, Marvin Road Safety and Capacity improvements, and Ci tywide Pedestr ian Cross ing improvements. The resources to cover these transportation improvements include $1.9 mill ion in Real Estate Excise Tax revenues, grants, miscellaneous revenues from State Fuel tax and collected mitigation fees, and reserves. The highly successful street overlay program continued in 2016. In recent years, transfers from the General Fund to the Arterial Street Fund have funded the annual street overlay program. To reduce the 2013 Budget deficit, the annual transfer was eliminated. From 2013 through 2016, the overlay program was funded by City Council committed reserves. During January 2016, the City Counci l adopted an ordinance establishing the Lacey Transportation Benefit District. One of the primary purposes of the Lacey Transportation Benefit District is to preserve and maintain the City’s significant transportation infrastructure investment. Lacey voters approved a two-tenths of one percent sales tax funding source at a special election in February 2017. This community support ensures the street overlay program will continue to be a high priority.

Utility projects include ongoing water rights mitigation, Well Source 15 and 16 replacement, Hoh Street Water transmission line, Steilacoom Regional Liftstation, Union Mills Reservoir seismic upgrade, Lift Station No. 2 replacement, Liftstation No. 9 corrosion rehabilitation, Liftstation No. 15 rehabilitation, and 25th Loop stormwater improvements. The resources used to fund these improvements include util ity rates and general facility charges.

Awards and Acknowledgments

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Lacey for its comprehensive annual financial report (CAFR) for the fiscal years ended December 31, 1999-2007 and again for the fiscal years ended December 31, 2009-2015. The City did not seek this award in 2008 due to budget reductions. In order to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied



both the generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements. The 2016 CAFR will be submitted to the GFOA to determine its eligibil ity for another certificate.

Preparation of this report could not have been accomplished without the professional, efficient, and dedicated services of the staff of the Finance Department. We wish to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Credit also must be given to the Council and City Manager for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Lacey’s finances.

Respectfully submitted,

Troy M. WooFinance Director





Boards and Commissions

Library BoardHistorical CommissionPlanning CommissionPark BoardLEOFFTCTVLodging TaxPublic Facilities District

Civil Service Commission

Finance Public Affairs and Human Resources

Public InformationNeighborhood Assoc.Community LiaisonRecycling/Solid WasteLegislative LiaisonAnimal Services SupportSpecial Projects

Financial Mgmt/Accting.Utilities/BillingTreasuryInformation ServicesViolations BureauPassport ServicesBusiness Licensing

Police

RecruitingClassification/CompensationPerformance Mgmt.Safety/Workers Comp.Risk ManagementEmployee Asst. ProgramSpecial Projects

Law EnforcementInvestigationCommunity PolicingCrime PreventionSchool Resource OfficersInterlocal Drug Unit Support

City Attorney

Legal CounselProsecutionIndigent Defense

Parks and Recreation

Current and Advanced PlanningCode Inspection & Permit ServicesGrowth Management

Community Development

Youth & Adult Recreation Programs

Parks DevelopmentOpen Space/Regional Athletic ComplexCommunity Buildings Operations/Events

Public Works

Administration SupportEngineeringWater Resources/Groundwater ProtectionParks & Facilities MaintenanceStreets/ElectricalWater/Wastewater/Stormwater/Reclaimed Water UtilityFleet Maintanance

• Aquatics/Physical activities• Sports/Fitness/Special Events• Cultural/Outdoor Activities

• Building• Electrical• Mechanical• Plumbing• ADA Barrier Free

Mayor

Deputy Mayor

Council

LACEY CITY GOVERNMENT

CITIZENS

Clerk/Records

City Manager



City of Lacey Council Members

Scott H. Spence City Manager

David S. Schneider City Attorney

Frederick O. Walk Community Development Director

Troy M. Woo Finance Director

Jennifer Burbidge Parks & Recreation Director

Dusty D. Pierpoint Police Chief

Elizabeth P. Gotelli Public Affairs/Human Resource Director

Scott D. Egger Public Works Director

ADMINISTRATION

Jeff Gadman Lenny Greenstein Michael Steadman

Virgil Clarkson Jason Hearn Cynthia Pratt - Deputy Mayor

Andy Ryder - Mayor


Financial Section 2-1

Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 [email protected]

INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS

June 28, 2017

Mayor and City Council City of Lacey Lacey, Washington

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 the City of Lacey, Thurston County, Washington, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financia l 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, 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 City’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 City’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.

Office of the Washington State Auditor Pat McCarthy


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

Opinion

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 the City of Lacey, Thurston County, Washington, as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-1 through 3-14, budgetary comparison information on page 5-2, pension plan information on pages 5-3 through 5-4 and information on postemployment benefits other than pensions on page 5-5 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 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 City’s basic financial statements. The accompanying information listed as combining and individual fund statements and schedules and supplementary information on pages 6-1 through 7-17 is presented for purposes of additional analysis and 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 financial statements. This information has been subjected to 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 financial statements or to the 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.

The information identified in the table of contents as the Introductory and Statistical Sections is presented for purposes of additional analysis and is not a required part of the basic financial statements of the City. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.


OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS

In accordance with Government Auditing Standards, we will also issue our report dated June 28, 2017, on our consideration of the City’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 integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Sincerely,

Pat McCarthy

State Auditor

Olympia, WA


Management Discussion and Analysis 3-1


Management’s Discussion and Analysis

As management of the City of Lacey, we offer readers of the City of Lacey’s financial statements this narrative overview and analysis of the financial activities of the City of Lacey for the fiscal year ended December 31, 2016. We encourage readers to consider the information presented here, in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages 1-1 to 1-4 of this report.

Financial Highlights

• The government’s overall financial position improved in 2016 as compared to 2015.

• At the end of the fiscal year, the assets and deferred outflows of resources of the City of Lacey exceeded its liabilities and deferred inflows of resources by $671.8 million. Net investments in capital assets account for 80.7 percent of the amount ($542.1 million). Of the remaining net position in the amount of $129.6 million, $3.3 million is subject to external restrictions and $126.4 million may be used to meet the City’s ongoing obligations to citizens and creditors.

• The City of Lacey’s total net position increased by $20.3 million. The governmental activity net position increased by $4.8 million compared to the previous year. The business-type activity net position increased by $15.5 million. The business-type increase included net position for the Water Utility of $8.9 million and $6.4 million for the Wastewater Utility and a net decrease of $42,397 for the Stormwater Utility and $21,813 for the Reclaimed Water Utility.

• At the close of 2016, the City of Lacey’s governmental funds reported a combined ending fund balance of $72.3 million, an increase of $6.9 million.

Of the major funds, the ending fund balance of the General Fund increased $5.6 million, the Arterial Street Fund increased $2.2 million, and the L.I.D. Redemption Fund increased $566,463.

Nonmajor funds combined fund balance decreased $1.5 million. The capital project funds combined resulted in a decrease of $1.2 million, which was a net result of the completion of major capital projects.

Approximately $13.2 million (18.2 percent) of the combined ending fund balance is unassigned and reported in the General Fund, which is a decrease of $1.8 million compared to the prior year’s amount of $15.0 million. Unassigned fund balance is available to the City of Lacey for discretionary spending.

• The City of Lacey’s total outstanding debt decreased $3.6 million (15.1 percent) to $20.0 million during the current fiscal year.

• Revenues from local tax sources, including property, sales, business excise, and miscellaneous other taxes increased by $2.3 million to $31.1 million, a 7.9 percent increase compared to 2015. Retail sales taxes experienced the largest increase due to strong construction activity and overall retail sales activity growth.

The above financial highlights are explained in more detail in the “financial analysis” section of this document.



Overview of the Financial Statements

This discussion and analysis provided here are intended to serve as an introduction to the City of Lacey’s basic financial statements. The City of Lacey’s basic financial statements comprise of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Lacey’s finances, in a manner similar to a private-sector business.

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

The statement of activities presents information showing how the City of Lacey’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 for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City of Lacey that are principally supported by taxes and intergovernmental revenues (governmental activities) from 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 the City of Lacey include general government, public safety, transportation and streets, physical environment, economic development and culture and recreation. The business-type activities of the City of Lacey include Water, Wastewater, Stormwater, and Reclaimed water operations. The internal service funds provide services to other funds within the City of Lacey and the majority of these activities are reported in governmental activities at the government-wide financial reporting level.

The government-wide financial statements can be found on pages 4-1 to 4-3 of this report.

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. The City of Lacey, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Lacey 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 assessing a government’s near-term financing requirements.

Because of 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 governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.



The City of Lacey maintains eleven 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 general fund, arterial street fund, and L.I.D. redemption fund, which are considered to be major funds. Data from the other eight governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The City of Lacey adopts an annual budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget.

The basic governmental fund financial statements can be found on pages 4-4 to 4-7 of this report.

Proprietary Funds. The City of Lacey 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 City of Lacey uses enterprise funds to account for its Water, Wastewater, Stormwater, and Reclaimed water operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Lacey’s various functions. The City of Lacey uses internal service funds to account for its fleet of vehicles and for its information management systems. Because both 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 Water, Wastewater, Stormwater, and Reclaimed water operations, which are considered to be major funds of the City of Lacey. Conversely, both 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 on pages 4-8 to 4-10 of 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 the City of Lacey’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary fund financial statement can be found on page 4-11 of this report.

Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 4-13 to 4-53 of this report.

Required Supplementary Information. This report also contains other required supplementary information (RSI) on budgetary comparisons for major governmental funds and trend data on the funding status of other postemployment benefits. The required supplementary information can be found on pages 5-1 to 5-6 of this report.

Combining Statements. The combining statements referred to earlier in connection with the nonmajor funds, internal service funds and fiduciary funds are presented immediately following the required supplementary information on pages 6-1 to 6-26 of this report.

Government-wide Overall Financial Analysis

As noted earlier, net position over time, may serve as a useful indicator of a government’s financial position. In the case of the City of Lacey, assets and deferred outflows of resources exceeded liabilities and deferred



inflows of resources by $671.8 million at the close of the most recent fiscal year.

The following table provides a summary of the City of Lacey’s net position as of December 31, 2016 and December 31, 2015:

By far the largest portion of the City of Lacey’s net position (80.7 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that are still outstanding. The City of Lacey uses these capital assets to provide services to citizens. Accordingly, these assets are not available for future spending. Although the City of Lacey’s investment in its capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City of Lacey’s net position ($3.3 million) represents resources that are subject to external restrictions on how they may be used. Reported as unrestricted net position, the governing body has committed and assigned $56.9 million of the City’s net position for specific purposes. The remaining balance of unrestricted net position ($69.4 million) may be used to meet the government’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the City of Lacey is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year.

The City of Lacey’s overall net position increased by $20.3 million in 2016. The increase is explained in the following discussion of governmental and business-type activities.

2016 2015 2016 2015 2016 2015 2016 2015Assets:

Current assets 91,614,959$ 82,970,751$ 60,705,216$ 50,112,998$ 152,320,175$ 133,083,749$ 21.3% 19.1%Restricted assets 230,604 140,573 937,683 874,625 1,168,287 1,015,198 0.2% 0.1%Investment in joint venture 617,752 614,590 - - 617,752 614,590 0.1% 0.1%Net pension asset 1,301,647 2,205,964 - - 1,301,647 2,205,964 0.2% 0.3%Capital assets 312,100,298 317,742,403 248,370,865 242,699,150 560,471,163 560,441,553 78.3% 80.4%

Total assets 405,865,260 403,674,281 310,013,764 293,686,773 715,879,024 697,361,054 100.0% 100.0%

Deferred outflows of resourcesDeferred charge on refunding 684,980 761,366 - - 684,980 761,366 17.6% 29.7%Deferred outflows related to pensions 2,640,040 1,473,466 563,361 331,085 3,203,401 1,804,551 82.4% 70.3%

Total deferred outflows of resources 3,325,020 2,234,832 563,361 331,085 3,888,381 2,565,917 100.0% 100.0%

Liabilities:Current liabilities 5,195,436 3,547,051 2,944,943 1,704,741 8,140,379 5,251,792 17.2% 11.5%Long-term liabilities 17,159,248 20,121,742 7,913,581 8,242,950 25,072,829 28,364,692 52.9% 62.2%Net pension Liability 10,783,301 9,110,881 3,368,556 2,865,549 14,151,857 11,976,430 29.9% 26.3%

Total liabilities 33,137,985 32,779,674 14,227,080 12,813,240 47,365,065 45,592,914 100.0% 100.0%

Deferred inflows of resourcesDeferred inflows related to pensions 485,830 2,360,950 151,767 544,229 637,597 2,905,179 100.0% 0.0%

Total deferred inflows of resources 485,830 2,360,950 151,767 544,229 637,597 2,905,179 100.0% 0.0%

Net Position:

Net investment in capital assets 301,594,758 303,126,115 240,521,398 234,591,397 542,116,156 537,717,512 80.7% 82.5%Restricted 2,679,839 3,486,000 607,425 607,425 3,287,264 4,093,425 0.5% 0.6%Unrestricted 71,291,868 64,156,372 55,069,455 45,461,567 126,361,323 109,617,939 18.8% 16.8%

Total net position 375,566,465$ 370,768,487$ 296,198,278$ 280,660,389$ 671,764,743$ 651,428,876$ 100.0% 100.0%

TotalPercentage

Of Total

Summary of Net Position

GovernmentalActivities

Business-TypeActivities



Governmental Activities. Governmental activities increased the City of Lacey’s net position by $4.8 million.

• Operating revenues (charges for services) increased by $1.6 million mainly due to increased building permit, inspection, and plan review from strong construction activity. Program expenses for security of persons and property activities increased in the amount of $382,787 due to inflationary increases and paid overtime duty that was reimbursed. Culture and recreation program expenses increased $256,794 due to professional services increases relating to recreation programs, water utility charges, and other inflationary increases.

• Transportation capital grant and contribution revenues decreased $8.1 million due to lower developer contributed assets and the completion of a significant grant funded project.

• General revenues increased $2.3 million. Retail and business taxes increased by $957,331 and $562,558, respectively, because of a higher level of new construction and overall retail sales activities. Excise taxes increased $590,096 as a result of increasing real estate excise taxes due to higher home sales activity. Interest and investment earnings revenue increased $142,044, due to the rising interest rate environment.

The following table provides a summary of the City’s changes in net position as of December 31, 2016 and December 31, 2015:

$-

$100

$200

$300

$400

$500

$600

Net investment incapital assets

Restricted Unrestricted

Mill

ions

20162015

City of Lacey Net Position December 31, 2016 and 2015



2016 2015 2016 2015 2016 2015 2016 2015Revenues:

Program:Charges for services 10,912,959$ 9,361,208$ 39,755,147$ 34,816,440$ 50,668,106$ 44,177,648$ 51.9% 43.5%Operating Grants 3,465,648 3,339,913 24,422 14,877 3,490,070 3,354,790 3.6% 3.1%Capital Grants 5,534,442 13,595,686 6,171,865 8,159,747 11,706,307 21,755,433 12.0% 23.5%

General:

Taxes 31,088,831 28,821,331 - - 31,088,831 28,821,331 31.9% 29.2%Interest 385,821 243,777 277,239 118,561 663,060 362,338 0.7% 0.4%Gain (loss) on disposal of capital assets (7,202) 33,235 - - (7,202) 33,235 0.0% 0.0%Miscellaneous 824 63,908 - - 824 63,908 0.0% 0.3%

Total revenues 51,381,323 55,459,058 46,228,673 43,109,625 97,609,996 98,568,683 100.1% 100.0%

Program expenses:

General Government 6,527,225 6,546,747 - - 6,527,225 6,546,747 8.5% 8.2%Security of Persons and Property 11,408,012 11,025,225 - - 11,408,012 11,025,225 14.8% 14.8%Physical Environment 4,275,044 4,095,125 - - 4,275,044 4,095,125 5.5% 5.4%Transportation 13,621,689 13,633,098 - - 13,621,689 13,633,098 17.6% 19.6%Economic Environment 1,501,210 1,448,095 - - 1,501,210 1,448,095 1.9% 1.7%Mental and Physical Health 12,362 10,951 - - 12,362 10,951 0.0% 0.0%Culture & Recreation 8,192,800 7,936,006 - - 8,192,800 7,936,006 10.6% 11.0%Interest and fiscal charges 464,178 510,370 - - 464,178 510,370 0.6% 0.9%Water - - 11,183,040 10,820,232 11,183,040 10,820,232 14.5% 14.3%Wastewater - - 16,083,520 15,188,845 16,083,520 15,188,845 20.8% 19.4%Stormwater - - 3,974,944 3,687,056 3,974,944 3,687,056 5.1% 4.7%Reclaimed Water - - 30,105 28,253 30,105 28,253 0.0% 0.0%

Total expenses 46,002,520 45,205,617 31,271,609 29,724,386 77,274,129 74,930,003 99.9% 100.0%

Excess (deficiency) of revenues over(under) expenses 5,378,803 10,253,441 14,957,064 13,385,239 20,335,867 23,638,680

Transfers (580,825) (438,506) 580,825 438,506 - - Change in net position 4,797,978 9,814,935 15,537,889 13,823,745 20,335,867 23,638,680

Net position - beginning as previously reported 370,768,487 370,047,632 280,660,389 270,205,169 651,428,876 640,252,801 Changes in accounting priciple - (9,094,080) - (3,368,525) - (12,462,605)

Net position - beginning, adjusted 370,768,487 360,953,552 280,660,389 266,836,644 651,428,876 627,790,196

Net position - ending 375,566,465$ 370,768,487$ 296,198,278$ 280,660,389$ 671,764,743$ 651,428,876$

Summary of Changes in Net Position


Business-TypeActivities Total

PercentageOf Total

$

$2

$4

$6

$8

$10

$12

$14

GeneralGovernment

Public Safety PhysicalEnvironment

Transportation EconomicEnvironment

Mental &Physical Health

Culture &Recreation

Interest andFiscal Charges

$Mill

ions

Expenses Program Revenues

Expenses and Program Revenues - Governmental



Business-type Activities. Business-type activities increased the City of Lacey’s net position by $15.5 million. Key elements of this increase are as follows:

• Water, Wastewater and Stormwater sales increased 14.2 percent ($4.9 million) due to utility rate increases and higher than normal water sales due to an early start to the irrigation season.

• Capital grants and contributions attributed to 13.4 percent ($6.2 million) of business-type revenues. This was a decrease of $2.0 million compared to the previous year. The water, wastewater, and stormwater utilities capital grants and contributions were lower than the previous year, because capital contributions from developers decreased $3.7 million, which was offset by a $1.4 million increase to contributed capital from utility local improvement districts.

Charges for Services 21.24%

Operating Grants & Contributions

6.74%

Capital Grants & Contributions

10.77% Property Taxes

13.59%

Retail Taxes 22.83%

Business Taxes 18.39%

Excise & other taxes 5.69%

Investment interest 0.75% Misc.

0.00%

Revenues by Source - Governmental Activities

$-

$5

$10

$15

$20

$25

Water Wastewater Stormwater Reclaimed water

Mill

ions

Expense and Program Revenues-Business-Type Activities

Expenses

ProgramRevenues



Governmental Functional Expenses. Transportation costs make up 29.6 percent of the total governmental expenses. Security of persons and property costs comprise 24.8 percent of the City of Lacey’s total governmental expenses. The culture and recreation expenses make up 17.8 percent and general government services expenses make up 14.2 percent of governmental expenses.

This table presents the cost of each of the City of Lacey’s programs, including net costs (i.e., total costs less revenues generated by the activities). The net costs illustrate the financial burden that was placed on the City of Lacey’s taxpayers by each of these functions.

Financial Analysis of Governmental Funds

As noted earlier, the City of Lacey uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

The following table provides a revenue, expenditure, and fund balance summary for the City of Lacey’s governmental funds as of December 31, 2016 and December 31, 2015:

Major Funds2016 2015 2016 2015 2016 2015

RevenuesTaxes 26,680,287$ 24,994,272$ 2,536,111$ 1,897,390$ -$ -$ License and permits 2,824,458 2,074,369 - - - - Intergovernmental revenues 1,574,749 1,559,981 1,889,720 2,144,758 - - Charges for services 6,851,702 6,170,381 871,193 858,443 - - Fines & forfeitures 306,335 569,044 - - - - Other revenue 527,951 470,350 132,453 47,965 546,038 747,935

Total revenues 38,765,482$ 35,838,397$ 5,429,477$ 4,948,556$ 546,038$ 747,935$

Expenditures 29,592,397$ 29,068,480$ 3,237,330$ 4,215,010$ -$ -$

Other Financing Sources and UsesProceeds from sale of assets -$ 2,906$ -$ -$ -$ -$ Proceeds from capital lease - 40,924 - - - - Transfers (3,523,239) (3,378,775) - - 20,425 -

Total other financing sources and uses (3,523,239)$ (3,334,945)$ -$ -$ 20,425$ -$

Fund BalancesNonspendable 2,911$ 924$ 750$ -$ 485,317$ 502,001$ Restricted 168,600 148,463 - - - - Committed 12,966,042 14,294,628 - - - - Assigned 9,046,443 262,901 18,607,133 16,415,736 2,978,671 2,395,524 Unassigned 13,179,688 15,006,922 - - - -

Total fund balances 35,363,684$ 29,713,838$ 18,607,883$ 16,415,736$ 3,463,988$ 2,897,525$

Revenue, Expenditure, and Fund Balance SummaryGovernmental Funds

General Fund Arterial Street Fund L.I.D. Redemption Fund

2016 2015 2016 2015General Government 6,527,225$ 6,546,747$ (5,308,683)$ (5,422,695)$ Security of persons and property 11,408,012 11,025,225 (9,728,464) (9,457,649) Physical Environment 4,275,044 4,095,125 (596,810) (764,795) Transportation 13,621,689 13,633,098 (6,135,444) 1,816,215 Economic Environment 1,501,210 1,448,095 1,379,153 526,599 Mental & Physical Health 12,362 10,951 (12,362) (10,951) Culture & Recreation 8,192,800 7,936,006 (5,222,683) (5,085,164) Interest and fiscal charges 464,178 510,370 (464,178) (510,370)

46,002,520$ 45,205,617$ (26,089,471)$ (18,908,810)$

Governmental Activities

Total CostOf Services

Net CostOf Services



Governmental Funds. The focus of the City of Lacey’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Lacey’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for discretionary use as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the City of Lacey itself, or a group or an individual that has been delegated authority to assign resources for use for particular purposes by the City of Lacey’s Council.

As of the end of the current fiscal year, the City of Lacey’s governmental funds reported combined ending fund balances of $72.3 million, an increase of $6.9 million in comparison with the prior year. Approximately 18.2 percent ($13.2 million) of this total amount constitutes unassigned fund balance, which is available for spending at the government’s discretion. The $59.1 million remaining of the fund balance is nonspendable, restricted, committed or assigned to indicate that it is not available for new spending because it has already been designated for 1) $348,753 restriction for the state loan secured on behalf of Thurston 9-1-1 Communications, 2) lodging tax total fund balance of $985,100, 3) $488,978 for nonspendable which includes $485,317 interfund loan for a wastewater utility local improvement district other purposes, and 4) $57.3 million is restricted for a variety of other fund committed or assigned purposes. Additional information on the City of Lacey’s restricted, committed, and assigned purposes can be found in Note 3 I starting page 4-35 of this report.

The general fund is the chief operating fund of the City of Lacey. At the end of the current fiscal year, unassigned fund balance of the general fund was $13.2 million, while the total fund balance reached $35.4 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. Unassigned fund balance represents 44.5 percent of the total general fund expenditures, while total fund balance represents 119.5 percent of that same amount.

The fund balance of the City of Lacey’s general fund was increased by $5.6 million during the current fiscal year. Key factors in this increase are as follows:

• Total tax revenues increased by $2.3 million. This increase is primarily due to higher retail taxes from strong new construction activity and retail sales activity growth.

Nonmajor Funds2016 2015 2016 2015 2016 2015

RevenuesTaxes 483,927$ 477,897$ 1,424,988$ 1,471,599$ -$ -$ License and permits - - - - 37,277 38,864 Intergovernmental revenues 721,400 681,505 - - 1,012,309 919,113 Charges for services 51,590 59,651 - - - - Other revenue 141,722 43,233 1,595 2,010 79,005 106,550

Total revenues 1,398,639$ 1,262,286$ 1,426,583$ 1,473,609$ 1,128,591$ 1,064,527$

Expenditures 3,255,539$ 3,410,831$ 3,510,525$ 2,116,863$ 1,653,615$ 1,097,907$

Other Financing Sources and UsesPremium on debt issued -$ -$ -$ 1,015,321$ -$ -$ Debt issuance-refunding bonds - - - 7,765,000 - - Payments to refunded bonds escrow agent - - - (8,691,603) - - Transfers 1,532,764 2,013,112 2,058,150 572,624 (668,925) 238,631

Total other financing sources and uses 1,532,764$ 2,013,112$ 2,058,150$ 661,342$ (668,925)$ 238,631$

Fund BalancesRestricted 1,005,871$ 957,688$ -$ -$ 552,473$ 689,787$ Committed 750,000 1,250,000 - - 6,616,683 8,131,048 Assigned 1,100,455 972,774 317,273 343,065 4,547,174 4,089,444

Total fund balances 2,856,326$ 3,180,462$ 317,273$ 343,065$ 11,716,330$ 12,910,279$

Special Revenue Funds Debt Service Funds Capital Projects Funds

Revenue, Expenditure, and Fund Balance SummaryGovernmental Funds



• The total expenditure increase was $523,917. Salaries and benefits increased $597,868 due to inflationary increases and the aforementioned reimbursed security of persons and property paid overtime duty.

• Net transfers out increased $1.2 million primarily due to the one-time $1.5 million transfer to the General Obligation Bonds fund for the early retirement of LTGO Bonds.

The arterial street fund has a total fund balance of $18.6 million, of which the entire amount is committed or assigned to indicate that it is not available for new spending. Total revenues increased $480,921. Real Estate Excise taxes increased $638,721 during 2016, which was offset by decreases to grant revenues as grant funded project activity declined. The net increase in the fund balance during the current year was $2.2 million.

The local improvement district bond fund has a total fund balance of $3.5 million as of the end of current fiscal year. Proprietary Funds. The City of Lacey’s proprietary funds provide the same type of information found in the government-wide financial statements but in more detail.

Unrestricted net position of the Water, Wastewater, Stormwater and Reclaimed Water operations at the end of the year amounted to $53.8 million. The total change in net position for enterprise funds was $15.2 million, which includes total growth of $15.2 million from 2016 activities. Other factors regarding the finances of these funds have already been addressed in the discussion of the City of Lacey’s business-type activities.

General Fund Budgetary Highlights

Original budget compared to final budget. During the year, there was a $334,563 increase in appropriations between the original and final amended budget. Following are the significant components of the 2016 General Fund budget amendments:

• Police overtime salaries were increased $150,000. A local business has requested overtime services and is reimbursing the City.

• Expansion of the Lacey Veterans Outreach Center required an additional $90,000.

• Activities relating to the celebration of Lacey’s 50th Anniversary required an amendment in the amount of $25,000.

Final budget compared to actual results. In total, actual General Fund revenues exceeded the final budget by $4.1 million or an 11.9 percent difference. The total actual expenditures were $2.2 million less than budget or 7.0 percent below budget.

On the revenue side of the budget, the primary difference between the final budget and the actual amounts relates to taxes, licenses/permit fees, intergovernmental revenues, and charges for services. The tax and license/permit fee categories were impacted by an increase to construction. One-time sales tax on new construction was the most significant impact to taxes and building permit and plan checking fee revenues were the most significant increases to licenses and permits revenue. Intergovernmental revenues exceeded the final budget amounts due to higher liquor excise tax distributions and internal services charges relating to project design services. Paid overtime duty within the Police Department was the primary reason charges for services experienced an increase.

On the expenditure side of the budget, the largest variances between the final budget and the actual amounts occurred in the general government, security of persons and property, and culture and recreation functions.



Capital Assets and Debt Administration

Capital assets. The City of Lacey’s investment in capital assets for its governmental and business-type activities as of December 31, 2016, amounts to $560.5 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings and system improvements, machinery and equipment, park facilities, and infrastructure. The City of Lacey’s investments in capital assets were increased by $29,000 (net additions were $20.9 million and depreciation expense was $20.9 million). Governmental activities decreased 1.78 percent and business-type activities increased 2.3 percent, a 0.01 percent total increase from previous year. The following schedule shows the City of Lacey’s investment in capital assets.

Major capital asset events during the current fiscal year included the following:

• Land and land rights for the City increased by $2.7 million, which included $859,691 for land parcels and right of way purchases for streets and utilities projects, and $1.9 million in developer contributed easements and right of ways for streets and utilities.

• Construction in progress for governmental activities had a net increase $213,101. A total of $2.2 million was added during 2016, which included new and existing street projects and various other projects. A total of $2.0 million of various city street projects that began during and/or prior to 2016 were completed during 2016.

• Construction in progress for business-type activities had a net decrease of $2.8 million. A total of $9.0 million was added during 2016 for new and existing Water, Wastewater and Stormwater utilities projects. A various utilities improvement projects were completed during the current fiscal year at a cost of $11.8 million, which includes the completion of Waterline Replacement 2015, College to Ruddell/Brentwood Waterline, Lift Station #25 and #31 Pump and Electrical, ULID No. 24 Sewer Improvement, Vactor Decant Facility, and Chambers Lake Stormwater Facility projects. Construction in progress as of the close of the fiscal year had reached $4.3 million, which includes $1.8 million for Shady Lane Water and Sewer main, $733,076 Telemetry Control Cla-Vals, $447,035 for Lift Station #2 replacement, and other various projects.

• Improvements for business-type activities increased by $15.2 million, which includes $11.6 million of

2016 2015 2016 2015 2016 2015 2016 2015Non-depreciable assets:

Land & land rights 144,940$ 142,645$ 15,334$ 14,901$ 160,274$ 157,546$ 18.4% 18.5%Construction in progress 4,223 4,010 4,292 7,091 8,515 11,101 1.0% 1.3%

Total non-depreciable 149,163 146,655 19,626 21,992 168,789 168,647 19.4% 19.8%

Depreciable assets:Buildings 31,039 30,573 1,521 1,521 32,560 32,094 3.7% 3.8%Improvements 26,869 26,869 315,538 300,348 342,407 327,217 39.2% 38.4%Infrastructure 315,654 311,093 - - 315,654 311,093 36.2% 36.5%Machinery and equipment 12,237 12,067 875 677 13,112 12,744 1.5% 1.4%

Total depreciable assets 385,799 380,602 317,934 302,546 703,733 683,148 80.6% 80.1%

Total cost of capital assets 534,962 527,257 337,560 324,538 872,522 851,795 100.0% 99.9%

Less accumulated depreciation 222,862 209,515 89,190 81,839 312,052 291,354

Book value - capital assets 312,100$ 317,742$ 248,370$ 242,699$ 560,470$ 560,441$

Percentage depreciated 41.7% 39.7% 26.4% 25.2% 35.8% 34.2%

Total Of Total

Capital Assets(Amounts Presented in $1,000's)

Governmental Business-Type PercentageActivities Activities



projects that were completed and reclassified from construction in progress in 2016 and $3.6 million in developer contributed utilities.

• For governmental activities, there was various new equipment for fleet vehicles, parks maintenance, and information technology equipment were purchased at a cost of $354,696; the cost of various obsolete and out of service machinery and equipment that was replaced or removed totaled $185,070.

Additional information on the City of Lacey’s capital assets can be found in Note 3-D starting on page 4-26 of this report.

Debt Administration. The City of Lacey is authorized to issue debt pursuant to the Acts of the State of Washington. The City of Lacey has two types of debt issues outstanding: general obligation and revenue debt. The City may issue general bonded debt up to 2.5 percent of the assessed value of taxable property. Of this limit, up to 1.5 percent may be non-voter approved debt (Councilmanic bonds). In addition to the aforementioned limits, the City has debt authority of 2.5 percent each for utility and parks purposes. The combination of unlimited tax and limited tax general obligation debt for all purposes cannot exceed 7.5 percent of assessed valuation.

The ratios of general obligation debt to assessed valuation and the amount of debt per capita are useful to citizens, management and investors as indicators of the City of Lacey’s debt position.

The City of Lacey received a “AA+” rating with a stable outlook from Standard & Poor’s for its 2015 unlimited tax refunding general obligation bond and 2015 limited tax general obligation bond issues. This is an upgrade from the previous Standard & Poor’s “AA” rating. Standard and Poor’s revised its view of the City of Lacey’s financial management practices as “strong” from “good” under its Financial Management Assessment methodology after reviewing the City’s budgeting practices.

The City of Lacey is authorized to issue revenue bonds to finance capital improvements for its various enterprise activities, requiring only a majority approval vote of the Council. The City of Lacey has a revenue bond coverage ratio requirement of 120 percent of annual debt.

The City of Lacey received an “AA” rating with a stable outlook from Standard & Poor’s for its 2013 utilities revenue bond issue. The bond rating was the first issued for the City’s utilities in many years, so it was considered a new credit.

As the demand for public sector investment in infrastructure continues to grow, the issuance of debt has become an increasingly important component of state and local government capital programs. While the issuance of debt is frequently an appropriate method of financing capital projects at the local level, it also entails careful monitoring of such obligations to ensure an erosion of the City of Lacey’s credit quality does not result. Lacey’s general facilities connection charges for water and wastewater services have minimized the need to issue debt.

Special assessment debt created from the formation of a local improvement district (LID) is another form of debt issued and administered by the City of Lacey. LID debt assists property owners in making significant public improvements (streets, sidewalks, street lighting, and some associated water, wastewater, and stormwater improvements) that benefit their property. Upon the formation of the local improvement district, improvements are constructed. When all improvement costs and administrative expenses are determined, a special benefit appraisal is conducted to determine the amount to be assessed each property according to the benefit received. Property owners may finance the cost of these improvements for a period of years through the City of Lacey. The City of Lacey sells LID bonds to recover the cost of constructing the improvements. These bonds are backed by liens on the benefiting property and a guarantee fund established by the City of Lacey.



Long-term Debt. At the end of the current fiscal year, the City of Lacey had total bonded debt outstand-ing of $20.0 million including a State of Washington LOCAL Program loan of $500,641. $12.1 million is comprised of debt backed by the full faith and credit of the government and $7.3 million is guaranteed by revenues generated by the City’s water, wastewater, and stormwater utilities. The bonded debt includes $11.7 million of refunding bonds.

The City of Lacey’s total outstanding debt decreased by $3.6 million (15.1 percent) during the current fiscal year of which equals to the amount of debt redemption during 2016. The current year’s debt redemption includes the early retirement of all of the 2006 Limited Tax General Obligation Bonds ($1.5 million). The debt per capita was approximately $421.28, which is considered low.

Additional information on the City of Lacey’s long-term debt can be found in note 3-H on pages 4-31 to 4-34.

Economic Factors and Next Year’s Budgets and Rates

• The 2016 average unemployment rate for the County was 5.5 percent, which is a decrease from a rate of 5.8 percent a year ago. This is higher compared to the state and national average unemployment rates of 5.2 and 4.7 percent, respectively.

• The City of Lacey’s population continues to grow, (47,540 in the current fiscal year) and is placing more demand on services. The City of Lacey’s population continues to grow faster than the State average. The City’s population increased 3.3 percent while the State’s population increased by 1.7 percent.

• Prior to the recession, revenue growth to property tax, sales tax, and planning and inspection fees offset the costs associated with growth. Revenues declined during the years 2009 through 2011. 2012 through 2015, revenues increased, but not at a level to offset the rising operating costs. 2016 revenue growth was strong primarily due to strong sales tax growth from one-time new construction. The positive impact from new construction is expected to continue through 2017. The City will continue its conservative approach matching one-time revenues to capital and other one-time expenditures rather than using the potentially temporary revenue growth for ongoing operational expenditures.

