Tualatin Valley Fire and Rescue, a Rural Fire Protection District

The information in this Preliminary Official Statement is not complete and may be changed. This Preliminary Official Statement is not an offer to sell the referenced Bonds and is not soliciting an offer to buy the Bonds in any state where the offer or sale is not permitted. Optional Redemption”herein. District andtopaythecostsofissuance.See“THEBONDS –TheRefundingPlan”herein. than theDistrict. Washington County,ClackamasMultnomahtheStateofOregon,oranypoliticalsubdivisionthereof other if any,ontheBondspromptlywhenandastheybecomedue.Thedonotconstituteadebtorindebtedness of taxes andothermonies available for the payment of debtserviceonthe Bonds, to pay interest, principal, andpremium, Constitution, aftertakingintoconsiderationdiscountstakenanddelinquenciesthatmayoccurinthepayment ofsuch without limitationastorateoramount,andoutsideofthelimitationsSections1111b,ArticleXI Oregon Bondowners to levy annually a direct ad valorem tax upon all of the taxable property within the District in an amount owners ofeachtheBondsforpunctualpaymentsuchobligations,whendue.TheDistrictcovenants withthe in turn,willberequiredtodistributesuchpaymentsDTCParticipantsforultimatedistributiontheBeneficial Owners. the book-entry-onlysystem,principalandinterestpaymentsaretoberemittedbyPayingAgentdirectlyDTC who, currently U.S.BankNationalAssociation,Portland,Oregon(the“PayingAgent”).SolongastheBondsremainsubject to date. Interestwillbepaidthroughtheprincipalcorporatetrustofficesofregistrarandpayingagent District, Bond registerasoftheclosebusinesson15thdaymonth(the“RecordDate”)precedingeachinterest payment March 1andSeptemberofeachyear,commencing1,2018totheregisteredownerataddressappearing onthe Company (“DTC”),NewYork,York(see“BOOK-ENTRYSYSTEMONLY”herein).Interestispayablesemiannually on multiples thereof.TheBondsareregisteredbondsissuedinthenameofCEDE&Co.,asnomineeDepository Trust Rescue, ARuralFireProtectionDistrict(the“District”),inbook-entryonlyformdenominationsof$5,000or integral * Preliminary, subjectto change. DATED: DATEOFDELIVERY opinion ofBondCounsel. from State of Oregon personal income tax under existing law. See “TAX MATTERS” herein for a discussion of the of calculatingthealternativeminimumtax.InopinionBondCounsel,interestonBondsisexempt corporations undertheCodeandisnotincludedinadjustedcurrentearningsofforpurposes is nottreatedasapreferenceitemincalculatingthealternativeminimumtaximposedonindividualsand Section 103oftheInternalRevenueCode1986,asamended(the“Code”),and(ii)interestonBonds herein, (i)interestontheBondsisexcludedfromgrossincomeforfederaltaxpurposespursuantto existing statutesandcourtdecisionsassumingcontinuingcompliancewithcertaintaxcovenantsdescribed BOOK ENTRYONLY NEW ISSUE–COMPETITIVESALE investment decision. Investors must read the entire Official Statement to obtain information essential tothemaking of an informed Securities Transferonbehalf ofDTC,onoraboutOctober18,2017. Oregon, BondCounsel.Itis expected thattheBondswillbeavailablefordeliveryto thePayingAgentforFastAutomated sale totheoriginalpurchaser subjectto the finalapprovinglegalopinion of HawkinsDelafield&WoodLLP,Portland, included herein. Competitive Sale.TheBondswillbesoldpursuanttoacompetitivesaleasdescribedintheOfficialNoticeofBondSale The Bonds are not subject to optional redemption prior to their stated maturity dates. See “THE BONDS – No The proceedsofthesaleBondswillbeusedtorefund certainoutstandinggeneralobligationbondsofthe The BondsaregeneralobligationsoftheDistrict.fullfaithandcreditDistrictpledgedtosuccessive The GeneralObligationRefundingBonds,Series2017(the“Bonds”),willbeissuedbyTualatinValleyFireand This coverpagecontains certain informationforquickreferenceonly.Itis notasummaryoftheissue. ______, theinitialpurchaser, purchasedtheBondsviacompetitivesaleon______,2017. TheBondsareofferedfor In theopinionofHawkinsDelafield&WoodLLP,BondCounseltoDistrict(“BondCounsel”),under PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER 7, 2017 (Washington, ClackamasandMultnomahCounties,Oregon)

General ObligationRefundingBonds,Series2017 T

ualatin See MaturityScheduleonInsideCover A RuralFireProtectionDistrict

V alley $12,990,000* F ire

and R escue DUE: MARCH1,ASSHOWNBELOW , (See “RATING”herein) RATING: MOODY’SAaa

∗ $12,990,000 Tualatin Valley Fire and Rescue, A Rural Fire Protection District (Washington, Clackamas and Multnomah Counties, Oregon) General Obligation Refunding Bonds, Series 2017

MATURITY SCHEDULE*

Due Principal Interest CUSIP † March 1 Amount* Rate Yield ______

2018 $ 270,000 2019 55,000 2020 1,750,000 2021 1,775,000 2022 1,810,000 2023 1,840,000 2024 550,000 2025 900,000 2026 940,000 2027 985,000 2028 1,035,000 2029 1,080,000

† Copyright 2017, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, managed by Standard and Poor’s Financial Services LLC, a division of The McGraw Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the District and are included solely for the convenience of the registered owners of the applicable Bonds. Neither the District nor the Underwriter is responsible for the selection or uses of these CUSIP numbers, and no representation is made as to their correctness on the applicable Bonds or as included herein. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

∗ Preliminary, subject to change.

TUALATIN VALLEY FIRE AND RESCUE, A Rural Fire Protection District (Washington, Clackamas and Multnomah Counties, Oregon) 11945 S.W. 70TH AVENUE TIGARD, OREGON 97223-9196 (503) 649-8577

BOARD OF DIRECTORS Clark I. Balfour President Gordon L. Hovies Vice President Brian J. Clopton Secretary/Treasurer Robert C. Wyffels Board Member Randy J. Lauer Board Member

OFFICIALS Michael R. Duyck Fire Chief Debra L. Grabler Chief Financial Officer Mark E. Havener Assistant Chief – Business Operations Les M. Hallman Assistant Chief – EMS, Training, Volunteers Deric C. Weiss Assistant Chief – Integrated Operations

BOND COUNSEL Hawkins Delafield & Wood LLP Portland, Oregon

REGISTRAR AND PAYING AGENT U.S. Bank National Association Global Corporate Trust Services Portland, Oregon

MUNICIPAL ADVISOR PFM Financial Advisors LLC Portland, Oregon

No dealer, broker, salesperson or other person is authorized by the District or the Underwriter to give any information or to make any representation other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing.

The information set forth in this Official Statement has been furnished by the District and includes information obtained from other sources, all of which are believed to be reliable. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. Such information and expressions of opinion are made for the purpose of providing information to prospective investors and are not to be used for any other purpose or relied on by any other party.

No website mentioned in this Official Statement is part of this Official Statement, and readers should not rely upon any information presented on any such website in determining whether to purchase the Bonds. Any references to any website mentioned in this Official Statement are not hyperlinks and do not incorporate such websites by reference.

In connection with this offering, the Underwriter may over allot or effect transactions that stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The public offering prices or yields set forth on the inside cover page hereof may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers, unit investment trusts or money market funds at prices lower than the public offering prices stated on the inside cover pages hereof.

Certain statements contained in this Official Statement do not reflect historical facts but are forecasts and “forward- looking statements.” No assurance is given that any future results discussed herein will be achieved, and actual results may differ materially from any forecasts described herein. In this respect, the words such as “estimate,” “project,” “forecast,” “anticipate,” “expect,” “intend,” “plan,” “believe” and similar expressions identify forward- looking statements. All projections, forecasts, assumptions, expressions of opinion and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement.

The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety. The offering of the Bonds is made only by means of this entire Official Statement.

This Preliminary Official Statement has been “deemed final” as of its date by the District, except for the omission of offering prices, interest rates, selling commissions, aggregate principal amount, principal amount per maturity, delivery dates and other terms of the Bonds depending on such matters, in accordance with Rule 15c2-12(b)(i) under the Securities Exchange Act of 1934, as amended.

The District maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making investment decisions with respect to the Bonds.