During the current fiscal year, unassigned fund balance in the general fund decreased $1.8 million (12.2 percent) to $13.2 million compared to the 2015 unassigned fund balance.

The Water utility rates in the 2016 budget year were increased by 6.5 percent. The City of Lacey has phased in a water rate schedule that places more emphasis on conservation. The conservation rates place greater emphasis on the relationship of water usage to the amount paid by the customer. This change rewards the conservative customer while encouraging, through a higher rate, the high-end consumer to conserve water resources. Wastewater and Stormwater rates increased 4.25 percent and 9.0 percent, respectively, in the 2016 budget. These rates along with general facility charges, fund the current operating expenses, maintenance of the system, replacement, emergency repairs, and fund needed capital improvements.

Percentage2016 2015 2016 2015 2016 2015 Change

General obligation bonds 12,105$ 15,085$ -$ -$ 12,105$ 15,085$ -19.8%Special assessment debt - - - - - - 0.0%Revenue bonds - 73 7,345 7,670 7,345 7,743 -5.1%Capital leases 77 107 - - 77 107 0.0%LOCAL loans 501 661 - - 501 661 -24.2%Total 12,683$ 15,926$ 7,345$ 7,670$ 20,028$ 23,596$ -15.1%

Activities Activities Totals

Outstanding Debt(in $1,000's)

Governmental Business-Type



Requests for Information

This financial report is designed to provide a general overview of the City of Lacey’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 the City of Lacey’s Finance Department, 420 College Street SE, Lacey, Washington, 98503.



Basic Financial Statements 4-1


The notes to the financial statements are an integral part of this statement

Governmental Business-TypeActivities Activities Total

ASSETS

Cash and cash equivalents 84,998,510$ 55,099,312$ 140,097,822$ Receivables (net) 7,270,131 4,618,566 11,888,697 Internal balances (812,545) 812,545 - Inventories 155,202 174,391 329,593 Prepaid expenses and deposits 3,661 402 4,063 Restricted:

Cash and cash equivalents 230,604 937,683 1,168,287 Investment in joint venture 617,752 - 617,752 Net pension asset 1,301,647 - 1,301,647 Capital assets:

Non-depreciable 149,162,903 19,625,926 168,788,829 Depreciable, net 162,937,395 228,744,939 391,682,334

Total assets 405,865,260 310,013,764 715,879,024

DEFERRED OUTFLOWS OF RESOURCES

Deferred charge on refunding 684,980 - 684,980 Deferred outflows related to pension 2,640,040 563,361 3,203,401

Total deferred outflows of resources 3,325,020 563,361 3,888,381

LIABILITIES

Accounts payable 1,594,222 2,899,488 4,493,710 Interest payable 35,687 45,455 81,142 Unearned revenues 3,565,527 - 3,565,527 Noncurrent liabilities:

Due within one year 2,072,817 442,899 2,515,716 Due in more than one year 15,086,431 7,470,682 22,557,113

Net pension liability 10,783,301 3,368,556 14,151,857

Total liabilities 33,137,985 14,227,080 47,365,065

DEFERRED INFLOWS OF RESOURCES

Deferred inflows related to pension 485,830 151,767 637,597

Total deferred inflows of resources 485,830 151,767 637,597

NET POSITION

Net investment in capital assets 301,594,758 240,521,398 542,116,156 Restricted for: Pension related 1,301,647 - 1,301,647 Criminal bail 153,215 - 153,215 Lodging/tourism 985,100 - 985,100 HUD grant 20,771 - 20,771 City facilities 113,946 - 113,946 Public education fees 89,775 - 89,775 Other 15,385 - 15,385 Debt Service - 607,425 607,425 Unrestricted 71,291,868 55,069,455 126,361,323

Total net position 375,566,465$ 296,198,278$ 671,764,743$

Primary Government

Statement of Net PositionDecember 31, 2016



Page 1 of 2

OperatingCharges for Grants and Capital Grants &

Functions/Program Expenses Services Contributions ContributionsPrimary government:Governmental activities:

General government 6,527,225$ 1,119,346$ 99,196$ -$ Security of persons and property 11,408,012 621,104 1,058,444 - Physical environment 4,275,044 3,678,234 - - Transportation 13,621,689 959,485 998,318 5,528,442 Economic environment 1,501,210 2,874,363 - 6,000 Mental and physical health 12,362 - - - Culture and recreation 8,192,800 1,660,427 1,309,690 - Interest and fiscal charges 464,178 - - -

Total governmental activities 46,002,520 10,912,959 3,465,648 5,534,442

Business-type activities:Water 11,183,040 18,031,451 24,422 1,498,664 Wastewater 16,083,520 18,673,246 - 3,729,171 Stormwater 3,974,944 3,050,450 - 944,030 Reclaimed water 30,105 - - -

Total business-type activities 31,271,609 39,755,147 24,422 6,171,865

Total primary government 77,274,129$ 50,668,106$ 3,490,070$ 11,706,307$

General revenues:Property taxesRetail taxesBusiness taxesExcise taxesInterest and investment earningsGain (loss) on disposal of capital assetsMiscellaneous

Transfers

Total general revenues and transfers

Change in net position

Net position - beginning

Net position - ending

Program Revenues

Statement of ActivitiesFor the Year Ended December 31, 2016




Page 2 of 2

Governmental Business-TypeActivities Activities Total

(5,308,683)$ -$ (5,308,683)$ (9,728,464) - (9,728,464)

(596,810) - (596,810) (6,135,444) - (6,135,444) 1,379,153 - 1,379,153

(12,362) - (12,362) (5,222,683) - (5,222,683)

(464,178) - (464,178)

(26,089,471) - (26,089,471)

- 8,371,497 8,371,497 - 6,318,897 6,318,897 - 19,536 19,536 - (30,105) (30,105)

- 14,679,825 14,679,825

(26,089,471) 14,679,825 (11,409,646)

6,983,665 - 6,983,665 11,734,430 - 11,734,430 9,447,710 - 9,447,710 2,923,026 - 2,923,026

385,821 277,239 663,060 (7,202) - (7,202)

824 - 824 (580,825) 580,825 -

30,887,449 858,064 31,745,513

4,797,978 15,537,889 20,335,867

370,768,487 280,660,389 651,428,876

375,566,465$ 296,198,278$ 671,764,743$

Net(Expense)Revenues andChanges in Net Position

Primary Government




Other TotalArterial L.I.D. Governmental Governmental

General Street Redemption Funds FundsASSETSCurrent cash & cash equivalents 32,062,253$ 21,338,352$ 2,978,670$ 14,192,338$ 70,571,613$Receivables (net of allowances):

Taxes 3,469,310 227,671 - 77,456 3,774,437 Customer accounts 1,080,497 862 - 508,150 1,589,509 Due from other funds - - 6,596 - 6,596 Due from other governmental units 114,507 771,557 - 284,260 1,170,324 Special assessments - - 365,624 - 365,624

Prepayments 2,911 750 - - 3,661 Interfund loan receivable - - 485,317 - 485,317 Restricted assets:

Cash & cash equivalents 228,571 - - 2,033 230,604 Long term loan receivable - - - 348,753 348,753

Total assets 36,958,049 22,339,192 3,836,207 15,412,990 78,546,438

LIABILITIES AND FUND BALANCESLiabilities:

Accounts payable 555,275 310,476 - 218,869 1,084,620 Due to other governmental units 196,638 - - 13,352 209,990 Customer deposits 228,571 - - 2,033 230,604 Unearned revenue 161,701 3,403,827 - - 3,565,528

Total liabilities 1,142,185 3,714,303 - 234,254 5,090,742

DEFERRED INFLOWS OF RESOURCESUnavailable revenues-property tax 78,007 - - 14,593 92,600 Unavailable revenues-special assessments - - 365,624 - 365,624 Unavailable revenues-violations 374,174 - - - 374,174 Unavailable revenues-grants and loans - 17,006 6,595 274,212 297,813

Total deferred inflows of resources 452,181 17,006 372,219 288,805 1,130,211

Fund balancesNonspendable 2,911 750 485,317 - 488,978 Restricted 168,600 - - 1,558,344 1,726,944 Committed 12,966,042 - - 7,366,683 20,332,725 Assigned 9,046,443 18,607,133 2,978,671 5,964,902 36,597,149 Unassigned 13,179,688 - - - 13,179,688

Total fund balances 35,363,684 18,607,883 3,463,988 14,889,929 72,325,484

Total liabilities, deferred inflows of resources

and fund balances 36,958,050$ 22,339,192$ 3,836,207$ 15,412,988$ 78,546,437$

Balance SheetGovernmental FundsDecember 31, 2016




Fund balances - total governmental funds 72,325,484$

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

Certain assets used in governmental activities are not financial resourcesand therefore are not reported in the fund statement:

Inventory - unsused supplies on-hand 155,202$ Investment in joint venture 617,752 Deferred charges on refunding 684,980 Net pension asset 1,301,647 2,759,581

Capital assets used in governmental activities are not financialresources and therefore are not reported in the governmental funds:

Non-depreciable assets 149,162,903 Depreciable assets (net) 160,524,271 309,687,174

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

Deferred inflows of resources: unavailable revenuesProperty taxes receivable 92,600 Special assessments receivable 365,624 Local court revenue receivable 374,174 Grants earned but not available 17,006 HUD & Other Loan assessments receivable 280,807 1,130,211

Long-term liabilities, including bonds payable are not due and payable inthe current period and therefore are not reported in the governmental funds:

Interest payable (35,687) Bonds and loans including unamortized debt premiums (13,731,040) Compensated absences and OPEB Liabilities (3,379,302) (17,146,029)

Internal service funds are used by management to charge thecosts of certain activities to individual funds. The assets and liabilities ofthe internal service funds are reported in the statement of net position. 14,622,035 14,622,035

Net pension asset, liability and pension related deferred outflows and inflows of resources are not due in the current period, and therefore, are notreported in the funds. These amounts consist of:

Net pension liability (9,852,467) Deferred outflows of resources 2,484,366 Deferred inflows of resources (443,892) (7,811,993)

Rounding adjustments 2

Net position of government activities. 375,566,465$

The notes to the financial statements are an integral part of this statement.

Reconciliation of the Balance SheetTo the Statement of Net Position

Governmental FundsDecember 31, 2016




Other TotalArterial L.I.D. Governmental Governmental

General Street Redemption Funds Funds

REVENUESTaxes 26,680,287$ 2,536,111$ -$ 1,908,915$ 31,125,313$ Licenses and permits 2,824,458 - - 37,277 2,861,735 Intergovernmental revenues 1,574,749 1,889,720 - 1,733,709 5,198,178 Charges for services 6,851,702 871,193 - 51,590 7,774,485 Fines and forfeitures 306,335 - - - 306,335 Other revenues 527,951 132,453 546,038 222,322 1,428,764

Total revenues 38,765,482 5,429,477 546,038 3,953,813 48,694,810

EXPENDITURES Current:

General government 5,836,322 - - - 5,836,322 Security of persons and property 11,327,437 - - - 11,327,437 Physical environment 4,432,746 - - - 4,432,746 Transportation - - - 3,004,471 3,004,471 Economic environment 1,461,370 - - 7,070 1,468,440 Mental and physical health 12,362 - - - 12,362 Culture and recreation 6,480,852 - - 246,650 6,727,502

Capital outlay - 3,237,330 - 1,477,603 4,714,933 Debt service:

Principal retirement 30,244 - - 3,140,039 3,170,283 Interest 11,064 - - 543,846 554,910

Total expenditures 29,592,397 3,237,330 - 8,419,679 41,249,406 Excess (deficiency) of revenue

over (under) expenditures 9,173,085 2,192,147 546,038 (4,465,866) 7,445,404

OTHER FINANCING SOURCES (USES) Transfers in 1,902,798 - 20,425 5,399,937 7,323,160 Transfers out (5,426,037) - - (2,477,948) (7,903,985)

Total other financing sources (uses) (3,523,239) - 20,425 2,921,989 (580,825)

Net change in fund balances 5,649,846 2,192,147 566,463 (1,543,877) 6,864,579

Fund balance - beginning 29,713,838 16,415,736 2,897,525 16,433,806 65,460,905

Fund balance - ending 35,363,684$ 18,607,883$ 3,463,988$ 14,889,929$ 72,325,484$

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

For the Year Ended December 31, 2016



Net changes in total fund balances per fund financial statements 6,864,579$

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

Governmental funds report capital outlays as expenditures; however, in thestatement of activities the cost of those assets are depreciated over theirestimated useful lives. This is the amount by which capital outlays exceededdepreciation in the current period.

Capital outlay 3,510,245$ Current year depreciation (12,786,829) (9,276,584)

Contributed /donated capital assets are included in the statement of activities but are not included in the governmental funds as they do not provide current financial resources:

Contributed from developers and other outside sources 4,026,401 4,026,401

Issuance of long-term debt (e.g., bonds, leases) provides current financial resourcesto governmental funds, while the repayment of the principal of long-term debt consumesthe current financial resources of governmental funds. Neither transaction, however, has anyeffect on net position. Also, governmental funds report the effect of premiums, discounts, andsimilar items when debt is first issued, whereas these amounts are deferred and amortized inthe statement of activities. This amount is the net effect of these differences in the treatmentof long-term debt and related items.

Debt principal repayments 3,242,938 Net amortization of bond premiums and deferral on refunding 80,966 3,323,904

Revenues in the statement of activities that do not provide current financialresources are not reported as revenues in the fund statement.

Unavailable revenue - property taxes (36,482) Unavailable revenue - special assessments (557,789) Unavailable revenue - grants earned but not available (103,153) Unavailable revenue - court local revenue earned but not available (38,688) (736,112)

Some expenses reported in the statement of activities do not require the use ofcurrent financial resources and, therefore, are not reported as expenditures in governmental funds.

Increase (decrease) in prepaid supplies on-hand (171,197) Increase (decrease) in investment in joint venture 3,162 (Increase) decrease in compensated absences and OPEB Liabilities (446,982) (Increase) decrease in accrued interest payable 9,767 (605,250)

Internal service funds or activities are used by management to chargethe costs of certain activities to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities. 744,579

Changes to net pension liability and pension related deferred outflows and inflows of resources do not require the use of current financial resources and, therefore, arenot reported as expenditures in governmental funds. 456,461

Rounding adjustmentsChanges in net position of governmental activities 4,797,978$

Reconciliation of the Statement of Revenues, Expendituresand Changes in Fund Balances of Governmental Funds

To the Statement of ActivitiesGovernmental Funds







Waste- Storm Reclaimed Internal ServiceWater Water Water Water Total Funds

ASSETSCurrent assets:Cash and cash equivalents 26,547,217$ 23,199,725$ 3,267,251$ 2,085,117$ 55,099,310$ 14,426,897$ Restricted cash and cash equivalents:

Customer deposits 274,731 51,530 3,998 - 330,259 - Receivables (net of allowances):

Customer accounts 900,954 1,447,740 266,739 - 2,615,433 14,889 Accrued interest & penalty 13,096 72,365 - - 85,461 -

Prepayments 402 - - - 402 - Due from governmental units 31,888 - - - 31,888 - Inventory 174,391 - - - 174,391 -

Total current assets: 27,942,679 24,771,360 3,537,988 2,085,117 58,337,144 14,441,786

Noncurrent assets:Restricted cash and cash equivalents:

Revenue bonds covenants 607,425 - - - 607,425 - Special assessments 14,746 80,567 - - 95,313 - Special assessments - noncurrent 218,139 1,572,333 - - 1,790,472 - Capital assets, net of depreciation:

Land 10,582,184 1,443,147 3,308,394 - 15,333,725 - Buildings 379,986 587,447 - - 967,433 103,362 Improvements other than buildings 110,094,575 72,149,032 43,658,076 1,394,827 227,296,510 42,041 Equipment 136,621 339,134 5,242 - 480,997 2,267,721 Construction in progress 2,747,616 1,538,571 6,014 - 4,292,201 -

Total noncurrent assets 124,781,292 77,710,231 46,977,726 1,394,827 250,864,076 2,413,124

Total assets 152,723,971 102,481,591 50,515,714 3,479,944 309,201,220 16,854,910

DEFERRED OUTFLOWS OF RESOURCESDeferred outflows of resources related to pension 322,702 163,468 77,191 - 563,361 155,674

Total deferred outflows of resources 322,702 163,468 77,191 - 563,361 155,674

LIABILITIESCurrent liabilities:

Accounts payable 214,959 186,287 35,686 - 436,932 60,262 Matured interest payable 37,805 - 7,650 - 45,455 - Due to other funds - 6,596 - - 6,596 - Due to other governmental units 43,390 2,072,972 9,338 - 2,125,700 8,747 Compensated absences 67,780 32,565 12,554 - 112,899 21,429 Current liabilities payable from restricted assets:

Customer deposits 274,731 51,530 3,998 - 330,259 - Current portion of interfund loans payable - 17,368 - - 17,368 - Current portion of revenue bonds payable 274,464 - 55,536 - 330,000 -

Total current liabilities 913,129 2,367,318 124,762 - 3,405,209 90,438

Noncurrent liabilities:Compensated absences 72,304 20,394 11,212 - 103,910 27,477 Long-term portion of interfund loan payable - 467,949 - - 467,949 - Bonds payable (net of premium/discount) 6,127,015 - 1,239,757 - 7,366,772 - Net pension liability 1,929,561 977,438 461,557 - 3,368,556 930,834

Total noncurrent liabilities 8,128,880 1,465,781 1,712,526 - 11,307,187 958,311

Total liabilities 9,042,009 3,833,099 1,837,288 - 14,712,396 1,048,749

DEFERRED INFLOWS OF RESOURCESDeferred inflows of resources related to pension 86,935 44,037 20,795 - 151,767 41,938

Total deferred inflows of resources 86,935 44,037 20,795 - 151,767 41,938

NET POSITIONNet investment in capital assets 117,467,290 75,990,303 45,668,978 1,394,827 240,521,398 2,413,124 Restricted for debt service 607,425 - - - 607,425 - Unrestricted 25,843,014 22,777,620 3,065,844 2,085,117 53,771,595 13,506,773

Total net position 143,917,729$ 98,767,923$ 48,734,822$ 3,479,944$ 294,900,418$ 15,919,897$

Adjustment to reflect the consolidation of internal balances and internal service fund activities related to enterprise funds. 1,297,860

Net position of business-type activities. 296,198,278$

Statement of Net PositionProprietary FundsDecember 31, 2016

Business-type ActivitiesEnterprise Funds




Waste- Storm Reclaimed InternalWater Water Water Water Total Service Funds

OPERATING REVENUESCharges for services 17,708,126$ 18,667,270$ 3,042,070$ -$ 39,417,466$ 3,929,203$ Miscellaneous operating revenues 323,325 5,976 8,380 - 337,681 54,037

Total operating revenue 18,031,451 18,673,246 3,050,450 - 39,755,147 3,983,240

OPERATING EXPENSESOperating expense 3,242,734 11,431,501 1,103,962 - 15,778,197 1,988,254 Maintenance expense 3,746,978 2,425,374 1,067,208 - 7,239,560 316,096 Depreciation expense 3,481,720 2,093,503 1,760,853 30,105 7,366,181 733,123 Taxes 654,474 209,698 70,761 - 934,933 171

Total operating expenses 11,125,906 16,160,076 4,002,784 30,105 31,318,871 3,037,644 OPERATING INCOME (LOSS) 6,905,545 2,513,170 (952,334) (30,105) 8,436,276 945,596

NONOPERATING REVENUES (EXPENSES)Intergovernmental revenue 24,422 - - - 24,422 - Special assessments interest 9,132 66,865 - - 75,997 - Investment earnings 102,545 81,199 9,207 8,292 201,243 50,207 Interest expense (214,305) (20,806) (43,300) - (278,411) - Gain (loss) on disposal of capital assets - - - - - (7,202)

Total nonoperating revenues (expenses) (78,206) 127,258 (34,093) 8,292 23,251 43,005 Income (loss) before contributions

and transfers 6,827,339 2,640,428 (986,427) (21,813) 8,459,527 988,601

Capital Contributions - grants - - 260,875 - 260,875 - Capital Contributions - private 1,498,664 1,789,532 683,155 - 3,971,351 - Capital Contributions - interfund - - - - - 81,654 Capital Contributions - special assessments - 1,939,639 - - 1,939,639 - Transfers in 601,250 - - - 601,250 - Transfers out (20,425) - - - (20,425) -

Changes in net position 8,906,828 6,369,599 (42,397) (21,813) 15,212,217 1,070,255

Net position - beginning 135,010,901 92,398,324 48,777,219 3,501,757 14,849,642

NET POSITION - ENDING 143,917,729$ 98,767,923$ 48,734,822$ 3,479,944$ 15,919,897$

Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. 325,676Rounding adjustment (4)

Change in net position of business-type activities. 15,537,889$

The notes to the financial statements are an integral part of this statement.

Business-Type ActivitiesEnterprise Funds

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





Waste- Storm Reclaimed Internal Water Water Water Water Total Services Funds

CASH FLOW FROM OPERATING ACTIVITIES:

Receipts from customers and users 17,992,760$ 18,611,295$ 3,045,574$ -$ 39,649,629$ 115,363$ Receipts from interfund services - - - - - 3,864,388 Payments to suppliers (3,536,280) (10,478,591) (1,012,244) - (15,027,115) (1,012,248) Payments for interfund services (642,770) (392,993) (277,053) - (1,312,816) (8,172) Payments for employees (2,881,668) (1,928,997) (803,851) - (5,614,516) (1,261,674) Payments for taxes (654,474) (209,698) (70,761) - (934,933) (171)

Net cash provided by operating activities 10,277,568 5,601,016 881,665 - 16,760,249 1,697,486

CASH FLOW FROM NON-CAPITAL FINANCING ACTIVITIES:

Transfers in from other funds 601,250 - - - 601,250 - Receipt (Repayment) of interfund loan - 5,888,195 - - 5,888,195 - Receipt of interfund loan interest payment 310 20,582 - - 20,892 - Transfers out to other funds (20,425) - - - (20,425) -

Net cash provided by non-capital financing activities 581,135 5,908,777 - - 6,489,912 -

CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets (5,111,831) (3,256,644) (698,070) - (9,066,545) (271,414) Proceeds from sales of capital assets - - - - - 4,666 Proceeds (payment) on Interfund loan (5,888,195) (16,684) - - (5,904,879) - Interest paid on interfund loan (310) (20,582) - - (20,892) - Principal paid on revenue bonds (270,305) - (54,694) - (324,999) - Interest paid on revenue bonds (232,234) - (46,991) - (279,225) - Payments received on special assessments 30,705 804,389 - - 835,094 - Subsidy from grant - - 260,875 - 260,875 -

Net cash used by capital and related financing activities (11,472,170) (2,489,521) (538,880) - (14,500,571) (266,748)

CASH FLOW FROM INVESTING ACTIVITIES:Redemption (purchase) of investments 620,093 - - - 620,093 (3,000) Interest received on investments 102,235 60,617 9,207 8,292 180,351 50,207

Net cash provided (used) by investing activities 722,328 60,617 9,207 8,292 800,444 47,207

Net increase (decrease) in cash and cash equivalents 108,861 9,080,889 351,992 8,292 9,550,034 1,477,945

Cash and cash equivalents January 1 27,320,512 14,170,366 2,919,257 2,076,825 46,486,960 12,518,896

Cash and cash equivalents December 31 (see Note below)(including restricted cash & cash equivalents) 27,429,373$ 23,251,255$ 3,271,249$ 2,085,117$ 56,036,994$ 13,996,841$

RECONCILIATION OF OPERATING INCOME (LOSS) TO NETCASH PROVIDED BY OPERATING ACTIVITIES:

Net operating income (loss) 6,905,545$ 2,513,170$ (952,334)$ (30,105)$ 8,436,276$ 945,596$ Adjustments to reconcile operating income (loss) to net cash

provided by operating activities:

Depreciation 3,481,720 2,093,503 1,760,853 30,105 7,366,181 733,123 Decrease (increase) in:

Customer receivables (98,419) (57,389) (5,303) - (161,111) (3,489) Intergovernmental receivables (7,466) - - - (7,466) - Prepaid expenses 1,785 - - - 1,785 - Inventories (11,220) - - - (11,220) - Customer deposits 67,194 (4,562) 427 - 63,059 -

Increase (decrease) in:Accounts payable 7,875 53,353 9,953 - 71,181 31,206 Intergovernmental payables 43,364 1,054,117 9,338 - 1,106,819 8,732 Compensated absences 5,564 1,415 9,497 - 16,476 (9,186) Net pension liability, deferred outflows and inflows of

pension related resources (118,374) (52,591) 49,234 - (121,731) (8,496) Total adjustments 3,372,023 3,087,846 1,833,999 30,105 8,323,973 751,890

Net cash provided by operating activities 10,277,568$ 5,601,016$ 881,665$ -$ 16,760,249$ 1,697,486$

Reconciliation of cash and cash equivalents with the amounts on the fund statement of net position:

Cash and cash equivalents 26,547,217$ 23,199,725$ 3,267,251$ 2,085,117$ 55,099,310$ 14,426,897$ Restricted cash and cash equivalents 882,156 51,530 3,998 - 937,684$ - Less investments with maturity over 3 months - - - - - (430,056) Cash and cash equivalents for cash flow statements 27,429,373$ 23,251,255$ 3,271,249$ 2,085,117$ 56,036,994$ 13,996,841$

Schedule of noncash capital and related financing activities

Contributions of capital assets from developers 1,498,664$ 1,789,532$ 683,155$ -$ 3,971,351$ -$ Capital assets transferred from other funds 81,654

Business-type ActivitiesEnterprise Funds

Statement of Cash FlowsProprietary Funds





AgencyFunds

ASSETS

Cash and cash equivalents 3,386,088$ Restricted cash and cash equivalents 42,260 Prepaid expenses and deposits 151 Accounts receivables, net of

uncollectible accounts 533 Due from other governmental units 333,064

Total assets 3,762,096$

LIABILITIES

Accounts payable 52,220$ Accrued employee leave payable 88,731 Custodial - seizure cases pending 42,260 Capital lease payable 7,345 Due to other governmental units 3,571,540

Total liabilities 3,762,096$

Statement of Fiduciary Net PositionFiduciary Funds

December 31, 2016





Notes to the Financial StatementsDecember 31, 2016

Basic Financial Statements Notes page

1. Summaryofsignificantaccountingpolicies 4-14 A. Reportingentity ................................................................................. 4-14 B. Basicfinancialstatements ................................................................ 4-14 C. Measurementfocus,basisofaccountingandfinancialpresentation 4-16 D. BudgetaryInformation ....................................................................... 4-17 E. Assets,liabilities,deferredoutflows/inflowsofresources, andnetposition/fundbalance ........................................................... 4-17 G. Revenues,expendituresandexpenses ............................................ 4-21 2. Stewardship,compliance,andaccountability 4-22 3. Detailednotesonallactivitiesandfunds 4-22 A. Depositsandinvestments ................................................................. 4-22 B. Receivablesandunearnedandunavailablerevenues ..................... 4-24 C. Propertytaxes ................................................................................... 4-25 D. Capitalassets .................................................................................. 4-25 E. Interfundloansandtransfers ............................................................ 4-27 F. Restrictedassets .............................................................................. 4-29 G. Leases .............................................................................................. 4-29 H. Long-termliabilities ........................................................................... 4-29 I. Fundbalances .................................................................................. 4-33 J. Employeepensionplans ................................................................... 4-34 K. Postemploymentbenefitsotherthanpensions(OPEB) .................... 4-42 L. Contingencies ................................................................................... 4-46 M. Riskmanagement ............................................................................. 4-46 N. Interlocalagreementsandjointventures .......................................... 4-47 O.Subsequentevents............................................................................4-50



City of LaceyNotes to the Financial Statements

December 31, 2016

Note 1. Summary of significant accounting policies

ThefinancialstatementsoftheCityofLaceyhavebeenpreparedinconformitywithgenerallyacceptedaccountingprinciples(GAAP)applicabletostateandlocalgovernments.GAAPforlocalgovernmentsincludethoseprinciplesprescribedbytheGovernmentalAccountingStandardsBoard(GASB),theFinancialAccountingStandardsBoard(FASB),whenapplicable,andtheAmericanInstituteofCertifiedPublicAccountants(AICPA)pronouncementsthathavebeenmadeapplicablebyGASBStatementsorInterpretation.

A. Reporting entity

TheCityofLaceywasincorporatedonDecember5,1966.TheCityoperatesunderaCouncil-Managerformofgovernment.TheCity’smajoroperations,asauthorizedunderthelawsoftheStateofWashingtonapplicabletoanon-chartercodecity,includeplanningandzoning,publicsafety,publicworks,recreationandculture,andutilities.

AsrequiredbyGAAP,theCity’sfinancialstatementspresenttheCityofLacey–theprimarygovernment.Therearenocomponentunits(eitherblendedordiscretelypresented)includedinthesestatements.

B. Basic financial statements

TheCity’sbasic financialstatements includebothgovernment-wide(reporting theCityasawhole)andfundfinancialstatements(reportingtheCity’smajorfunds).Boththegovernment-wideandfundfinancialstatementscategorizeprimaryactivitiesaseithergovernmentalorbusiness-type.

Government-wide financial statements

Thegovernment-wide financial statements report information on all of the nonfiduciary activities of theprimarygovernment.Whileseparategovernment-wideandfundfinancialstatementsarepresented,theyareinterrelated.Thegovernmentalactivitiescolumnincorporatesdatafromgovernmentalfundsandinternalservicefunds,whilebusiness-typeactivitiesincorporatedatafromthegovernment’senterprisefunds.

Governmental activities, which generally are financed by taxes, inter-government revenues, and othernonexchangerevenues,arereportedseparatelyfrombusiness-typeactivities,whichrelytoasignificantextentonfeesandchargestoexternalpartiesforthegoodsorservicestheyacquirefromtheCity.Governmentalactivitiesincludeprograms/activitiessuchasgeneralgovernment,publicsafety,streets,physicalenvironment,transportation,cultureandrecreation,andhealthandwelfare.Business-typeactivities,anintegralpartoftheCity’sactivitiesandresponsibilities,includetheCity’sWaterutilities,Wastewaterutilities,StormwaterutilitiesandReclaimedWaterutilities.

Thestatementofactivitiesdemonstratesthedegreetowhichthedirectexpensesofagivenfunctionorsegments are offset by program revenues.Direct expenses are those that are clearly identifiablewitha specific functionor segmentandmay include indirect costelements.Asageneral rule, theeffectofinterfundactivityhasbeeneliminatedfromthegovernment-widestatements.Exceptionstothisgeneralrulearechargesbetweenthegovernment’sutilitiesfunctionsandvariousotherfunctionsofthegovernment.Eliminationofthesechargeswoulddistortthedirectcostsandprogramrevenuesreportedforthevariousfunctionsconcerned.



Fund financial statements

Unlikegovernment-widefinancialstatements,thefocusoffundfinancialstatementsisdirectedtospecificactivitiesof theCity rather than theCityasawhole.The fund financial statementsprovide informationaboutthegovernment’sfunds,includingitsfiduciaryfunds.Separatestatementsforeachfundcategory–governmental,proprietary,andfiduciary–arepresented.TheCity’sfiduciaryfundsareexcludedfromthegovernment-widefinancialstatements,becauseresourcesofthesefundscannotbeusedtofinancetheCity’sactivities.However,thefinancialstatementsoffiduciaryfundsareincludedintheCity’sfundfinancialstatements,becausetheCityisfinanciallyaccountableforthoseresources,eventhoughtheybelongtootherparties.Theemphasisoffundfinancialstatementsisonmajorgovernmentalandenterprisefunds,eachdisplayedinaseparatecolumn.Allremaininggovernmentalfundsareaggregatedandreportedasnonmajorfunds.Majorindividualgovernmentalandenterprisefundsarereportedasseparatecolumnsinthefundfinancialstatements.

Thegovernmentreportsthefollowingmajorgovernmentalfunds:

Thegeneral fundistheCity’sprimaryoperatingfund.Itaccountsforallfinancialresourcesofthegeneralgovernment,exceptthoserequiredtobeaccountedforinanotherfund.Thegeneralfundincludespolice,healthandsocialservices,parksandrecreation,financeandadministration,planning,buildinginspection,communitydevelopment,parkmaintenance,publicworksandengineeringmanagement,andservicescontractedtootheragenciessuchas,TCOMM911,districtcourt,andjailservices.

Thearterial street fundprovidesfundingforstreetconstructionandtransportationimprovementprojects.Revenuescomefromstatesharedfueltaxes,utilitytaxes,realestateexcisetaxes,stateandfederalgrantsandmitigation impact fees.Workaccomplished includesright-of-wayacquisition,designandconstructionofroadways,stormdrainage,sidewalks,streetlighting,trafficsignals,andlandscaping.

Thelocal improvement district (L.I.D.) bond redemption fundwascreatedtoprovidefortheretirementofall local improvementdistrictbondsissuedforCityfacilitiesorequipment. Debt issuedorbondsreceivedwithout theguaranteeofCity tax revenuesmustdependon special assessmentsagainstpropertyowners.TheLIDfunddidnotmeetthemajorfundcriteriain2016butisreportedasamajorfundtomaintainconsistencyandcomparability.

TheCityreportsthefollowingmajorenterprisefunds:

Thewater utility fund accounts for revenues and reserve dollars to construct or replace thewaterproductionanddistributionsystem.ThefundsprovidehighqualitydrinkingwaterinsufficientquantityandpressuretosupportthecitizensofLaceyandserviceareasoutsidetheCity.WatercomesprimarilyfromwellsthatareownedandoperatedbytheUtility.WaterisalsopurchasedfromtheCityofOlympia.

Thewastewater utility fundaccountsforrevenuesandreservedollarstoconstructneworreplaceportionsofthewastewatercollectionandtreatmentsystemincludingsewerlines,liftstationsandholdingtanks.These facilitiesserve tocollect, initiate treatment,and transportwastewater to theLOTTTreatmentFacilitylocatedinOlympia.

The stormwater utility fund accounts for the operations andmaintenance of theCity-owned stormdrainageandfloodcontrolsystemsaswellastheactivitiesfortheplanning,design,propertyacquisitionandconstructionofcapitalprojects.

Thereclaimed water utility fundwascreatedtoutilizealternativewatersupplyfornon-potablewaterapplication.Thefundaccountsforrevenuesandexpensestoconstructneworreplacereclaimedwaterlinesandmaintenanceandoperations.


Additionally,thegovernmentreportsthefollowingfundtypes:

Internal services fundsaccountforfleetmanagementservicesandinformationmanagementservicesprovidedtootherdepartmentswithintheCityonacost-reimbursementbasisandincludethefollowingfunds:

Equipment rental fund accountsforfleetmanagementservicesprovidedtootherdepartmentswithintheCityofLacey,onacostreimbursementbasis.ActivitiesofthefundincludethemaintenanceandreplacementofCityownedvehiclesandequipment.TheCity’sfinancedepartmentprovidesadministrativeandaccountingserviceswhilethepublicworksdepartmentprovidesmaintenanceandrepairservices.

Information management services fundisresponsibleforkeepingallcomputerandofficeautoma-tionequipmentandprogramsoperatingandresponsivetotheCity’sneeds.Thisisaccomplishedthroughresearchingnewcomputertechniques,correctingandrevisingprogramstomeetchangingneeds,managingcomputertechniques,andmanagingcomputerequipmenttoachievemaximumperformance.

Fiduciary funds accountforcashandinvestmentsheldbythegovernmentonbehalfofothergovern-mentsinanagencycapacity,whichincludeJointAnimalServicesfund,InterlocalDrugUnitfund,andCapitalAreaRegionalPublicFacilitiesDistrict(CARPFD)fund.

C. Measurementfocus,basisofaccountingandfinancialstatementpresentation

Theaccountingandfinancialreportingtreatmentisdeterminedbytheapplicablemeasurementfocusandbasisofaccounting.Measurementfocusindicatesthetypeofresourcesbeingmeasuredsuchascurrent financial resources or economic resources. Thebasisofaccountingindicatesthetimingoftransactionsoreventsforrecognitioninthefinancialstatements.

The government-wide financial statementsarereportedusingtheeconomic resources measurement focus andtheaccrual basis of accounting,asaretheproprietaryfundandfiduciaryfundfinancialstatements.Agencyfundsarereportedusingtheaccrualbasisofaccounting,however,areunlikeallothertypesoffunds,reportingonlyassetsandliabilities;therefore,havenomeasurementfocus.Revenuesarerecordedwhenearnedandexpensesarerecordedwhenaliabilityisincurred,regardlessofthetimingofrelatedcashflows.Propertytaxesarerecognizedasrevenuesintheyearforwhichtheyarelevied.Grantsandsimilaritemsarerecognizedasrevenueassoonasalleligibilityrequirementsimposedbytheproviderhavebeenmet.

Thegovernmental fund financial statementsarereportedusingthecurrent financial resources measure-ment focusandthemodified accrual basis of accounting.Revenuesarerecognizedassoonastheyarebothmeasurableandavailable.Revenuesareconsideredtobeavailablewhentheyarecollectiblewithinthecurrentperiodorsoonenoughthereaftertopayliabilitiesofthecurrentperiod.Forthispurpose,theCityconsidersrevenuestobeavailableiftheyarecollectedwithin60daysoftheendofthecurrentfis-calperiod.Expendituresaregenerallyrecordedwhenaliabilityisincurred,asunderaccrualaccounting.However,debtserviceexpenditures,aswellasexpendituresrelatedtocompensatedabsencesandclaimsandjudgments,arerecordedonlywhenpaymentisdue.Generalcapitalassetacquisitionsarereportedasexpendituresingovernmentalfunds.Issuanceoflong-termdebtandacquisitionsundercapitalleasesarereportedasotherfinancingsources.

Propertytaxes,salestaxes,businessandlicensingtaxes,utilitytaxes,andexcisetaxes,andinterestas-sociatedwiththecurrentfiscalperiodareallconsideredtobesusceptibletoaccrualandsohavebeenrecognizedasrevenuesofthecurrentfiscalperiod.Entitlementsarerecordedasrevenueswhenalleligibil-ityrequirementsaremet,includinganytimerequirements,andtheamountisreceivedduringtheperiodorwithintheavailabilityperiodforthisrevenuesource(within60daysofyearend).Expenditure-drivengrants



arerecognizedasrevenuewhenthequalifyingexpenditureshavebeen incurredandallothereligibilityrequirementshavebeenmet,andtheamountisreceivedduringtheperiodorwithintheavailabilityperiodforthisrevenuesource(within90daysofyearend).Onlytheportionofspecialassessmentduewithinthecurrentfiscalperiodisconsideredtobesusceptibletoaccrualasrevenueofthecurrentperiodprovidedthattheamountisreceivedduringtheperiodorwithinthe60-dayavailabilityperiod.AllotherrevenueitemsareconsideredtobemeasurableandavailableonlywhencashisreceivedbytheCity.

Theproprietaryfundsarereportedusingtheeconomic resources measurement focus andtheaccrual basis of accounting. Theagencyfundhasnomeasurementfocusbututilizestheaccrual basis of accounting for reportingitsassetsandliabilities.

D. Budgetary Information

1. Scope of Budget

TheCitybudgetsitsfundsinaccordancewiththeRevisedCodeofWashingtonchapter35A.33.Thebud-get,asadopted,constitutesthelegalauthorityforexpenditures.Annualbudgetsareadoptedonabasisconsistentwithgenerallyacceptedaccountingprinciplesforallfunds.TheCity’sbudgetisadoptedatthefundlevel,sothatexpendituresmaynotlegallyexceedappropriationsatthatlevelofdetail.Thestepsinthebudgetprocessareasfollows:

(1) PriortoOctober1,theCityManagersubmitstotheCityCouncilaproposedoperatingbudgetforthefiscalyearcommencingthefollowingJanuary1.Theoperatingbudgetincludesproposedexpenditures/expensesandthemeansoffinancingthem.(2) ApublichearingisconductedatCityHalltoobtaintaxpayercomments.(3) DuringthemonthofDecember,thebudgetislegallyenactedthroughpassageofanordinance.(4) Anyrevisionsthatalterthetotalamountofexpenditures/expensesofanyfundmustbeapprovedbytheCityCouncil.

Appropriationinallbudgetedfundslapseattheendofthefiscalyear(exceptforappropriationsforcapitalprojects,whichmaybecarriedforward,withtheCityCouncil’sapproval,fromyeartoyear,untilfullyex-pendedorthepurposeoftheappropriationhasbeenaccomplishedorabandoned)eveniftheyhaverelatedencumbrances.Unexpendedresourcesmustbere-appropriatedinthesubsequentperiod.

2. Amending the budget

TransfersorrevisionsforbudgetedamountswithinfundsareauthorizedbytheCityManager;however,anyrevisionsthatalterthetotalamountofexpenditures/expensesofanyfundmustbeapprovedbytheCityCouncil.

Theaccompanyingsupplementaryinformationpresentsboththeoriginalandfinalbudgetinformation.Theoriginalbudgetisthefirstcompleteappropriatedbudget.Thefinalbudgetistheoriginalbudgetadjustedbyallreserves,transfers,allocations,supplementalappropriations,andotherlegallyauthorizedchangesapplicableforthefiscalyear.

E. Assets, liabilities, deferred outflows/inflows of resources, and net position/fund balance

1. Cash, deposits, and investments

TheCityhasdefinedcashandcashequivalentsascashonhand,demanddeposits,andallhighlyliquidshort-terminvestments(includingrestrictedassets)withamaturityofthreemonthsorlessfromthedateofacquisition.Theseamountsareclassifiedonthebalancesheetorinthestatementofnetpositionwithincashandcashequivalentsorinvestmentsinthevariousfunds.Theinterestincomeontheseinvestmentsisproratedtotheapplicablefundsthatreporttheunderlyinginvestments.




InvestmentsfortheCityarereportedatfairvalue,basedonthefairmarketvalueatfiscalyearend,exceptfor theposition in theStateTreasurer’sLocalGovernment InvestmentPool (LGIP).TheLGIPoperatesinaccordancewithappropriatestatelawsandregulations(RCW43.250.020).TheLGIPiscomparabletoaRule2a-7moneymarketfund,ascurrentlyrecognizedbytheSecuritiesandExchangeCommission(17CFR.270.2a-7).Rule2a-7fundsarelimitedtohighqualityobligationswithlimitedmaximumandaveragematurities,theeffectofwhichistominimizebothmarketandcreditrisk.Assuch,investmentsarereportedatamortizedcost(whichapproximatesfairvalue).

Forpurposesofthestatementofcashflows,theCityconsiderstheinvestmentintheLGIPtobecashandcashequivalents.

2. Receivables and payables

Taxes receivableconsistsofpropertytaxesandrelatedinterestandpenalties.

Accrued interest receivableconsistsofamountsearnedoninvestments,notes,specialassessments,andcontracts.

Customer accounts receivable/payableconsistsofamountsowedfrom/toprivateindividualsororganiza-tionsforgoodsandservices.Ifthetransactioniswithanothergovernmentalunit,itisaccountedforwithin“duefrom/toothergovernments”.

Special assessmentsarerecordedwhenleviedandareliensagainstthepropertybenefited.Specialas-sessmentsreceivableconsistofcurrentanddelinquentassessments.Deferredassessmentsonthefundfinancialstatementsconsistofunbilledspecialassessmentsnotduewithinoneyear.

Receivableshavebeenreportednetofestimateduncollectibleaccounts.Becausepropertytaxes,specialassessments,andutilitybillingsareconsideredliensonproperty,noestimateduncollectibleamountsareestablished.

Inthegovernment-widefinancialstatements,andproprietaryfundtypesinthefundfinancialstatements,long-term liabilitiesarereportedinapplicablegovernmentalactivities,business-typeactivities,orproprietaryfundtypestatementofnetposition.

3. Amounts due to/from other funds and interfund loans and advances(SeeNote3.E.InterfundLoansandTransfers)

Activitybetweenfundsthatarerepresentativeoflending/borrowingarrangementsoutstandingattheendofthefiscalyeararereferredtoeitherinterfundloansreceivable/payableoradvances to/from other fund.Allotheroutstandingbalancesbetweenfundsarereportedasdue to/from other funds.Dueto/fromotherfundsresultfromgoodsissued,workperformed,orservicesrenderedtoorforthebenefitofanotherfundwithintheCitywhencashisnotimmediatelymovedbetweenthefunds.Allotheroutstandingbalancesbetweenthegovernmentalactivitiesandbusiness-typeactivitiesarereportedinthegovernment-widefinancialstate-mentsas“internal balances”.

Advances(long-terminterfundloan)betweenfunds,asreportedinthefundfinancialstatements,areoffsetbyafundbalancereserveaccountinapplicablegovernmentalfundstoindicatethattheyarenotavailableforappropriationandarenotexpendableavailablefinancialresources.

4. Inventories and prepaid items

Inventoriesareassetsheldforinternalconsumptionorforresale.Inventoriesingovernmentalfundsarereportedusingpurchasesmethodsandexpendituresarerecognizedwhentheyarepurchased.Inventoriesintheenterprisefundsarereportedusingconsumptionmethodswhereinventoriesarereportedasassetswhenpurchasedandthenexpensedwhentheitemisconsumed.Inventoriesarecarriedatcostonthefirst



in,firstout(FIFO)basisorspecificidentificationbasis.Anymaterialinventoriesatyear-endareincludedinthebalancesheetorstatementofnetpositionoftheappropriatefund.

Certainpaymentstovendorsreflectcostsapplicabletofutureaccountingperiodsandarerecordedaspre-paiditemsinboththegovernment-wideandfundstatementsusingconsumptionmethod.

5. Restricted assets and liabilities

Enterprisefundsmayhaveaccountsthatcontainresourcesforconstructionand/ordebtservices,includingcurrentanddelinquentspecialassessmentsreceivable.Certainproceedsoftherevenuebondssetasidefundsfortheirrepayment.Thecurrentportionofrelatedliabilitiesareshownaspayablefromrestrictedas-sets.Specificdebtservicereserverequirements,ifany,aredescribedinthelong-termdebtnote.

6. Capital assets (See Note 3.D. Capital Assets)

Capital assets include property, plant, equipment, and infrastructure assets (i.e., roads, sidewalks andsimilar items),andarereportedintheapplicablegovernmentalorbusiness-typeactivitiescolumninthegovernment-widefinancialstatements.Capitalassets,otherthantheinfrastructureassets,aredefinedbythegovernmentasassetswithaninitial,individualcostof$5,000ormore(landiscapitalizedregardlessofvalue),andanestimatedusefullifeinexcessoftwoyears.Forinfrastructureassetsthecapitalizationthresholdis$50,000ormore.Majoroutlaysforcapitalassetsandimprovementsarecapitalizedasprojectsareconstructed.Thecostofnormalmaintenanceandrepairsthatdonotaddtothevalueoftheassetormateriallyextendassets’livesarenotcapitalized.Interestincurredduringtheconstructionphaseofcapitalassetsofenterprisefundsisincludedaspartofthecapitalizedvalueoftheassetsconstructed.Theamountofinterestcapitalizeddependsonthespecificcircumstances.

TheCityhascapitalizedcertainsculpturesasartandhistoricaltreasures.Artandhistoricaltreasuresareexpectedtobemaintainedorenhancedovertimeandthus,arenotdepreciated.

Capitalassetsarerecordedathistoricalcost,estimatedhistoricalcostifpurchasedorconstructed,orthelowerofcostorfairmarketvaluewhentransferredbetweenproprietaryandgovernmentalfunds.Donatedcapitalassetsarerecordedatestimatedacquistionvalueatthedateofdonation.

TheCityimplementedthegeneralprovisionsofGASBStatementNo.34infiscalyear1999andtheinfra-structureacquiredpriortofiscalyearsendedafterJune30,1980,isreported.Theseassetswerereportedatestimatedhistoricalcosts throughback-trendingmethod(i.e.estimatingthecurrentreplacementcostoftheinfrastructuretobecapitalizedandusinganappropriateprice-levelindextodeflatethecosttotheacquisitionyearorestimatedacquisitionyear).

TheCityimplementedthegeneralprovisionsofGASBStatementNo.51(AccountingandFinancialReport-ingforIntangibleAssets)infiscalyear2010.TheCityoptedtonottoretroactivelyreportintangibleassetsthatareconsideredtohaveindefiniteusefullivesasoftheeffectivedateofthisStatementandthosethatwouldbeconsideredinternallygenerated.

GovernmentalcapitalassetsoftheCitypurchased,leased,orconstructedarerecordedasexpendituresinthegovernmentalfundsandarecapitalizedinthegovernment-widestatements.Capitalassetsofproprietaryfundsarecapitalizedintheirrespectivestatementofnetposition.

Depreciationonallassetsisprovidedonthestraight-linebasisoverthefollowingusefullives:

Type of Asset Number of YearsBuildingandstructures 15-40Otherimprovements 05-50Machineryandequipment 02-15Infrastructure 20-50



7. Deferred outflows/inflows of resources

Inadditiontoassetsandliabilities,thestatementoffinancialpositionreportsseparatesectionsfordeferredoutflowsofresourcesanddeferredinflowsofresources.Thedeferred outflows of resources, representsaconsumptionofnetpositionthatappliestoafutureperiod(s)andsowillnotberecognizedasanoutflowofresources(expense/expenditure)untilthen.Thedeferred inflows of resources, representsanacquisi-tionofnetpositionthatappliestoafutureperiod(s)andsowillnot berecognizedasaninflowofresources(revenue)untilthattime

Deferredresourcesrelatedtopensionexpenseandunamortizedportionsofthelossandgainonrefundingdebtarereportedasdeferredoutflowsanddeferredinflowsofresources,respectively.Inadditiontothis,whenanassetisrecordedingovernmentalfundsbalancesheetbuttherevenueisnotavailable,adeferredinflowofresourcesisreporteduntilsuchtimeastherevenuebecomesavailable.

8. Compensated absences

ItistheCity’spolicytopermitemployeestoaccumulateearnedbutunusedvacationandsickpaybenefits.Vacationpaymayaccumulateupto240hoursatyearendandispayableuponresignation,retirementordeath.Sickleavemayaccumulateupto960hoursorasprovidedbycontract.UponretiringfromemploymentwiththeCity,AFSCMEbargainingunitemployeesshallbepaidforallaccumulatedsickleavebeyond60days(480hours)attherateof1day(8hours)ofpayathis/herregularrateforeach3days(24hours)accumu-latedforamaximumpayoffof45days(360hours)sickleavefor15days’(120hours)pay.EachJanuary,ifsickleaveexceeds60days,theAFSCMEbargainingunitemployeesalsohavetheoptiontoconvertsickleavetovacationona3:1ratioortheycantradethree(3)daysofsickleaveforone(1)dayofpayatthissametime.LaceyPoliceOfficersGuildbargainingunitoffersasickleavebuy-backprogramforunusedsickleaveover300hoursminimumandupto1,000hoursattherateof25%perhour.Tobeeligibleforthebuy-backprogram,anemployeemusthaveaminimumof300hoursofsickleaveaccruedandqualifyforLEOFFretirementorLEOFFDisabilityretirement.

Accruedsickleaveisconsideredimmaterialandisnotaccrued.Allvacationpayisaccruedwhenincurredinthegovernment-wideandproprietaryfundfinancialstatements.Aliabilityfortheseamountsisreportedingovernmentalfundsonlyiftheyhavematured,forexample,asaresultofemployeeresignationsandretire-ments.Theliabilitiesforcompensatedabsencesareconsideredtobelong-termliabilitiesandareincludedinNote3.H.(Long-termliabilities).

9. Long-term liabilities

Long-termdebtandotherlong-termobligationsarereportedasliabilitiesintheapplicablegovernmentalactivities,business-typeactivitiesinthegovernment-widefinancialstatementsandintheproprietaryfundtypestatementofnetposition.Bondpremiumsanddiscountsaredeferredandamortizedoverthelifeofthebondsusingthestraight-linemethod.Bondspayablesarereportednetoftheapplicablebondpremiumordiscount.

Inthefundfinancialstatements,governmentalfundtypesrecognizebondpremiumsanddiscounts,aswellasbondissuancecosts,duringthecurrentperiod.Thefaceamountofdebtissuedisreportedasotherfinancingsourceswhilediscountsonthedebtissuancearereportedasotherfinancinguses.Issuancecosts,whetherornotwithheldfromtheactualdebtproceedsreceived,arereportedasdebtserviceexpenditures.

10. Fund balance, net position classifications and policies

Fundbalanceofgovernmentalfundsisreportedinvariouscategoriesbasedonthenatureofanylimitationsrequiringtheuseofresourcesforspecificpurposes.Thegovernmentitselfcanestablishlimitationsontheuseofresourcesthrougheitheracommitment(committedfundbalance)oranassignment(assignedfundbalance).


ThecommittedfundbalanceclassificationincludesamountsthatcanonlybeusedforthespecificpurposesdeterminedbyaformalactionofCityCouncil,byadoptionofanordinancepriortotheendofthefiscalyear.Onceadopted,thelimitationimposedbytheordinanceremainsinplaceuntilasimilaractionistaken(theadoptionofanotherordinance)toremoveorrevisethelimitation.

Amountsintheassignedfundbalanceclassificationareintendedtobeusedbythegovernmentforspecificpurposesbutdonotmeetthecriteriatobeclassifiedascommitted.TheCity’spolicyasadoptedbythegoverningbodyauthorizestheCityManagerandFinanceDirectortoassignamountstoaspecificpurpose.Unlikecommitments,assignmentsgenerallyonlyexisttemporarily.Inotherwords,anadditionalactiondoesnotnormallyhavetobetakenfortheremovalofanassignment.Forfinancialreportingpurposes,amountsinexcessofnonspendable,restricted,andcommittedfundbalanceinfundsotherthanthegeneralfundaregenerallyconsideredassignedfundbalancesforthepurposesintendedforthosefunds.

ItistheCity’spolicytoconsiderrestrictedfundbalancetohavebeendepletedbeforeusinganyofthecom-ponentsofunrestrictedfundbalance,whenexpenditureisincurredforpurposesforwhichbothrestrictedandunrestrictedfundbalanceisavailable.Further,whenthecomponentsofunrestrictedfundbalancecanbeusedforthesamepurpose,thecommittedfundbalanceisdepletedfirst,followedbyassignedfundbal-ance.Unassignedfundbalanceisappliedlast. ItistheCity’spolicytoconsiderrestrictednetpositiontohavebeendepletedbeforeunrestrictednetpositionisappliedforgovernment-wideandproprietaryfundfinancialstatements.

TheCitycouncilhasadoptedafinancialpolicytomaintainaminimumlevelofunrestrictedfundbalance(thetotalofthecommitted,assigned,andunassignedcomponentsoffundbalance)inthegeneralfund.Thetargetlevelissetattwomonthsofoperatingrevenuesinthegeneral,utility,andinternalservicefunds.Thisamountisintendedtoprovidefiscalstabilitywheneconomicdownturnsandotherunexpectedeventsoccur.

11. Pensions

Forpurposeofmeasuringthenetpensionliability,deferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensions,andpensionexpense,informationaboutthefiduciarynetpositionofallstatesponsoredpensionplansandadditionsto/deductionsfromthoseplans’fiduciarynetpositionhavebeendeterminedonthesamebasisastheyarereportedbytheWashingtonStateDepartmentofRetirementSystems.Forthispurpose,benefitpayments(includingrefundsofemployeecontributions)arerecognizedwhendueandpayableinaccordancewiththebenefitterms.Investmentsarereportedatfairvalue.

F. Revenues, expenditures and expenses

1. Program revenues

Programrevenuesinclude1)chargestocustomersorapplicantswhopurchase,use,ordirectlybenefitfromgoods,services,orprivilegesprovidedbyagivenfunctionorsegmentand2)grantsandcontributionsthatarerestrictedtomeetingtheoperationalorcapitalrequirementsoraparticularfunctionorsegment.Taxesandotheritemsnotproperlyincludedamongprogramrevenuesarereportedinsteadasgeneralrevenues.

2. General revenues

Internallydedicatedresourcesarereportedasgeneralrevenuesratherthanprogramrevenues.Likewise,generalrevenuesincludealltaxesandassociatedpenaltiesandinterestandinvestmentearnings.

3. Interfund transactions and interfund transfers

Permanentreallocationsofresourcesbetweenfundsofthereportingentityareclassifiedasinterfundtransfers.




Chargesfordirectexpensesforinterfundservicesprovidedandusedandindirectexpenses(i.e.administrationchargesandcommonfacilitiescharges)areaccountedforbytherelatedfundsasrevenues,expenditures,orexpenseatfundlevel.

Asageneralrule,theeffectofinterfundactivitywithinthesamefunctionalcategorieshasbeeneliminatedfromthegovernment-widestatementofactivities.Ourpolicyisnottoeliminatetheindirectcostsportionofthedirectchargesforinterfundservicesprovidedandusedbetweenfunctions(i.e.,engineeringservicesprovidedandused).Exceptionstothisgeneralrulearechargesbetweenthegovernment’sutilitiesfunctionsandvariousotherfunctionsofthegovernment.Eliminationofthesechargeswoulddistortthedirectcostsandprogramrevenuesreportedforthevariousfunctionsconcerned.

4. Expenditures/expenses

Expensesinthegovernment-widestatementofactivitiesarereportedbyfunctionasagovernmentalactivities(generalgovernment,securityofpersonsandproperty,physicalenvironment,transportation,economicenvi-ronment,cultureandrecreation,orinterestonlong-termdebt)orbusiness-typeactivities(water,wastewater,stormwater,orreclaimedwater).Inthefundfinancialstatements,expendituresofgovernmentalfundsareclassifiedbyfunctions,debtserviceprincipalandinterestpayments,orpurchasesofcapitalitems.

5. Operating and nonoperating revenues and expenses

Proprietaryfundsdistinguishoperatingrevenuesandexpensesfromnonoperatingitems.Operatingrevenuesandexpensesgenerallyresultfromprovidingservicesandproducinganddeliveringgoodsinconnectionwithaproprietaryfund’sprincipalongoingoperations.TheprincipaloperatingrevenuesoftheCity‘senterprisefundsandoftheCity’sinternalservicesfundsarechargestocustomersforsalesandservices.Operatingexpensesforenterprisefundsandinternalservicefundsincludethecostofsalesandservices,administra-tiveexpenses,anddepreciationoncapitalassets.Allrevenuesandexpensesnotmeetingthisdefinitionarereportedasnonoperatingrevenuesandexpenses.

Note 2. Stewardship, compliance and accountability

Therehavebeennomaterialviolationsoffinance-relatedlegalorcontractualprovisions.

Note 3. Detailed notes on all activities and funds

A. Deposits and investments

TheCity’sdeposits,includingmoneymarketsandcertificatesareentirelycoveredbytheFederalDepositoryInsuranceCorporation(FDIC)orbycollateralheldinamultiplefinancialinstitutioncollateralpooladministeredby theWashingtonPublicDepositProtectionCommission (PDPC). ThePDPC is a statutory authorityestablishedunderChapter39.58oftheRevisedCodeofWashington.

TheCity’s investmentsare incompliancewithallapplicablestate investment lawsandCity investmentpolicies.AsrequiredbystatelawandtheCity’sinvestmentpolicies,allinvestmentsoftheCity’sfundsareobligationsoftheU.S.Government,U.S.agencyissues,obligationsoftheStateofWashington,generalobligationsofWashingtonStatemunicipalities,theStateTreasurer’sLocalGovernmentInvestmentPool(LGIP),orcertificatesofdepositwithcommercialbanksandsavingsandloanassociationsthatareapprovedbythePDPC.

TheLGIPoperatesinaccordancewithappropriatestatelawsandregulations(RCW43.250.020).TheLGIPiscomparabletoaRule2a-7moneymarketfund,ascurrentlyrecognizedbytheSecuritiesandExchangeCommission(17CFR.270.2a-7).Rule2a-7fundsarelimitedtohighqualityobligationswithlimitedmaximumandaveragematurities,theeffectofwhichistominimizebothmarketandcreditrisk.Assuch,investmentsarereportedatamortizedcost(whichapproximatesfairvalue).InvestmentsordepositsheldbytheLGIPare



eitherinsuredorheldbyathird-partycustodyproviderintheLGIP’sname.Forbankdepositsandrepurchaseagreements,thiscost-basedmeasureequalstheircarryingvalueamount.Fairvalueisdeterminedmonthly.ThereportedvalueofCityinvestmentintheLGIPisdollarfordollarequaltothefairvalueofpoolshares.

TheLGIPtransactswithitsparticipantsatastablenetassetvaluepershareof$1.00,thesamemethodusedforreporting.Participantsmaycontributeandwithdrawfundsonadailybasis.ParticipantsmustinformtheOfficeoftheStateTreasurer(OST)ofanycontributionorwithdrawaloveronemilliondollarsnolaterthan9a.m.onthesamedaythetransactionismade.Contributionsorwithdrawalsforonemilliondollarsorlesscanberequestedatanytimepriorto10a.m.onthedayofthetransaction.However,participantsmaycompletetransactionsgreaterthanonemilliondollarswhennotificationismadebetween9a.m.and10a.m.atthesolediscretionofOST.AllparticipantsarerequiredtofilewiththeStateTreasurerdocumentationcontainingthenamesandtitlesoftheofficialsauthorizedtocontributeorwithdrawfunds.TheLGIPdoesnotimposeliquidityfeesorredemptiongatesonparticipantwithdrawals.

Custodial Credit Risk.Custodialcreditriskistheriskthat,intheeventadepositoryinstitutionorcounterpartyfails,theLGIPwillnotbeabletorecoverthevalueofitsdeposits,investmentsorcollateralsecuritiesthatareinthepossessionofanoutsideparty.InvestmentsheldasdepositsinfinancialinstitutionsareinsuredbytheFDICand/orcollateralized.CollateralprotectionisadministeredbythePDPC.ThePDPC,createdbytheLegislatureperChapter39.58oftheRevisedCodeofWashington,constitutesamultiplefinancialinstitution collateral pool comprisedof securitiespledged to secureuninsuredpublic deposits.PledgedsecuritiesareheldbythePDPC’sagentinthenameofthecollateralpool.TheLGIPinvestmentpolicyrequiresthatsecuritiespurchasedbeheldbythemastercustodian,actingasanindependentthirdparty,initssafekeepingortrustdepartment.Securitiesutilizedinrepurchaseagreementsaresubjecttoadditionalrestrictions.TheserestrictionsaredesignedtolimittheLGIP’sexposuretoriskandinsurethesafetyoftheinvestment.AllsecuritiesutilizedinrepurchaseagreementswereratedAAAbyMoody’sandAA+byStandard&Poor’s.Thefairvalueofsecuritiesutilizedinrepurchaseagreementsmustbeatleast102percentofthevalueoftherepurchaseagreement

Interest rate risk.Inaccordancewithitsinvestmentpolicy,theCitymanagesitsexposuretodeclinesinfairvaluesbylimitingtheweightedaveragematurityofitsinvestmentportfoliotofive(5)yearsorlessfromthedateofpurchase,unlessmatchedtoaspecificcashfloworbondreservefunds.Theinterestraterisksofparticipants’balancesintheLGIParelimitedastheweightedaveragematurityoftheportfoliowillnotexceed60days.AsofDecember31,2015,theLGIPhadaweightedaveragematurityof35days.

Credit risk.Asrequiredbystatelaw,itistheCity’spolicytolimititsinvestmentsindebtsecuritiestotheobligations of U.S. Government, U.S. agency issues, obligations of the State of Washington, generalobligationsofWashingtonStatemunicipalitiesandtheLGIP.ThecreditriskoftheLGIPislimitedasmostinvestmentsareeitherobligationsoftheUSgovernmentorstateofWashingtonoritspoliticalsubdivisions,government-sponsoredenterprises,certainlimitedbanker’sacceptancesorcommercialpapers,orinsureddemanddepositaccountsandcertificatesofdeposit.TheLGIPisnotratedbyanoutsideagency.

Concentration of credit risk:ConcentrationriskistheriskoflossattributedtothemagnitudeoftheCity’sinvestmentinasingleissuer.TheCity’spolicystates,withintheexceptionofUSTreasurysecuritiesandauthorizedpools,nomorethanfifty(50)percentoftotalportfoliomaybeinvestedinasinglesecurityorwithasinglefinancialinstitution.

AmountsreportedinthefundstatementsfortheyearendedDecember31,2016areasfollows:



Cash,deposits,andinvestmentsfortheyearendedDecember31,2016areasfollows:

B. Receivables and unearned and unavailable revenues

The$3,469,310taxesreceivableinthegeneralfundincludes$117,124propertytaxes,$1,884,594salesandusetaxes,and$1,319,367businessandutilitytaxes,and$148,225forothertaxes.Thecustomerac-countsreceivable$1,080,497inthegeneralfundincludes$374,174infinesforviolations.

The special assessment receivable amount of $365,624 reported in the LID redemption fund includes$256,788ofdelinquentprincipaland$93,942ofdelinquentinterestandpenalties,andtheyareexpectedtobecollectedwithinthenextyear.

Thelong-termloanreceivableof$348,753reportedintheothergovernmentalfundsrepresentsaloanpay-ablefromTCOMM911.InNovember2011,theCityenteredintoaLocalAgencyFinancingContractwiththeWashingtonStateLocalOptionCapitalAssetLending(LOCAL)Programfortheacquisitionandfinancingofthe911Communicationsequipment.AninterlocalagreementwasenteredbetweenTCOMM911andtheCity,whichrequiresTCOMM911topaytheCityfortheannualdebtservicepayments.

Governmentalfundsdeferrevenuerecognitioninconnectionwithresourcesthathavebeenreceived,butnotyetearned(unearned).Belowisthedetailofthecomponentsofunearnedrevenuesreportedinthegovernmentalfunds:

AmountCashonhand 32,725$Checkingaccounts 15,263,123 PublicFundsInterestChecking 3,916,631 Certificatesofdeposits 430,056 WashingtonStateInvestmentPool(LGIP) 125,051,921Total 144,694,456$(1)Investmentsmeasuredatamortizedcost

AmountGovernmentalFundsCashandcashequivalentsandinvestments 70,571,613$Restrictedcashandcashequivalentsandinvestments 230,604 Totalgovernmentalfunds 70,802,217

EnterpriseFundsCashandcashequivalents 55,099,310 Restrictedcashandcashequivalents 937,684 Totalproprietaryfunds 56,036,994

InternalServicesFundsCashandcashequivalents 14,426,897 Restrictedcashandcashequivalents(deposits) - Totalproprietaryfunds 14,426,897

FiduciaryFundsCashandcashequivalents 3,386,088 Restrictedcashandcashequivalentsandinvestments 42,260 Totalfiduciaryfunds 3,428,348

Total 144,694,456$



C. Property taxes

Thecountytreasureractsasanagenttocollectpropertytaxesleviedinthecountyforalltaxingauthorities.

TaxesareleviedannuallyonJanuary1andbecomeanenforceablelienagainsttheproperties.PropertyassessmentsareupdatedannuallybythecountyassessorandarebasedonfairmarketvalueasofJanuary1.TheCountyAssessordeterminescurrentmarketvalueofallpropertyinThurstonCountyfortaxpurposes.Levyamountsarebasedoncertifiedbudgetssubmittedbytaxingdistricts.Eachyearallpropertiesarerevaluedtofairmarketvaluewithinone-sixthofthecountybeingphysicallyinspected.Appraisersusevalidsalesdataandcurrentreplacementcosts(basedonlaborandmaterial,lessdepreciation)toarriveatfairmarketvalue.Thisensuresthateachownerpaysaproportionalshareofpropertytaxesthatsupportpublicservices,suchas:schools,libraries,roads,fire,police,andemergencyservices.

TaxesaredueintwoequalinstallmentsonApril30andOctober31.Taxliensareautomaticatthepointthetaxesarelevied.Noallowanceforuncollectibletaxesisestablishedbecausedelinquenttaxesareconsideredfullycollectible.Thecountytreasurerremitscollectionsmonthlytotheappropriatedistrict.

TheCityispermittedbylawtolevyupto$3.60minuslibraryrateof$0.41andfiredistrictrateof$1.50per$1,000ofassessedvaluationforgeneralgovernmentalservices.Thisamountmaybereducedforanyofthefollowingthreereasons:

1. TheLevyLimit:Thelevylimitcalculationappliestoataxingdistrict’sbudget,andnottoincreasesintheassessedvalueortaxbillofindividualproperties.WashingtonStatelaw(RCW84.55.010)restrictsindividualtaxingdistrictsfromcollecting,inanyyear,morethanonepercentincreaseintheirregular,non-voted,levyoverthehighestlevyamountsince1985.Newconstruction,annexations,andexcessleviesapprovedbythevotersarenotincludedinthelevylimitcalculation.Iftheassessedvaluationincreasesbymorethanonepercentduetorevaluation,thelevyratewillbedecreased.

2. TheOnePercentConstitutionalLimit:TheWashingtonStateConstitutionlimitstheregular(non-voted)combinedpropertytaxrateappliedtoanindividual’spropertytoonepercent($10per$1,000)ofthemarketvaluation.Votersmayvotespecialleviesthatareaddedtothisfigure.Ifthetaxesofalldistrictsexceedthisamount,eachisproportionatelyreduceduntilthetotalisatorbelowtheone-percentlimit.

3. TheCitymayvoluntarilylevytaxesbelowthelegallimit.Specialleviesapprovedbythevotersarenotsubjecttotheabovelimitations.TheCity’sregularlevyratefor2016was$1.2057per$1,000onanas-sessedvaluationof$4,919,604,019foratotalregular levyof$5,931,654.Additionally,special leviesforG.O.bondobligationstotaled$1,104,323valuationof$4,609,370,743foratotalregularlevyof$5,707,368.Additionally,specialleviesforG.O.bondobligationstotaled$1,142,426.