TABLE OF CONTENTS

OFFICIAL NOTICE OF SALE ...... i THE BONDS ...... 1 PRINCIPAL AMOUNT, DATE, INTEREST PAYMENT AND MATURITIES ...... 1 PAYING AGENT AND REGISTRATION FEATURES ...... 1 DELIVERY OF THE BONDS - BOOK ENTRY FORM ...... 1 PROCEDURE IN THE EVENT OF REVISIONS OF BOOK-ENTRY TRANSFER SYSTEM ...... 1 NO OPTIONAL REDEMPTION...... 2 [MANDATORY REDEMPTION] ...... 2 NOTICE OF REDEMPTION ...... 2 AUTHORIZATION AND PURPOSE ...... 3 THE REFUNDING PLAN ...... 3 SECURITY FOR AND PAYMENT OF THE BONDS ...... 4 DEFAULTS AND REMEDIES ...... 5 DEFEASANCE ...... 5 ESTIMATED SOURCES AND USES OF FUNDS ...... 6 THE DISTRICT ...... 7 EXPANSION OF DISTRICT SERVICE AREA ...... 8 DISTRICT ADMINISTRATION ...... 9 THE BOARD OF DIRECTORS ...... 9 KEY ADMINISTRATIVE OFFICIALS ...... 10 DEBT LIMITATION ...... 11 LONG-TERM BORROWING ...... 14 FUTURE DEBT PLANS ...... 15 SHORT-TERM BORROWING ...... 15 DEBT MANAGEMENT ...... 15 DISTRICT STAFF AND LABOR CONTRACT...... 15 DEBT POLICIES ...... 15 FINANCIAL INFORMATION ...... 16 AWARDS ...... 16 BUDGETING PROCESS AND CONTROLS ...... 16 OTHER REVENUE SOURCES ...... 17 BASIS OF ACCOUNTING ...... 17 FISCAL YEAR ...... 17 CASH AND INVESTMENTS ...... 17 RETIREMENT PLANS ...... 18 OTHER POST-EMPLOYMENT BENEFITS ...... 23 DEFERRED COMPENSATION PLANS...... 24 PENSION AND OTHER POST-EMPLOYMENT BENEFITS RELATED TO EXPANSION OF DISTRICT SERVICE AREA ...... 24 RISK MANAGEMENT ...... 26 INDEPENDENT AUDIT REQUIREMENT ...... 27 TAXES AND STATE FUNDING ...... 32 LOCAL OPTION PROVISIONS ...... 34 TAX LEVY ...... 34 PROPERTY TAX EXEMPTIONS ...... 34 STRATEGIC INVESTMENTS PROGRAM AND GAIN SHARE ...... 36 ECONOMIC AND DEMOGRAPHIC INFORMATION ...... 37 GENERAL ...... 37 POPULATION ...... 37 LABOR FORCE AND EMPLOYMENT ...... 38 LOCAL AREA PERSONAL AND PER CAPITA INCOME ...... 42 HOUSING ...... 42 MANUFACTURING ...... 42 SHOPPING AND RETAIL ...... 43 TRANSPORTATION ...... 43 UTILITIES ...... 43 PUBLIC FACILITIES ...... 43 PUBLIC SAFETY ...... 44 HIGHER EDUCATION...... 44 HEALTH CARE ...... 44 RECREATION/TOURISM ...... 44 INFORMATION SOURCES ...... 44 THE INITIATIVE AND REFERENDUM PROCESS ...... 45 TAX MATTERS...... 46

RATING ...... 48 UNDERWRITING ...... 48 CONTINUING DISCLOSURE UNDERTAKING ...... 48 LITIGATION ...... 48 CERTAIN LEGAL MATTERS ...... 48 MUNICIPAL ADVISOR ...... 49 FORWARD-LOOKING STATEMENTS ...... 49 MISCELLANEOUS ...... 49

APPENDIX A: DISTRICT’S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016 ...... A-1 APPENDIX B: FORM OF BOND COUNSEL OPINION ...... B-1 APPENDIX C: FORM OF CONTINUING DISCLOSURE CERTIFICATE ...... C-1 APPENDIX D: BOOK ENTRY ONLY SYSTEM ...... D-1

OFFICIAL NOTICE OF SALE

$12,990,000∗ TUALATIN VALLEY FIRE AND RESCUE, A RURAL FIRE PROTECTION DISTRICT WASHINGTON, CLACKAMAS AND MULTNOMAH COUNTIES, OREGON GENERAL OBLIGATION REFUNDING BONDS SERIES 2017

NOTICE IS HEREBY GIVEN that bids will be received on behalf of Tualatin Valley Fire and Rescue, A Rural Fire Protection District, Washington, Clackamas and Multnomah Counties, Oregon (the “District”) for the purchase of the above-captioned Series 2017 Bonds (the “Bonds”) until 9:00 a.m. (Prevailing Pacific Time) on: September 19, 2017

Bids must be submitted electronically through PARITY as described herein. The District will act on the bids within four hours.

SECURITY: The Bonds are general obligations of the District. The full faith and credit of the District are pledged to the successive owners of each of the Bonds for the punctual payment of such obligations, when due. The District covenants with the Bondowners to levy annually a direct ad valorem tax upon all of the taxable property within the District in an amount without limitation as to rate or amount, and outside of the limitations of Sections 11 and 11b, Article XI of the Oregon Constitution, after taking into consideration discounts taken and delinquencies that may occur in the payment of such taxes and other monies available for the payment of debt service on the Bonds, to pay interest, principal, and premium, if any, on the Bonds promptly when and as they become due.

RATING: The District has applied for and received a rating of “Aaa” from Moody’s Investors Service on the Bonds, and will pay the cost thereof.

INTEREST PAYMENTS AND MATURITY: Interest on the Bonds is payable semiannually on March 1 and September 1 of each year until maturity, commencing March 1, 2018. The Bonds will be dated with their date of delivery, will be issued in the aggregate principal amount of $12,990,000*, and will mature on March 1 of the following dates in the following amounts, subject to adjustment as provided below:

Due March 1 Amounts* 2018 $ 270,000 2019 55,000 2020 1,750,000 2021 1,775,000 2022 1,810,000 2023 1,840,000 2024 550,000 2025 900,000 2026 940,000 2027 985,000 2028 1,035,000 2029 1,080,000

∗ Preliminary, subject to change.

ADJUSTMENT OF MATURITIES: The District reserves the right to adjust the principal amount specified in the bidding maturity schedule within four hours following receipt of bids. The District will adjust maturities to meet cash flow requirements. If the District adjusts the principal amount, the price to be paid to the District by the winning bidder will be adjusted in a manner that preserves the winning bidder’s percentage net compensation. The successful bidder of the Bonds will promptly be given notice of any adjustment.

RIGHT TO CANCEL, CHANGE TIMING AND TERMS OF SALE: The District reserves the right at any time prior to the sale to change the date, maturity schedule, amount, timing, and other terms of the Bonds and terms under which the Bonds are offered for sale, to postpone the sale to a later date, or to cancel the sale based upon market conditions. Notice of any changes will be communicated through Ipreo or The Municipal Market Monitor (TM3).

NO OPTIONAL REDEMPTION: The Bonds are not subject to optional redemption prior to their stated maturity dates.

TERM BONDS: Bidders may designate two or more consecutive maturities of Bonds, with identical interest rates, as term Bonds. Each term Bonds will mature on the final maturity date of its consecutive maturities, in an aggregate principal amount equal to the sum of the principal amounts of its consecutive maturities. Term Bonds will be subject to mandatory redemption at par and by lot, in the amounts and on the dates which would have been consecutive maturities. If no term Bonds are designated in the winning bid, the Bonds will mature serially as provided in this Notice of Sale.

BIDDING CONSTRAINTS: All bids will be subject to the terms and conditions of this Official Notice of Sale. All bids for the Bonds must comply with the following conditions: (1) each interest rate must be a multiple of one thousandths of one percent (0.001%); (2) no Bond may bear more than one rate of interest; (3) each Bond must bear interest from its date to its stated maturity date at the interest rate specified in the bid; (4) all Bonds within each series of Bonds maturing on the same date must bear the same rate of interest; and (5) no bid will be considered that does not offer to purchase all of the maturities of the Bonds.

BIDS: Bids must be submitted via PARITY. Bids must be received by the PARITY system not later than the date and time indicated in the first paragraph of this Notice of Sale. For further information about submitting a bid using PARITY, potential bidders may contact Kieu-Oanh Nguyen, PFM Financial Advisors LLC (the “Municipal Advisor”) at Telephone: (503) 249-1412 or PARITY at Telephone: (212) 849-5021. To the extent any instructions or directions set forth in PARITY conflict with this Notice of Sale, the terms of this Notice of Sale shall control. Bidders electing to submit bids through PARITY must obtain access to the PARITY system and bear all risks associated with using that system, including errors and delays in receipt of bids.