D. Capital assets

Capital assetactivitiesfortheyearendedDecember31,2016wereasfollows:

Description

UnearnedRevenues12/31/2016

Depositsforadvancereservations(generalfund) 161,701$Trafficmitigationfeescollectedbutearningsprocessnotyetcomplete(arterialstreetfund) 3,403,827 Totalunearnedrevenuesforgovernmentalfunds 3,565,528$



2016Depreciationexpenseswerechargedtofunctions/programsoftheprimarygovernmentasfollows:

Governmental activities AmountGeneralGovernment 491,723$Securityofpersonsandproperty 10,705 Physicalenvironment 1,067 Transportation 10,582,130 Economicenvironment 36,930 Cultureandrecreation 1,664,274 Internalservicesfunds 733,123 Totalgovernmental-typeactivitiesdepreciationexpense 13,519,952$

Beginning Ending

GovernmentalActivities Balance1/1/2015 Increases DecreasesBalance

12/31/2016Non-depreciable Capital Assets:Landandlandrights $142,644,745 $2,294,814 $- $144,939,559Constructioninprogress 4,010,243 2,218,193 2,005,092 4,223,344Totalnon-depreciableassets 146,654,988 4,513,007 2,005,092 149,162,903Depreciable Capital Assets:Buildings 30,573,165 465,717 - 31,038,882Improvements 26,869,119 - - 26,869,119Infrastructure 311,093,097 4,561,387 - 315,654,484Machinery&equipment 12,066,874 354,696 185,070 12,236,500Totaldepreciableassetsatcost 380,602,255 5,381,800 185,070 385,798,985Less accumulated depreciation:Buildings 12,117,444 728,515 - 12,845,959Improvements 10,224,316 1,372,472 - 11,596,788Infrastructure 178,592,692 10,584,641 - 189,177,333Machinery&equipment 8,580,388 834,324 173,202 9,241,510Totalaccumulateddepreciation 209,514,840 13,519,952 173,202 222,861,590TotalDepreciableassets,net 171,087,415 (8,138,152) 11,868 162,937,395Governmental activities capital assets, net $ 317,742,403 $ (3,625,145) $ 2,016,960 $ 312,100,298

Business-type activities AmountWater 3,481,720$Wastewater 2,093,503 Stormwater 1,760,853 ReclaimedWater 30,105 Totalbusiness-typeactivitiesdepreciationexpense 7,366,181$

Beginning Ending

Business-typeactivitiesNon-depreciable Capital Assets:Landandlandrights $14,901,326 $432,399 $- $15,333,725Constructioninprocess 7,090,253 9,031,560 11,829,612 4,292,201Totalnon-depreciableassets 21,991,579 9,463,959 11,829,612 19,625,926Depreciable Capital Assets:Buildings 1,520,813 - - 1,520,813Improvements 300,348,446 15,189,724 - 315,538,170Machinery&equipment 676,883 213,825 15,223 875,485Totaldepreciableassetsatcost 302,546,142 15,403,549 15,223 317,934,468Less accumulated depreciation:Buildings 516,306 37,075 - 553,381Improvements 80,962,461 7,279,200 - 88,241,661Machinery&equipment 359,804 49,906 15,223 394,487Totalaccumulateddepreciation 81,838,571 7,366,181 15,223 89,189,529Totaldepreciableassets,net 220,707,571 8,037,368 - 228,744,939Business-type activities capital assets, net $ 242,699,150 $ 17,501,327 $ 11,829,612 $ 248,370,865

Balance1/1/2015 Increase DecreaseBalance

12/31/2016



ConstructionCommitments

TheCityhasactiveconstructionprojectsinprogressasofDecember31,2016.Theprojectsincludeconstructionofstreetsinvariousareasandtheconstructionofvariouswater,wastewater,andstormwaterfacilities.

Attheendofthefiscalyear2016,theCity’scommitmentswithcontractorsformajoractiveutilitiesconstructionprojectswereasfollows:

TheCity’s2017budgetforutilitiescapitalfundsincludeexpendituresforcompletionoftheseprojects.

TheCityhadthefollowingmajoractivearterialstreetcapitalimprovementprojectsinprogressasofDecember31,2016:

• CollegeSt.&22ndAveRoundaboutPermitCompliance• HogumBayRoadImprovements• HawksPrairieRoad/MarvinroadRoundaboutDesign• RuddellRoadSidewalk/RetainingWalls• Sleater-Kinney/WoodlandTrailPedestrianCrossing• MarvinRoadSafetyandCapacityImprovements

TheArterialStreetfund’s2017capitalexpendituresbudgetof$10,538,655includesthefundingfortheseprojects.

E. Interfund loans and transfers

Loans/advances from/to other funds:

InterfundloanbalancesatDecember31,2016wereasfollows:

TheinterfundloansbetweenLocalImprovementDistrict(LID)debtfundandWastewaterfundwereissuedbyOrdinanceNo.1475in2016toprovidefundingfortheCollegeStreetandMartinWaySewerimprove-mentproject(ULIDNo.23)inaformofrevenuebonds,withamaturitydateofSeptember1,2035andaninterestrateof4.10%.AnnualpaymentisdueSeptember1ofeachyear.

ProjectdescriptionSpentto-date12/31/2016

EstimatedRemainingCommitment

TelemetryControlCla-Vals 536,053$ 45,492$WestsideBPSVFD/Generator - 552,666 ShadyLaneWater/SewerReplacement 1,515,182 151,704 Total 2,051,235$ 749,862$

ReceivableFund PayableFund Amount

LIDDebtFund WastewaterFund 485,317 485,317$



Interfund transfers:

Interfundtransfersactivitiesfortheyearwereasfollows:AmountsTransferred

AmountsTransferred

Fund Purpose In OutGovernmentalFunds:MajorFundsGeneralFund RoutinetransfersfromParks&OpenSpacefundforRainierVistaPark

Maintenance$392,838andRegionalAthleticComplex(RAC)maintenance$249,626;fromLodgingTaxfundformuseumoperations$50,334andRACpromotionandadvertisement$150,000.

$842,798 $-

Non-routinetransferfromCapitalEquipmentfund$560,000andStreetfund$500,000forconsolidatedcommitmentreserves.

$1,060,000

RoutinetransfersoffirehydrantflowstoWaterM&Ofund$601,250andutilitytaxcollectionsof$3,339,787toStreetfund,CapitalEquipmentfundandParks&OpenSpacefundtomaintainoperationsandfundcapitalreplacements.

3,941,037

Non-routinetransfertoG.O.Debtservicefundfor2006UTGOredemption. 1,485,000

L.I.D.RedemptionFund

Non-routinetransferfromWaterDebtServicefundforULID21assessmentcosts.

20,425

NonmajorGovernmentalFunds:

Routinetransferof$573,150fromRACCapitalfundinG.O.Debtfundfordebtservice;utilitytaxrevenuesdistributionfromGeneralfundinStreetfund$2,233,098,CapitalEquipmentfund$617,424andtoParksandOpenSpacefund$489,265.Non-routinetransfersof$2,000fromParksandOpenspacefundtoCapitalEquipmentfundforequipmentpurchase.Non-routinetransferof$1,485,000fromGeneralfundinG.O.DebtServicefundforearlyredemptionof2006UTGO.

5,399,937 -

RoutinetransferfromLodgingTaxFundtoRegionalAthleticComplexOperatingfund$150,000forRACpromotion;fromParksandOpenSpacefundtoGeneralFund$249,626forRACmaintenanceand$392,838forRainierVistaParksmaintenance.Routinetransfer$573,150fromRACCapitalfundtoG.O.DebtServicefundfordebtservice.Routinetransferof$50,334fromLodgingTaxfundtoRACCapitalfundformuseumoperations;$2,000fromParks&OpenSpacetoCapitalEquipmentfundequipmentpurchase.

- 1,417,948

Non-routinetransfertoGeneralfundforconsolidatedcommitmentreserves;$500,000fromStreetfundand$560,000fromCapitalEquipmentfund.

1,060,000

TotalGovernmentalFunds 7,323,160 7,903,985

EnterpriseFunds:WaterFund RoutinetransferfromGeneralfundforfirehydrantflow. 601,250

Non-routinetransfertoLIDDebtServiceFundforULID21assessmentcosts.

20,425

TotalProprietaryFunds 601,250 20,425

Total $7,924,410 $7,924,410

ReconciliationtoStatementofActivitiesTotalnettransfers-governmentalfunds (580,825)$CapitalassettransferfromStormwaterfund -Totalgovernmentalactivities,transfersout $(580,825)

Totalnettransfers-enterprisefunds 580,825$Capitalassettransfertogovernmentalactivities -Totalbusiness-typeactivities-transfersin 580,825$



F. Restricted assets

ThebalancesoftherestrictedassetsoftheCity’sfundstatementsarecomposedofthefollowing:

G. Leases

CapitalLeases

TheCityofLaceyhasenteredintoleaseagreementsforfinancingmachineryandequipment.Leaseitemsbelowthecapitalizationthresholdarenotcapitalizedandthereforearenon-capitalleases.

Theseleaseagreementsqualifyascapitalleasesforaccountingpurposes,therefore,havebeenrecordedatthepresentvalueoftheirfutureminimumleasepaymentsasoftheinceptiondate.

TheassetsacquiredthroughcapitalleaseasofDecember31,2016areasfollows:

ThefutureminimumleaseobligationsandthenetpresentvalueoftheseminimumleasepaymentsasofDecember31,2016wereasfollows:

OperatingLeases

TheCityof Laceyhas leasecommitments for leasesof officemachineryandequipment thatarenon-cancelablewithleasetermsprimarilyfrommonthtomonthwithonethatextendsto48months.ThetotaloperatingleaseexpendituresfortheyearendedDecember31,2016was$4,503.

H. Long-term liabilities

TheCity’slong-termliabilitiesaresegregatedbetweentheamountstoberepaidfromgovernmentalactivi-tiesandamountstoberepaidfrombusiness-typeactivities.

GeneralObligationBonds

TheCityissuesgeneralobligationbondstofinancetheacquisition,construction,improvementsofcapitalfacilities,andmajorequipmentpurchases.Generalobligationbondsaredirectobligationsandpledgethefull

Purposes GovernmentalFunds EnterpriseFundsCustomerdeposit 230,604$ 330,259$Revenuebondscovenants - 607,425 Total 230,604$ 937,684$

GovernmentalAssets: ActivitiesMachineryandequipment 135,629$Less:Accumulateddepreciation (71,061) Total 64,568$

GovernmentalYearEndingDecember31 Activities2017 41,308 2018 36,111 2019 9,430

Total minimum leasepayments 86,849 Less:amountrepresentinginterest (9,919) Presentvalueofminimumleasepayments 76,930$



faithandcreditofthegovernment.Paymentsonvoterapprovedbonds(unlimited)arefundedfrompropertytaxlevies.Non-voterapprovedbonds(limited)havebeenfundedbyothersourcesofrevenuessuchassalestaxandtransfersin.Variable-ratedebtusedwastheeffectiveinterestrateasofDecember31,2016.

GeneralObligationBondsoutstandingasofDecember31,2016areasfollows:

Annualdebtservicerequirementstomaturityforgeneralobligationbondsareasfollows:

Description Balance2007LimitedTaxGeneralObligationBondsissueamountof$8,000,000;datedDecember20,2007;interestrateof3.75-5.00%withfinalmaturitydateofDecember1,2027.Issuedtoprovidefundsforphase2oftheRegionalAthleticComplexconstruction.PaymentsarefundedwiththesalesandusetaxleviedbytheCapitalAreaRegionalPublicFacilitiesDistrict,pursuanttoRCW82.14.390.Interestratesare5%in2016&2017;3.75-3.90%in2018-2021and4%in2022-2027.

$380,000

2010UnlimitedTaxGeneralObligationRefundingBondsissueamountof$3,790,000;datedDecember1,2010;interestratesof2.0-4.0%withmaturitydateofDecember1,2021.IssuedtoadvancerefundaportionoftheCity'soutstanding2002UTGOBondsmaturingonDecember1oftheyears2012through2021andtopaythecostsoftherefundingissuance.Interestratesare3%in2016-2017,3.25%in2018,and4%in2019-2021.

2,040,000

2012UnlimitedTaxGeneralObligationRefundingBondsissueamountof$2,945,000;datedDecember19,2012;interestratesof2.0-3.0%withmaturitydateofDecember1,2023.IssuedtoadvancerefundaportionoftheCity'soutstanding2003UTGOBondsmaturingonDecember1oftheyears2014through2023andtopaythecostsoftherefundingissuance.

2,055,000

2015UnlimitedTaxGeneralObligationRefundingBondsissueamountof$2,995,000;datedMay20,2015;interestratesof2.0-4.0%withmaturitydateofDecember1,2026.IssuedtoadvancerefundaportionoftheCity'soutstanding2006UTGOBondsmaturingonDecember1oftheyears2017-2026andtopaythecostsoftherefundingissuance.Interestratesare2%in2016-2017,3%in2018-2021and4%in2022-2027.

2,945,000

2015LimitedTaxGeneralObligationRefundingBondsissueamountof$4,770,000;datedMay20,2015;interestrateof2.0-4.0%withfinalmaturitydateofDecember1,2027.IssuedtoadvancerefundaportionoftheCity'soutstanding2007LTGOBondsmaturingonDecember1oftheyears2018-2027andtopaythecostsoftherefundingissuance.Interestratesare2%in2016-2017,3%in2018-2021and4%in2022-2027.

4,685,000

Total 12,105,000$

YearEndingDecember31 Principal Interest

2017 1,285,000$ 416,525$2018 1,320,000 373,125 2019 1,360,000 335,350 2020 1,410,000 293,350 2021 1,465,000 249,800

2022-2026 4,700,000 644,650 2027-2030 565,000 22,600

Total 12,105,000$ 2,335,400$

GeneralObligationBonds




RevenueBonds

Revenuebondsarebondswherethegovernmentpledgesincomederivedfromtheacquiredorconstructedassetstopaydebtservice.

TheCity issued$8,290,000ofWaterandSewerRevenueBonds inNovember2013.TheCitypledgestopayallof theGrossRevenueof theWaterworksUtility (thecombinedwater,sewerandStormwatersystemsoftheCity)intotheRevenueFundascollectedandmakepaymentsrequiredtobemadeintotheBondFundtopaythematuringprincipalandinterestandtherequireddebtservicereservesasdefinedinOrdinanceNo.1420.TheprincipalandinterestonthisBondarepayablesolelyoutoftheWaterDebtService,WastewaterDebtServiceandStormwaterDebtServiceFunds(collectively,the“BondFund”).Thebondcovenantsrequirethatineachcalendaryear,thenetrevenueoftheWaterworksUtilitywillequalatleast1.20timestheannualdebtserviceforsuchyearandalsorequireareserveaccounttosecurethepaymentoftheprincipalandinterestontheBonds.Thereserveaccountistobeanamountequaltothelesserofa)125%ofaverageannualdebtserviceonthebondsorb)maximumannualdebtserviceonthebonds.AreserveaccountonthebondshasbeenestablishedintheWaterDebtServicefund.Therequiredminimumdebtservicereserveis$607,425.

TheCityisincompliancewithallsignificantlimitationsandrestrictions.

RevenuebondoutstandingasofDecember31,2016isasfollows:

Annualdebtservicerequirementstomaturityfortherevenuebondareasfollows:

GovernmentLoans

GovernmentloansoutstandingasofDecember31,2016areasfollows:

Description Balance2013WaterandSewerRevenueBondsissueamountof$8,290,000;datedNovember19,2013;originalinterestratesof2.0%-4.5%withfinalmaturitydateofNovember1,2033.IssuetofinanceimprovementstotheWaterworksUtilityandtofundareserveaccountandpaythecostsofissuanceandsaleofthebonds.PaymentsarefundedbytherevenuesoftheWaterworksUtility.

$7,345,000

Total 7,345,000$


2017 330,000$ 272,725$2018 340,000 266,125 2019 350,000 255,925 2020 355,000 248,925 2021 365,000 238,275

2022-2026 2,020,000 1,007,3252027-2031 2,450,000 579,400 2032-2033 1,135,000 77,175

Total 7,345,000$ 2,945,875$

BondsBusiness-typeActivities

Revenue

Description BalanceWashingtonStateTreasurerLOCALProgramloanissuedamountof$1,122,033.27;datedMarch29,2012;interestrateof1.54231%;maturitydateJune1,2019.IssuedtoprovidefundingforSimulcast/NarrowbandRadioSystemacquisitionforTCOMM911.PaymentsarefundedbyTCOMM911byaninterlocalagreement.

$500,641

Total 500,641$



Annualdebtservicerequirementstomaturityforgovernmentloansareasfollows:

Legaldebtmargin

TheCityissubjecttoastatutorydebtlimitationthatis7.5percentofassessedvalueoftaxableproperty.OnDecember31,2016thestatutorydebtlimitationamountwas$368,970,301.AsofDecember31,2016thetotalnetoutstandingdebtapplicabletothislimitwas$13,731,040whichis3.6percentofthetotaldebtlimit.

Changesinlong-termliabilities

Thefollowingisasummaryofchangesinlong-termliabilitiesfortheyearendedDecember31,2016:

Internalservicefundspredominantlyservethegovernmentalfunds.Accordingly,long-termliabilitiesforthemareincludedinthetotalsforgovernmentalactivities.Forthegovernmentalfunds,long-termliabilitiesotherthandebt(i.e.compensatedabsencesandotherpostemploymentbenefits)aregenerallyliquidatedinthegeneralandothergovernmentalfunds.ThecompensatedabsencesforInternalservicefundsfor$48,906isincludedinthetotalforgovernmentalactivities.

Bonddiscountsandpremiums:

TheCityissuedrevenuebondsatpremiumin2013.TheCityalsohadissuedgeneralobligationbondsandrefundingbondsatpremiumin2007,2010,2012,and2015.Thesebondpremiumsaredeferredandareamortizedunderthestraight-linemethodoverthelifeofthebonds(7-20years).Theunamortizedamountsareincludedinthebondspayableandarereportedinthestatementsofnetposition.


2017 163,272$ 10,088$2018 166,571 6,790 2019 170,798 2,562 Total 500,641$ 19,440$

GovernmentLoansGovernmentalActivities

TypeofDebt

BeginningBalance1/1/2015 Additions

Reductions/Adjustments

EndingBalance

12/31/2016DueWithinOneYear

Governmental Activities:G.O.Bonds:G.O.Bonds,par 15,085,000$ -$ 2,980,000$ 12,105,000$ 1,285,000$Unamortizedbondspremiums 1,205,821 - 157,352 1,048,469 - TotalG.O.bondspayable: 16,290,821 - 3,137,352 13,153,469 1,285,000

Other:Revenuebonds-AnimalServices 72,656 - 72,656 - - WALOCALProgramloan 660,680 - 160,039 500,641 163,272 Capitalleasespayable 107,173 - 30,243 76,930 34,257

Netpensionliability 9,110,881 4,458,761 2,786,341 10,783,301 - NetOPEBobligation 1,850,191 525,349 146,743 2,228,797 - Compensatedabsences 1,140,221 1,178,546 1,119,356 1,199,411 590,288Totalother 12,941,802 6,162,656 4,315,378 14,789,080 787,817

Totalgovernmentalactivities 29,232,623$ 6,162,656$ 7,452,730$ 27,942,549$ 2,072,817$

Business-type Activities:

RevenueBonds,par 7,670,000$ -$ 325,000$ 7,345,000$ 330,000$Unamortizedbondspremiums 372,617 - 20,845 351,772 - Netpensionliability 2,865,549 1,392,856 889,849 3,368,556 - Compensatedabsences 200,333 270,533 254,057 216,809 112,899

TotalBusiness-typeactivities 11,108,499$ 1,663,389$ 1,489,751$ 11,282,137$ 442,899$

N:\CAFR\2016CAFR\2016FOOTNOTETABLES.xlsxLTDChg&sch 6/27/2017



Arbitrage:

TheCityreviewedtheapplicabilityofarbitrageregulationsonitsoutstandingtax-exemptbondsandisincompliancewiththoseregulations.

I. Fund Balances

AsofDecember31,2016,theCity’sgovernmentalfundsreportthefollowingfundbalances:Non-spendable:FundRestricted Purpose Authority AmountGeneralfund Non-spendable(prepaids) Non-spendableitem 2,911$ArterialStreetfund Non-spendable(prepaids) Non-spendableitem 750 L.I.D.Redemptionfund Long-terminterfundloanprincipal GASBNo.54 485,317

Total Non-spendable 488,978$ Restricted:FundRestricted Purpose Authority AmountGeneralfund Criminalbail RCW69.50.508 153,215$

Various Privatedonor 15,385 Subtotal for general fund 168,600

Nonmajor funds:LodgingTaxfund Tourism RCW67.28.180 985,100 Communitybockgrantfund HUDapprovedprojects CDBGGrant 20,771 Capitalequipmentfund Childcarecenterrepairs Privatecontract 113,945

PEGFees-publiceducation Privatecontract 89,775 Long-termloanreceivable(TCOMM911) GASBNo.54 348,753 Subtotal for capital equipment fund 552,473Subtotal for nonmajor funds 1,558,344Total Restricted 1,726,944$

Committed:FundCommitted Purpose Authority AmountGeneralfund Insurancedeductibles OrdinanceNo.1484 200,000$

Cityhallfacilitiesimprovements OrdinanceNo.1484 250,000 Futurepensioncontribution OrdinanceNo.1484 926,042 Gatewayproject OrdinanceNo.1484 6,000,000 Budgetpolicyimplementation OrdinanceNo.1484 2,000,000 Strategicinvestmentprogram OrdinanceNo.1484 2,560,000 Gamblingtaxreductiontransition OrdinanceNo.1484 87,500 Furniture&equipmentreplacement OrdinanceNo.1484 67,500 Communitybuildingrepair OrdinanceNo.1484 500,000 RACfieldreplacement(fund007) OrdinanceNo.1484 375,000 Subtotal for general fund 12,966,042

Nonmajor funds:Streetfund Transportationbuildingreplacement OrdinanceNo.1484 350,000

Transportationequipment&replacement OrdinanceNo.1484 400,000 Subtotal for street fund 750,000Seniorcenterrepairs/replacement OrdinanceNo.1484 82,010 Cityfacilityreplacement OrdinanceNo.1484 1,500,000 HistoricJacobSmithHouse OrdinanceNo.1484 266,816

Buildingimprovementfund Publicarts OrdinanceNo.1484 23,106 Cityfacilitiesplanprojects OrdinanceNo.1484 1,500,000 Subtotal for building improvement fund 3,371,932

Capitalequipmentfund Unscheduledequipmentreplacement OrdinanceNo.1484 500,000 Parkfacilities-replacement/repairs OrdinanceNo.1484 385,000 IMSfiber&telephonereplacement/repairs OrdinanceNo.1484 500,000 Securitycamerasinparks(fund302) OrdinanceNo.1484 150,000 RACfieldreplacement(fund302) OrdinanceNo.1484 750,000 Subtotal for capital equipment fund 2,285,000

Parksandopenspacefund Parkspropertyacquisitionpriority1 OrdinanceNo.1484 45,635 RACfieldreplacement(fund303) OrdinanceNo.1484 500,000 WoodlandtrailRCOgrantmatch OrdinanceNo.1484 64,116 Subtotal for parks and open space fund 609,751

RACCapitalfund Sportscomplexlifecyclereplacements OrdinanceNo.1484 350,000 Subtotal for RAC capital fund 350,000 Total for nonmajor funds: 7,366,683Total committed 20,332,725$



J. Employee Pension Plans

ThefollowingtablerepresentstheaggregatepensionamountsforallplanssubjecttotherequirementsoftheGASBStatement68,AccountingandFinancialReportingforPensionsfortheyear2016:

State Sponsored Pension Plans

Substantially all City’s full-time and qualifying part-time employees participate in one of the followingstatewideretirementsystemsadministeredbytheWashingtonStateDepartmentofRetirementSystems,undercost-sharing,multiple-employerpublicemployeedefinedbenefitanddefinedcontributionretirementplans.ThestateLegislatureestablishes,andamends,lawspertainingtothecreationandadministrationofallpublicretirementsystems.

TheDepartmentofRetirementSystems(DRS),adepartmentwithintheprimarygovernmentoftheStateofWashington, issuesapublicly available comprehensiveannual financial report (CAFR) that includesfinancial statements and required supplementary information for each plan. The DRSCAFRmay beobtainedbywritingto:

Assigned: *FundAssigned Purpose Authority AmountGeneralfund Parksreserve OrdinanceNo.1484 112,901$

Websiteupgrade/publicrecords OrdinanceNo.1484 300,000 Cityhallfacilitiesimprovements OrdinanceNo.1484 750,000 PropertyImprovement(5700Pacific) OrdinanceNo.1484 500,000 Depotproject(trailamenity) OrdinanceNo.1484 250,000 Parkspriority1 OrdinanceNo.1484 1,000,000 Seniorcenterparking OrdinanceNo.1484 750,000 RACdebtpayment OrdinanceNo.1484 600,000 GatewayLRFcommitment OrdinanceNo.1484 2,000,000 RACparkingexpansion OrdinanceNo.1484 1,250,000 State-sharedrevenuesreductions OrdinanceNo.1484 343,952 Limited-termemployeeprogram OrdinanceNo.1484 464,590 Criminaljusticefacility/equipment OrdinanceNo.1484 725,000 Subtotal for general fund 9,046,443

Arterialstreetfund Streetcapitalprojects 18,607,133 LIDRedemptionfund Debtservice 2,978,671 Nonmajor funds:Streetfund Streetmaintenance 1,100,455 Debtservicefund Debtservice 317,273 Buildingimprovementfund Capitalprojects 471,153 Capitalexpenditurefund Capitalacquisitions 1,061,253 Capitalexpenditurefund Debtservice(TCOMM911prepayment) OrdinanceNo.1484 159,847 Capitalexpenditurefund RACsyntheticfield OrdinanceNo.1484 500,000 Capitalexpenditurefund Phonesystemupgrade OrdinanceNo.1484 147,181 Capitalexpenditurefund Cellphone/mobiledevice(PRP) OrdinanceNo.1484 50,000 Capitalexpenditurefund Credit/purchasingcardimplementation OrdinanceNo.1484 15,000 Parksandopenspacefund Capitalprojects 1,170,525 Regionalathleticcomplexfund Capitalprojects 972,215

Subtotal for nonmajor funds 5,964,902Total 36,597,149$

*Nonrestrictedandnoncommittedfundbalancesofallgovernmentalfundsotherthangeneralfundarereportedasassignedfundbalancesforthespecificpurposesintendedforthosefunds.

Pensionassets 1,301,647$PensionLiabilities 14,151,857$Deferredoutflowsofresources 3,203,401$Deferredinflowsofresources 637,597$Pensionexpense/expenditures 1,464,061$

Aggregate Pension Amounts - All Plans



DepartmentofRetirementSystems CommunicationsUnit P.O.Box48380 Olympia,WA98540-8380

OrtheDRSCAFRmaybedownloadedfromtheDRSwebsiteatwww.drs.wa.gov.

Public Employees’ Retirement System (PERS)

PERS members include elected officials; state employees; employees of the Supreme, Appeals andSuperior Courts; employees of the legislature; employees of district and municipal courts; employeesof local governments; andhigher education employees not participating in higher education retirementprograms.PERSiscomprisedofthreeseparatepensionplansformembershippurposes.PERSplans1and2aredefinedbenefitplans,andPERSplan3isadefinedbenefitplanwithadefinedcontributioncomponent.

PERS Plan 1providesretirement,disabilityanddeathbenefits.Retirementbenefitsaredeterminedastwopercentofthemember’saveragefinalcompensation(AFC)timesthemember’syearsofservice.TheAFCistheaverageofthemember’s24highestconsecutiveservicemonths.Membersareeligibleforretirementfromactivestatusatanyagewithatleast30yearsofservice,atage55withatleast25yearsofservice,oratage60withatleastfiveyearsofservice.Membersretiringfromactivestatuspriortotheageof65mayreceiveactuariallyreducedbenefits.Retirementbenefitsareactuariallyreducedtoreflectthechoiceofasurvivorbenefit.Otherbenefitsincludedutyandnon-dutydisabilitypayments,anoptionalcost-of-livingadjustment(COLA),andaone-timeduty-relateddeathbenefit,iffoundeligiblebytheDepartmentofLaborandIndustries.PERS1memberswerevestedafterthecompletionoffiveyearsofeligibleservice.TheplanwasclosedtonewentrantsonSeptember30,1977.

Contributions

ThePERS Plan 1membercontributionrateisestablishedbyStatestatuteat6percent.TheemployercontributionrateisdevelopedbytheOfficeoftheStateActuaryandincludesanadministrativeexpensecomponent that is currently set at 0.18 percent. Each biennium, the state Pension Funding CounciladoptsPlan1employercontributionrates.ThePERSPlan1requiredcontributionrates(expressedasapercentageofcoveredpayroll)for2016wereasfollows:

PERS Plan 1Actual Contribution Rates: Employer Employee*PERSPlan1 6.23% 6.00%PERSPlan1UAAL 4.77% 6.00%AdministrativeFee 0.18%

Total: 11.18% 6.00%

PERS Plan 2/3providesretirement,disabilityanddeathbenefits.Retirementbenefitsaredeterminedastwopercentofthemember’saveragefinalcompensation(AFC)timesthemember’syearsofserviceforPlan2and1percentofAFCforPlan3.TheAFCistheaverageofthemember’s60highest-paidconsecu-tiveservicemonths.Thereisnocaponyearsofservicecredit.Membersareeligibleforretirementwithafullbenefitat65withatleastfiveyearsofservicecredit.Retirementbeforeage65isconsideredanearlyretirement.PERSPlan2/3memberswhohaveatleast20yearsofservicecreditandare55yearsofageorolder,areeligibleforearlyretirementwithabenefitthatisreducedbyafactorthatvariesaccordingtoageforeachyearbeforeage65.PERSPlan2/3memberswhohave30ormoreyearsofservicecreditandareatleast55yearsoldcanretireunderoneoftwoprovisions:

• Withabenefitthatisreducedbythreepercentforeachyearbeforeage65;or



• Withabenefitthathasasmaller(orno)reduction(dependingonage)thatimposesstricterreturn-to-workrules.

PERSPlan2/3membershiredonor afterMay1, 2013have theoption to retire early byacceptingareductionoffivepercentforeachyearofretirementbeforeage65.Thisoptionisavailableonlytothosewhoareage55orolderandhaveatleast30yearsofservicecredit.PERSPlan2/3retirementbenefitsarealsoactuariallyreducedtoreflectthechoiceofasurvivorbenefit.OtherPERSPlan2/3benefitsincludeduty and non-duty disability payments, a cost-of-living allowance (based on theCPI), capped at threepercentannuallyandaone-timedutyrelateddeathbenefit,iffoundeligiblebytheDepartmentofLaborandIndustries.PERS2membersarevestedaftercompletingfiveyearsofeligibleservice.Plan3membersarevestedinthedefinedbenefitportionoftheirplanaftertenyearsofservice;orafterfiveyearsofserviceif12monthsofthatserviceareearnedafterage44.

PERS Plan 3definedcontributionbenefitsare totallydependentonemployeecontributionsand invest-mentearningsonthosecontributions.PERSPlan3memberschoosetheircontributionrateuponjoiningmembershipandhaveachancetochangeratesuponchangingemployers. Asestablishedbystatute,Plan3requireddefinedcontributionratesaresetataminimumof5percentandescalateto15percentwithachoiceofsixoptions.Employersdonotcontributetothedefinedcontributionbenefits.PERSPlan3membersareimmediatelyvestedinthedefinedcontributionportionoftheirplan.

Contributions

ThePERS Plan 2/3employerandemployeecontributionratesaredevelopedbytheOfficeoftheStateActuarytofullyfundPlan2andthedefinedbenefitportionofPlan3.ThePlan2/3employerratesincludeacomponenttoaddressthePERSPlan1UAALandanadministrativeexpensethatiscurrentlysetat0.18percent.Eachbiennium,thestatePensionFundingCounciladoptsPlan2employerandemployeecontri-butionratesandPlan3contributionrates.ThePERSPlan2/3requiredcontributionrates(expressedasapercentageofcoveredpayroll)for2016wereasfollows:

PERS Plan 2/3Actual Contribution Rates: Employer 2/3 Employee 2PERSPlan2/3 6.23% 6.12%PERSPlan1UAAL 4.77%AdministrativeFee 0.18%EmployeePERSPlan3 varies

Total: 11.18% 6.12%

TheCity’sactualPERSplancontributionswere$5,958toPERSPlan1and$1,566,507toPERSPlan2/3fortheyearendedDecember31,2016.

LawEnforcementOfficers’andFireFighters’RetirementSystem(LEOFF)

LEOFFmembershipincludesallfull-time,fullycompensated,locallawenforcementcommissionedofficers,firefighters,andasofJuly24,2005,emergencymedicaltechnicians.LEOFFiscomprisedoftwoseparatedefinedbenefitplans.

LEOFF Plan 1providesretirement,disabilityanddeathbenefits.Retirementbenefitsaredeterminedperyearofservicecalculatedasapercentoffinalaveragesalary(FAS)asfollows:

• 20+yearsofservice–2.0%ofFAS• 10-19yearsofservice–1.5%ofFAS



• 5-9yearsofservice–1%ofFAS

TheFASisthebasicmonthlysalaryreceivedatthetimeofretirement,providedamemberhasheldthesamepositionorrankfor12monthsprecedingthedateofretirement.Otherwise,itistheaverageofthehighestconsecutive24months’salarywithinthelasttenyearsofservice.Membersareeligibleforretire-mentwithfiveyearsofserviceattheageof50.Otherbenefitsincludedutyandnon-dutydisabilitypay-ments,acost-oflivingadjustment(COLA),andaone-timeduty-relateddeathbenefit,iffoundeligiblebytheDepartmentofLaborandIndustries.LEOFF1memberswerevestedafterthecompletionoffiveyearsofeligibleservice.TheplanwasclosedtonewentrantsonSeptember30,1977.

Contributions

StartingonJuly1,2000,LEOFF Plan 1employersandemployeescontributezeropercent,aslongastheplanremainsfullyfunded.TheLEOFFPlanIhadnorequiredemployeroremployeecontributionsforfiscalyear2015.Employerspaidonlytheadministrativeexpenseof0.18percentofcoveredpayroll.

LEOFF Plan 2providesretirement,disabilityanddeathbenefits.Retirementbenefitsaredeterminedastwopercentofthefinalaveragesalary(FAS)peryearofservice(theFASisbasedonthehighestcon-secutive60months).Membersareeligibleforretirementwithafullbenefitat53withatleastfiveyearsofservicecredit.Memberswhoretirepriortotheageof53receivereducedbenefits.Ifthememberhasatleast20yearsofserviceandisage50,thereductionisthreepercentforeachyearpriortoage53.Oth-erwise,thebenefitsareactuariallyreducedforeachyearpriortoage53.LEOFF2retirementbenefitsarealsoactuariallyreducedtoreflectthechoiceofasurvivorbenefit.Otherbenefitsincludedutyandnon-dutydisabilitypayments,acost-of-livingallowance(basedontheCPI),cappedatthreepercentannuallyandaone-timeduty-relateddeathbenefit,iffoundeligiblebytheDepartmentofLaborandIndustries.LEOFF2membersarevestedafterthecompletionoffiveyearsofeligibleservice.

Contributions

TheLEOFF Plan 2employerandemployeecontributionratesaredevelopedbytheOfficeof theStateActuarytofullyfundPlan2.Theemployerrateincludedanadministrativeexpensecomponentsetat0.18percent.Plan2employersandemployeesarerequiredtopayattheleveladoptedbytheLEOFFPlan2RetirementBoard.TheLEOFFPlan2requiredcontributionrates(expressedasapercentageofcoveredpayroll)for2016wereasfollows:

LEOFF Plan 2Actual Contribution Rates: Employer EmployeeStateandlocalgovernments 5.05% 8.41%AdministrativeFee 0.18%

Total: 5.23% 8.41%PortsandUniversities 8.41% 8.41%AdministrativeFee 0.18%

Total: 8.59% 8.41%

TheCity’sactualcontributionstotheplanwere$296,089fortheyearendedDecember31,2016.

TheLegislature,bymeansofaspecialfundingarrangement,appropriatesmoneyfromthestateGeneralFundtosupplementthecurrentserviceliabilityandfundthepriorservicecostsofPlan2inaccordancewiththerecommendationsofthePensionFundingCouncilandtheLEOFFPlan2RetirementBoard.Thisspecialfundingsituationisnotmandatedbythestateconstitutionandcouldbechangedbystatute.ForthestatefiscalyearendingJune30,2016,thestatecontributed$60,375,158toLEOFFPlan2.TheamountrecognizedbytheCityasitsproportionateshareofthisamountis$179,193.



Actuarial Assumptions

Thetotalpensionliability(TPL)foreachoftheDRSplanswasdeterminedusingthemostrecentactuarialvaluationcompletedin2016withavaluationdateofJune30,2015.TheactuarialassumptionsusedinthevaluationwerebasedontheresultsoftheOfficeoftheStateActuary’s(OSA)2007-2012 Experience Study.

Additional assumptions for subsequent events and law changes are current as of the 2015 actuarialvaluationreport.TheTPLwascalculatedasofthevaluationdateandrolledforwardtothemeasurementdateofJune30,2016.PlanliabilitieswererolledforwardfromJune30,2015,toJune30,2016,reflectingeachplan’snormalcost(usingtheentry-agecostmethod),assumedinterestandactualbenefitpayments.

• Inflation:3%totaleconomicinflation;3.75%salaryinflation

• Salary increases:Inadditiontothebase3.75%salaryinflationassumption,salariesarealsoex-pectedtogrowbypromotionsandlongevity.

• Investment rate of return:7.5%

Mortality rateswere based on theRP-2000 report’s CombinedHealthyTable andCombinedDisabledTable,publishedbytheSocietyofActuaries.TheOSAappliedoffsetstothebasetableandrecognizedfutureimprovementsinmortalitybyprojectingthemortalityratesusing100percentScaleBB.Mortalityratesareappliedonagenerationalbasis;meaning,eachmemberisassumedtoreceiveadditionalmortal-ityimprovementsineachfutureyearthroughouthisorherlifetime.Therewereminorchangesinmethodsandassumptionssincethelastvaluation.

• Forallsystems,exceptLEOFFPlan2,theassumedvaluationinterestratewasloweredfrom7.8%to7.7%.Assumedadministrativefactorswereupdated.

• ValuationsoftwarewascorrectedonhowthenondutydisabilitybenefitsforLEOFFPlan2activemem-bersiscalculated.

• NewLEOFFPlan2benefitdefinitionswereaddedwithintheOSAvaluationsoftwaretomodellegisla-tionsingedintolawduringthe2015legislativesession.

Discount Rate

ThediscountrateusedtomeasurethetotalpensionliabilityforallDRSplanswas7.5percent.

Todeterminethatrate,anassetsufficiencytestincludedanassumed7.7percentlong-termdiscountratetodeterminefundingliabilitiesforcalculatingfuturecontributionraterequirements.(Allplansuse7.7percentexceptLEOFF2,whichhasassumed7.5percent).Consistentwiththelong-termexpectedrateofreturn,a7.5percentfutureinvestmentrateofreturnoninvestedassetswasassumedforthetest.Contributionsfromplanmembersandemployersareassumedtocontinuebeingmadeatcontractuallyrequiredrates(includingPERS2/3,PSERS2,SERS2/3,andTRS2/3employers,whoseratesincludeacomponentforthePERS1,andTRS1planliabilities).Basedontheseassumptions,thepensionplans’fiduciarynetposi-tionwasprojectedtobeavailabletomakeallprojectedfuturebenefitpaymentsofcurrentplanmembers.Therefore,thelong-termexpectedrateofreturnof7.5percentwasusedtodeterminethetotalliability.

Long-Term Expected Rate of Return

Thelong-termexpectedrateofreturnontheDRSpensionplaninvestmentsof7.5percentwasdeterminedusingabuilding-block-method.TheWashingtonStateInvestmentBoard(WSIB)usedabestestimateofexpectedfutureratesofreturn(expectedreturns,netofpensionplaninvestmentexpense,includinginfla-tion)todevelopeachmajorassetclass.ThoseexpectedreturnsmakeuponecomponentofWSIB’scapital



marketassumptions.TheWSIBusesthecapitalmarketassumptionsandtheirtargetassetallocationtosimulatefuture investmentreturnsatvariousfuturetimes.Thelong-termexpectedrateofreturnof7.5percentapproximatelyequalsthemedianofthesimulatedinvestmentreturnsovera50-yeartimehorizon.

Estimated Rates of Return by Asset Class

Bestestimatesofarithmeticrealratesofreturnforeachmajorassetclassincludedinthepensionplan’stargetassetallocationasofJune30,2016,aresummarizedinthetablebelow.Theinflationcomponentusedtocreatethetableis2.2percentandrepresentstheWSIB’smostrecentlong-termestimateofbroadeconomicinflation.

Asset Class Target Allocation% Long-Term Expect-ed Real Rate of Return

ArithmeticFixedIncome 20% 1.70%TangibleAssets 5% 4.40%RealEstate 15% 5.80%GlobalEquity 37% 6.60%PrivateEquity 23% 9.60%

100%

Sensitivity of Net Pension Liability/(Asset)

ThetablebelowpresentstheCity’sproportionateshare*ofthenetpensionliabilitycalculatedusingthediscountrateof7.5percent,aswellaswhattheCity’sproportionateshareofthenetpensionliabilitywouldbeifitwerecalculatedusingadiscountratethatis1-percentagepointlower(6.5percent)or1-percentagepointhigher(8.5percent)thanthecurrentrate.

Pension Plan Fiduciary Net Position

Detailed informationabouttheState’spensionplans’fiduciarynetposition isavailable intheseparatelyissuedDRSfinancialreport.

PensionLiabilities(Assets),PensionExpense,andDeferredOutflowsofResourcesandDeferredInflowsofResourcesRelatedtoPensions

At June 30, 2016, the City reported a total pension asset of $1,301,647 and net pension liability of$14,151,857foritsproportionateshareofthenetpensionliabilities(assets)asfollows:

Pension Plans1% Decrease

(6.5%)Current Discount

Rate (7.5%)* 1% Increase (8.5%)PERS1* 7,829,114$ 6,492,344$ 5,341,972$PERS2/3* 14,102,540$ 7,659,513$ (3,987,218)$LEOFF1 (152,457)$ (256,644)$ (345,701)$LEOFF2 2,930,477$ (1,045,003)$ (4,041,360)$*ExcludestheproportionateshareamountsforPERSPlansallocatedtoandreportedintheJointAnimalServiceandtheThurstonCountyNarcoticsTaskForce,whichwere$698,836and$54,512,respectively.

Employer's Net Pension Liability



TheamountoftheassetreportedaboveforLEOFFPlans1and2reflectsareductionforStatepensionsupport provided to theCity. Theamount recognizedby the city as its proportionate shareof thenetpensionasset,therelatedStatesupport,andthetotalportionofthenetpensionassetthatwasassociatedwiththeCitywereasfollows:

AtJune30,theCity’sproportionateshareofthecollectivenetpensionliabilitieswasasfollows:

Employer contribution transmittals received and processed by theDRS for the fiscal year ended June30areusedasthebasis fordeterminingeachemployer’sproportionateshareof thecollectivepensionamounts reportedby theDRS in theSchedules of Employer and Nonemployer Allocations forallplansexceptLEOFF1.

LEOFFPlan1allocationpercentagesarebasedonthetotalhistoricalemployercontributionstoLEOFF1from1971through2000andtheretirementbenefitpaymentsinfiscalyear2015.Historicaldatawasobtainedfroma2011studybytheOfficeoftheStateActuary(OSA).Infiscalyear2015,thestateofWash-ingtoncontributed87.12percentofLEOFF1employercontributionsandallotheremployerscontributedtheremaining12.88percentofemployercontributions.LEOFF1isfullyfundedandnofurtheremployercontributionshavebeenrequiredsinceJune2000.Iftheplanbecomesunderfunded,fundingofthere-mainingliabilitywillrequirenewlegislation.Theallocationmethodtheplanchosereflectstheprojectedlong-termcontributioneffortbasedonhistoricaldata.

Infiscalyear2016,thestateofWashingtoncontributed39.46percentofLEOFF2employercontributionspursuanttoRCW41.26.725andallotheremployerscontributedtheremaining60.54percentofemployercontributions.

Thecollectivenetpensionliability(asset)wasmeasuredasofJune30,2016,andtheactuarialvaluationdateonwhichthetotalpensionliability(asset)isbasedwasasofJune30,2015,withupdateproceduresusedtorollforwardthetotalpensionliabilitytothemeasurementdate.

Pension Plans Liability (or Asset)PERS1 6,492,344$PERS2/3 7,659,513$LEOFF1 (256,644)$LEOFF2 (1,045,003)$

Description AssetLEOFF2-Employer'sproportionateshare 1,045,003$LEOFF2-State'sproportionateshareofthenetpensionassetassociatedwiththeemployer 681,266 TOTAL 1,726,269$

ProportionateShare 6/30/2015

Proportionate Share6/30/2016*

Changes inProportion

PERS1* 0.123009% 0.120890% -0.002119%PERS2/3* 0.154363% 0.152128% -0.002235%LEOFF1 0.023373% 0.024910% 0.001537%LEOFF2 0.187222% 0.179668% -0.007554%*Excludestheproportionateshare%allocatedforPERSplanstoandreportedintheJointAnimalServicesandThurstonCountyNarcoticsTaskForce,whichwere0.013482%and0.001052%,respectively.



Thecollectivenetpensionliability(asset)wasmeasuredasofJune30,2015,andtheactuarialvaluationdateonwhichthetotalpensionliability(asset)isbasedwasasofJune30,2014,withupdateproceduresusedtorollforwardthetotalpensionliabilitytothemeasurementdate.

Pension Expense

FortheyearendedDecember31,2016,theCityrecognizedpensionexpenseasfollows:

DeferredOutflowsofResourcesandDeferredInflowsofResources

AtDecember31,2016,theCityreporteddeferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensionsfromthefollowingsources:

Pension Plans Pension ExpensePERS1 227,898$PERS2/3 913,189 LEOFF1 (48,591) LEOFF2 371,565TOTAL 1,464,061$

PERS Plan 1

DeferredOutflows of Resources

DeferredInflows of Resources

Differencebetweenexpectedandactualexperiences -$ -$Netdifferencebetweenprojectedandactualinvestmentearningsonpensionplaninvestments 163,467 - Changesofassumptions - - Changesinproportionanddifferencesbetweencontributionsandproportionateshareofcontributions - - Contributionssubsequenttothemeasurementdate 338,738 - TOTAL 502,205$ -$

PERS Plan 2/3



Differencebetweenexpectedandactualexperiences 407,864$ 252,853$Netdifferencebetweenprojectedandactualinvestmentearningsonpensionplaninvestments 937,303 - Changesofassumptions 79,167 - Changesinproportionanddifferencesbetweencontributionsandproportionateshareofcontributions - 384,744 Contributionssubsequenttothemeasurementdate 440,235 - TOTAL 1,864,569$ 637,597$

LEOFF Plan 1



Differencebetweenexpectedandactualexperiences -$ -$Netdifferencebetweenprojectedandactualinvestmentearningsonpensionplaninvestments 26,087 - Changesofassumptions - - Changesinproportionanddifferencesbetweencontributionsandproportionateshareofcontributions - - Contributionssubsequenttothemeasurementdate - - TOTAL 26,087$ -$



Atotalof$926,540reportedasdeferredoutflowsofresourcesrelatedtopensionsresultingfromtheCitycontributionssubsequenttothemeasurementdatewillberecognizedasareductionofthenetpensionliabilityintheyearendedDecember31,2017.Otheramountsreportedasdeferredoutflowsanddeferredinflowsofresourcesrelatedtopensionswillberecognizedinpensionexpenseasfollows:

K.Postemploymentbenefitsotherthanpensions(OPEB)

InadditiontothepensionbenefitsdescribedinNote3-J,theCityofLaceyprovidespostemploymenthealthcarebenefits.

1. LEOFF I Retiree Medical Plan

Plan Description. TheCity’sDisabilityBoard,inconjunctionwiththeCity’sHumanResourcesdepartment,administersasingle-employerdefinedbenefithealthcareplan(LEOFF1RetireeHealthPlan).Theplanprovides lifetimehealthcarebenefits forretiredfull-timeandfullycompensated lawenforcementofficerswhoestablishedmembershipintheLEOFF1planretirementsystemonorbeforeSeptember30,1977inaccordancewithWashingtonLawEnforcementOfficers’andFireFighters’RetirementSystem(LEOFF)Act(RCW41.26.150).ThelastemployerofaretiredLEOFF1memberisresponsibleforthefullcostofanypost-retirementmedicalbenefits.Theplancoversretireeswhoareretiredondisabilityaswellasareretiredafterreachingagerequirements.AsofDecember31,2016,theplanhasthirteen(13)retiredmembersandnoactivemembers.TheLEOFF1RetireeHealthPlandoesnotissueapublicallyavailablefinancialreport.

TheCityprovideshealthcoverage forLEOFF I retirees throughamedicalplanpurchased through theAssociationofWashingtonCities(AWC)EmployeesBenefitTrust.Uponreachingage65,theretireesareenrolledinMedicarePartBCoverage,withtheCityreimbursingtheseMedicarepremiums.Inaddition,theCitypaysorreimburseseligibleretiredLEOFF1policeofficersthenecessaryusualandcustomarymedicalexpenses,inexcessofthosecoveredbytheapplicableinsuranceplan.TheCityalsopurchasesalong-termcareinsuranceplanforeligibleLEOFFImembers.Dentalcostsanddependentsarenotcovered.

Funding policy. Thesemedicalbenefitsarefundedonapay-as-you-gobasisthroughthegeneralfundandpaidoutofpolicedepartmentbudget.Healthinsurancepremiumsandlong-termcareinsurancepremiums

LEOFF Plan 2



Differencebetweenexpectedandactualexperiences 143,194$ -$Netdifferencebetweenprojectedandactualinvestmentearningsonpensionplaninvestments 375,512 - Changesofassumptions 3,940 - Changesinproportionanddifferencesbetweencontributionsandproportionateshareofcontributions 140,325 - Contributionssubsequenttothemeasurementdate 147,567 - TOTAL 810,538$ -$

PERS 1 PERS 2/3 LEOFF 1 LOEFF 2 TotalYear2021 -$ -$ -$ 23,366$ 23,366$2020 93,838 439,817 14,276 245,100 793,031 2019 150,127 642,265 22,594 341,756 1,156,7422018 (40,249) (147,672) (5,391) 26,374 (166,938) 2017 (40,249) (147,672) (5,391) 26,374 (166,938) Total DeferredOutflows/(Inflows) 163,467$ 786,738$ 26,088$ 662,970$ 1,639,263$

Deferred Outflows (Inflows) of Resources



arepaidmonthly.Othermedicalservicesarepaidasbillingsarepresentedforreimbursement.TheCityreimbursed100percentoftheamountofvalidatedclaimsformedicalcostsincurredbytheseindividuals.Amountspaidfrom2014through2016bytheCityareasfollows:

Annual OPEB Cost and Net OPEB Obligation. TheCity’sOPEBcost (expense) iscalculatedbasedon theannual requiredcontribution (ARC)of theemployer.TheCityhaselected touse thealternativemeasurementmethodpermittedunderGASBstatementNo.45foremployersinplanswithfewerthanonehundredtotalplanmembers,utilizingtheinteractivetooldevelopedbytheOfficeoftheStateActuary(OSA)forusebylocalgovernments.TheARCrepresentsaleveloffundingthat,ifpaidonanongoingbasis,isprojectedtocovernormalcosteachyearandamortizeanyunfundedactuarialliabilities(orfundingexcess)overaperiodnottoexceedfifteenyears.

ThefollowingtableshowsthecomponentsoftheCity’sannualOPEBcostfortheyear,theamountactuallycontributedtotheplan,andchangesintheCity’snetOPEBobligationtotheLEOFF1RetireeHealthPlan.

TheCity’sannualOPEBcost,thepercentageofannualOPEBcostcontributedtotheplanandthenetOPEBobligationforfiscalyear2016andthetwoprecedingfiscalyearsareasfollows:

Description Year2016 Year2015 Year2014AWCmedicalinsurancepremiums 119,514$ 120,605$ 117,526$Reimbursementofothermedicalcosts 20,015 5,756 4,590 Long-termcareinsurancepremiums 7,214 18,798 18,475 Total 146,743$ 145,159$ 140,591$Numberofretirees 13 13 13 Averagecostperretiree 11,288$ 11,166$ 10,815$

Year2016UAALAmortization 617,749$Normalcost - TotalAnnualrequiredcontribution(ARC): 617,749 InterestonnetOPEBobligation 74,008 Adjustmenttoannualrequiredcontribution (166,408)

AnnualOPEBcost(expense) 525,349 Contributionsmade (146,743)

IncreaseinnetOPEBobligation 378,606 NetOPEBobligation-Beginningofyear 1,850,191 NetOPEBobligation-Endofyear 2,228,797$

Annual OPEB Cost

PercentageAnnual ofAnnual

Fiscalyear Annual OPEBCost OPEBCost NetOPEBEnded OPEBCost Contributed Contributed Obligation

12/31/2016 525,349$ 146,743$ 28% 2,228,797$12/31/2015 524,808 145,159 28% 1,850,19112/31/2014 447,690 140,591 31% 1,470,542



Funding Status and Funding Progress.AsofDecember31,2016,theactuarialaccruedliability(AAL)forbenefitswas$6,868,370allofwhichwasunfunded.Thecoveredpayroll(totalannualamountforactiveLEOFFPlan1member)was$0,astherewerenoactivemember,andtheratiooftheunfundedactuarialaccruedliabilitytothecoveredpayrollwas0percent.

Theprojectionoffuturebenefitpaymentsofanongoingplaninvolvesestimatesofthevalueofreportedamountsandassumptionsabouttheprobabilityofoccurrenceofeventsfarintothefuture.Examplesincludeassumptionsaboutfutureemployment,mortality,andthehealthcarecosttrend.Amountsdeter-minedregardingthefundedstatusoftheplanandtheannualrequiredcontributionsoftheemployeraresubjecttocontinualrevisionasactualresultsarecomparedwithpastexpectationsandnewestimatesaremadeaboutthefuture.Thescheduleoffundingprogress,presentedasrequired,presentsmulti-yeartrendinformationaboutwhethertheactuarialvalueofplanassetsisincreasingordecreasingovertimerelativetotheactuarialaccruedliabilitiesforbenefits.

Actuarial Methods and Assumptions.Projectionsofbenefitsforfinancialreportingpurposesarebasedonsubstantiveplan(theplanasunderstoodbytheemployerandplanmembers)andincludethetypesofbenefitsprovidedatthetimeofeachvaluationandthehistoricalpatternofsharingofbenefitcostsbetweentheemployerandplanmemberstothatpoint.Themethodsandassumptionsusedincludetechniquesthataredesignedtoreducetheeffectsofshort-termvolatility inactuarialaccruedliabilitiesandtheactuarialvalueofassets,consistentwiththelong-termperspectiveofthecalculations.

Asingleretirementageof55.3wasassumedforallremainingactivemembersforthepurposeofdetermin-ingtheactuarialaccruedliability(AAL)andnormalcost.Retirement,disablement,terminationandmortalityrateswereassumedtofollowtheLEOFF1ratesusedintheJune30,2014actuarialvaluationreportissuedbythebytheOfficeoftheStateActuary(OSA).HealthcarecostsandtrendsweredeterminedbyMillimanandusedbyOSAinthestate-wideLEOFF1medicalstudyperformedin2013.Theresultswerebasedongroupeddatawithfouractivegroupingsandfourinactivegroupings.TheactuarialcostmethodusedtodeterminetheactuarialaccruedliabilitywasProjectedUnitCredit.TheAALandNOOareamortizedonanopenbasisasaleveldollarover15years.Theseassumptionsareindividuallyandcollectivelyreasonableforthepurposesofthisvaluation.

Theexpectedmedical inflationtrendassumption,withthefederalexcisetax,formembersoverage65,startsat6.2percentin2014,peaksto12.9percentin2017anddecreasestoanultimaterateof4.6percentin2089.Comparatively,themedicalinflationtrendassumption,formembersunderage65,startsat6.2per-centin2014,peaksto24.7percentin2017,anddecreasestoanultimaterateof6.2percentin2018.Theexpectedlong-termcareinflationtrendis4.75percentforallyears.Investmentreturnassumption(discountrate)usedwas4.0percent.Thegeneralinflationratewasassumedat3.0percent.

2. Association of Washington Cities Employee Benefit Trust Health Care Program (AWC Trust HCP) –Non-LEOFF I and Non-Medicare Advantage Retiree Medical Plan

Trust Description. TheCityofLacey isamemberof theAssociationofWashingtonCitiesEmployeeBenefitTrustHealthCareProgram(AWCTrustHCP).Chapter48.62RCWprovidesthattwoormorelocalgovernmententitiesmay,byInterlocalagreementunderChapter39.34RCW,formtogetherorjoinapoolororganizationforthejointpurchasingofinsurance,and/orjointself-insurance,tothesameextentthattheymayindividuallypurchaseinsurance,orself-insure.

AnagreementtoformapoolingarrangementwasmadepursuanttotheprovisionsofChapter39.34RCW,theInterlocalCooperationAct.TheAWCTrustHCPwasformedonJanuary1,2014whenparticipatingcities,towns,andnon-cityentitiesoftheAWCEmployeeBenefitTrustintheStateofWashingtonjoinedtogetherbysigninganInterlocalGovernmentalAgreementtojointlyself-insurecertainhealthbenefitplansandprograms for participatingemployees, their covereddependents andother beneficiaries throughadesignatedaccountwithintheTrust.



AsofDecember31,2016,258cities/towns/non-cityentitiesparticipateintheAWCTrustHCP.

TheAWCTrustHCPallowsmemberstoestablishaprogramofjointinsuranceandprovideshealthandwelfareservicestoallparticipatingmembers.TheAWCTrustHCPpoolsclaimswithoutregardtoindividualmemberexperience.Thepoolisactuariallyratedeachyearwiththeassumptionofprojectedclaimsrun-outforallcurrentmembers.TheAWCTrustHCPincludesmedicalinsurancethroughGroupHealth,RegenceBlueShieldandAsurisNorthwestHealth,dentalinsurancethroughDeltaDentalofWashington,andvisioninsurancethroughVisionServicePlan.EligiblemembersarecitiesandtownswithinthestateofWashing-ton.Non-CityEntities(publicagency,publiccorporation,intergovernmentalagency,orpoliticalsubdivisionwithinthestateofWashington)areeligibletoapplyforcoverageintotheAWCTrustHCP,submittingap-plicationtotheBoardofTrusteesforreviewasrequiredintheTrustAgreement.

Funding policy. ParticipatingemployerspaymonthlypremiumstotheAWCTrustHCP.TheAWCTrustHCPisresponsibleforpaymentofallcoveredclaims.TheAWCTrustHCPpurchasesstoplossinsuranceforRegence/Asurisplansatan IndividualStopLoss (ISL)of$1.5million throughLifeMap,andGroupHealthISLat$750,000throughSunLife.Theaggregatepolicyisfor200%ofexpectedmedicalclaims.

RetireesoftheCityreceivingmedicalbenefitsfromtheTrustcontributethefollowingmonthlyamounts:

Participatingemployerscontract toremain in theAWCHCPforaminimumof threeyears.Participatingemployerswithover250employeesmustprovidewrittennoticeofterminationofallcoverageaminimumof12monthsinadvanceoftheterminationdate,andparticipatingemployerswithunder250employeesmustprovidewrittennoticeofterminationofallcoverageaminimumof6monthsinadvanceofterminationdate.Whenallcoverageisbeingterminated,terminationwillonlyoccuronDecember31.Participatingemploy-ersterminatingagrouporlineofcoveragemustnotifytheHCPaminimumof60dayspriortotermination.Aparticipatingemployer’sterminationwillnotobligatethatmembertopastdebts,orfurthercontributionstotheHCP.Similarly,theterminatingmemberforfeitsallrightsandinteresttotheHCPAccount.

TheoperationsoftheHealthCareProgramaremanagedbytheBoardofTrusteesoritsdelegates.TheBoardofTrusteesiscomprisedoffourregionallyelectedofficialsfromTrustmembercitiesortowns,theEmployeeBenefitAdvisoryCommitteeChairandViceChair,andtwoappointedindividualsfromtheAWCBoardofDirectors,whoarefromTrustmembercitiesortowns.TheTrusteesoritsappointeddelegatesre-viewandanalyzeHealthCareProgramrelatedmattersandmakeoperationaldecisionsregardingpremiumcontributions,reserves,planoptionsandbenefitsincompliancewithChapter48.62RCW.

TheBoardofTrusteeshasdecisionauthorityconsistentwiththeTrustAgreement,HealthCareProgrampolicies,Chapter48.62RCWandChapter200-110-WAC.

TheaccountingrecordsoftheTrustHCParemaintainedinaccordancewithmethodsprescribedbytheStateAuditor’sofficeundertheauthorityofChapter43.09RCW.TheTrustHCPalsofollowsapplicableaccountingstandardsestablishedbytheGovernmentalAccountingStandardsBoard(“GASB”).Year-endfinancialreportingisdoneonanaccrualbasisandsubmittedtotheOfficeoftheStateAuditorasrequiredbyChapter200-110WAC.TheauditreportfortheAWCTrustHCPisavailablefromtheWashingtonStateAuditor’soffice.

HealthFirst® - 1000 Retiree$734.37 Non-MedicareEnrolledRetiree$740.78 Non-MedicareEnrolledSpouse

HealthFirst® - 2500 Retiree$641.21 Non-MedicareEnrolledRetiree$645.87 Non-MedicareEnrolledSpouse



L.Contingencies

Litigation

TheCityhasapendinglawsuitinvolvingapublicrecordsactattheendof2016.ItistheopinionoftheCity’slegalteamthatitisnotprobablethattheCitywouldpayasettlement.TheCityreportsinitsfinancialstatementsallmaterialliabilities,includinganestimateforsituationswhicharenotyetresolvedbutwhere,basedonavailableinformation,managementbelievesitisprobablethattheCitywillhavetomakepayment.Intheopinionofmanagement,theCity’sinsurancepoliciesand/orself-insurancereservesareadequatetopayallknownorpendingclaims.

Contingenciesundergrantprovisions

TheCityparticipatesinanumberoffederalandstateassistedprograms.Thesegrantsaresubjecttoauditbythegrantorsoftheirrepresentatives.Suchauditscouldresultinrequestsforreimbursementtograntingagenciesforexpendituresdisallowedunderthetermsofthegrants.TheCity’smanagementbelievesthatsuchdisallowances,ifany,willbeimmaterial.

M. Risk management

TheCityofLaceyisamemberoftheWashingtonCitiesInsuranceAuthority(WCIA).

UtilizingChapter48.62RCW(self-insuranceregulation)andChapter39.34RCW(InterlocalCooperationAct),ninecitiesoriginallyformedWCIAonJanuary1,1981.WCIAwascreatedforthepurposeofprovidingapoolingmechanismforjointlypurchasinginsurance,jointlyself-insuring,and/orjointlycontractingforriskmanagementservices.WCIAhasatotalof168Members.

Newmembersinitiallycontractforathree-yearterm,andthereafterautomaticallyrenewonanannualbasis.Aone-yearwithdrawalnoticeisrequiredbeforemembershipcanbeterminated.Terminationdoesnotrelieveaformermemberfromitsunresolvedlosshistoryincurredduringmembership.

Liabilitycoverageiswrittenonanoccurrencebasis,withoutdeductibles.Coverageincludesgeneral,auto-mobile,police,errorsoromissions,stopgap,employmentpracticesandemployeebenefitsliability.Limitsare$4millionperoccurrenceintheself-insuredlayer,and$16millioninlimitsabovetheself-insuredlayerisprovidedbyreinsurance.Totallimitsare$20millionperoccurrencesubjecttoaggregatesandsublimits.TheBoardofDirectorsdeterminesthelimitsandtermsofcoverageannually.

Insuranceforproperty,automobilephysicaldamage,fidelity,inlandmarine,andboilerandmachinerycover-agearepurchasedonagroupbasis.Variousdeductiblesapplybytypeofcoverage.Propertycoverageisself-fundedfromthemembers’deductibleto$750,000,forallperilsotherthanfloodandearthquake,andinsuredabovethatto$300millionperoccurrencesubjecttoaggregatesandsublimits.Automobilephysicaldamagecoverageisself-fundedfromthemembers’deductibleto$250,000andinsuredabovethatto$100millionperoccurrencesubjecttoaggregatesandsublimits.

In-houseservicesincluderiskmanagementconsultation,losscontrolfieldservices,andclaimsandlitigationadministration.WCIAcontractsforcertainclaimsinvestigations,consultantsforpersonnelandlanduseissues,insurancebrokerage,actuarial,andlobbyistservices.

WCIAisfullyfundedbyitsmembers,whomakeannualassessmentsonaprospectivelyratedbasis,asdeterminedbyanoutside,independentactuary.Theassessmentcoversloss,lossadjustment,andadminis-trativeexpenses.Asoutlinedintheinterlocal,WCIAretainstherighttoadditionallyassessthemembershipforanyfundingshortfall.



Aninvestmentcommittee,usinginvestmentbrokers,producesadditionalrevenuebyinvestmentofWCIA’sassetsinfinancialinstrumentswhichcomplywithallStateguidelines. ABoardofDirectorsgovernsWCIA,whichiscomprisedofonedesignatedrepresentativefromeachmember.TheBoardelectsanExecutiveCommitteeandappointsaTreasurertoprovidegeneralpolicydirectionfortheorganization.TheWCIAExecutiveDirectorreportstotheExecutiveCommitteeandisresponsibleforconductingthedaytodayoperationsofWCIA.

Therewerenosignificantchangesininsurancecoveragefromthepreviousyear.Thesettlementshavenotexceededcoverageforeachofthepastthreefiscalyears.

N. Interlocal agreements and joint ventures

Capital Area Regional Public Facilities District (CARPFD).

In2003,theCityofLaceyenteredintoacontractwiththeCapitalAreaRegionalPublicFacilitiesDistrict(CARPFD)fortheacquisition,development,operationandmaintenanceoftheLaceyAreaAthletic,Recre-ationandSpecialEventsComplex.TheCARPFDimposesasalesandusetaxpursuanttoRCW82.14.390torepayfinancingobtainedtofundthedesign,construction,acquisition,operationandmaintenanceofthecomplexproject.ThemoniescollectedassalestaxesshallonlybeusedforthepurposespermittedunderRCW82.14.390andRCW35.57.020.In2016,theCityofLaceyreceived$1,165,466insalestaxesleviedbytheCARPFDandisaccountedforwithintheRegionalAthleticComplexOperatingFundandRegionalAthleticComplexCapitalFund.

Interlocal Drug Unit

TheThurstonNarcoticsTaskForce(InterlocalDrugUnit)wascreatedasaresultofaninterlocalagreementbetweenThurstonCounty,theCityofOlympia,theCityofLacey,theCityofTumwater,andtheWashingtonStatePatrol.InterlocalDrugUnitoperatesasajointventureandresponsibleforcontrollingillegaldrugtraf-fickinginThurstonCounty,investigatingviolationsoftheUniformControlledSubstanceAct,andprovidingtrainingandassistancetoninelocallawenforcementagenciesinThurstonCounty.TheInterlocalDrugUnitisfundedbygrantsandseizuresofdrugfunds.

Totalnetposition,asofDecember31,2016was$691,187.AnypartymaywithdrawfromthisAgreementbygivingninety(90)dayswrittennoticetotheotherparties.Moniescontributedduringthecalendaryearofaparty’swithdrawswillbereturnedtothatparty,onaproratebasis,afterdeterminationbytheExecutiveCommitteeofanypurchasecommitmentsmadepriortothenotificationofaparty’swithdrawal.Moneysorefundedwillbeusedbythewithdrawingpartyforitsuseincarryingoutdrugenforcementactivitiespursu-anttoCh.69.50RCW.Propertypurchasedwiththedrugunitfundsorforfeitedtothedrugunitwillremainthepropertyofthenon-withdrawingpartiesandthewithdrawingpartywillhavenointerestinorclaimoftitletosaidproperty.Allmoniesandequipmentremainwiththedrugunituntilthedrugunitdisbandsentirely.Dispositionanddisbursementofnetequityupondissolutionisnotspecifiedintheagreement,therefore,isnotrecordedintheCityofLacey’sfinancialstatements.Thereisnoongoingfinancialresponsibility.

CompletedfinancialstatementscanbeobtainedfromtheCityofLaceyFinanceDepartment,420CollegeStreetSE,Lacey,WA98503.

Joint Animal Services

ThurstonCountyJointAnimalServicesisajointventureprovidingservicestoLacey,Olympia,Tumwater,andThurstonCounty.Servicesincludelicensing,education,complaint,investigation,andenforcement.Ashelterisalsooperatedtoholdimpoundedorlostanimals,and/oradoptableanimalsplacedwiththeshelter.



ItisgovernedbytheJointAnimalServicesCommissioncomprisedofmembersfromtheCityofLacey,theCityofOlympia,theCityofTumwater,theSouthPugetSoundVeterinaryMedicalAssociation,ThurstonCountyandtheThurstonCountyHumaneSociety.

Anequityinterestexistsandisbasedontotalcontributionsto-datebythecitiesofLacey,Olympia,Tumwater,andtheThurstonCounty.Thenetposition,asofDecember31,2016was$3,390,658.TheCityofLaceyhasa17.37percent(or$588,957)shareoftheequityasofDecember31,2016.TheCityofLaceyreportsitsshareofequityinterestasinvestmentinjointventure,inthegovernment-widestatementofnetposition.

AnongoingfinancialinterestexistsfortheCityofLacey,theCityofOlympia,theCityofTumwater,andThurstonCountyforloanproceedsborrowedforthepurposeofpurchasing/constructingtheMartinWayanimalshelter.Theagreementspecifiesthefundingformulathatallocatescostsbasedonservicedanimalcasesandpopulationperjurisdictionintheprioryear.For2016theCityofLacey’scontributionforthean-nualagreementwas$248,700andisaccountedforwithinthegeneralfund.

CompletedFinancialStatementscanbeobtainedfromtheCityofLaceyFinanceDepartment,420CollegeStreetSE,Lacey,WA98503.

Law Enforcement Records Management System (LERMS)

TheLawEnforcementRecordsManagementSystem(LERMS)isajointventureprovidingaccurateandtimelycriminaljusticedatasharingtothecitiesofLacey,Olympia,Tenino,Tumwater,andYelm.Thegoalofthisjointventureistosharepublicsafetyinformation,increaseoperationalefficiencyviaareductionindataentry,andeasetheprocessofaccessinginformation.Thesegoalswillimproveofficerandcitizensafety,facilitatecoordinationandinformationsharingtobothinternalandexternalagencies,andimprovedataqualityand timelinessofdataaccessibility. It isgoverned throughan interlocalagreementby theLERMSConsortium,whichisa5memberboardcomposedofeachcity’sChiefofPolice(ortheirdesignee).

AnequityinterestexistsforthecitiesofLacey,Olympia,Tenino,Tumwater,andYelm.NetpositionasofDecember31,2016,was$75,776.AsofDecember31,2016,theCityofLaceyhasa38percentshare(or$28,795)oftheequity.TheCityofLaceyreportsitsshareofequityinterestasaninvestmentinjointventure,inthegovernment-widestatementofnetposition.

Anongoingfinancial interestexists for thecitiesofLacey,Olympia,Tenino,Tumwater,andYelm.Theagreement specifies a funding formula that annually assessesmember cities based on current yearpopulationasdeterminedbytheThurstonRegionalPlanningCouncil(unlessotherwiseadjustedbytheConsortium).For2016,theCityofLacey’scontributed$142,219asitsshareoftheannualassessment.Allpropertyisconsideredtobejointlyowned.PartieswillbereimbursedbasedontheircontributionuponsaleofpropertyuponthedissolutionofLERMS.Anymembermaywithdrawfromtheagreementattheendofanycalendaryear,providinganoticetotheConsortiumnolessthansixmonthspriortothedateofwithdrawal.Withdrawalofapartywillnotterminatetheagreementoftheremainingparties.

The City of Olympia accounts for the joint venture in a separate agency fund. Completed FinancialStatementscanbeobtainedfromtheCityofOlympiaAdministrativeServicesDepartment,POBox1967,Olympia,WA98507.