BEST BID: Unless all bids are rejected, the Bonds will be awarded to the responsible bidder submitting the bid which results in the lowest true interest cost based on the submitted bid to the District. True interest cost will be determined by doubling the semiannual interest rate necessary to discount the debt service on the Bonds to October 18, 2017 (the estimated closing date of the Bonds), and the price bid for the Bonds. Each bidder is requested to supply the total interest cost and the true interest cost that the District will pay on the Bonds if the bid is accepted. The purchaser must pay accrued interest, computed on a 360-day basis, from the date of the Bonds to their date of delivery.

GOOD FAITH DEPOSIT: The winning bidder will be required to provide a good faith deposit in the amount of $260,000 in immediately available funds wired to the District not later than 1:30 p.m.

(Pacific Time) on September 19, 2017. The District or the District’s Municipal Advisor will provide the wire information immediately upon the award of bids.

The good faith deposit will be held by the District to secure the District from any loss resulting from the failure of the bidder to comply with the terms of its bid, and will be forfeited to the District as liquidated damages if the bidder to whom the Bonds are awarded withdraws its bid or fails to complete its purchase of the Bonds in accordance with this Notice of Sale and its bid.

Interest earnings on the good faith deposit will be the property of the District, and will not be credited against the purchase price of the Bonds. The successful bidder shall pay the balance of the purchase price of the Bonds at closing, in funds immediately available to the District on the date and at the time of closing.

RIGHT OF REJECTION: The District reserves the right to reject any or all bids, and to waive any irregularities.

BOOK ENTRY ONLY: The Bonds will be issued in registered, book-entry only form through DTC. Bonds will be available in denominations of $5,000, or integral multiples. Unless the book-entry-only system is discontinued, Bond principal and interest payments will be made by the District to DTC through the District’s paying agent. DTC will be responsible for making payments to beneficial owners of Bonds.

STANDARD FILINGS AND CHARGES: The successful bidder will be required to make the standard filings and maintain the appropriate records routinely required pursuant to Municipal Securities Rulemaking Board (“MSRB”) Rules G 8, G 11, and G 36. The successful bidder will be required to pay the standard MSRB charge for the Bonds purchased. In addition, if the successful bidder is a member of the Securities Industry and Financial Markets Association (“SIFMA”) it will be required to pay SIFMA’s standard charges.

PURPOSE: The Bonds were authorized pursuant to Oregon Revised Statutes Chapters 287A and 478 and the Resolution adopted by the District on August 22, 2017. The Bonds will be issued to advance refund all or a portion of the District’s callable General Obligation Bonds, Series 2009 and General Obligation Bonds, Series 2009B and pay bond issuance costs incidental thereto.

OBLIGATION OF WINNING BIDDER TO ASSIST IN ESTABLISHING ISSUE PRICE AND TO DELIVER AN ISSUE PRICE CERTIFICATE AT CLOSING: By submitting a bid, each bidder is certifying that it is an underwriter of municipal bonds who has an established industry reputation for underwriting new issuances of municipal bonds, and that its bid is a firm offer to purchase the Bonds and is not a “courtesy bid” being submitted for the purpose of assisting in meeting the competitive sale requirements relating to the establishment of the “issue price” of the Bonds pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the “Code”), including the requirement that bids be received from at least three (3) underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds (the “Competitive Sale Requirements”). Prior to the formal award of the sale, and promptly after bids for the Bonds are due, the winning bidder shall provide the Municipal Advisor with the reoffering prices and yields (the “Initial Reoffering Prices”). The Municipal Advisor will advise the winning bidder at that time if the Competitive Sale Requirements were met. Bids are not subject to cancellation in the event that the competitive sale requirements are not satisfied. Hold-the-Offering-Price. If the Municipal Advisor has informed the winning bidder that the Competitive Sale Requirements are not met, the winning bidder:

iii

(a) will offer the Bonds to the public at the Initial Reoffering Prices and provide Bond Counsel with reasonable supporting documentation prior to the delivery of the Bonds, such as a copy of the pricing wire or equivalent communication, the form of which is acceptable to Bond Counsel,

(b) will neither offer nor sell to any person any Bonds within any maturity for which less than ten percent (10%) of such maturity has been sold to the public at the Initial Reoffering Prices as of the date of award (the “Unsold Bonds”) at a price that is higher, or a yield that is lower, than the Initial Reoffering Price of such maturity until the earlier of (i) the date on which the winning bidder has sold to the public at least 10 percent of the Bonds of such maturity at a price that is no higher, or a yield that is no lower, than the Initial Reoffering Price of such maturity or (ii) the close of business on the 5th business day after the date of the award of the Bonds, and

(c) has or will include within any agreement among underwriters, any selling group agreement and each retail distribution agreement or any similar document (to which the winning bidder is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, language obligating each underwriter to comply with the limitations on the sale of the Bonds as set forth in (a) and (b) above.

For purposes of this Notice, a “maturity” refers to Bonds that have the same interest rate, credit and payment terms.

For purposes of this Notice, the “public” does not include (i) the winning bidder or any person that agrees pursuant to a written contract with the winning bidder to participate in the initial sale of the Bonds to the public (such as a retail distribution agreement between a national lead underwriter and a regional firm under which the regional firm participates in the initial sale of the Bonds to the public), or (ii) any entity that is a “related party” to an entity identified in (i).

Two entities are “related parties” if the entities are subject, directly or indirectly, to more than 50 percent common ownership of (i) the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

Regardless of whether or not the Competitive Sale Requirements were met, the winning bidder shall submit to the District a certificate (the “Issue Price Certificate”), satisfactory to Bond Counsel and the winning bidder, prior to the delivery of the Bonds substantially in the form attached here to.

The District acknowledges that, in making any representations as set forth above regarding the Hold-the-Offering-Price rule, the winning bidder will rely on (i) the agreement of each underwriter to comply with the Hold-the-Offering-Price rule, as set forth in an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the Hold-the-Offering-Price rule, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter is a party to a retail distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker- dealer that is a party to such agreement to comply with the Hold-the-Offering-Price rule, as set forth in the retail distribution agreement and the related pricing wires. The District further acknowledges that each underwriter shall be solely liable for its failure to comply with its agreement regarding the Hold-the- Offering-Price rule and that no underwriter shall be liable for the failure of any other underwriter, or of

any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement to comply with its corresponding agreement regarding the Hold-the-Offering-Price rule as applicable to the Bonds.

LEGAL OPINION: The approving opinion of Hawkins Delafield & Wood LLP, Bond Counsel, of Portland, Oregon, will be provided at no cost to the purchaser.

TAX-EXEMPT STATUS: Upon delivery of the Bonds, Bond Counsel will deliver an opinion that states that, under existing statutes and court decisions and assuming continuing compliance with the provisions and procedures set forth in the Tax Certificate, (i) interest on the Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code; and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code and is not included in the adjusted current earnings of corporations for purposes of calculating the alternative minimum tax. In addition, the opinion of Bond Counsel will state that, under existing statutes, interest on the Bonds is exempt from Oregon personal income taxation.

NOT BANK QUALIFIED: The District will not designate the Bonds as “qualified tax-exempt obligations” under Section 265(b)(3) of the Code.

DELIVERY: It is expected that delivery of the Bonds will be made to the paying agent under DTC’s Fast Automated Securities Transfer (FAST) program, without cost to the bidder. Delivery of the Bonds will be made on or about October 18, 2017.

PRELIMINARY OFFICIAL STATEMENT AND ADDITIONAL INFORMATION: The preliminary official statement for the Bonds is available in electronic form from MuniOS.com. For information on automatically receiving electronic delivery, please email ImageMaster with your request for an electronic copy at: [email protected]. Any questions concerning PARITY should be directed to (212) 849-5021. Requests for additional information about this sale should be directed to the District’s Municipal Advisor, Kieu-Oanh Nguyen, PFM Financial Advisors LLC, Telephone: (503) 249-1412 or [email protected].

FINAL OFFICIAL STATEMENT; COMPLIANCE WITH SEC RULES: The District agrees to provide the successful bidder with a sufficient number of copies of the official statement in a form “deemed final” by the District to enable the successful bidder to satisfy its responsibilities under the SEC rules at the expense of the District, and such additional copies as the successful bidder may request at the expense of the bidder, not later than the seventh business day following the date on which bids are due. Bidders should expect that the official statements will not be available prior to the seventh business day following the date on which bids are due, and should not issue confirmations which request payment prior to that date. This provision will constitute a contract with the successful bidder upon acceptance of its bid by the District, in compliance with Section 240.15c2-12(b)(3) in Chapter II of Title 17 of the Code of Federal Regulations.