ThefollowingiscondensedfinancialinformationonjointventuresforwhichtheCityhasequityinterestasofDecember31,2016:



TheCityofLacey’sequityinterestsinjointventuresfortheyearendedDecember31,2016wereasfollows:

LOTT Clean Water Alliance (“LOTT”)

ThecitiescitiesofLacey,OlympiaandTumwaterandThurstonCountyarepartners intheLOTTCleanWaterAlliance through the LOTT Interlocal CooperationActAgreement forWastewater Management,which governs the operations of LOTTWastewater Treatment Facilities. Each of theAlliance partnerspaysforitsrespectiveshareofmaintenanceandoperatingexpensesofthewastewatertreatmentsystem(the“TreatmentSystem”),includingdebtserviceassociatedwithrevenuebondsissuedtofinancecapitalimprovementsoftheTreatmentSystem. Substantially all the LOTT’s revenues come fromwastewater service charges and connection charges(CapacityDevelopmentCharge)collectedbythecitiesofLacey,OlympiaandTumwaterandremittedtotheLOTT.EachLOTTpartner’spro-ratashareofthechargesisbasedonitsnumberofequivalentresidentialunits(“ERUs”)thatarecontributedtotheTreatmentSystem.TheCity’sLOTTchargesareaccountedforasaCitycostofmaintenanceandoperationoftheSewerSystem.TheCitypassesthesechargesthroughtousersoftheSewerSystem.

LOTT isgovernedbya long-rangeplan toaddress the region’schangingwastewaterneeds.Alsoasaresultof the long-rangeplanningprocess,LOTTbegana transition fromapaperworkpartnership toanorganization.In2000,LOTTwasincorporatedasapublicnon-profitorganization,formedundertheState’sInterlocalCooperationAct.

LOTTownsandoperatesphysicalfacilitiesinallfourpartnerjurisdictions.ThesefacilitiesincludetheBuddInletTreatmentPlant,BuddInletReclaimedWaterPlant,MartinWayReclaimedWaterPlant,HawksPrairieRechargeBasins,severalpumpstations,andabout23milesofmainsewerinterceptorpipelines.

JointAnimalServices

LawEnforcementRegionalRecordManagement

System12/31/2016 12/31/2016

TotalAssets 4,112,851$ 75,776$TotalDeferredOutflowsofResources: 116,873 - TotalLiabilities 807,581 - TotalDeferredinflowsofResources: 31,485 - TotalNetPosition12/31/2016 3,390,658$ 75,776$

TotalRevenues 1,745,344$ 387,912$TotalExpenses 1,749,776 389,177 Netincrease(decrease)innetposition (4,432) (1,265) Netposition-beginning 3,395,090 77,041

Endingnetposition12/31 3,390,658$ 75,776$CityofLaceyEquity% 17.37% 38.00%CityofLaceyEquityInterest 588,957$ 28,795$

Beginning EndingBalance Balance

GovernmentalTypeActivities 1/1/2016 Increase Decrease 12/31/2016JointAnimalServices 585,314$ 3,643$ -$ 588,957$LawEnforcementRegionalRecordManagementSystem(LERMS) 29,276 481 28,795 TotalInvestmentinJointVenture 614,590$ 3,643$ 481$ 617,752$



AsofDecember31,2016,theCityhadshort-termpayablesof$2,072,959whichwaspaidinearly2017.

Thurston County Regional Health and Human Services Council

TheThurstonCountyRegionalHealthandHumanServicesCouncil(the“Council”) isajointly-governedorganizationgovernedbyoneelectiveofficialfromeachparticipatingjurisdiction.ThisCouncilwasformedbyaninterlocalagreementbetweenThurstonCountyandthecitiesofLacey,OlympiaandTumwater,toworktogetherandjoinresourcesnecessarytoaddresscommongapsinmeetingbasichealthandhumanservicesneedswithinthisregion.TheCityofLaceycontributed$40,649asitsshareofannualoperationsin2015.Theannualfundingcontributionfromeachjurisdictionisbasedonthegeneralsalesandusetaxcollected.ThurstonCountyprovidesadministrativestaffingfortheCouncil.

O. Subsequent Events

Revenue Bonds Issue

OnMarch17,2017,theCityissuedaWaterandSewerRevenueBond,Series2017(UtilityLocalImprovementDistrictNo.24)intheamountof$1,294,000toprovidefundstopaythecostofsewerimprovementstotheWaterworksUtility(thecombinedwater,sewerandstromwatersystems)oftheCity,tofundtheReserveAccountandpaycostsofissuancepursuanttoOrdinanceNo.1504(the“BondOrdinance”).Theprincipalofand interestonthisBondarepayablesolelyoutof thesubaccountof theCity’sWaterDebtService,WastewaterDebtServiceandStormwaterDebtServiceFunds(collectively,the“BondFund”).Theinterestratesare from2.56% to2.74%with the firstdebtpaymentpayableonFebruary1,2018,andannuallythereafteronthefirstdaysofeachFebruaryuntilthematuritydateofFebruary1,2032.

Transportation Benefit District

OnJanuary28,2016theCityofLaceyadoptedOrdinanceNo.1485creating theLaceyTransportationBenefitDistrictpursuant(TBD)toRCW35.21.225and36.73RCWandadoptedanewChapter12.40totheLaceyMunicipalCode.OnFebruary11,2016,theCityCouncilpassedOrdinanceNo.1486establishingtheCity’sassumptionoftherights,powers,functionsandobligationsoftheLaceyTBD,andtheLaceyTBDwasdissolvedasaseparatelegalentity.InFebruary2017,theCityreceivedvoters’approvalfora0.2%salesandusetax,effectiveJuly1,2017fortheperiodoftenyears.Thisnewsalesandusetaxesrevenueswillbeusedfornecessarytransportationprojectsthatmayalleviatecongestionandpreserveandmaintainexistingtransportationinfrastructureandwillbereportedasatransportationimprovementcapitalprojectfundin2017.Therewerenofundingorfinancialactivitiesin2016.

Bonds Rating Upgrade

OnFebruary15,2017,Moody’sInvestorsServiceupgradeditslong-termunderlyingratingontheLimitedtaxgeneralobligation(“LTGO”)debtoftheCityofLacey,Washington(the“City)).TheupgradewasdonepursuanttoMoody’spublicationofanewmethodologyforthesector.Asaresultofthisratingaction,theCity’sLTGOratingwasupgradedfrom“Aa3”to“Aa2”.



Required Supplementary Information 5-1


REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A



Variance withActual Final Budget

Original Final GAAP Basis Positive (Negative)REVENUES

Taxes 24,217,804$ 24,217,804$ 26,680,287$ 2,462,483$ Licenses and permits 1,701,700 1,701,700$ 2,824,458 1,122,758 Intergovernmental revenues 1,184,345 1,189,345$ 1,574,749 385,404 Charges for services 6,426,444 6,576,444$ 6,851,702 275,258 Fines and forfeitures 525,000 525,000$ 306,335 (218,665) Other revenues 428,450 428,450$ 527,951 99,501

Total revenues 34,483,743 34,638,743 38,765,482 4,126,739

EXPENDITURESCurrent:

General government 6,609,830 6,715,130 5,836,322 878,808 Security of persons and property 11,858,141 12,036,143 11,327,437 708,706 Physical environment 4,623,219 4,623,219 4,432,746 190,473 Economic environment 1,479,518 1,489,518 1,461,370 28,148 Mental and physical health 8,360 8,360 12,362 (4,002) Culture and recreation 6,923,362 6,964,623 6,480,852 483,771

Debt service:Principal retirement - - 30,244 (30,244) (1)Interest - - 11,064 (11,064) (1)

Total expenditures 31,502,430 31,836,993 29,592,397 2,244,596

Excess (deficiency) of revenueover (under) expenditures 2,981,313 2,801,750 9,173,085 6,371,335

OTHER FINANCING SOURCES (USES)Transfers in 1,907,964 1,909,798 1,902,798 (7,000) Transfers out (3,941,037) (5,426,037) (5,426,037) -

Total other financing sources (2,033,073) (3,516,239) (3,523,239) (7,000)

Net change in fund balances 948,240 (714,489) 5,649,846 6,364,335

Fund balance - beginning 903,586 2,566,315 29,713,838 27,147,523

Fund balance - ending 1,851,826$ 1,851,826$ 35,363,684$ 33,511,858$

Explanation of differences:(1) Certain equipment lease payments are budgeted as current expenditures but are reported as debt service for GAAP

See accompanying notes to the required supplemental information.

Schedule of Revenues, Expenditures, andChanges in Fund Balances - Budget to Actual

General FundFor the Year Ended December 31, 2016

Budgeted Amounts



2015(1) 2016 (1)(3)

Employer's proportion of the net pension liability 0.123755% 0.120890%Employer's proportionate share of the net pension liability $ 6,473,532 6,492,344$Employer's covered employee payroll $ 13,876,617 14,218,880$Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 46.65% 45.66%Plan fiduciary net position as a percentage of the total pension liability (2) 59.10% 57.03%

Public Employees' Retirement System Plan 1 (PERS 1)

2015(1) 2016 (1)(3)

Employer's proportion of the net pension liability 0.154291% 0.152128%Employer's proportionate share of the net pension liability $ 5,502,898 7,659,513$Employer's covered employee payroll $ 13,759,392 14,145,039$Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 39.99% 54.15%Plan fiduciary net position as a percentage of the total pension liability (2) 89.20% 85.82%

Public Employees' Retirement System Plan 2 and 3 (PERS 2/3)

2015(1) 2016 (1)(3)

Employer's proportion of the net pension asset 0.023373% 0.024910%Employer's proportionate share of the net pension asset $ 281,696 256,644$ Employer's covered employee payroll (4) $ - -$ Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 0.00% 0.00%Plan fiduciary net position as a percentage of the total pension liability (2) 127.36% 123.74%

Law Enforcement Officers' and Fire Fighters' Retirement System Plan 1 (LEOFF 1)

2015(1) 2016 (1)(3)

Employer's proportion of the net pension asset 0.187222% 0.179668%Employer's proportionate share of the net pension asset $ 1,924,268 1,045,003$State's proportionate share of the net pension asset associated with the employer 1,272,329 681,266TOTAL $ 3,196,597 1,726,269$Employer's covered employee payroll $ 5,433,910 5,445,937$Employer's proportionate share of the net pension liability as a percentage of covered employee payroll 58.83% 31.70%Plan fiduciary net position as a percentage of the total pension liability (2) 111.67% 106.04%


Notes to Schedule:(1) Measurement date: June 30, 2016(2) DRS Participating Employer Financial Information Report, Note 2. E, Net Pension Liability(3) Actuarial Methods and Assumptions (See Note J. Employee Pension Plans)(4) All LEOFF 1 members are retired (no active members during the covered period).*Schedule is intended to show information for 10 years commencing with the fiscal year endedDecember 31, 2016. Additional years will be displayed as they become available.

Schedule of the City’s Proportionate Share of the Net Pension Liability and Asset and Related Ratios, as of June 30



Schedule of the City’s Employer Contributions, as of December 31

2015 (1) 2016 (1)

Statutorily or contractually required contributions $ 628,534 677,848$ Contributions in relation to the statutorily or contractually required contributions (628,534) (677,848) Contribution deficiency (excess) -$ -$

Covered employer payroll $ 14,147,427 14,127,222$Contributions as a percentage of covered employee payroll 4.44% 4.80%

Public Employees' Retirement System Plan 1 (PERS 1)

2015 (1) 2016 (1)

Statutorily or contractually required contributions $ 792,933 876,768$ Contributions in relation to the statutorily or contractually required contributions (792,933) (876,768) Contribution deficiency (excess) -$ -$

Covered employer payroll $ 14,074,316 14,073,925$Contributions as a percentage of covered employee payroll 5.63% 6.23%

Public Employees' Retirement System Plan 2 and 3 (PERS 2/3)

2015 (1) 2016 (1)

Statutorily or contractually required contributions -$ -$ Contributions in relation to the statutorily or contractually required contributions - - Contribution deficiency (excess) -$ -$

Covered employer payroll -$ -$ Contributions as a percentage of covered employee payroll (2) N/A N/A


2015 (1) 2016 (1)

Statutorily or contractually required contributions 275,466$ 285,892$ Contributions in relation to the statutorily or contractually required contributions (275,466) (285,892) Contribution deficiency (excess) -$ -$

Covered employer payroll 5,454,776$ 5,664,267$Contributions as a percentage of covered employee payroll 5.05% 5.05%


Notes to Schedule:(1) As of December 31(2) Starting on July 1, 2000, LEOFF 1 has zero contribution percent, as long as the plan remainsfully funded. There were no required contributions for fiscal year 2016.*Schedule is intended to show information for 10 years commencing with the fiscal year endedDecember 31, 2016. Additional years will be displayed as they become available.



City of Lacey

ActuarialAccrued UAAL as a

Actuarial Liability Unfunded PercentageActuarial Value of (AAL) - AAL Funded Covered of CoveredValuation Assets Entry Age (UAAL) Ratio Payroll* Payroll

Date (a) (b) (b-a) (a/b) © [(b-a)/c]

12/31/2016 -$ 6,868,370$ 6,868,370$ 0% -$ 0%12/13/2015 - 6,651,558 6,651,558 0% - 0%12/31/2014 - 5,623,610 5,623,610 0% - 0%

*All LEOFF 1 members are retired as of May 2012. No covered payroll.

Schedule of Funding ProgressOther Postemployment Benefits (OPEB) Plan

LEOFF 1, Police Officers

Notes to the Required Supplemental Information

1. Budgetary Information

For more detailed information, see the Notes to the financial statements (Note 1, D. Budgetary information).

2. Budgetary Basis of Accounting

The budgetary process is based upon accounting for certain transactions on a basis other than the accounting principles generally accepted in the United States (‘GAAP”) basis.

The major differences between the budgetary basis and GAAP basis are as follows:

• Certain loan transactions are recognized as expenditures for the budgetary basis, but not for the GAAP basis. When these loans are made, they are recorded as receivables on a GAAP basis and as expenditures on a budgetary basis. When loan payments are received, they are recorded as reductions to the receivables on a GAAP basis, but are recognized as revenues on a budgetary basis.

• Certain advances and loans to other funds are recognized as expenditure for the budgetary basis, but not for the GAAP basis. When these advances and loans are made, they are recorded as receivables on a GAAP basis and as expenditures as on a budgetary basis. When repayments are received, they are recognized as reductions to advances and loans on a GAAP basis, but are recognized as revenues on a budgetary basis.


Combining & Individual Fund Statements & Schedules 6-1


COMBINING & INDIVIDUAL FUND STATEMENTS & SCHEDULES




NONMAJOR OTHER GOVERNMENTAL FUNDS

Special Revenue Funds

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

Street Fund is responsible for evaluating, maintaining and repairing all roadways, traffic control devices, drainage systems, sidewalks and roadsides. The division is also responsible for street cleaning, snow and ice removal, and removing road debris from traffic lanes. Additionally, the street division performs special projects such as the Christmas tree pickup and hanging the street banners.

Lodging Tax Fund is authorized by state law and must operate under the restrictive provision thereof. Revenue is generated from a use tax based on hotel/motel room rentals. Expenditures of lodging tax dollars are limited to tourist promotion and for the acquisition and/or maintenance of tourism-related facilities.

Community Development Block Grant Fund provides for the accounting of state and federal grants dollars awarded to qualifying agencies serving Lacey citizens.

Debt Service Funds

General Obligation (G.O.) Bond Fund was created to provide for the retirement of all general purpose bonds issued for City facilities or equipment. When capital expenditures are funded by debt authorized by voter approval, the revenues generated to retire this debt come from property taxes. Debt issued or bonds received without guaranteed to the City property tax revenues must depend on all sources of general City revenue to retire debt.

Capital Project Funds

Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds.

Building Improvement Fund is only used when there is a need to account for a significant building project or equipment acquisition that is usually funded by a bond sale.

Capital Expenditure Fund accounts for special revenue dedicated to capital and capital equipment purchases that are required for general operation purposes. Utility and real estate taxes are the main sources of revenue.

Parks & Open Space Fund accounts for the resources accumulated by council action to set aside the revenue generated by a one percent utility tax rate for acquisition of property for future parks and open space, and/or the maintenance and operations and development of existing park sites.

Regional Athletic Complex (RAC) Capital Fund accounts for revenues dedicated for debt retirement, the purchase of capital equipment to operate this facility and future development of the RAC. The source of revenue is sales taxes that the City receives from the Capital Area Regional Public Facilities District (CARPFD) per an interlocal agreement.



Page 1 of 2

Debt Service FundCommunity General

Street Lodging Development Obligation Fund Tax Block Grant Bond Fund

ASSETSCurrent cash and cash equivalents 1,601,348$ 954,059$ 20,771$ 309,961$ Receivables (net of allowances):

Taxes - 55,551 - 21,905 Customer accounts 221,847 - 274,212 - Due from other governmental units 104,393 - - -

Restricted assets:Cash & cash equivalents 183 - - -

Long term loan receivable - - - -

Total assets 1,927,771 1,009,610 294,983 331,866

LIABILITIES AND FUND BALANCESLiabilities

Accounts payable 77,113 24,510 - - Due to other governmental units 19 - - - Customer deposits 183 - - -

Total Liabilities 77,315 24,510 - -

DEFERRED INFLOWS OF RESOURCESUnavailable revenues-property tax - - - 14,593 Unavailable revenues-grants and loans - - 274,212 -

Total deferred inflows of resources - - 274,212 14,593

Fund balancesRestricted - 985,100 20,771 - Committed 750,000 - - - Assigned 1,100,455 - - 317,273

Total fund balances 1,850,455 985,100 20,771 317,273

Total liabilities, deferred inflows of resourcesand fund balances 1,927,770$ 1,009,610$ 294,983$ 331,866$


Combining Balance SheetOther Governmental Funds

December 31, 2016



Page 2 of 2

TotalOther

Building Capital Parks & Open Regional Athletic GovernmentalImprovement Expenditure Space Fund Complex Capital Funds

3,938,695$ 4,447,162$ 1,777,994$ 1,142,348$ 14,192,338$

- - - - 77,456 - 9,368 2,723 - 508,150 - - - 179,867 284,260

- - 1,850 - 2,033 - 348,753 - - 348,753

3,938,695 4,805,283 1,782,567 1,322,215 15,412,990

95,610 21,195 441 - 218,869 - 13,333 - - 13,352 - - 1,850 - 2,033

95,610 34,528 2,291 - 234,254

- - - - 14,593 - - - - 274,212

- - - - 288,805

- 552,473 - - 1,558,344 3,371,932 2,285,000 609,751 350,000 7,366,683

471,153 1,933,281 1,170,525 972,215 5,964,902 3,843,085 4,770,754 1,780,276 1,322,215 14,889,929

3,938,695$ 4,805,282$ 1,782,567$ 1,322,215$ 15,412,988$




Page 1 of 2

Debt Service FundCommunity General

Street Lodging Development ObligationFund Tax Block Grant Bond Fund

REVENUESTaxes -$ 483,927$ -$ 1,424,988$ Licenses and permits - - - - Intergovernmental revenues 721,400 - - - Charges for services 51,590 - - - Other revenues 137,659 3,979 84 1,595

Total revenues 910,649 487,906 84 1,426,583


Transportation 3,004,471 - - - Economic environment - - - - Culture and recreation - 239,473 - -

Capital outlay 11,595 - - - Debt service:

Principal retirement - - - 2,980,000 Interest - - - 530,525

Total expenditures 3,016,066 239,473 - 3,510,525

Excess of revenue over (under) expenditures (2,105,417) 248,433 84 (2,083,942)

OTHER FINANCING SOURCES (USES)Transfers in 2,233,098 - - 2,058,150 Transfers out (500,000) (200,334) - -

Total other financing sources (uses) 1,733,098 (200,334) - 2,058,150

Net change in fund balances (372,319) 48,099 84 (25,792)

Fund balances - beginning 2,222,774 937,001 20,687 343,065 Fund Balance - ending 1,850,455$ 985,100$ 20,771$ 317,273$


Combining Statement of Revenues, Expenditures, and Changes in Fund BalancesOther Governmental Funds




Page 2 of 2

TotalParks & Other

Building Capital Open Space Regional Athletic GovernmentalImprovement Expenditure Fund Complex Capital Funds

-$ -$ -$ -$ 1,908,915$ - 37,277 - - 37,277

46,843 - - 965,466 1,733,709 - - - - 51,590

25,742 21,902 28,177 3,184 222,322

72,585 59,179 28,177 968,650 3,953,813

- - - - 3,004,471 - 7,070 - - 7,070 - - 3,856 3,321 246,650

190,504 299,441 963,125 12,938 1,477,603

- 160,039 - - 3,140,039 - 13,321 - - 543,846

190,504 479,871 966,981 16,259 8,419,679

(117,919) (420,692) (938,804) 952,391 (4,465,866)

- 619,424 489,265 - 5,399,937 - (560,000) (644,464) (573,150) (2,477,948) - 59,424 (155,199) (573,150) 2,921,989

(117,919) (361,268) (1,094,003) 379,241 (1,543,877)

3,961,004 5,132,022 2,874,279 942,974 16,433,806 3,843,085$ 4,770,754$ 1,780,276$ 1,322,215$ 14,889,929$






Intergovernmental revenues 659,254$ 659,254$ 721,400$ 62,146$ Charges for services 7,500 7,500 51,590 44,090 Other revenues 4,500 49,500 137,659 88,159

Total revenues 671,254 716,254 910,649 194,395


Transportation 3,004,352 3,278,974 3,004,471 274,503 Capital outlay - - 11,595 (11,595)

Total expenditures 3,004,352 3,278,974 3,016,066 262,908

Excess of revenue over (under) expenditures (2,333,098) (2,562,720) (2,105,417) 457,303

OTHER FINANCING SOURCES (USES)Transfers in 2,233,098 2,233,098 2,233,098 - Transfers out (500,000) (500,000) (500,000) -

Total other financing sources 1,733,098 1,733,098 1,733,098 -

Net change in fund balances (600,000) (829,622) (372,319) 457,303

Fund balance - beginning 600,000 829,622 2,222,774 1,393,152

Fund balance - ending -$ -$ 1,850,455$ 1,850,455$


Street FundFor the Year Ended December 31, 2016

Budgeted Amounts





Taxes 1,500,000$ 1,500,000$ 2,536,111$ 1,036,111$ Intergovernmental revenues 6,763,039 6,763,039 1,889,720 (4,873,319) Charges for services 485,088 485,088 871,193 386,105 Other revenues 151,320 156,320 132,453 (23,867)

Total revenues 8,899,447 8,904,447 5,429,477 (3,474,970)

EXPENDITURESCurrent:Capital outlay 9,237,323 9,297,323 3,237,330 6,059,993

Total expenditures 9,237,323 9,297,323 3,237,330 6,059,993

Excess of revenue over (under) expenditures (337,876) (392,876) 2,192,147 2,585,023

Net change in fund balances (337,876) (392,876) 2,192,147 2,585,023

Fund balance - beginning 337,876 392,876 16,415,736 16,022,860



Arterial StreetsFor the Year Ended December 31, 2016

Budgeted Amounts





Taxes 425,000$ 425,000$ 483,927$ 58,927$ Other revenues 2,000 2,000 3,979 1,979

Total revenues 427,000 427,000 487,906 60,906


Culture and recreation 253,100 253,100 239,473 13,627

Total expenditures 253,100 253,100 239,473 13,627

Excess of revenueover (under) expenditures 173,900 173,900 248,433 74,533

OTHER FINANCING SOURCES (USES)Transfers out (205,500) (207,334) (200,334) 7,000

Total other financing sources (205,500) (207,334) (200,334) 7,000

Net change in fund balances (31,600) (33,434) 48,099 81,533

Fund balance - beginning 31,600 33,434 937,001 903,567

Fund balance - ending -$ -$ 985,100$ 985,100$


Lodging TaxFor the Year Ended December 31, 2016

Budgeted Amounts





Other revenue 200$ 200$ 84$ (116)$

Total revenues 200 200 84 (116)

EXPENDITURESCurrent:Total expenditures - - - -

Excess of revenue over (under) expenditures 200 200 84 (116)

OTHER FINANCING SOURCES (USES)Total other financing sources - - - -

Net change in fund balance 200 200 84 (116)

Fund balance - beginning - - 20,687 20,687

Fund balance - ending 200$ 200$ 20,771$ 20,571$

Budgeted Amounts


Community Development Block GrantFor the Year Ended December 31, 2016





Taxes 1,452,375$ 1,452,375$ 1,424,988$ (27,387)$ Other revenues 1,000 1,000 1,595 595

Total revenues 1,453,375 1,453,375 1,426,583 (26,792)

EXPENDITURESCurrent:Debt service:

Principal retirement 1,495,000 2,980,000 2,980,000 - Interest 530,525 530,525 530,525 -

Total expenditures 2,025,525 3,510,525 3,510,525 -

Excess of revenue over (under) expenditures (572,150) (2,057,150) (2,083,942) (26,792)

OTHER FINANCING SOURCES (USES)Transfers in 573,150 2,058,150 2,058,150 -

Total other financing sources 573,150 2,058,150 2,058,150 -

Net change in fund balance 1,000 1,000 (25,792) (26,792)

Fund balance - beginning - - 343,065 343,065

Fund balance - ending 1,000$ 1,000$ 317,273$ 316,273$


General Obligation Bond FundFor the Year Ended December 31, 2016

Budgeted Amounts





Other revenues 1,006,796$ 1,006,796$ 546,038$ (460,758)$

Total revenues 1,006,796 1,006,796 546,038 (460,758)

EXPENDITURES

Total expenditures - - - -

Excess of revenue over (under) expenditures 1,006,796 1,006,796 546,038 (460,758)

OTHER FINANCING SOURCES (USES)Interfund loan proceeds 20,582 20,582 - (20,582) Transfers in 20,425 20,425 20,425 -

Total other financing sources 41,007 41,007 20,425 (20,582)

Net change in fund balance 1,047,803 1,047,803 566,463 (481,340)

Fund balance - beginning - - 2,897,525 2,897,525

Fund balance - ending 1,047,803$ 1,047,803$ 3,463,988$ 2,416,185$


L.I.D. RedemptionFor the Year Ended December 31, 2016

Budgeted Amounts



Variance with Actual Final Budget


Intergovernmental revenues -$ -$ 46,843$ 46,843$ Other revenues 7,000 7,000 25,742 18,742

Total revenues 7,000 7,000 72,585 65,585

EXPENDITURESCurrent:Capital outlay - 411,178 190,504 220,674

Total expenditures - 411,178 190,504 220,674

Excess of revenue over (under) expenditures 7,000 (404,178) (117,919) 286,259

OTHER FINANCING SOURCES (USES)

Total other financing sources - - - -

Net change in fund balance 7,000 (404,178) (117,919) 286,259

Fund balance - beginning - 411,178 3,961,004 3,549,826

Fund balance - ending 7,000$ 7,000$ 3,843,085$ 3,836,085$


Building ImprovementFor the Year Ended December 31, 2016

Budgeted Amounts



Actual Final BudgetOriginal Final GAAP Basis Positive (Negative)

REVENUESLicenses and permits 38,500$ 38,500$ 37,277$ (1,223)$ Other revenues 188,860 188,860 21,902 (166,958) (1)

Total revenues 227,360 227,360 59,179 (168,181)


Economic environment 2,500 2,500 7,070 (4,570) Capital outlay 866,122 1,186,243 299,441 886,802 Debt service:

Principal retirement 160,040 160,040 160,039 1 Interest 13,322 13,322 13,321 1

Total expenditures 1,041,984 1,362,105 479,871 882,234

Excess of revenue over (under) expenditures (814,624) (1,134,745) (420,692) 714,053

OTHER FINANCING SOURCES (USES)

Transfers in 619,424 619,424 619,424 - Transfers out (560,000) (560,000) (560,000) -

Total other financing sources 59,424 59,424 59,424 -

Net change in fund balances (755,200) (1,075,321) (361,268) 714,053



Explanation of differences:(1) Long-term loan payments received are budgeted as revenues but they are recorded as reduction of the receivables for GAAP.


Capital ExpenditureFor the Year Ended December 31, 2016

Budgeted Amounts





Intergovernmental revenues 53,172$ 53,172$ -$ (53,172)$ Other revenues 28,386 28,386 28,177 (209)

Total revenues 81,558 81,558 28,177 (53,381)


Culture and recreation - - 3,856 (3,856) Capital outlay 242,288 1,252,288 963,125 289,163

Total expenditures 242,288 1,252,288 966,981 285,307

Excess of revenue over (under) expenditures (160,730) (1,170,730) (938,804) 231,926

OTHER FINANCING SOURCES (USES)Transfers in 489,265 489,265 489,265 - Transfers out (644,464) (644,464) (644,464) -

Total other financing sources (155,199) (155,199) (155,199) -

Net change in fund balance (315,929) (1,325,929) (1,094,003) 231,926




Parks & Open SpaceFor the Year Ended December 31, 2016

Budgeted Amounts





Intergovernmental revenues 800,000$ 800,000$ 965,466$ 165,466$ Other revenues 1,500 1,500 3,184 1,684

Total revenues 801,500 801,500 968,650 167,150


Culture and recreation 8,000 8,000 3,321 4,679 Capital outlay 105,500 105,500 12,938 92,562

Total expenditures 113,500 113,500 16,259 97,241

Excess of revenue over (under) expenditures 688,000 688,000 952,391 264,391

OTHER FINANCING SOURCES (USES)Transfers out (573,150) (573,150) (573,150) -

Total other financing sources (573,150) (573,150) (573,150) -

Net change in fund balances 114,850 114,850 379,241 264,391

Fund balance - beginning 100,000 100,000 942,974 842,974

Fund balance - ending 214,850$ 214,850$ 1,322,215$ 1,107,365$


Regional Athletic Complex CapitalFor the Year Ended December 31, 2016

Budgeted Amounts



Internal Service Funds

Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government and to other government units, on a cost reimbursement basis.

The Equipment Rental Fund is an internal service fund created to provide for maintenance and replacement of City owned vehicles and equipment. The finance department provides administrative and accounting services while the public works department provides maintenance and repair services.

Information Management Services Fund is responsible for keeping all computer and office automation equipment and programs operating and responsive to the City’s needs. This is accomplished through researching new computer techniques; correcting and revising programs to meet changing needs; and managing computer techniques; and managing computer equipment to achieve maximum performance.



Equipment InformationRental Services Total

ASSETSCurrent assets:Cash and cash equivalents 11,157,914$ 3,268,983$ 14,426,897$ Restricted cash and cash equivalents:

Customer accounts 14,889 - 14,889

Total current assets: 11,172,803 3,268,983 14,441,786

Noncurrent assets:Capital assets, net of depreciation:

Buildings 103,362 - 103,362 Improvements other than buildings 42,041 - 42,041 Equipment 2,139,622 128,099 2,267,721

Total noncurrent assets 2,285,025 128,099 2,413,124

Total assets 13,457,828 3,397,082 16,854,910

DEFERRED OUTFLOWS OF RESOURCESDeferred outflows of resources related to pension 37,825 117,849 155,674


LIABILITIESCurrent liabilities:

Accounts payable 46,307 13,955 60,262 Due to other governmental units 15 8,732 8,747 Compensated absences 10,806 10,623 21,429 Total current liabilities 57,128 33,310 90,438

Noncurrent liabilities:Compensated absences 13,717 13,760 27,477 Net pension liability 226,168 704,666 930,834

Total noncurrent liabilities 239,885 718,426 958,311

Total liabilities 297,013 751,736 1,048,749

DEFERRED INFLOWS OF RESOURCES

Deferred inflows of resources related to pension 10,190 31,748 41,938


NET POSITIONNet investment in capital assets 2,285,025 128,099 2,413,124 Unrestricted 10,903,425 2,603,348 13,506,773

Total net position 13,188,450$ 2,731,447$ 15,919,897$


Combining Statement of Net PositionInternal Service Funds

December 31, 2016




Equipment InformationRental Services Total

OPERATING REVENUESCharges for services 2,248,240$ 1,680,963$ 3,929,203$ Miscellaneous operating revenues 49,588 4,449 54,037

Total operating revenue 2,297,828 1,685,412 3,983,240

OPERATING EXPENSESOperating expense 914,750 1,073,504 1,988,254 Maintenance expense 64,865 251,231 316,096 Depreciation expense 669,946 63,177 733,123 Taxes 151 20 171

Total operating expenses 1,649,712 1,387,932 3,037,644 OPERATING INCOME (LOSS) 648,116 297,480 945,596

NONOPERATING REVENUES (EXPENSES)Investment earnings 38,514 11,693 50,207 Gain (loss) on disposal of capital assets (8,363) 1,161 (7,202)

Total nonoperating revenues (expenses) 30,151 12,854 43,005

Income (loss) before contributionsand transfers 678,267 310,334 988,601

Capital Contributions - interfund 81,654 - 81,654

Changes in net position 759,921 310,334 1,070,255

Net position - beginning as restated 12,428,529 2,421,113 14,849,642

NET POSITION - ENDING 13,188,450$ 2,731,447$ 15,919,897$


Combining Statement of Revenues, Expenses, and Changes in Fund Net PositionInternal Service Funds





Equipment Information TotalRental Services Internal Service

CASH FLOW FROM OPERATING ACTIVITIES:

Receipts from customers and users 110,913$ 4,450$ 115,363$ Receipts from interfund services 2,183,426 1,680,962 3,864,388 Payments for interfund services (8,172) - (8,172) Payments to suppliers (541,118) (471,130) (1,012,248) Payments to employees (410,057) (851,617) (1,261,674) Payments for taxes (151) (20) (171)

Net cash provided by operating activities 1,334,841 362,645 1,697,486

CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition and construction of capital assets (263,450) (7,964) (271,414) Proceeds from sales of capital assets 3,505 1,161 4,666

Net cash (used) by capital and related financing activities (259,945) (6,803) (266,748)

CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of investment (3,000) - (3,000) Interest received on investments 38,514 11,693 50,207

Net cash provided (used) by investing activities 35,514 11,693 47,207

Net increase (decrease) in cash and cash equivalents 1,110,410 367,535 1,477,945

Cash and cash equivalents January 1 9,617,448 2,901,448 12,518,896

Cash and cash equivalents December 31 (see Note below) 10,727,858$ 3,268,983$ 13,996,841$

RECONCILIATION OF OPERATING INCOME (LOSS) TO NETCASH PROVIDED BY OPERATING ACTIVITIES:

Net operating income 648,116$ 297,480$ 945,596$ Adjustments to reconcile operating income (loss) to net

cash provided by operating activities:

Depreciation 669,946 63,177 733,123 Decrease (increase) in:

Customer receivables (3,489) - (3,489) Increase (decrease) in:

Accounts payables 27,065 4,141 31,206 Intergovernmental payables - 8,732 8,732 Compensated absences payables 1,120 (10,306) (9,186) Net pension liability, deferred outflows and inflows of

pension related resources (7,917) (579) (8,496) Total adjustments 686,725 65,165 751,890

Net cash provided by operating activities 1,334,841$ 362,645$ 1,697,486$

Reconciliation of Cash and cash equivalents with the amounts on the fund statement of net position:

Cash and cash equivalents 11,157,914$ 3,268,983$ 14,426,897$ Less investments with maturity over 3 months (430,056) - (430,056)

Cash and cash equivalents for cash flow statements 10,727,858$ 3,268,983$ 13,996,841$

Schedule of noncash capital and related financing activities:Capital assets transferred from other funds 81,654$ -$ 81,654$

Combining Statement of Cash FlowsInternal Service Funds


Governmental ActivitiesInternal Service Funds



Fiduciary Funds

Agency Funds

Joint Animal Services Fund accounts for cash and investments held by the City of Lacey for Animal Services in an agency capacity.

Interlocal Drug Unit Fund accounts for cash and investments held by the City of Lacey for the Thurston County Narcotics Task Force (Drug Unit) in an agency capacity.

Capital Area Public Facilities District (CARPFD) Fund accounts for cash and investments held by the City of Lacey for the CARPFD in an agency capacity.