CONTINUING DISCLOSURE: The District will undertake to provide continuing disclosure for the benefit of the Bond Owners in compliance with SEC Rule 15c2-12. The form of the undertaking is attached as Appendix C to the preliminary official statement.

CUSIP: The purchaser must apply for and obtain CUSIP numbers for the Bonds, and the CUSIP Service Bureau charge for the assignment of the CUSIP numbers shall be paid by the purchaser.

CLOSING CERTIFICATES: At the time of payment for the delivery of the Bonds, the District will furnish the successful bidder a certificate confirming that there is no material litigation pending that is not disclosed in the final official statement, and that the official statement does not contain any material misstatements or omissions. BY ORDER OF TUALATIN VALLEY FIRE AND RESCUE, A RURAL FIRE PROTECTION DISTRICT, WASHINGTON, CLACKAMAS AND MULTNOMAH COUNTIES, OREGON

FORM OF CERTIFICATE OF ISSUE PRICE

CERTIFICATE OF ISSUE PRICE

$______Tualatin Valley Fire and Rescue, a Rural Fire Protection District Washington, Clackamas and Multnomah Counties, Oregon General Obligation Refunding Bonds Series 2017

______, as the [lead] underwriter and winning bidder (the “Winning Bidder”) in connection with the competitive sale by the Tualatin Valley Fire District, Oregon (the “District”) of its $______aggregate principal amount General Obligation Refunding Bonds, Series 2017 (the “Bonds”) pursuant to the Notice of Sale published on [PUBLICATION DATE], hereby certifies as follows:

[the following (1)-(4) to be used in competitive sale requirements are met]

1. The Winning Bidder reasonably expected to reoffer the Bonds on [SALE DATE] to the Public at the prices or yields set forth in the District’s final Official Statement relating to the Bonds (the “Official Statement”).

2. ATTACHMENT I is a true and correct copy of the bid provided by the Winning Bidder to purchase the Bonds.

3. The Winning Bidder was not given the opportunity to review other bids prior to submitting its bid.

4. The bid submitted by the Winning Bidder constituted a firm offer to purchase the Bonds.

[the following (1)-(4) to be used in competitive sale requirements are not met]

1. As of [SALE DATE], 2017 (the “Sale Date”), all of the Bonds have been the subject of an offering to the Public at the prices or yields set forth in the District’s Official Statement relating to the Bonds (the “Official Statement”).

2. Attached hereto as ATTACHMENT I is a copy of the pricing wire for the Bonds or an equivalent communication showing that each Maturity of the Bonds was offered to the Public on the Sale Date at the price or yield set forth in the Official Statement (the “Initial Offering Price”).

3. As of the Sale Date, except for the [PLEASE IDENTIFY UN/UNDERSOLD MATURITIES] (the “Unsold Maturities”), the first price or yield at which at least 10 percent of each Maturity of the Bonds was sold by the Underwriters to the Public was the price or yield set forth in the Official Statement (the “Initial Offering Price”).

4. Following the Sale Date, with respect to each Unsold Maturity, the Underwriters, as defined below, in compliance with the applicable provisions of the Notice of Sale, have each agreed in writing not to, and have not, offered or sold the Bonds comprising any such Unsold Maturity to the Public at a price that is higher or yield that is lower than the Initial Offering Price during the period starting on the Sale Date and ending on the earlier of the following: (a) the close of the fifth business day after the Sale Date, or (b) the date on which at least 10 percent of the bonds of the Unsold Maturity has been sold to the Public.

5. For purposes of this certificate, the following definitions will apply:

vii

“Public” means any person (including an individual, trust, estate, partnership, association, company or corporation) other than an Underwriter or a Related Party, as defined below, to an Underwriter.

“Underwriter” means (i) the Winning Bidder, (ii) any person that agrees pursuant to a written contract with the Winning Bidder to form an underwriting syndicate to participate in the initial sale of the Bonds to the Public, and (iii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (ii) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public).

“Related Party” means any entity if an Underwriter and such entity are subject, directly or indirectly, to more than 50 percent common ownership of (i) the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other).

We understand that the representations contained herein may be relied upon by the District in making certain of the representations contained in the Tax Certificate, and we further understand that Hawkins Delafield & Wood LLP, as bond counsel to the District, may rely upon this certificate, among other things, in providing an opinion with respect to the exclusion from gross income of interest on the Bonds pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned’s interpretation of any laws; in particular the regulations under the Code, or the application of any laws to these facts. The certifications contained herein are not necessarily based on personal knowledge, but may instead be based on either inquiry deemed adequate by the undersigned or institutional knowledge (or both) regarding the matters set forth herein. Although certain information furnished in this Certificate has been derived from other purchasers who may be considered Related Parties to the Winning Bidder and cannot be independently verified by us, we have no reason to believe it to be untrue in any material respect.

Dated as of the _____ day of ______, 2017.

[successful bidder]______

By: Authorized Officer

Name:

Title:

viii

PRELIMINARY OFFICIAL STATEMENT

$12,990,000∗ Tualatin Valley Fire and Rescue, A Rural Fire Protection District (Washington, Clackamas and Multnomah Counties, Oregon) General Obligation Refunding Bonds, Series 2017

Tualatin Valley Fire and Rescue, A Rural Fire Protection District, Washington, Clackamas and Multnomah Counties, Oregon (the “District”), a political subdivision duly organized and existing under and by virtue of the laws of the State of Oregon furnishes this Official Statement in connection with the offering of $12,990,000* principal amount of General Obligation Refunding Bonds, Series 2017 (the “Bonds”). This Official Statement, which includes the cover page and all attachments hereto, provides information concerning the District and the Bonds.

THE BONDS

PRINCIPAL AMOUNT, DATE, INTEREST PAYMENT AND MATURITIES

The Bonds will be issued in the aggregate principal amount of $12,990,000* and will be dated and bear interest from the date of delivery. The Bonds will mature on the dates and in the principal amounts and will bear interest payable semiannually on March 1 and September 1, commencing March 1, 2018 at the respective rates as set forth on the inside cover of this Official Statement. The Bonds will be issued initially in book-entry only form. Capitalized terms used in this Official Statement that are not specifically defined herein have the meanings as set forth in the Bond Resolution.

Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

PAYING AGENT AND REGISTRATION FEATURES

The District has appointed U.S. Bank National Association, Portland, Oregon, as paying agent and registrar (the “Paying Agent”) for the Bonds. The principal of and interest on the Bonds will be payable by the Paying Agent to The Depository Trust Company (“DTC”), which in turn, will remit such principal and interest to the Beneficial Owners of the Bonds, as further described in Appendix D herein.

The Bonds will be issued in fully registered form and when issued, will be registered in the name of Cede & Co. as Owner and as nominee for DTC who will act as securities depository for the Bonds. Individual purchases and sales of the Bonds may be made in book-entry form only in minimum denominations of $5,000 within a single maturity and integral multiples thereof. Purchasers will not receive certificates representing their interest in the Bonds. While the Bonds are in book-entry only form, the Paying Agent will pay Bond principal and interest to DTC or its nominee in accordance with DTC’s rules. See Appendix D attached hereto.

DELIVERY OF THE BONDS - BOOK ENTRY FORM

DTC will act as securities depository for the Bonds. The ownership of one fully registered Bond for each maturity of the Bonds, as set forth on the inside cover of this Official Statement, each in the aggregate principal of such maturity, will be registered in the name of Cede & Co., as nominee for DTC. See Appendix D attached hereto for additional information.

PROCEDURE IN THE EVENT OF REVISIONS OF BOOK-ENTRY TRANSFER SYSTEM

If DTC resigns as the securities depository and the District is unable to retain a qualified successor to DTC, or if the District has determined that it is in the best interest of the District not to continue the book-entry system of transfer

∗ Preliminary, subject to change. 1

or that interests of the Beneficial Owners of the Bonds might be adversely affected if the book-entry system of transfer is continued, the District will execute, authenticate and deliver at no cost to the Beneficial Owners of the Bonds or their nominees, Bonds in fully registered form, in the denomination of $5,000 or any integral multiple thereof within a maturity. Thereafter, the principal of the Bonds will be payable upon due presentment and surrender thereof at the principal office of the Paying Agent. Interest on the Bonds will be payable by check or draft mailed or by wire transfer to the person in whose names such Bonds are registered, at the address appearing upon the registration books of the 15th day on the month preceding an interest payment date (the “Record Date”), and the Bonds will be transferable as provided in the Bond Resolution.

NO OPTIONAL REDEMPTION

The Bonds are not subject to optional redemption prior to their stated maturity dates.