Thurston Capital AreaJoint County Public

Animal Narcotics FacilitiesServices Task Force District Total

ASSETS

Cash and cash equivalents 2,635,782$ 679,958$ 70,348$ 3,386,088$ Restricted cash and cash equivalents - 42,260 - 42,260 Prepaid expenses and deposits 151 - - 151 Accounts receivables, net of

uncollectible accounts 533 - - 533 Due from other governmental units - 35,474 297,590 333,064

Total assets 2,636,466 757,692 367,938 3,762,096

LIABILITIES

Accounts payable 21,105 31,115 - 52,220 Accrued employee leave payable 80,797 7,934 - 88,731 Custodial - seizure cases pending - 42,260 - 42,260 Capital lease payable 6,843 502 - 7,345 Due to other governmental units 2,527,721 675,881 367,938 3,571,540

Total liabilities 2,636,466$ 757,692$ 367,938$ 3,762,096$

Combining Statement of Fiduciary Net PositionAgency Funds

December 31, 2016



Balance BalanceDecember 31,

2015 Additions DeductionsDecember 31,

2016ASSETS

Cash and cash equivalents 2,656,190$ 2,516,585$ 2,536,993$ 2,635,782$ Prepaid expenses and deposits 219 500 568 151 Accounts receivables, net of

uncollectible accounts 533 1,050,027 1,050,027 533

Total assets 2,656,942 3,567,112 3,587,588 2,636,466

LIABILITIES

Accounts payable 41,372 425,242 445,509 21,105 Accrued employee leave payable 67,627 47,175 34,005 80,797 Capital lease payable 9,256 - 2,413 6,843 Notes payable 72,655 - 72,655 - Due to other governmental units 2,466,032 3,186,949 3,125,260 2,527,721

Total liabilities 2,656,942$ 3,659,366$ 3,679,842$ 2,636,466$



2016ASSETS

Cash and cash equivalents 308,256$ 708,824$ 337,122$ 679,958$

Restricted Cash and cash equivalents 501,808 140,741 600,289 42,260 Accounts receivables, net of

uncollectible accounts - 3,252 3,252 - Due from other governmental units 33,995 35,474 33,995 35,474

Total assets 844,059 888,291 974,658 757,692

LIABILITIES

Accounts payable 40,318 490,231 499,434 31,115 Accrued employee leave payable 7,019 6,776 5,861 7,934 Custodial - seizure cases pending 501,808 140,741 600,289 42,260 Capital lease payable 3,395 502 3,395 502 Due to other governmental units 291,519 1,133,438 749,076 675,881

Total liabilities 844,059$ 1,771,688$ 1,858,055$ 757,692$

Combining Statement of Changes in Assets and LiabilitiesAgency Funds


Joint Animal Services

Thurston County Narcotics Task Force

Page 1 of 2



Page 2 of 2



2016ASSETSCash and cash equivalents 70,584$ 1,702,707$ 1,702,943$ 70,348$ Due from other governmental units 271,564 298,350 272,324 297,590

Total assets 342,148 2,001,057 1,975,267 367,938

LIABILITIES

Accounts payable - 445,765 445,765 - Due to other governmental units 342,148 2,468,904 2,443,114 367,938

Total liabilities 342,148$ 2,914,669$ 2,888,879$ 367,938$



2016ASSETSCash and cash equivalents 3,035,030$ 4,928,116$ 4,577,058$ 3,386,088$ Restricted Cash and cash equivalents 501,808 140,741 600,289 42,260 Prepaid expenses and deposits 219 500 568 151 Accounts receivables, net of

uncollectible accounts 533 1,053,279 1,053,279 533 Due from other governmental units 305,559 333,824 306,319 333,064

Total assets 3,843,149 6,456,460 6,537,513 3,762,096

LIABILITIESAccounts payable 81,690 1,361,238 1,390,708 52,220 Accrued employee leave payable 74,646 53,951 39,866 88,731 Custodial - seizure cases pending 501,808 140,741 600,289 42,260 Capital lease payable 12,651 502 5,808 7,345 Notes payable 72,655 - 72,655 - Due to other governmental units 3,099,699 6,789,291 6,317,450 3,571,540

Total liabilities 3,843,149$ 8,345,723$ 8,426,776$ 3,762,096$

Total All Agencies

Combining Statement of Changes in Assets and LiabilitiesAgency Funds


Capital Area Public Facilities District


Other Supplementary Information 7-1


OTHER SUPPLEMENTARY INFORMATION




Original Final GAAP Basis Positive (Negative)

OPERATING REVENUESCharges for services 13,726,034$ 13,726,034$ 17,708,126$ 3,982,092$ Miscellaneous operating revenues 160,250 160,250 323,325 163,075

Total operating revenue 13,886,284 13,886,284 18,031,451 4,145,167

OPERATING EXPENSESOperating expense 3,352,608 3,413,370 3,242,734 170,636 Maintenance expense 13,913,466 15,282,632 3,746,978 11,535,654 Depreciation expense 3,500,000 3,500,000 3,481,720 18,280 Taxes 560,884 625,000 654,474 (29,474)

Total operating expenses 21,326,958 22,821,002 11,125,906 11,695,096

OPERATING INCOME (LOSS) (7,440,674) (8,934,718) 6,905,545 15,840,263

NONOPERATING REVENUES (EXPENSES)Intergovernmental revenue - - 24,422 24,422 Special assessments - - 9,132 9,132 Investment earnings 42,933 42,933 102,545 59,612 Interfund loan disbursement (5,903,000) (5,903,000) - 5,903,000 (1)Revenue bond principal payment (270,306) (270,306) - 270,306 (2)Miscellaneous non-operating revenues 11,092 11,092 - (11,092) Interest expense (232,234) (232,234) (214,305) 17,929

Total nonoperating revenues (expenses) (6,351,515) (6,351,515) (78,206) 6,273,309

Income (loss) before contributionsand transfers (13,792,189) (15,286,233) 6,827,339 22,113,572

Capital Contributions - - 1,498,664 1,498,664 Transfers in 601,250 601,250 601,250 - Transfers out (20,425) (20,425) (20,425) -

Changes in net position (13,211,364) (14,705,408) 8,906,828 23,612,236

NET POSITION - BEGINNING 13,211,364 14,705,408 135,010,901 120,305,493

NET POSITION - ENDING -$ -$ 143,917,729$ 143,917,729$

Explanation of differences:(1) Repayment of interfund loan is budgeted as expense but it is recorded as a reduction of the interfund loan payables for GAAP.(2) Debt principal payments made are budgeted as expenses but they are recorded as reduction of bonds payable for GAAP.

This schedule is presented as supplemental information

Schedule of Operations - Budget to ActualWater Fund


Budgeted Amounts





OPERATING REVENUESCharges for services 16,018,298$ 16,245,030$ 18,667,270$ 2,422,240$ Miscellaneous operating revenues - - 5,976 5,976

Total operating revenue 16,018,298 16,245,030 18,673,246 2,428,216

OPERATING EXPENSES

Operating expense 11,523,306 11,750,038 11,431,501 318,537 Maintenance expense 9,367,051 11,781,159 2,425,374 9,355,785 Depreciation expense 2,350,000 2,350,000 2,093,503 256,497 Taxes 170,650 170,650 209,698 (39,048)


OPERATING INCOME (LOSS) (7,392,709) (9,806,817) 2,513,170 12,319,987

NONOPERATING REVENUES (EXPENSES)Special assessments - - 66,865 66,865 Debt issuance and service cost (57,000) (57,000) - 57,000 Investment earnings 38,932 38,932 81,199 42,267 Interfund loan 5,903,000 5,903,000 - (5,903,000) (1)Revenue bond proceeds 2,414,101 2,414,101 - (2,414,101) (2)Interest expense (37,266) (37,266) (20,806) 16,460 Miscellaneous non-operating revenues 17,065 17,065 - (17,065)

Total nonoperating revenues (expenses) 8,278,832 8,278,832 127,258 (8,151,574)

Income (loss) before contributionsand transfers 886,123 (1,527,985) 2,640,428 4,168,413

Capital contributions - - 3,729,171 3,729,171

Changes in net position 886,123 (1,527,985) 6,369,599 7,897,584


NET POSITION - ENDING 3,235,773$ 3,235,773$ 98,767,923$ 95,532,150$

Explanation of differences:(1) Interfund loan proceeds received and repayments received are budgeted as revenues but they are recognized as reductions to receivables and

increase to payables for GAAP.(2) Proceeds from debt issue was budgeted but not actually issued.


Schedule of Operations - Budget to ActualWastewater Fund


Budgeted Amounts





OPERATING REVENUESCharges for services 2,932,728$ 2,932,728$ 3,042,070$ 109,342$ Miscellaneous operating revenues - - 8,380 8,380

Total operating revenue 2,932,728 2,932,728 3,050,450 117,722

OPERATING EXPENSES

Operating expense 1,156,697 1,156,697 1,103,962 52,735 Maintenance expense 2,238,914 2,369,793 1,067,208 1,302,585 Depreciation expense 1,650,000 1,650,000 1,760,853 (110,853) Taxes 46,400 46,400 70,761 (24,361)


OPERATING INCOME (LOSS) (2,159,283) (2,290,162) (952,334) 1,337,828

NONOPERATING REVENUES (EXPENSES)

Investment earnings 5,472 5,472 9,207 3,735 Revenue bond principal payment (54,695) (54,695) - 54,695 (1)Interest expense (46,991) (46,991) (43,300) 3,691

Total nonoperating revenues (expenses) (96,214) (96,214) (34,093) 62,121

Income (loss) before contributionsand transfers (2,255,497) (2,386,376) (986,427) 1,399,949

Capital contributions 662,121 352,000 944,030 592,030

Changes in net position (1,593,376) (2,034,376) (42,397) 1,991,979


NET POSITION - ENDING 56,624$ 56,624$ 48,734,822$ 48,678,198$

Explanation of differences:(1) Debt principal payments made are budgeted as expenses but they are recorded as reduction of bonds payable for GAAP.


Schedule of Operations - Budget to ActualStormwater Fund


Budgeted Amounts





OPERATING REVENUES

Total operating revenue - - - -

OPERATING EXPENSESDepreciation expense - - 30,105 (30,105)

Total operating expenses - - 30,105 (30,105)

OPERATING INCOME (LOSS) - - (30,105) (30,105)

NONOPERATING REVENUES (EXPENSES)Investment earnings 3,900 3,900 8,292 4,392

Total nonoperating revenues (expenses) 3,900 3,900 8,292 4,392

Income (loss) before contributionsand transfers 3,900 3,900 (21,813) (25,713)

Changes in net position 3,900 3,900 (21,813) (25,713)

NET POSITION - BEGINNING - - 3,501,757 3,501,757



Schedule of Operations - Budget to ActualReclaimed Water


Budgeted Amounts




Original Final GAAP Basis Positive (Negative)OPERATING REVENUES

Charges for services 2,288,100$ 2,288,100$ 2,248,240$ (39,860)$ Miscellaneous operating revenues - - 49,588 49,588


OPERATING EXPENSES

Operating expense 1,489,638 1,597,218 914,750 682,468 Maintenance expense 55,346 55,346 64,865 (9,519) Depreciation expense 693,512 693,512 669,946 23,566 Taxes - - 151 (151)

Total operating expenses 2,238,496 2,346,076 1,649,712 696,364

OPERATING INCOME (LOSS) 49,604 (57,976) 648,116 706,092

NONOPERATING REVENUES (EXPENSES)Investment earnings 15,335 15,335 38,514 23,179 Miscellaneous non-operating revenues - 37,676 - (37,676) Gain (loss) on disposal of capital assets - - (8,363) (8,363) (1)

Total nonoperating revenues (expenses) 15,335 53,011 30,151 (22,860)

Income (loss) before contributionsand transfers 64,939 (4,965) 678,267 683,232

Capital contributions - - 81,654 81,654

Changes in net position 64,939 (4,965) 759,921 764,886

NET POSITION - BEGINNING 240,087 309,991 12,428,529 12,118,538


Explanation of differences:(1) Gain or loss on disposal of capital assets are not formally budgeted transactions.


Schedule of Operations - Budget to ActualEquipment Rental Fund


Budgeted Amounts




Original Final GAAP Basis Positive (Negative)OPERATING REVENUES

Charges for services 1,680,962$ 1,680,962$ 1,680,963$ 1$ Miscellaneous operating revenues - - 4,449 4,449


OPERATING EXPENSES

Operating expense 1,509,924 1,509,924 1,073,504 436,420 Maintenance expense 236,663 236,663 251,231 (14,568) Depreciation expense 159,149 159,149 63,177 95,972 Taxes - - 20 (20)

Total operating expenses 1,905,736 1,905,736 1,387,932 517,804

OPERATING INCOME (LOSS) (224,774) (224,774) 297,480 522,254

NONOPERATING REVENUES (EXPENSES)

Investment earnings 4,500 4,500 11,693 7,193 Gain (loss) on disposal of capital assets - - 1,161 1,161 (1)

Total nonoperating revenues (expenses) 4,500 4,500 12,854 8,354

Income (loss) before contributionsand transfers (220,274) (220,274) 310,334 530,608

Changes in net position (220,274) (220,274) 310,334 530,608

NET POSITION - BEGINNING 220,274 220,274 2,421,113 2,200,839

NET POSITION - ENDING -$ -$ 2,731,447$ 2,731,447$

Explanation of differences:(1) Gain or loss on disposal of capital assets are not formally budgeted transactions.


Budgeted Amounts

Schedule of Operations - Budget to ActualInformation Management Services FundFor the Year Ended December 31, 2016



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Notes to the Schedule of Expenditures of Federal AwardsFor the Year Ended December 31, 2016

Note 1 - Basis of AccountingThese schedules are prepared on the same basis of accounting as the City of Lacey's financial statements. The City uses the accrual basis of accounting for all funds except governmental fund types and agency funds, which use the modified accrual basis of accounting.

Note 2 - Program CostsThe amount shown as current year expenditures represents only the City's grant portion of the program costs. Entire program costs, including the City portion, may be more than shown.

Note 3 - Revolving Loan - Program IncomeThe City has a revolving loan program under the Department of Housing & Urban Development. Under this federal program, repayments to the City are considered program revenues (income). No interest is charged on the loans and full payment is due upon sale of the property. The amount of loan principal received in loan repayment for the year 2016 was $0. The City has received approval from Washington Department of Commerce (formerly CTED) to utilize the program revenues to finance future CDBG approved projects.

Note 4 - Program IncomeSummer food service program for children permits the City to earn program income while administering this program and use the income for program purposes in addition to the original grant award. The expenditure amount reported includes a program income of $0.

Note 5 - Indirect Cost RateThe amount expensed does not include any indirect cost recovery neither using an approved indirect cost rate, northe ten percent de Minimis indirect cost rate allowed under the Uniform Guidance.

Note 6 - Prior Year ExpendituresThe amount shown represents expenditures for the year ended December 31, 2015.

Highway Planning and Construction Grant GCB-1208 includes $21,587 of expenditures for the year ended December 31, 2015. In February 2016, the grantor subsequently awarded the City an additional $60,000 after they had reached their original award maximum in November of 2015. The remaining 2015 expenditures not covered by the original grant award are shown on this schedule along with the 2016 expenditures.



CurrentIdentification Year

Grantor / Program Title Number Expenditures

WA State Department of Ecology:2012 Statewide Stormwater Grant G1200508 260,875$ Hicks Lake Integrated Aquatic Vegitation WQAIP-2017-LacePW-00001 24,422

Sub-total 285,297

WA State Department of TransportationCollege Street & 22nd Ave Roundabout LA-7245 (STPUS-5289-004) 372,987

Sub-total 372,987

WA State Transportation Improvement BoardMarvin Road NE - Britton Parkway NE to 30th Ave NE 8-5-197(025)-1 891,808

Sub-total 891,808

WA State Department of Commerce:2012 Energy Efficiency Grants for Local Governments 13-93222-049 14,842

Sub-total 14,842

WA State Office of Superintendent of Public Instruction:Summer Food Service Program for Children 159215 1,044 Summer Meals for Kids 673293-00 1,200

Sub-total 2,244

TOTAL STATE ASSISTANCE 1,567,178

Thurston CountyHeritage Grant Program 16-001 COL 5,000 Lodging Tax N/A 1,317

Sub-total 6,317

TOTAL LOCAL ASSISTANCE 6,317

TOTAL STATE AND LOCAL ASSISTANCE 1,573,495$

Schedule of State Financial AssistanceFor The Year Ended December, 31, 2016



Year Ended Interest Interest Principal Total Debt31-Dec Rate - % Due - 01 Jun Due - 01 Dec Due - 01 Dec Service

2017 5.000% $ 9,500.00 $ 9,500.00 $ 380,000.00 $ 399,000.00$ 9,500.00 $ 9,500.00 $ 380,000.00 $ 399,000.00

City of Lacey General Obligation Bond Debt2007 Limited Tax General Obligated Bonds

December 31, 2016

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

2017

2007 Limited Tax General Obligation BondsAnnual Debt Service Payments




2017 3.000% $ 37,437.50 $ 37,437.50 $ 380,000.00 $ 454,875.002018 3.250% 31,737.50 31,737.50 390,000.00 453,475.002019 4.000% 25,400.00 25,400.00 405,000.00 455,800.002020 4.000% 17,300.00 17,300.00 420,000.00 454,600.002021 4.000% 8,900.00 8,900.00 445,000.00 462,800.00

$ 120,775.00 $ 120,775.00 $ 2,040,000.00 $ 2,281,551.00

City of Lacey General Obligation Bond Debt2010 Unlimited Tax General Obligated Refunding Bonds

December 31, 2016

$448,000

$450,000

$452,000

$454,000

$456,000

$458,000

$460,000

$462,000

$464,000

2017 2018 2019 2020 2021

2010 Unlimited Tax General Obligation Refunding Bonds Annual Debt Service Payments



Year Ended Interest Interest Principal Total Debt31-Dec Rate - % Due - 01 Jun Due - 01 Dec Due - 01 Jun Service

2017 1.542% $ 5,860.41 $ 4,227.68 $ 163,272.28 $ 173,360.372018 1.542% 4,227.68 2,561.98 166,570.71 173,360.372019 1.542% 2,561.98 - 170,798.39 173,360.37

$ 12,650.07 $ 6,789.66 $ 500,641.38 $ 520,081.11

City of Lacey/TCOMM 9112012 Local Option Capital Asset Lending (LOCAL) Program Loan

December 31, 2016

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

$170,000

$190,000

2017 2018 2019

2012 Local Option Capital Asset Lending (LOCAL) Annual Debt Service Payments




2017 1.500% $ 23,650.00 $ 23,650.00 $ 275,000.00 $ 322,300.002018 1.500% 20,900.00 20,900.00 280,000.00 321,800.002019 2.000% 18,100.00 18,100.00 285,000.00 321,200.002020 3.000% 15,250.00 15,250.00 295,000.00 325,500.002021 3.000% 12,300.00 12,300.00 300,000.00 324,600.002022 3.000% 9,300.00 9,300.00 305,000.00 323,600.002023 3.000% 4,725.00 4,725.00 315,000.00 324,450.00

$ 104,225.00 $ 104,225.00 $ 2,055,000.00 $ 2,263,450.00


December 31, 2016

$319,000

$320,000

$321,000

$322,000

$323,000

$324,000

$325,000

$326,000

2017 2018 2019 2020 2021 2022 2023

2012 Unlimited Tax General Obligation Refunding Bonds Debt Service Payments



Year Ended Interest Interest Principal Total Debt31-Dec Rate - % Due - 01 May Due - 01 Nov Due - 01 Nov Service

2017 2.000% $ 136,362.50 $ 136,362.50 $ 330,000.00 $ 602,725.002018 3.000% 133,062.50 133,062.50 340,000.00 606,125.002019 2.000% 127,962.50 127,962.50 350,000.00 605,925.002020 3.000% 124,462.50 124,462.50 355,000.00 603,925.002021 3.000% 119,137.50 119,137.50 365,000.00 603,275.002022 3.000% 113,662.50 113,662.50 380,000.00 607,325.002023 4.000% 107,962.50 107,962.50 390,000.00 605,925.002024 4.000% 102,112.50 102,112.50 400,000.00 604,225.002025 4.000% 94,112.50 94,112.50 415,000.00 603,225.002026 4.000% 85,812.50 85,812.50 435,000.00 606,625.002027 4.000% 77,112.50 77,112.50 450,000.00 604,225.002028 4.000% 68,112.50 68,112.50 470,000.00 606,225.002029 4.250% 58,712.50 58,712.50 490,000.00 607,425.002030 4.250% 48,300.00 48,300.00 510,000.00 606,600.002031 4.500% 37,462.50 37,462.50 530,000.00 604,925.002032 4.500% 25,537.50 25,537.50 555,000.00 606,075.002033 4.500% 13,050.00 13,050.00 580,000.00 606,100.00

$ 1,472,937.50 $ 1,472,937.50 $ 7,345,000.00 $ 10,290,875.00

City of Lacey General Obligation Bond Debt2013 Revenue BondsDecember 31, 2016

$500,000

$520,000

$540,000

$560,000

$580,000

$600,000

$620,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

2013 Water/Sewer Revenue BondsAnnual Debt Service Payments




2017 $ 85,450.00 $ 85,450.00 $ - $ 170,900.002018 3.000% 85,450.00 85,450.00 390,000.00 560,900.002019 3.000% 79,600.00 79,600.00 405,000.00 564,200.002020 3.000% 73,525.00 73,525.00 420,000.00 567,050.002021 3.000% 67,225.00 67,225.00 435,000.00 569,450.002022 4.000% 60,700.00 60,700.00 455,000.00 576,400.002023 4.000% 51,600.00 51,600.00 470,000.00 573,200.002024 4.000% 42,200.00 42,200.00 490,000.00 574,400.002025 4.000% 32,400.00 32,400.00 515,000.00 579,800.002026 4.000% 22,100.00 22,100.00 540,000.00 584,200.002027 4.000% 11,300.00 11,300.00 565,000.00 587,600.00

$ 611,550.00 $ 611,550.00 $ 4,685,000.00 $ 5,908,100.00

City of Lacey General Obligation Bond Debt2015 Limited Tax General Obligated Refunding Bonds

December 31, 2016

$‐

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

2015 Limited Tax General Obligation Refunding Bonds Annual Debt Service Payment




2017 3.000% $ 52,225.00 $ 52,225.00 $ 250,000.00 $ 354,450.002018 3.000% 48,475.00 48,475.00 260,000.00 356,950.002019 3.000% 44,575.00 44,575.00 265,000.00 354,150.002020 3.000% 40,600.00 40,600.00 275,000.00 356,200.002021 3.000% 36,475.00 36,475.00 285,000.00 357,950.002022 4.000% 32,200.00 32,200.00 295,000.00 359,400.002023 4.000% 26,300.00 26,300.00 310,000.00 362,600.002024 4.000% 20,100.00 20,100.00 320,000.00 360,200.002025 4.000% 13,700.00 13,700.00 335,000.00 362,400.002026 4.000% 7,000.00 7,000.00 350,000.00 364,000.00

$ 321,650.00 $ 321,650.00 $ 2,945,000.00 $ 3,588,300.00


December 31, 2016

$348,000

$350,000

$352,000

$354,000

$356,000

$358,000

$360,000

$362,000

$364,000

$366,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

2015 Unlimited Tax General Obligation Refund Bonds Annual Debt Debt Service Payments


Statistical Section 8-1


Statistical Section

This part of the City of Lacey’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary infor-mation says about the city’s overall financial health.

Contents Page Financial Trends

These schedules contain trend information to help the reader understand how the city’s finan-cial performance and well-being have changed over time.

1 Net Position by Component .............................................................................................. 8-2 2 Changes in Net Position ................................................................................................... 8-3 3 Fund Balances of Governmental Funds ........................................................................... 8-4 4 Changes in Fund Balances of Governmental Funds ........................................................ 8-5

Revenue Capacity These schedules contain information to help the reader assess the city’s two most significant local revenue sources, the sales/retail tax and property tax.

5 Governmental Activities Tax Revenues by Source ........................................................... 8-6 6 Sales Tax Revenues by Type, Governmental Funds ....................................................... 8-7 7 Assessed Value and Estimated Actual Value of Taxable Property ................................... 8-8 8 Property Tax Rates ........................................................................................................... 8-9 9 Principal Property Taxpayers ............................................................................................ 8-10 10 Property Tax Levies and Collections ................................................................................ 8-11

Debt Capacity These schedules present information to help the reader assess the affordability of the city’s current levels of outstanding debt and the city’s ability to issue additional debt in the future.

11 Ratio of Outstanding Debt by Type .................................................................................. 8-12 12 Ratios of General Bonded Debt Outstanding ................................................................... 8-13 13 Direct and Overlapping Government Activities Debt ........................................................ 8-14 14 Legal Debt Margin Information ......................................................................................... 8-15 15 Pledged-Revenue Coverage ............................................................................................ 8-16

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the city’s financial activities take place.

16 Demographic and Economic Statistics ............................................................................. 8-17 17 Principal Employers .......................................................................................................... 8-18

Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the city’s financial report relates to the services the city provides and the activities it performs.

18 Full-time Equivalent City Government Employees by Function ....................................... 8-19 19 Operating Indicators by Function ..................................................................................... 8-20 20 Capital Asset Statistics by Function ................................................................................. 8-21

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.



2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Governmental activities

Net investment in capital assets 269,717$ 281,557$ 287,705$ 302,167$ 304,458$ 304,245$ 298,885$ 300,936$ 303,126$ 301,595$Restricted 16,780 2,430 1,261 995 7,909 1,182 1,253 1,193 3,486 2,680Unrestricted 50,043 * 64,706 * 68,455 63,256 53,522 61,630 63,392 67,919 64,156 71,291

Total governmental activities net position 336,540$ * 348,693$ * 357,421$ 366,418$ 365,889$ 367,057$ 363,530$ 370,048$ 370,768$ 375,566$

Business-type activitiesNet investment in capital assets 182,646$ 215,424$ 218,450$ 221,544$ 224,593 230,039 228,482 231,073 234,592 240,521Restricted - - - - - - 6,091 3,498 607 607Unrestricted 22,336 14,983 16,861 18,139 22,355 25,189 24,858 35,634 45,462 55,070

Total business-type activities net position 204,982$ 230,407$ 235,311$ 239,683$ 246,948$ 255,228$ 259,431$ 270,205$ 280,661$ 296,198$

Primary governmentNet investment in capital assets 452,363$ 496,981$ 506,155$ 523,711$ 529,051$ 534,284$ 527,366 532,009 537,718 542,116Restricted 16,780 2,430 1,261 995 7,909 1,182 7,344 4,691 4,093 3,287Unrestricted 72,379 79,689 85,316 81,395 75,877 86,819 88,251 103,553 109,618 126,361

Total primary government net position 541,522$ 579,100$ 592,732$ 606,101$ 612,837$ 622,285$ 622,961$ 640,253$ 651,429$ 671,764$

*Restatement reduced the balance by $743,453 (see 2009 Note 4.G)

Table 1Net Position by Component

Last Ten Fiscal Years(accrual basis of accounting)

(amounts expressed in thousands)

$

$50

$100

$150

$200

$250

$300

$350

$400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Thou

sand

s

Net Position by Component

Governmental Business-type



Expenses 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Governmental activities:

General government 5,459$ 5,745$ 5,550$ 5,210$ 6,056$ 5,920$ 5,863$ 6,145$ 6,547$ 6,527$ Security of persons and property 12,337 13,348 14,088 15,284 10,599 10,879 11,137 11,019 11,025 11,408 Physical environment 3,139 3,526 3,656 3,605 3,566 3,625 3,724 4,037 4,095 4,275 Transportation 11,086 * 13,821 10,748 12,402 13,048 12,726 13,734 14,608 13,633 13,622 Economic development 1,271 1,260 1,173 1,492 1,287 1,211 1,286 1,284 1,448 1,501 Mental and physical health 10 8 11 8 10 11 8 10 11 12 Culture and recreation 4,429 5,757 6,519 7,388 7,033 7,640 7,860 8,200 7,936 8,193 Interest on long-term debt 924 1,122 1,023 977 875 811 752 684 511 464

Total governmental activities 38,655 * 44,587 42,768 46,366 42,474 42,823 44,364 45,987 45,206 46,002 Business-type activities:

Water 8,468 9,843 9,784 10,030 10,088 10,540 10,283 10,688 10,820 11,183 Wastewater 9,513 10,507 11,114 11,821 12,750 13,397 14,109 14,458 15,189 16,084 Stormwater 2,343 2,825 3,220 3,166 3,330 3,334 3,549 3,482 3,687 3,975 Reclaimed Water 332 67 49 20 23 28 30

Total business-type activities 20,656 23,242 24,118 25,017 26,168 27,320 27,961 28,651 29,724 31,272 Total primary government expenses 59,311$ 67,829$ 66,886$ 71,383$ 68,642$ 70,143$ 72,325$ 74,638$ 74,930$ 77,274$

Program RevenuesGovernmental activities:

Charges for services:General government 812$ 1,235$ 1,005$ 561$ 853$ 867$ 909$ 987$ 1,028$ 1,119$ Security of persons and property 337 849 1,385 1,624 1,210 879 887 860 512 621 Physical environment 2,285 2,677 2,858 2,827 2,537 2,550 2,994 3,206 3,330 3,678 Transportation 1,097 1,065 1,467 2,319 1,015 1,082 1,062 797 923 960 Economic development 3,328 1,863 1,084 1,117 1,577 1,450 1,178 1,610 1,969 2,874 Culture and recreation 988 1,065 1,303 1,451 1,500 1,554 1,586 1,595 1,599 1,661

Operating grants and contributions 1,478 1,464 2,006 3,221 2,947 3,011 2,822 2,856 3,340 3,466 Capital grants and contributions 19,499 13,470 9,780 7,920 8,464 6,933 4,264 13,949 13,596 5,534

Total governmental activities program revenues 29,824 23,688 20,888 21,040 20,103 18,326 15,702 25,860 26,297 19,913 Business type activities:

Charges for services:Water 10,556 10,632 11,320 10,436 11,535 12,140 11,640 13,371 15,444 18,032 Wastewater 10,651 11,112 11,161 11,873 12,817 13,216 13,954 15,097 16,663 18,673 Stormwater 1,685 1,826 1,929 1,992 2,103 2,091 2,186 2,423 2,709 3,051

Operating grants and contributions 51 - - 9 32 48 - 27 15 24 Capital grants and contributions 18,675 23,931 4,219 4,994 3,684 8,000 3,070 7,619 8,160 6,172

Total business-type activities program revenue 41,618 47,501 28,629 29,304 30,171 35,495 30,850 38,537 42,991 45,952 Total primary government program revenues 71,442$ 71,189$ 49,517$ 50,344$ 50,274$ 53,821$ 46,552$ 64,397$ 69,288$ 65,865$

Net (expenses)/revenue:Governmental activities (8,831)$ (20,899)$ (21,880)$ (25,326)$ (22,371)$ (24,497)$ (28,662)$ (20,127)$ (18,909)$ (26,089)$Business-type activities 20,962 24,259 4,511 4,287 4,004 8,175$ 2,889$ 9,886$ 13,267$ 14,680$Total primary government net (expense) revenue 12,131$ 3,360$ (17,369)$ (21,039)$ (18,367)$ (16,322)$ (25,773)$ (10,241)$ (5,642)$ (11,409)$

General Revenues and Other Changes in Net PositionGovernmental activities:

TaxesProperty taxes 8,524$ 9,594$ 10,096$ 10,447$ 5,929$ 6,313$ 6,538$ 6,642$ 6,826$ 6,984$ Timber taxes - - - - - - - - Retail taxes 10,506 10,230 9,111 9,064 8,930 9,139 9,152 9,518 10,777 11,734 Business taxes 7,400 7,748 7,827 7,642 7,823 7,851 8,498 8,637 8,885 9,448 Excise taxes 3,300 2,390 1,610 1,298 1,383 1,548 1,685 2,038 2,333 2,923 Penalties and interest on taxes 7 2 - - - - - - - -

Investment earnings** 3,579 2,164 711 374 414 760 375 280 244 386 Gain (loss) on disposal of capital assets - - - - - - - - 33 (7) Miscellaneous 1,648 1,022 1,226 871 203 269 111 302 64 - Special items - - - 4,703 - - - - - - Transfers (1,336) (98) 27 (77) (3,775) (18) (1,224) (772) (439) (581)

Total governmental activities 33,628 33,052 30,608 34,322 20,907 25,862 25,135 26,645 28,723 30,887 Business-type activities:

Investment earnings** 1,238 684 199 74 79 87 90 116 119 277 Miscellaneous 774 384 221 (66) 190 - - - - - Transfers 1,336 98 (27) 77 3,775 18 1,224 772 439 581

Total business-type activities 3,348 1,166 393 85 4,044 105 1,314 888 558 858 Total primary government 36,976$ 34,218$ 31,001$ 34,407$ 24,951$ 25,967$ 26,449$ 27,533$ 29,281$ 31,745$

Change in net positionGovernmental activities 24,797$ 12,153$ 8,728$ 8,996$ (1,464)$ 1,365$ (3,527)$ 6,518$ 9,814$ 4,798$ Business-type activities 24,310 25,425 4,904 4,372 8,048 8,280 4,203 10,774 13,825 15,538 Total primary government 49,107$ 37,578$ 13,632$ 13,368$ 6,584$ 9,645$ 676$ 17,292$ 23,639$ 20,336$

*Restatement increased expenses by $743,453 and reduced changes in net position by $743,453 (see 2009 Note 4. G.)

**Amount includes special assessment interest and penalties and interfund loan interest revenues.Total investment earnings, primary government 4,816$ 2,848$ 910$ 448$ 493$ 847$ 465$ 396$ 363$ 663$ Less interfund loan interest - 184 69 24 15 13 - 7 10 21 Less special assessment interests & penalties:

LID interest & penalties 458 369 185 146 234 543 197 134 82 37 ULID interest & penalties 7 5 4 2 1 1 11 10 30 76

Less special assessment interests & penalties 465 374 189 148 235 544 208 144 112 113 Net investment interest earnings 4,351$ 2,290$ 652$ 276$ 243$ 290$ 257$ 245$ 241$ 529$

Table 2Changes in Net PositionLast Ten Fiscal Years

(accrual basis of accounting)(amounts expressed in thousands)



2007 2 2008 2009 2010 2011 3 2012 4 2013 2014 2015 2016General fund

Nonspendable -$ -$ -$ -$ 5$ 6$ 10$ 6$ 1$ 3$ Restricted 137 129 133 11 6,113 134 124 134 148 169Committed - - - - 4,770 4,770 11,895 11,819 14,295 12,966Assigned - - - - 614 6,113 363 1,613 263 9,046Unassigned 21,863 22,706 25,195 27,066 10,196 12,245 11,265 12,707 15,007 13,180

Total general fund 22,000 22,835 25,328 27,077 21,698 23,268 23,657 26,279 29,714 35,364

All other governmental fundsNonspendable - - - - - - - - 502 486Restricted 1,352 2,301 1,128 995 1,791 2,202 1,969 1,738 1,648 1,558Committed - - - - 12,151 9,579 9,490 7,525 9,381 7,367Assigned:

Special revenue funds 7,703 11,651 14,183 16,274 10,753 13,652 1,074 1,281 972 1,100Debt service funds 585 522 465 478 261 758 1,986 2,475 2,739 3,296Capital projects funds 26,931 10,462 8,723 11,250 3,438 4,681 18,099 21,159 20,505 23,154

Total assigned 35,219 22,635 23,371 28,002 14,452 19,091 21,159 24,915 24,216 27,550Total all other governmental funds 36,571 24,936 24,499 28,997 28,394 31,067 32,618 34,178 35,747 36,961

Total governmental funds 58,571$ 47,771$ 49,827$ 56,074$ 50,092$ 54,335$ 56,275$ 60,457$ 65,461$ 72,325$

Note:1 The City issued G.O. bonds in the amount of $8.49 million late in 2006. The increase in unreserved fund balance in capital project funds is due

to the unspent bonds proceeds at the end of the year.2 The spike in capital project funds assigned fund balance was mainly contributable to the $8 million G.O bond issued in December 2007 and

remained unspent at the year end.3 The City implemented GASB Statement No. 54 in year 2011. Reserved fund balances for prior years are renamed as restricted fund balance and

fund balances in excess of reserved for all other governmental funds other than the general fund are reclassified as assigned fund balances.Increases and decreases in committed, assigned, and unassigned fund balances in 2011 are due to the GASB Statement No. 54 implementation.