[MANDATORY REDEMPTION]

[The Term Bonds maturing on March 1 in the years ____ , ____ and ____ are subject to mandatory redemption (in such manner as the Paying Agent and DTC will determine or by lot by the Paying Agent) on March 1 of the following years in the following principal amounts, at a price of par plus accrued interest to the date of redemption.]

Term Bond Due March 1, 20___ Mandatory Date Sinking Fund (March 1) Redemption

‡ ______‡Final maturity.

Term Bond Due March 1, 20___ Mandatory Date Sinking Fund (March 1) Redemption

‡ ______‡Final maturity.

NOTICE OF REDEMPTION

So long as the book-entry-only system remains in effect with respect to the Bonds the District shall notify the Paying Agent of an early redemption and the Paying Agent shall notify DTC of any early redemption not less than 20 days nor more than 60 days prior to the date fixed for redemption, or such shorter period if DTC then accepts a shorter notice. The Paying Agent shall provide such information in connection with the redemption as required by the letter of representations submitted to DTC.

During any period in which the Bonds are not in book-entry-only form, unless waived by any Owner of the Bonds to be redeemed, official notice of any redemption of the Bonds shall be given by the Paying Agent on behalf of the District by mailing a copy of an official redemption notice, in a form generally accepted in the municipal bond

markets, by first class mail, postage prepaid, no fewer than 30 calendar days nor more than 60 calendar days prior to the date fixed for redemption, to the Owners to be redeemed at the address shown on the bond register or at such other address as is furnished in writing by such Owner to the Paying Agent.

On or prior to any redemption date, the District shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date.

Official notice of redemption having been given as aforesaid, the Bonds or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified, and from and after such date (unless the District shall default in the payment of the redemption price) such Bonds or portions of Bonds shall cease to bear interest. Upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Paying Agent at the redemption price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. All Bonds which have been redeemed shall be canceled and destroyed by the Paying Agent and shall not be reissued.

AUTHORIZATION AND PURPOSE

The Bonds are issued in compliance with Oregon Revised Statutes (“ORS”) Chapter 287A and Resolution No. 2017-08 adopted by the District’s Board of Directors on August 22, 2017 (the “Bond Resolution”).

The Bond Resolution provides authorization for the refunding of the District’s General Obligation Bonds, Series 2009 and General Obligation Bonds, Series 2009B.

THE REFUNDING PLAN*

The District plans to use a portion of the proceeds of the Bonds to refund the District’s outstanding general obligation bonds shown below (collectively, the “Refunded Bonds”).

The selection of the outstanding general obligation bonds to be refunded is subject to market conditions. The District may determine not to refund some or all of the outstanding general obligation bonds.

A portion of the proceeds of the Bonds are expected to be used to refund the Refunded Bonds on the dates fixed for redemption shown in the table below and at the price (expressed as a percentage of the principal amounts to be redeemed) set forth in the table below. For this purpose, the District intends to establish an escrow deposit account (the “Escrow Deposit Account”) with U.S. Bank National Association, Portland, Oregon to accomplish the refunding of the Refunded Bonds. The District expects to purchase direct obligations of the United States for deposit into the Escrow Deposit Account, which together with cash or cash equivalents, if necessary, are in an amount sufficient to provide for the redemption of the Refunded Bonds.

Maturities Redemption Redemption Principal Amount Refunded Bonds Dated Refunded* Date Price Refunded Series 2009 GO Bonds 03/17/2009 2020-2024 03/01/2019 100% $4,800,000 Series 2009B GO Bonds 06/16/2009 2020-2029 06/15/2019 100% $8,870,000

* Preliminary; subject to change. 3

Refunded Amount CUSIP Series Maturities* Refunded* 89855E Series 2009 GO Bonds 2020 $ 960,000 CG1 2021 960,000 CH9 2022 960,000 CJ5 2023 960,000 CK2 2024 960,000 CL0 Series 2009B GO Bonds 2020 $ 730,000 CX4 2021 755,000 CY2 2022 790,000 CZ9 2023 820,000 DA3 2024 855,000 DB1 2025 895,000 DC9 2026 935,000 DD7 2027 980,000 DE5 2028 1,030,000 DF2 2029 1,080,000 DG0

Verification of Mathematical Calculations

Causey Demgen & Moore P.C. (the “Verification Agent”) is expected to deliver to the District on or before the date of delivery of the Bonds its reports indicating that it has verified the mathematical accuracy of (i) the mathematical computations relating to the sufficiency of the cash, if any, and maturing principal of and interest on the escrow investments to pay, when due, any call price, the principal of and interest on the Refunded Bonds; and (ii) any mathematical computations required by Bond Counsel related to the yield on the Bonds and certain escrow investments purchased with the Bonds, if applicable.

Bond Counsel may also rely upon such information in concluding that, subject to the condition that the District comply with certain covenants made to satisfy pertinent requirements of the Internal Revenue Code of 1986, as amended, (the “Code”) under present law, interest on the Bonds is not includible in gross income of the Owners thereof for federal income tax purposes, and will not be treated as an item of tax preference in computing the alternative minimum tax for individuals and corporations. See “TAX MATTERS.”

The verification performed by the Verification Agent will be solely based upon data, information and documents provided to the Verification Agent by the District and its representatives. The Verification Agent has restricted its procedures to recalculating the computations provided by the District and its representatives and has not evaluated or examined the assumptions or information used in the computations.

SECURITY FOR AND PAYMENT OF THE BONDS

The Bonds are general obligations of the District. The full faith and credit of the District are pledged to the successive owners of each of the Bonds for the punctual payment of such obligations, when due. The District covenants with the Bondowners to levy annually a direct ad valorem tax upon all of the taxable property within the District in an amount without limitation as to rate or amount, and outside of the limitations of Sections 11 and 11b, Article XI of the Oregon Constitution, after taking into consideration discounts taken and delinquencies that may occur in the payment of such taxes and other monies available for the payment of debt service on the Bonds, to pay interest, principal, and premium, if any, on the Bonds promptly when and as they become due.

The Bonds do not constitute a debt or indebtedness of Washington County, Clackamas County, Multnomah County, the State of Oregon, or any political subdivision thereof other than the District.

DEFAULTS AND REMEDIES

The occurrence of one or more of the following shall constitute an Event of Default:

a. Failure by the District to pay Bond principal, interest or premium when due (whether at maturity, or upon redemption after a Bond has been properly called for redemption);

b. Failure by the District to observe and perform any covenant, condition or agreement on its part to be observed or performed for the benefit of Owners of Bonds, for a period of sixty (60) days after written notice to the District by the Owners of fifty-one percent (51%) or more of the principal amount of Bonds then Outstanding specifying such failure and requesting that it be remedied; provided however, that if the failure stated in the notice cannot be corrected within such sixty (60) day period, it shall not constitute an Event of Default so long as corrective action is instituted by the District within the sixty (60) day period and diligently pursued, and the default is corrected as promptly as practicable after the written notice referred to in this paragraph; or,

c. The District is adjudged insolvent by a court of competent jurisdiction, admits in writing its inability to pay its debts generally as they become due, files a petition in bankruptcy, or consents to the appointment of a receiver for the payments.

The Owners of fifty-one percent (51%) or more of the principal amount of Bonds then Outstanding may waive any Event of Default and its consequences, except an Event of Default as described in (a) above.

Upon the occurrence and continuance of any Event of Default, the Owners of fifty-one percent (51%) or more of the principal amount of Bonds then Outstanding may take whatever action may appear necessary or desirable to enforce or to protect any of the rights of the Owners of Bonds, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in the Resolution or the Bonds or in aid of the exercise of any power granted in the Resolution or in the Bonds or for the enforcement of any other legal or equitable right vested in the Owners of Bonds by the Resolution or the Bonds or by law. HOWEVER, THE BONDS SHALL NOT BE SUBJECT TO ACCELERATION.

No remedy in the Resolution conferred upon or reserved to Owners of Bonds is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Resolution or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. To entitle the Owners of Bonds to exercise any remedy reserved to them, it shall not be necessary to give any notice other than such notice as may be required by the Resolution or by law.

DEFEASANCE

The District may defease the Bonds by setting aside, with a duly appointed escrow agent, in a special escrow account irrevocably pledged to the payment of the Bonds to be defeased, cash or direct obligations of the United States in an amount which, in the opinion of an independent certified public accountant, is sufficient without reinvestment to pay all principal and interest on the defeased Bonds until their maturity date or any earlier redemption date. Bonds which have been defeased pursuant to this paragraph shall be deemed paid and no longer outstanding, and shall cease to be entitled to any lien, benefit or security under the Bond Resolution except the right to receive payment from such special escrow account.

ESTIMATED SOURCES AND USES OF FUNDS

The proceeds from the Bonds are estimated as follows:

Sources: Par Amount of Bonds $ Net Original Issue Premium/(Discount)

Uses Deposit to Escrow Fund $ Underwriter’s Discount Cost of Issuance(1) Additional Proceeds Total Uses

______(1) Including, but not limited to, the fees of bond counsel, disclosure counsel, rating agency, municipal advisor and other expenses.

THE DISTRICT

Tualatin Valley Fire and Rescue, A Rural Fire Protection District, was formed in 1989 through the legal merger of Washington County Fire Protection District No. 1 and Tualatin Rural Fire Protection District. Subsequently, the District has expanded its service area through annexation to include the City of West Linn, the City of Beaverton, Valley View Water District, the Rosemont Fire District, and Washington County Fire District No. 2 (“WCFD2”) and the mergers of Multnomah County Fire Protection Districts No. 4 and 20. Through a fire protection contract the District also serves the City of Newberg and Newberg Rural Fire Protection District (“Newberg Rural”). The District’s total service area encompasses approximately 328 square miles (prior 210 square miles and an additional 118 square miles added July 1, 2017 through the annexation of WCFD2) and an additional 61 square miles with the City of Newberg and Newberg Rural service contract areas. The District provides services to east Washington County, northwest Clackamas County, the western edge of Multnomah County, and portions of Yamhill County through the Newberg service contract. The District is a special service district supported by the property owners within its boundaries and revenues from contract areas, currently serving an estimated 2016 population of 491,376 (District area before annexation of WCFD2- 446,375; WCFD2 - 14,939; and City of Newberg and Newberg Rural - 30,062).

The area served, which includes the cities of Beaverton, Durham, King City, Newberg, North Plains, Rivergrove, Sherwood, Tigard, Tualatin, West Linn and Wilsonville lies within one of the fastest growing regions of the State of Oregon. It is an area encompassing densely populated suburbs, rural farmlands, retail and commercial establishments and growing industrial complexes. The Newberg contract area also covers significant agricultural areas of Oregon including important winegrowing regions contributing to the state economy.

The District has 23 fire stations placed strategically throughout the District to protect property and the District population, with plans to build additional stations. The District uses defined response time standards, projected population densities and urban growth, as well as actual and planned traffic conditions to determine the best station sites to optimize response times. The District continues to implement operational improvements in order to accomplish its strategic goals. The 2013 voter support of the increased replacement local operating levy provided funding for additional fire station sites and units to be added throughout the District. In addition to the Command Center, the District manages and directs services to the public from two Integrated Operations divisions serving defined geographic areas through the North Operating Center and the South Operating Center, and a training center.

As a result of the high quality of services provided, training standards, equipment, staffing, and related support functions, the District is among the leaders in Oregon in obtaining a favorable insurance classification and carries a rating of 2 out of a scale of 1-10 (1 being the most favorable, according to the standards set forth by the Insurance Services Office). This classification results in lower premium rates for fire insurance to homeowners within the District.

of Oregon, with a service response area ranging from the City of Portland boundary on the east to the Pacific Ocean on the west and from the District’s northern boundary in Multnomah County southwest to Marion County.

The District’s staff is dedicated to meeting all of the state mandates concerning the investigation of fires, inspection of commercial and retail occupancies, and education of the citizens within its boundaries. The Deputy Fire Marshals and Inspectors provide code enforcement inspections and manage several proactive programs, such as the Apartment Manager Training program, in order to educate landlords in fire safe building management practices.

To deal with emergencies, both fire and medical, the District staffs a team of professional firefighters and paramedics 24 hours a day, with skills and equipment necessary to deal with a wide variety of emergencies. Approximately 255 professional firefighters are certified as advanced life support (ALS) paramedics, while 100% of the remaining fire suppression personnel are certified at either the Basic or Intermediate Emergency Medical Technician levels. Under the guidance of physician advisors, emergency medical service personnel maintain a highly certified skill level through several specialized programs.

EXPANSION OF DISTRICT SERVICE AREA

Annexation of Washington County Fire District No. 2

The District annexed WCFD2 and WCFD2 dissolved effective July 1, 2017 upon a vote of the electors of WCFD2. This followed completion of a one year fire protection agreement that began July 1, 2016. The annexation added 118 square miles and a July 1, 2016 estimated population of 14,939 to the District’s service area. At the inception of the contract on July 1, 2016, all 13 employees of WCFD2 were transferred to the District. Effective July 1, 2017, all remaining assets and liabilities of WCFD2 were transferred to the District including two fire station sites, apparatus and equipment. The WCFD2 area adds assessed value of approximately $1,820,888,250 or an additional 3.5% to the District. This additional value will be on the District’s tax rolls beginning with Fiscal Year 2018 and this area will be levied the District’s permanent rate, local option levy and general obligation bonds, like other areas within the District.

For Fiscal Year 2016, WCFD2’s governmental fund balances in the General Fund and Equipment Reserve Fund totaled $3,969,345. The District estimates a remaining fund balance transfer in the range of $3.4 million dollars after completion of the 2017 audit and final closure of WCFD2’s financial records.

Fire and Emergency Services Agreement for City of Newberg and Newberg Rural Fire Protection District

The District began serving the City of Newberg and Newberg Rural effective July 1, 2016 under a two year intergovernmental agreement. Newberg Rural had previously contracted with the City of Newberg for fire protection services through the two fire stations within the City of Newberg. On July 17, 2017, the City of Newberg adopted Resolution 2017-3393 proposing annexation of the City of Newberg to the District for the purpose of receiving fire and emergency medical services. On July 18, 2017, Newberg Rural also passed resolutions to begin the process to dissolve itself and annex to the District. Both governments are expected to bring the annexation vote in the November 2017 election to their respective voters with an intended annexation of July 1, 2018. The District cannot predict the outcome of the vote or whether the annexations will be accomplished by July 1, 2018 or at all.

As part of the intergovernmental agreement, Yamhill County transferred to the District the Yamhill County Ambulance Service Area #1 (the “ASA”) previously assigned to the City of Newberg. This ASA boundary covers additional areas of Yamhill County outside the boundaries of the City of Newberg and Newberg Rural. Payments under the agreement and ambulance transport revenues have covered the District’s costs of serving the area.

There were 28 fire employees of the City of Newberg, all of whom were conditionally transferred to the District effective July 1, 2016. Employees will return to the City of Newberg if voters do not approve the annexation or the contract is terminated. Newberg Rural did not have any employees and therefore none were transferred to the District.

The City of Newberg and Newberg Rural service area includes two fire stations covering 61 square miles and a July 1, 2016 estimated population of 30,092. The assessed value of the City of Newberg in Fiscal Year 2017 is $1,780,615,477 and Newberg Rural is $942,593,335.

DISTRICT ADMINISTRATION

The District operates under Oregon Revised Statutes Chapter 478 as a separate political subdivision and is managed by a Board of Directors composed of a president and four directors, who include a vice president and a secretary/treasurer. The Board hires a Fire Chief/Administrator to manage the day-to-day operations of the District. The governing board appoints members of the community to serve on boards and commissions which include the Budget Committee, and the Civil Service Commission.

THE BOARD OF DIRECTORS

The policies of the District are established by an elected five-member Board of Directors. Board member terms are for four years. The current members of the Board, along with the expiration date of their respective current terms, are in the table below. Brief biographies of each board member follow the table.

Director Title Occupation Service Began Term Expires Clark I. Balfour President Attorney July 1, 1997 June 30, 2021 Gordon L. Hovies Vice President Retired Lt., PF&R July 1, 2009 June 30, 2021 Brian J. Clopton Secretary-Treasurer Business Owner February 24, 1998 June 30, 2019 Robert C. Wyffels Member Self-Employed November 26, 1996 June 30, 2021 Randy J. Lauer Member General Manager, AMR January 1, 2011 June 30, 2019

Clark I. Balfour, President, Board of Directors. Mr. Balfour joined the Board of Directors in 1997. Mr. Balfour received a Bachelor of Arts degree from Linfield College in 1976, and a Juris Doctor degree from Lewis & Clark Law School in 1979. Since 1979, he has focused his practice primarily on municipal, land use, water and environmental law, and serves as general counsel to a variety of municipalities and special districts that provide sanitary sewer, surface water management, water supply services, and electricity. In addition to the District’s Board of Directors, Mr. Balfour serves on the Board of Directors and is the President of Special Districts Association of Oregon.

Gordon L. Hovies, Vice President, Board of Directors. Mr. Gordon Hovies joined the Board of Directors in 2009. After serving as a career firefighter with Clackamas County Fire District #54, and a volunteer firefighter with Tualatin Rural Fire Protection District, he joined and retired from City of Portland Fire & Rescue. Mr. Hovies has an associate degree from Portland Community College, an Advanced & Basic Fire Institute/Administrators Certificate from Western Oregon University and a degree in Fire Protection Technology from Portland Community College. He also attended Eastern Oregon University’s Fire Service Administration degree program.