4 Designation of $6,000,000 for Gateway civic center & property acquisition was reclassified from restricted to assigned in 2012.

Table 3Fund Balances of Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)


$‐

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

2007 2008 2009 2010 2011 2012 2013 2014 2015

Nonspendable Restricted Committed Assigned Unassigned

Fund Balance Governmental Funds

In th

ousand

s



Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016RevenuesTaxes 29,718$ 29,838$ 28,531$ 28,404$ 24,100$ 25,104$ 25,946$ 26,825$ 28,841$ 31,125$Licenses and permits 2,849 1,743 1,386 1,431 1,599 1,701 1,495 1,882 2,113 2,862Intergovernmental revenues 4,138 10,947 8,342 6,181 7,072 7,764 3,639 5,501 5,305 5,198Charges for services 6,978 7,145 7,564 8,530 7,803 7,428 7,344 6,448 7,089 7,775Fines & forfeitures 444 492 * 930 747 728 666 731 700 569 306Other revenue 4,410 3,096 1,185 1,899 1,268 2,163 1,423 1,462 1,418 1,429Total revenues 48,537 53,261 47,938 47,192 42,571 44,826 40,578 42,818 45,335 48,695

ExpendituresGeneral government 4,216 4,540 5,235 5,110 5,436 5,393 5,449 5,334 5,797 5,836Securities of persons and property 12,295 13,342 13,893 14,964 10,419 10,689 10,896 10,748 11,184 11,327Physical environment 3,169 3,560 3,668 3,620 3,757 3,784 3,921 4,080 4,293 4,433Transportation 2,281 2,397 2,350 2,579 2,646 2,711 2,807 2,793 3,184 3,005Economic environment 1,196 1,187 1,083 1,406 1,207 1,131 1,214 1,160 1,363 1,468Mental and physical health 10 9 11 8 10 11 8 10 11 12Culture and recreation 4,157 4,561 5,824 5,584 5,924 6,179 6,373 6,516 6,581 6,728Capital outlay 14,951 30,641 11,257 6,292 11,851 8,723 3,690 4,948 5,165 4,715Debt service

Principal 2,216 2,121 1,571 1,624 1,952 2,182 2,274 1,576 1,759 3,170Interest 933 1,152 1,074 1,013 896 850 755 688 482 555Debt issue costs 135 - - 51 47 59 - - 90 -

Total expenditures 45,559 63,510 45,966 42,251 44,146 41,712 37,387 37,853 39,909 41,249Excess of revenue over (under) expenditures 2,978 (10,249) 1,972 4,941 (1,575) 3,114 3,191 4,965 5,426 7,446

Other financing sources (uses)Capital leases - - 27 35 36 13 - 95 41 -Debt issued 8,000 - - 3,790 - 3,967 - - 7,765 -Premium on bonds issued 128 - - 104 - 233 - - 1,015 -Payments to refunded bond escrow agent - - - (3,843) - (2,984) - - (8,692) -Proceeds from sale of capital assets 4 - 57 - - - 3 - 3 -Transfers in 3,624 16,516 2,110 2,160 11,471 2,624 2,493 6,030 5,175 7,323Transfers out (5,124) (17,066) (2,110) (2,260) (15,467) (2,724) (3,748) (6,908) (5,729) (7,904)Total other financing sources (uses) 6,632 (550) 84 (14) (3,960) 1,129 (1,252) (783) (422) (581)Special item:Payment from County for RAC settlement - - - 1,321 - - - - - -Net change in fund balances 9,610$ (10,799)$ 2,056$ 6,248$ (5,535)$ 4,243$ 1,939$ 4,182$ 5,004$ 6,865$

Debt services as a percentage of noncapital expenditures 9.9% 6.6% 7.6% 7.1% 8.2% 9.0% 8.5% 6.4% 6.1% 9.9%

Table 4Changes in Fund Balances of Governmental Funds





Fiscal Property Timber Sales Business Excise PenaltiesYear Tax Tax Tax Tax Tax & Interest Total

2007 8,524 - 10,507 7,400 3,301 7 29,7392008 9,594 - 10,230 7,748 2,390 2 29,9642009 10,096 - 9,111 7,827 1,610 1 28,6452010 10,447 - 9,064 7,642 1,298 1 28,4522011 1 5,929 - 8,930 7,823 1,383 - 24,0652012 6,313 - 9,139 7,851 1,548 - 24,8512013 6,538 - 9,152 8,498 1,685 - 25,8732014 6,642 - 9,518 8,637 2,038 - 26,8352015 6,826 - 10,777 8,885 2,333 - 28,8212016 6,984 - 11,734 9,448 2,923 - 31,089

1 Decreased tax from previous year is due to the voter approved annexation to a fire district.

Source: City of Lacey Statement of Activities

Table 5Governmental Activities Tax Revenues By Source



$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Governmental Activities Tax Revenue by SourceProperty Tax Timber Tax Sales Tax Business Tax Excise Tax Penalties & Interest

Year

In th

ousand

s



2007 2008 2009 2010 2011 2012 2013 2014 2015 2016General Merchandise Stores 1,977$ 1,883$ 1,911$ 1,952$ 1,810$ 1,815$ 1,852$ 1,831$ 1,910$ 1,939$Food Services, Drinking Places 654 697 734 748 762 795 850 886 947 1,045Construction of Buildings 1,331 1,182 628 330 367 509 338 407 801 880 Building Material and Garden 394 461 437 458 446 473 521 571 642 679 Specialty Trade Contractors 815 514 368 348 359 407 407 448 535 645 Sporting Goods, Hobby, Books 326 630 706 690 673 633 637 558 558 549 Miscellaneous Store Retailers 341 360 350 375 381 363 400 399 402 420 Telecommunications 234 257 254 242 248 244 252 279 297 363 Motor Vehicle and Parts Dealer 470 434 372 351 297 337 311 308 317 348 Wholesale Trade, Durable Goods 424 312 219 264 212 245 261 279 350 345 Electronics and Appliances 255 264 296 285 274 240 244 255 317 273 Repair and Maintenance 167 169 181 190 183 188 200 216 228 256 Clothing and Accessories 120 162 162 172 170 170 177 189 232 244 Food and Beverage Stores 283 294 290 328 249 280 253 254 249 238Professional, Scientific, Tech 60 57 63 70 108 135 102 118 145 233 Heavy and Civil Engineering Construction 264 205 49 55 53 30 36 73 96 229 Nonstore Retailers 137 165 110 113 110 113 118 133 154 182 Administrative and Support Svc 159 154 149 162 163 176 139 134 161 169 Health and Personal Care Store 94 122 157 Rental and Leasing Services 145 141 122 99 95 86 103 100 107 140 Furniture and Home Furnishings 237 180 134 137 140 131 125 120 141 Amusement, Gambling & Recreation 83 119 118 121 126 123 99 Subtotal for top (20-22) 8,876 8,640 7,653 7,490 7,226 7,493 7,425 7,652 8,711 9,334Other (remaining) 743 653 569 675 729 636 705 790 859 1,121Total Sales Tax 9,619$ 9,293$ 8,222$ 8,165$ 7,955$ 8,129$ 8,130$ 8,442$ 9,570$ 10,455$

Local Tax Rate 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%

Population 35,870 38,040 39,250 42,393 42,830 43,600 44,350 45,320 46,020 47,540

Per Capita (*expressed in dollar)Per Capita Top 20 240$ 222$ 194$ 175$ 167$ 171$ 167$ 167$ 187$ 196$ Per Capita All Sales Tax 268$ 244$ 209$ 193$ 186$ 186$ 183$ 186$ 208$ 220$

Note: The total sales tax amounts reported in this table do not equal to the sales tax amounts reported in the financial section.The amounts for criminal justice and hotel/motel taxes are excluded from this table but are included in the financial section.

Table 6Sales Tax Revenues by Type, Governmental Funds


(amounts expressed in thousands except for per capita*)



AssessedFiscal Year Total Estimated Value as

Ended Personal Total Taxable Direct Actual a Percentage ofDecember 31 Real Property 1 Property 1 Assessed Value 1 Tax Rate Taxable Value Actual Value 2

2007 3,385,318 145,554 3,530,872 2.43 4,095,492 86.21%2008 4,320,765 164,624 4,485,389 2.15 4,974,321 90.17%2009 4,706,716 185,887 4,892,603 2.08 5,386,885 90.82%2010 4,749,994 175,333 4,925,327 2.14 5,453,794 90.31%2011 3 4,405,620 173,400 4,579,020 1.34 4,994,203 91.69%2012 4,151,701 171,080 4,322,781 1.47 4,787,210 90.30%2013 3,896,774 179,722 4,076,496 1.61 4,432,649 91.97%2014 4,155,780 183,332 4,339,112 1.54 4,604,217 94.24%2015 4,423,321 186,050 4,609,371 1.49 4,880,716 94.44%2016 4,729,482 190,122 4,919,604 1.43 5,224,283 94.17%

Source: Thurston County Assessor.Explanation:Property in the county is revalued each year to Fair Market Value with one-sixth of the county being physically inspected.Taxable assessed values have been adjusted for all tax-exempt real property. Tax rates are per $1,000 of assessed value.

1 Includes the regular values of property subject to regular (non-voter approved) levies. Values have been adjusted for all exemptions including senior citizens/disabled persons.2 Ratio set by the Washington Department of Revenue. 3 Decreased taxable value from previous year is due to the voter approved annexation to a fire district.

Table 7Assessed Value and Estimated Actual Value of Taxable Property

Last Ten Fiscal Years(amounts expressed in thousands)

$

$1000

$2000

$3000

$4000

$5000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mill

ions

Year

Total Taxable Assessed Value



General North TotalObligation Total Thurston Direct &

Fiscal Regular Debt Direct State Thurston Medic School Fire Port of OverlappingYear Rate Service Rates Schools County One PUD #1 Library District #3 District #3 Olympia Rates

2007 2.14 0.29 2.43 2.33 1.26 0.34 0.01 0.39 4.21 0.23 0.19 11.392008 1.88 0.26 2.15 2.01 1.08 0.29 0.01 0.34 3.61 0.15 0.15 9.792009 1.84 0.24 2.08 1.92 1.08 0.29 0.01 0.33 3.90 0.11 0.15 9.872010 1.90 0.24 2.14 2.06 1.14 0.31 0.01 0.34 3.76 0.12 0.16 10.042011 2 1.09 0.25 1.34 2.26 1.26 0.33 0.01 0.36 4.12 1.18 0.17 11.032012 1.20 0.27 1.47 2.45 1.32 0.37 0.01 0.38 4.57 1.32 0.18 12.072013 1.32 0.29 1.61 2.51 1.50 0.40 0.01 0.41 5.15 1.46 0.20 13.252014 1.28 0.26 1.54 2.38 1.39 0.39 0.01 0.42 4.84 1.53 0.20 12.702015 1.24 0.25 1.49 2.28 1.39 0.37 0.01 0.41 5.40 1.50 0.19 13.042016 1.21 0.22 1.43 2.12 1.32 0.37 0.01 0.41 5.25 1.50 0.18 12.59

Source: Thurston County Assessor, Statistical Report of Assessments for Taxes Payable in fiscal year.Explanation1 Overlapping rates are those of local and county governments that apply to property owners within the City of Lacey. Not all overlapping rates apply to all Lacey property owners; for example, although the county property tax rates apply to all city property owners, the Fire District ratesapply only to the approximately one-third of city property owners whose property is located within that district's geographic boundaries.2 Decreased tax rates from previous year is due to the voter approved annexation to a fire district.

Note: The levy limit calculation applies to a taxing district's budget, and not to increases in the assessed value or tax bill of individual properties. Washington State Law (RCW 84.55) restricts individual taxing districts from collecting, in any year, more than one percent increase in their regular, non-voted, levy over the highest levy amount since 1985. To increase the basic rate to the maximum of 3.60 would require a vote.

The Washington State Constitution limits the regular (non-voted) combined property tax rate applied to an individual's property toone percent of the market valuation. Voters may vote special levies that are added to this figure. If the taxes of all districts exceed this amount,each is proportionately reduced until the total is at or below the one-percent limit.

City of Lacey Overlapping Rates1

Table 8Property Tax Rates

Direct and Overlapping GovernmentsLast Ten Fiscal Years

$-

$2

$4

$6

$8

$10

$12

$14

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Levy Rates/$1,000Port of Olympia

Fire District #3

School District #3

Library

PUD #1

Medic One

Thurston County

State Schools

Debt Service

Regular Rate



Percentage of Percentage ofTaxable Total Taxable Taxable Total TaxableAssessed Assessed Assessed Assessed

Taxpayer Type of Business Value Rank Value Value Rank Value

Target Corporation Retail/Warehouse 101,553$ 1 2.07% 83,299$ 1 2.36%Panorama City Inc. Retirement Community 81,714 2 1.67% 61,670 2 1.75%WIG Properties LLC - Nisqually Real Estate Development 40,137 3 0.82%Home Depot USA Inc. Retail/Warehouse 35,499 4 0.72% 32,209 4 0.91%Capital Development Company Real Estate Development 34,569 5 0.70% 21,265 7 0.60%Puget Sound Energy/Elec Utility 27,806 6 0.57%Cabela's Wholesale INC Wholesale/retail 26,753 7 0.54%Trader Joes Company Retail 26,301 8 0.53%MWSH South Lacey LLC Real Estate Development 25,249 9 0.51%LR Lacey Market Square LLC Leasing/Land Development 23,773 10 0.48%CDC Properties II LLC Leasing/Land Development 59,774 3 1.69%Cox, Walt Leasing/Land Development 24,367 5 0.69%Lacey Market Square I and II LLC Leasing/Land Development 22,989 6 0.65%Wal-Mart Stores Inc Retail 21,137 8 0.60%VCG-Lacey LLC Leasing/Land Development 18,288 9 0.52%LALHA Properties Lacey LLC Real Estate Development 16,385 10 0.46%Totals for Top 10 423,354 8.61% 361,383 10.23%Balance of Taxpayers 4,496,250 91.39% 3,169,489 89.77%Total Assessed Values 4,919,604$ 100.00% 3,530,872$ 100.00%

Source: Thurston County Assessor

2016 2007

Table 9Principal Property Taxpayers

Current Year and Nine Years AgoDecember 31, 2016


Target CorporationPanorama City Inc.

WIG Properties LLC ‐Nisqually

Home Depot USA Inc.Home Depot USA Inc.

Puget Sound Energy/ElecCabela's Wholesale INC

Trader Joes Company

MWSH South Lacey LLC

LR Lacey Market Square LLC

Balance of Taxpayers

2016 Ten Largest Property Taxpayers



CollectionsFiscal Year Regular Tax Special Tax Total Tax Fiscal Year of the Levy 2 in

Ended Levy for Levy for Levy for Percentage subsequent PercentageDecember 31 Fiscal Year 1 Fiscal Year 1 Fiscal Year 1 Amount of Levy Years 2 Amount of Levy

2007 7,532 1,003 8,535 8,334 97.64% 201 8,535 100.00%2008 8,400 1,174 9,574 9,357 97.73% 217 9,574 100.00%2009 8,916 1,172 10,088 9,802 97.16% 283 10,085 99.97%2010 9,229 1,161 10,390 10,179 97.97% 201 10,380 99.90%2011 3 4,933 1,137 6,070 5,960 98.19% 106 6,066 99.93%2012 5,157 1,161 6,318 6,226 98.54% 88 6,314 99.94%2013 5,357 1,162 6,519 6,442 98.82% 76 6,518 99.98%2014 5,503 1,130 6,633 6,567 99.00% 53 6,620 99.80%2015 5,674 1,135 6,809 6,789 99.71% 3 6,792 99.75%2016 5,903 1,096 6,999 6,942 99.19% - 6,942 99.19%

1 Source: Thurston County Assessor2 Source: City of Lacey Finance Department and Thurston County Assessor3 Decreased tax levy from previous year is due to the voter approved annexation to a fire district.

Note: Tax levy for fiscal years 2007 through 2016 have been adjusted for subsequent certification adjustments.

To-DateCollected within the

Table 10Property Tax Levies and Collections


Total Collections

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Property Tax Levies & Collections

Total Tax Levy for FiscalYear 1

Total Collections To-Date

In thousands



General Special Revenue Bond Total PercentageFiscal Obligation Assessment PWTF LOCAL Animal Capital Contracts Water Stormwater Primary of Personal PerYear Bonds 1 Bonds Loan 2 Loan 3 Services 4 Leases Payable Fund Fund Government Income Capita 5

2007 25,609 1,405 2,161 - 213 99 - - - 29,487 2.08% 8222008 24,541 535 1,964 - 197 46 - - - 27,283 1.77% 7172009 23,418 270 1,768 - 182 27 743 - - 26,408 1.72% 6732010 22,459 - 1,571 - 166 54 743 - - 24,993 1.49% 5902011 21,201 - 875 149 69 743 - - 23,037 1.34% 5382012 20,067 - 750 1,122 131 59 - - - 22,129 1.24% 5082013 18,680 - - 971 113 30 - 7,240 1,464 28,498 1.56% 6432014 17,248 - - 818 93 93 - 6,972 1,411 26,635 1.37% 5882015 16,291 - - 661 73 107 - 6,689 1,353 25,174 1.27% 5472016 13,153 - - 501 - 77 - 6,403 1,294 21,428 1.05% 451

Note: Detail regarding the City's outstanding debt can be found in the notes to the financial statements.1 Presented net of original premiums2 Washington State Public Trust Fund Loan for Local Improvement District Special Assessment. Payments are funded by special assessments.3 Loan issued to provide funding to TCOMM 911 for a capital asset acquisition. Payments are funded by TCOMM 911.4 The City of Lacey administers the Animal Services financials. The balance at fiscal year-end 2012 represents the amount of debt due from the

City of Olympia. 5 See Table 16 - Demographic and Economics Statistics for personal income and population data.

* Information represents estimated information, as actual data is not available.

Business-Type Activities

Table 11Ratio of Outstanding Debt by Type

Last Ten Fiscal Years(amounts expressed in thousands, except per capital amount)

Governmental ActivitiesRevenue Bonds 1

$-

$200

$400

$600

$800

$1,000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Outstanding Debt Per Capita

In th

ousand

s

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Outstanding Debt by Type

Governmental Activities Business-type Activities

In th

ousand

s



Less: Percentage ofAmounts Estimated

General Restricted to Actual TaxableFiscal Obligation Repaying Value of Per Year Bonds 1 Principal Total Property 2 Capita 3

2007 25,609 - 25,609 0.63% 2482008 24,541 - 24,541 0.49% 2002009 23,418 - 23,418 0.43% 1702010 22,459 - 22,459 0.41% 1622011 21,201 - 21,201 0.42% 1712012 20,067 - 20,067 0.42% 1722013 18,680 - 18,680 0.42% 1732014 17,248 - 17,248 0.37% 1612015 16,291 - 16,291 0.33% 1442016 13,153 - 13,153 0.25% 108

Note: Details regarding the city's outstanding debt can be found in the notes to the financialstatements.

Explanation1 Presented net of original premiums.2 See the Schedule of Assessed Value and Estimated Actual Value of Taxable Property on

page 8-7 for property value data.3 Per capital data can be found in the Demographic and Economic Statistics on page 8-18.

Table 12Ratios of General Bonded Debt Outstanding

Last Ten Fiscal Years(amounts expressed in thousands, except per capita amount)

$-

$50

$100

$150

$200

$250

2007 2008 2009 2010 2011 2012 2013 2014 2015

Bonded Debt Per Capita

In th

ousand

s



Direct and Estimated Estimated

General Percent Share ofObligation Debt Overlapping Overlapping

Governmental Unit Outstanding with City1 Debt

Debt repaid with property taxes: Thurston County 73,358$ 17.63% 12,933$ Port of Olympia 42,520 17.63% 7,496 Public Utility District 1 5,223 17.63% 921 North Thurston School District #3 209,943 49.28% 103,460 Fire District No. 3 2,740 56.40% 1,545

333,784 126,355

City of Lacey's direct debt 2 13,731

Total direct and overlapping debt 140,086$

Source: Assessed value data used to estimate applicable percentages provided by the ThurstonCounty Assessor. Debt outstanding information is provided by the Thurston County Treasurer (County and District Debt Outstanding)

Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Lacey. This processrecognizes that, when considering the government's ability to issue and repay long-term debt, theentire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt,of each overlapping government.

Explanation1 The percentage of overlapping debt applicable is estimated using taxable assessed property values.

Applicable percentages were estimated by determining the portion of the county's taxable assessedvalue that is within the government's boundaries and dividing it by the county's total taxable assessed value as well as the other governmental units.

2 Presented net of original premiums.

Table 13Direct and Overlapping Government Activities Debt

As of December 31, 2016(amounts expressed in thousands)



2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Debt Limit 264,815$ 336,404$ 366,945$ 369,400$ 343,427$ 324,209$ 305,737$ 325,433$ 345,703$ 368,970$

Total net debt applicable to limit 25,340 24,214 23,089 22,169 21,011 20,968 19,362 17,840 16,528 13,421

Legal debt margin 239,475$ 312,190$ 343,856$ 347,231$ 322,416$ 303,241$ 286,375$ 307,593$ 329,175$ 355,549$

Total net debt applicable to thelimit as a percentage of debt limit 9.6% 7.2% 6.3% 6.0% 6.1% 6.5% 6.3% 5.5% 4.8% 3.6%

Legal Debt Margin Calculations:

Total Assessed Valuation of Taxable Real & Personal Property 4,919,604$

Legal Debt limit (7.5% of total assessed value) 368,970$

Outstanding General Obligation Indebtedness as of December 31, 2016Governmental Activities - general obligation bonds, net of premium 13,153$ Governmental Activities - LOCAL program loan 501 Governmental Activities - capital leases 77 Total Indebtedness subject to debt limit 13,731 Less: Amount set aside for repayment of general obligation debt (310)

Net Indebtedness subject to debt limit 13,421$

Legal debt margin 355,549$

Note: Under the Revised Code of Washington (RWC), the City of Lacey's outstanding obligation debt should not exceed 7.5 percent of total assessed property value.By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds.

Table 14Legal Debt Margin Information




Total Less Net SpecialFiscal Operating Operating Available AssessmentYear Revenues Expenses Revenue Principal Interest Coverage Collections Principal Interest Coverage

2007 22,027 14,148 7,880 330 11 23.11 1,453 1,401 224 0.892008 22,124 16,022 6,102 - - - 1,130 1,066 148 0.932009 22,703 16,489 6,213 - - - 515 461 91 0.93 2010 22,525 17,194 5,331 - - - 557 466 69 1.04 2011 24,541 18,026 6,515 - - - 777 696 47 1.05 2012 25,356 19,055 6,301 - - - 1,513 125 31 9.70 2013* 27,780 21,450 6,330 - - - 928 750 25 1.20 2014* 30,890 21,777 9,113 300 277 15.79 827 - - n/a2015* 34,816 22,633 12,183 320 286 20.10 742 - - n/a2016* 39,755 23,953 15,802 325 279 26.16 516 - - n/a

Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements.Operating revenues do not include investment earnings and other non-operating revenues. Operating expenses do not Include interest or depreciation expenses.Debt Service amounts are only for cash payments (excluding amortization of bonds premiums)Public trust fund loan is included for special assessment bonds.The City's minimum required debt coverage is 1.20 per bond ordinance, only for Sewer/Water Revenue Bonds.Amounts for 2004 through 2012 did not include stormwater fund revenues and expenses *Includes revenues and expense of the City's Waterworks Utility which includes water, wastewater, and stormwater funds.

Debt ServiceDebt Service

Table 15Pledged-Revenue Coverage


Sewer/Water Revenue Bonds Special Assessment Bonds



Personal North Income Thurston

(amounts Per Capita PublicFiscal expressed Personal School UnemploymentYear Population in thousands) Income1 Enrollment 2 Rate 3

2007 35,870 1,420,524 39,602 13,842 4.9%2008 38,040 1,543,473 40,575 14,025 5.4%2009 39,250 1,539,385 39,220 13,952 7.9%2010 42,393 1,671,938 39,439 14,177 9.0%2011 42,830 1,721,809 40,201 13,872 9.0%2012 43,600 1,789,649 41,047 14,407 8.4%2013 44,350 1,821,499 41,071 14,804 7.6%2014 45,320 1,948,488 42,994 4 14,848 6.4%2015 46,020 1,978,584 42,994 4 15,048 5.9%2016 47,540 2,043,935 42,994 4 15,065 5.5%

Data Sources: 1, 2 Thurston Regional Planning Council, The Profile (www.trpc.org)3 Thurston Regional Planning Council. The Profile (www.trpc.org)

U.S. Bureau of Labor Statistics: Local Area Unemployment Statisticshttp://www.bls.gov/lau/home.htm

Explanation:1 The per capita personal income for Lacey is not available and therefore used is the data for Thurston

County. The amount is presented is "nominal" dollars, which represent the actual dollar value at thepoint in time for which the income as measured and do not include the effects of inflation.

3 Unemployment Rate for Thurston County (Annual Average) 4 Current year data is not available. Used 2014 data.

Table 16Demographic and Economic Statistics

Last Ten Fiscal Years

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Years

Percent Increase in Population



Approx. Percentage Approx. Percentage Number of of Total City Number of of Total City

Employer Business type Employees Employment 6 Employees 3 Employment 3

State of Washington 1 Government 2,590 10.1% 3,545 18.7%North Thurston Public Schools 1 Education 1,800 7.0% 1,730 9.1%Xerox 1 Retail 650 2.5%Wal-Mart Corporation 1 Retail 500 2.0% 475 2.5%Safeway Corporation 1 Retail 500 2.0%Panorama City 1 Retirement Community 450 1.8% 300-400 1.8%Cabelas 1 Retail 300 1.2%St. Martin's University 1 Education 289 1.1% 350 1.8%City of Lacey 2 Government 244 1.0% 460 5 2.4%Fred Meyer 1 Retail 207 0.8% 251 1.3%Roo Lan Healthcare 1 Healthcare 200 0.8%Sunset Air 1 Retail 200 0.8%Lowes 1 Retail 125 0.5%Costco Corporation 1 Retail 110 0.4%Home Depot 1 Retail 100 0.4%Target Corporation 1 Retail 100-500 1.2% 300-500 2.1%Ostrom Mushroom Company Other 300-320 1.1%Illuminet (as of 2002, Verisign) Retail 250 1.3%Total 8,365 - 8,765 33.6% 7,961 - 8,281 42.1%Total estimated jobs in City 4 25,610 19,000 6

Source1. Thurston Economic Development Council (EDC)2. City of Lacey, full-time equivalent3. City of Lacey, 2007 CAFR4. Thurston Regional Planning Council (TRPC), the Profile

Explanation:5. 2016 number of employee is full-time equivalents. 2007 number of employees included fulltime and part-time employees.6 Percentage of total city employment for 2016 is based on First Quarter 2014 total estimated jobs 25,610.

2007 percentage was based 2003 total estimated jobs 19,000.

2016 2007

Table 17Principal Employers

Current Year and Nine Years Ago

Government 39%

Retail/Wholesale 26%

Education 28%Retirement

Community 6%

Principal Employer Business



Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

General government 27.00 30.00 30.00 30.00 30.00 31.00 31.00 31.00 31.00 31.00Security of persons and property

Police Officers 51.00 54.00 56.00 56.00 55.00 55.00 53.00 53.00 53.00 53.00Civilians 14.28 14.28 14.28 14.28 14.28 14.28 11.64 11.64 11.00 11.00

TransportationEngineering 37.00 38.00 38.00 38.00 38.00 38.00 35.00 36.00 36.00 36.00Maintenance 30.68 30.50 33.50 33.50 34.50 34.50 34.50 34.50 35.50 35.50

Economic development 17.75 17.75 17.75 17.75 17.75 17.75 15.00 15.00 16.00 16.00Culture and recreation 14.00 14.88 16.00 16.00 16.00 16.00 15.00 15.00 15.00 15.00Water 23.95 25.45 24.45 25.45 25.00 24.45 23.45 23.45 23.45 23.45Wastewater 16.05 14.55 14.55 14.55 14.00 14.55 15.55 15.55 15.55 15.55Stormwater 5.32 6.50 6.50 6.50 6.50 6.50 6.50 6.50 6.50 7.50

Total 237.03 245.91 251.03 252.03 251.03 252.03 240.64 241.64 243.00 244.00

Source: City of Lacey Budget Records

Table 18Full-time Equivalent City Government Employees by Function


225

230

235

240

245

250

255

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Full Time Equivalents



2007 2008 2009 2010 2011 2012 2013 2014 2015 2016FunctionPolice

Total Arrests 4,006 4,331 4,084 4,169 3,795 3,136 3,380 3,109 2,792 2,292 Total citations issued 4,997 6,180 7,571 5,736 5,824 4,455 6,121 4,557 4,197 2,203 Incidents 36,744 38,049 39,161 36,557 34,014 32,510 39,242 40,712 41,784 38,240 Overall crime rate per thousand population 51.4 48.2 41.1 41.1 34.8 35.4 34.4 30.2 Not available Not available

Highways and streetsState of the street (% of Very Good or Good Condition) 91.0% 95.0% 93.0% 94.0% 96.0% 95.9% 96.3% 96.5% 95.9% 97.0%St Ft of sidewalk replaced 4,311 4726 1035 202 3,007 2,028 2,625 2,600 3,530 4,530 Yards of sweeper debris collected 1,772 904 1,682 1,438 1,156 1,339 1,517 1,307 1,856 1,515

Economic DevelopmentNumber of new building permits issued 1,157 494 402 362 325 283 225 333 311 378Number of building inspections 17,002 9,467 7,351 6,586 6,915 7,132 7,587 7,587 7,587 11,145 Number of complaints processed 154 129 127 93 98 84 83 92 107 449 Commercial site plan reviews 1 29 32 10 12 9 12 10 12 16 42

Culture and recreationCommunity center bookings 911 921 724 765 760 778 788 756 719 730 Regional Athletic Complex (RAC) fields bookings - - 1,235 1,872 1,955 2,194 2,247 2,281 2,496 2,548 RAC Number of participants - leagues, tournaments - - - 42,785 47,685 50,243 50,315 74,910 75,150 76,349 Program registrations 12,350 13,582 13,181 13,740 12,108 13,538 9,001 11,860 12,105 16,644 Community-wide special events 38 40 40 41 41 31 31 31 31 33

WaterGallons of water pumped (millions) 2,774 2,666 2,595 2,199 2,243 2,396 2,416 2,483 2,633 2,698 Gallons of water sold (millions) 2,259 2,249 2,336 2,061 2,188 2,186 2,165 2,216 2,329 2,470 Percentage of water sold 81% 84% 90% 94% 98% 91% 90% 89% 88% 92%Average daily consumption (millions of gallons) 6 6 6 6 6 7 7 6 6 7 Number of valves exercised 1,184 1,924 3,617 1,653 1,456 2,230 3,186 2,578 1,715 2,226 Number of hydrants exercised 2,879 3,060 3,334 3,432 3,492 2,510 1,073 3,258 3,933 3,577 Number of water mains breaks 220 173 198 168 130 104 93 84 121 181 Number of customers served 20,295 20,863 21,362 21,812 22,840 23,237 22,813 23,185 23,571 23,984 Number of irrigation customers 651 693 709 724 692 702 713 723 739 751

WastewaterNumber of lift station incident responses 333 288 231 324 363 390 376 362 363 303 Number of STEP system connections 2,814 2,837 2,861 3,656 3,882 3,901 4,058 4,093 4,175 4,250 Number of STEP system incident responses 236 247 278 188 201 186 221 150 180 191 Lines cleaned (in feet) 130,511 104,219 390,555 390,644 323,671 373,410 331,763 403,906 262,153 277,756 Lines televised (in feet) 181,212 290,829 263,451 346,117 267,686 328,911 285,785 155,367 161,233 121,261 Odor complaints 7 11 1 1 3 - 3 1 1 3

StormwaterCity responses to spills 56 57 54 109 137 106 134 136 129 159

Sources: Various departments of the City and the "Statistical Measurements" reports from City Manager's Office.Notes:

1 2016 numbers include both commercial and residential site plan reviews (separate data not available)

Table 19Operating Indicators by Function




2007 2008 2009 2010 2011 2012 2013 2014 2015 2016FunctionSecurity of persons and property

Police station 1 1 1 1 1 1 1 1 1 1 Patrol vehicles 16 18 21 22 22 22 22 22 22 23

Highways and streetsMiles of street 1 132 CL 148 CL 345 LM 351 LM 352 LM 358 LM 360 LM 368 LM 375 LM 379 LMMiles of sidewalk 191 CL 191 CL 200 CL 200 CL 202 CLNumber of streetlights 3,246 3,653 3,796 3,842 4,015 4,136 4,311 4,311 4,448 4,910 Number of street signs 6,674 7,027 7,400 7,528 7,606 7,674 7,726 7,942 8,126 8,344 Number of traffic signals 40 40 42 42 55 56 56 56 56 56

Culture and recreationNumber of parks 24 25 25 25 25 25 25 25 25 25 Parks acreage including outside city limits 501 531 579 501 568 568 568 506 506 506 Developed parks acres 186 237 265 297 335 335 335 340 340 340 Total open space acres with outside city limits - - - 163 561 648 648 637 637 637 Soccer fields 8 8 10 10 10 10 10 10 10 10 Tennis courts 9 9 9 9 9 9 9 9 9 9 Baseball, softball fields 7 7 12 12 12 12 12 12 12 12 Community centers 1 1 1 1 1 1 1 1 1 1 Senior centers 1 1 1 1 1 1 1 1 1 1 Community buildings 3 3 3 3 3 3 3 3 3 3

WaterNumber of production wells 19 19 19 19 19 19 20 20 20 20 Miles of water lines 353 348 357 360 370 385 393 392 402 386 Number of reservoirs 8 8 7 7 8 7 7 7 7 7 Number of booster stations 8 8 6 6 10 6 6 6 6 6 Number of valves 2 10,023 10,187 10,002 10,174 10,219 10,211 10,399 10,512 12,214 11,283Number of Hydrants 2 3,037 4,216 3,424 3,469 3,479 3,500 3,572 3,653 3,685 3,720

WastewaterMiles of sewer transmission lines 136 145 147 151 154 156 157 162 147 167 Number of lift stations 46 44 44 45 48 47 48 48 50 51 Miles of STEP transmission lines 49 51 52 52 52 55 55 55 55 56 Odor control facilities 11 11 13 14 14 15 14 13 13 13

StormwaterNumber of catch basins 3,580 3,741 4,010 4,419 4,716 4,971 5,198 5,235 5,245 5,810 Number of city storm ponds 38 38 43 49 49 56 62 63 47 47 Acres of storm ponds 3 681 1,037 1,027 1,235 1,768 105 109 115 110 110

Sources: Various city departments and the "Statistical Measurements" reports from City Manager's Office.Note: No capital asset indicators are available for the general government or physical environment.

Note:1. CL = Center Line Miles; LM = Lane Miles2. Decline in numbers in 2009 were due to editing the map and some waterlines that were replacement had fewer valves.3. 2012 data is express as acres of storm ponds, whereas the data for 2011 through 2005 are expressed as

"acres maintained" calculated by multiplying the number of maintenance visits by the actual acre total.Certain statistical data for certain year(s) are either not applicable or not readily available, therefore are not presented.

Table 20Capital Asset Statistics by Function



Documents

2016 Comprehensive Annual Financial Report · 2016 Comprehensive Annual Financial Report City of Lacey, Washington 2016 Comprehensive . Annual Financial Report. For the Year Ended