Brian J. Clopton, Secretary/Treasurer, Board of Directors. Mr. Clopton joined the Board of Directors in 1998. He became interested in serving after participating on a committee tasked with developing a modified business plan for the District’s Regional Training & Simulation Center (now known as the Training Center). Mr. Clopton has worked in the construction field for over 40 years, including over 30 years as the owner of an excavating company. He is a lifelong resident of the District, and his grandfather was one of the first paid firefighters for Tualatin Rural Fire Protection District.

Robert C. Wyffels, Board of Directors. Prior to joining the Board of Directors in 1996, Mr. Wyffels served the District for 13 years as a member of its budget committee and as a Commissioner with the Tigard Water District from 1987 to 1993. Mr. Wyffels has been a resident of Washington County for over 47 years, and has served as a Director for Washington County Consolidated Communications Agency for 21 years. A former Stationary Engineer with the Morrison-Knudsen Corporation, he is now a self-employed general contractor specializing in residential remodeling.

Randy J. Lauer, Board of Directors. Mr. Lauer joined the Board of Directors in 2011, after serving as a member of its Budget Committee. He has been employed with American Medical Response (“AMR”) for over 36 years. He became AMR’s Regional Director in 2004 and is responsible for all aspects of the operation, including the management of staff, budget, government relations, and strategic planning. Mr. Lauer is a graduate of OHSU Paramedic Training, maintained a Paramedic license for 30 years, and is currently a licensed EMT. Mr. Lauer retired from the Coast Guard as a Master Chief in 2007, following 32 years of active and reserve service.

KEY ADMINISTRATIVE OFFICIALS

The day-to-day affairs of the District are managed by a professional administrative staff which includes the following principal officials:

Michael R. Duyck, Fire Chief. Chief Duyck joined the District in 1995, after beginning a fire service career with the City of Lake Oswego, Oregon in 1988. He became Fire Chief in September 2010, after serving in all ranks of emergency services, as well as fleet services, human resources, logistics, and governmental affairs. Chief Duyck has a Bachelor of Science degree in Fire Business Administration and an associate degree in Fire Science. He holds numerous certifications in emergency operations and is an Oregon-certified Paramedic. He completed the National Fire Academy Executive Fire Officer Program, is designated as a Center for Public Safety Excellence Chief Fire Officer, and is a member of the Institution of Fire Engineers. In addition to being the Past President of the Western Fire Chiefs Association, he serves as its representative on the International Association of Fire Chiefs Board of Directors in the role of International Director – Western Division. In April 2017, Chief Duyck was elected Treasurer of the Metropolitan Fire Chiefs Association that brings together fire chiefs from large metropolitan fire departments to share information and focus on major issues effecting policy changes in the U.S. and abroad. Chief Duyck is involved in local, state, and national initiatives addressing emergency communications dispatch, interoperability, mobile healthcare, fire service innovation and technology, intergovernmental affairs, government efficiency, and economic development.

Debra L. Grabler, CPA, Chief Financial Officer. Chief Financial Officer Grabler has been serving the District since 1989. Prior to beginning her tenure with the District, Ms. Grabler was an Audit Manager with the Portland office of Coopers & Lybrand (now Price Waterhouse Coopers). Ms. Grabler serves on the State of Oregon Financial Estimate Committee, as established by ORS 250.125; the Oregon PERS Employer Advisory Group, has served on the State of Oregon Municipal Debt Advisory Commission; and belongs to the OSCPA, GFOA, and AICPA. She has actively participated in PERS Employer Task Forces and numerous ad hoc committees to represent employers on PERS issues, including the Stakeholder Focus Group, Employer Task Force, Annual Earnings Crediting Advisory Committee, and the OPSRP Advisory Committee. Ms. Grabler currently serves on the Board of Directors as Treasurer for both the Sisters of St. Mary Campus Schools Corporation and the Little Flower Development Center Corporation. She graduated with a Bachelor of Science degree in Business with an emphasis in Accounting from Oregon State University and was awarded her CPA certificate in January 1986.

Mark E. Havener, Assistant Chief – Business Operations. Chief Havener joined the District in 2010 and is responsible for oversight, budget management and general management of the activities, programs, and services delivered by the support services in the District. This includes; Fleet purchasing and maintenance, Facilities maintenance, Supply services, Human Resources programs, Media services, Occupational Health and Wellness services, Logistics administration, Communications, IT services and the Capital Projects department. Prior to coming to the District, Chief Havener was the Fire Chief of South Pend Oreille Fire & Rescue (“SPOFR”) since 2004, a department of eight stations and 100 personnel. While there, he helped facilitate the merger between SPOFR and two other fire districts to increase efficiency and improve service delivery. Prior to that he spent time as a Deputy Fire Chief and was a Firefighter/Paramedic for 13 years. Chief Havener is a graduate of the National Fire Academy Executive Fire Officer Program. He attended University of Cincinnati, Ohio, and received a Bachelor of Science from Iowa State University. He is a member of the National Fire Protection Association, International Association Fire Chiefs, and Oregon Fire Chiefs Association.

Les M. Hallman, Assistant Chief – EMS, Training, Volunteers. The former Fire Chief of the City of Newberg fire department, Chief Hallman joined the District in 2016 through the operational integration of the two departments. Chief Hallman is responsible for oversight, budget management and general management of the Emergency Medical Services Division, Training Division, Incident Management Team, Chaplains and the Volunteer

Program for the District. Chief Hallman has over 35 years’ experience in emergency services. Chief Hallman is very involved at the State level serving as Chair of the Governor’s Fire Service Policy Council, Incident Commander of one of the State’s three Incident Management Teams deployed by the Governor to major incidents, and just completed his term as President of the Oregon Fire Chiefs Association. Prior to his appointment as Fire Chief for the City of Newberg, Chief Hallman served as the highest ranking fire official in the State of Florida – Director of the Florida Division of State Fire Marshal. Prior to that, he was a Fire Chief in Florida for over 12 years and served on the Executive Board of the Florida Fire Chiefs Association. Chief Hallman was extremely active with the Florida State Emergency Response Plan and served as the Emergency Services Branch Chief at the State EOC on numerous activations. Following Hurricane Katrina, he served as Operations Chief for Florida Forward Command in the State of Mississippi coordinating over 2,000 responders. Chief Hallman has been an active member of the International Association of Fire Chiefs since 1995.

Deric C. Weiss, Assistant Chief – Integrated Operations. Chief Weiss joined the District in 1994 and is responsible for oversight, budget management and general management of the activities, programs, and services delivered by the Integrated Operations services in the District. This includes the management and direction for all emergency response operations of the District as well as changes and innovations to service delivery. Chief Weiss has spent his entire career with the District including time in Fire Prevention, Training, and Emergency Management. He served time in every line position and chief officer position up to his current position as Assistant Chief. He is responsible for the overhaul air monitoring study that changed Oregon Fire Chiefs Association best practices and led to cancer presumptive legislation and was a recipient of the Senator Paul S. Sarbanes award for Safety Leadership. He attended Portland State University and Portland Community College where he earned his associate degree in Fire Science. Currently he is completing his Bachelor’s degree for Fire Service Administration. He is a member of the International Association of Fire Chiefs, and Oregon Fire Chiefs Association.

DEBT LIMITATION

Rural fire protection districts formed under ORS Chapter 478 are limited as to the total amount of indebtedness they may incur including both general obligation bonds and other financing liabilities. At no time is the aggregate amount of debt liabilities to exceed one and one-fourth percent (0.0125) of the Real Market Value of the District incurring the liability. The calculation of debt capacity for the District is as follows:

Real Market Value (Fiscal Year 2017 Washington, Multnomah and Clackamas Counties)(1) $77,836,940,023 Debt capacity (1.25% of RMV) 972,961,750 Outstanding obligations(1) (48,820,000) Remaining Debt Capacity $ 924,141,750 ______(1) As of June 30, 2017. Includes the Refunded Bonds, but excludes the Bonds. Because the real market value data is presented for Fiscal Year 2017, this data does not reflect additional real market value as a result of the annexation of WCFD2. See “EXPANSION OF DISTRICT SERVICE AREA.” Source: District.

TUALATIN VALLEY FIRE AND RESCUE Bonded Debt Ratios

Real Market Value of District (2016-2017) $77,836,940,023(1) Estimated Current Population 446,375 (1) Debt Information Net Direct Debt(2) $ 48,820,000 Net Overlapping Property-Tax Backed Debt(3) $ 2,344,191,944 Total Net Direct Debt and Net Overlapping Debt $ 2,393,011,944 Bonded Debt Ratios Net Direct Debt to Real Market Value 0.06% Net Direct and Net Overlapping Debt to Real Market Value 3.07% Per Capita Real Market Value $ 174,376 Per Capita Net Direct Debt $ 109 Per Capita Net Direct Debt and Net Overlapping Debt $ 5,361 ______(1) Because the real market value data is presented for Fiscal Year 2017, this data does not reflect additional real market value as a result of the annexation of WCFD2. Excludes population served by service contract with City of Newberg. Also, excludes population that was annexed to the District after the end of Fiscal Year 2017. See “THE DISTRICT” and “EXPANSION OF DISTRICT SERVICE AREA” herein. (2) Net Direct Debt includes all outstanding tax-supported bonds and obligations of the District as of June 30, 2017 including the Refunded Bonds. Does not include the Bonds. (3) Net Overlapping Property-Tax Backed Debt as of July 17, 2017. Net Overlapping Property-Tax Backed Debt includes all outstanding debt of the relative percentage of overlapping taxing districts with an unlimited (general obligation) and limited (full faith and credit obligations) tax pledge less tax supported obligations which are paid from other revenue sources. See table on next page. These calculations are done on the basis of the RMV as of January 1, 2016, which does not mirror the 2016-2017 RMV above. Sources: District; Debt Management Division, The Office of the State Treasurer.

TUALATIN VALLEY FIRE AND RESCUE Overlapping Debt Schedule As of July 17, 2017

OVERLAPPING Overlapping Real Market Percent Gross Property- Net Property-Tax (1) (2) Overlapping Issuer Valuation(1) Overlapping Tax Backed Debt Backed Debt City of Beaverton $ 14,012,853,462 100.00% $ 37,045,594 $ 34,565,694 City of Durham 301,767,138 99.99 329,956 329,956 City of Hillsboro 16,163,673,238 0.11 59,243 49,006 City of Sherwood 2,763,265,829 99.99 40,608,502 25,320,460 City of Tigard 8,945,740,291 100.00 23,683,406 22,426,492 City of Tualatin 6,524,754,977 99.99 9,900,970 6,001,375 City of West Linn 4,691,525,851 100.00 15,940,000 15,940,000 City of Wilsonville 4,442,905,495 100.00 34,525,000 0 Clackamas Community College 48,076,385,758 24.22 31,072,944 24,855,880 Clackamas County 65,630,370,446 18.55 28,918,898 28,659,153 Clackamas County ESD 62,476,630,354 18.16 4,143,566 4,143,566 Clackamas County SD 3J (W.Linn-Wilsonville) 10,066,913,409 100.00 229,667,377 229,667,377 Clackamas County SD 7J (Lake Oswego) 11,481,623,450 5.85 5,301,362 5,301,362 Clackamas County SD 86 (Canby) 4,240,998,252 13.53 8,229,449 8,229,449 Columbia County SD 1J (Scappoose) 2,098,871,553 0.21 59,310 59,310 Metro 271,838,567,528 27.18 55,106,211 49,880,587 Multnomah County 142,277,325,018 0.88 2,099,932 1,268,247 Multnomah County SD 1J (Portland) 108,958,774,919 1.41 9,348,323 9,348,323 Multnomah ESD 144,277,058,360 1.06 299,343 0 Northwest Regional ESD 107,659,200,472 58.50 2,612,257 0 Port of Portland 294,759,596,278 25.81 16,029,882 0 Portland Community College 217,143,369,580 29.67 115,500,059 89,635,239 Rivergrove Water District 14J 669,114,614 18.38 115,337 115,337 Tualatin Hills Park & Rec District 35,215,638,776 98.81 81,545,084 81,545,084 Valley View Water District 307,873,780 100.00 1,621,692 1,621,692 Washington County 86,849,367,154 72.13 186,159,729 167,186,748 Washington County Enhanced Patrol District 28,788,830,824 98.49 60,468 60,468 Washington County SD 1J (Hillsboro 7 Bd) 19,584,216,731 13.27 531,723 531,723 Washington County SD 1J (Hillsboro) 20,072,720,531 13.20 31,518,407 31,518,407 Washington County SD 23J (Tigard-Tualatin) 15,859,898,329 99.90 269,374,147 269,374,147 Washington County SD 48J (Beaverton) 41,668,937,057 95.28 1,015,426,173 1,015,426,173 Washington County SD 88J (Sherwood) 4,855,485,563 99.27 219,066,524 219,066,524 Willamette ESD 51,747,103,538 0.42 96,076 40,784 Yamhill County SD 29J (Newberg) 5,081,588,423 4.26 2,023,381 2,023,381 TOTAL OVERLAPPING $2,478,020,325 $2,344,191,944

______(1) Gross Overlapping Property-Tax Backed Debt includes all debt within an unlimited (general obligation bonds) and limited (full faith and credit obligations) tax pledge. Limited tax pension obligations are included. (2) Net Overlapping Property-Tax Backed Debt is Gross Overlapping Debt less tax supported obligations which are paid from other revenue sources. Source: Municipal Debt Advisory Commission, Debt Management Division, The Office of the State Treasurer as of July 17, 2017.

TUALATIN VALLEY FIRE AND RESCUE Estimated General Obligation Debt Service Requirements*(1)

Less The Bonds Fiscal Outstanding Refunded Total Year Debt Service Bonds Principal Interest Subtotal Debt Service

2018 $6,462,236 2019 6,377,836 2020 6,289,636 2021 6,202,636 2022 6,119,236 2023 6,021,436 2024 5,937,836 2025 2,833,286 2026 2,836,367 2027 2,843,198 2028 2,855,238 2029 2,862,263 2030 1,734,763 2031 1,735,763 Total: $61,111,730

______(1) Columns may not foot due to rounding. As of the date of delivery of the Bonds. * Preliminary; subject to change. Debt service for the Refunded Bonds and Bonds will be provided after pricing. Source: District.

LONG-TERM BORROWING(1)

The following table outlines the District’s outstanding long-term financing obligations as of June 30, 2017 and the Bonds.

Principal Date of Amount Series Obligation Dated Date Maturity Amount Issued Outstanding* 2009 General Obligation Bonds 03/17/2009 03/01/2019(1) $14,000,000 $ 6,720,000 Less Refunded Bonds (4,800,000) 2009B General Obligation Bonds 06/16/2009 06/15/2019(1) 15,000,000 10,245,000 Less Refunded Bonds (8,870,000) 2011 General Obligation Bonds 06/02/2011 06/01/2031 23,500,000 18,060,000 2015 General Obligation Refunding Bonds 03/25/2015 06/01/2024 14,905,000 13,795,000 2017 General Obligation Refunding Bonds* 10/18/2017 03/01/2029 12,990,000 12,990,000

Total General Obligation Bonds $80,395,000 $48,140,000 ______(1) Final maturity following redemption of the Refunded Bonds * Preliminary; subject to change. Source: District.

FUTURE DEBT PLANS

Other than the Bonds, the District has no authorized but unissued bonds outstanding, nor does it anticipate issuing additional long-term debt during the next three years, other than potential refunding bonds for savings.

SHORT-TERM BORROWING

The District has no short-term debt outstanding at this time.

DEBT MANAGEMENT

The District has never defaulted on a debt obligation. The District has not used bond proceeds for operational purposes.

DISTRICT STAFF AND LABOR CONTRACT

The District currently employs approximately 553 employees, including 440 unionized employees, and is supplemented by another 100 volunteers. The majority of the District employees who are eligible under State laws to be represented by a labor organization are employed under provision of a negotiated contract with one major labor organization. The District enters into written bargaining agreements with the bargaining organization, containing provisions on such matters as wages, paid time off, insurance and other benefits, working conditions, and grievance procedures. The International Association of Fire Fighters, Local 1660, represents the firefighters, fire marshals and inspectors, training officers, and battalion chiefs with a contract expiring June 30, 2018. Negotiations for this labor contract are scheduled to begin in early 2018.

DEBT POLICIES

The District’s debt policies are outlined in its budget. Specific current debt policies include:

1. Long-term borrowing is confined to meet the needs outlined in the capital program.

2. Long-term capital projects may not be financed by the issuance of debt obligations for periods unless correlated with the projected useful life of the project or item.

3. Revenue sources that will be used to pay long-term debt will be conservatively forecasted to ensure that such debt is adequately financed.

4. Long-term debt will be used only when it has been determined that future generations of citizens and/or taxpayers will derive benefit from the improvement.

5. The District’s total general obligation debt will not exceed 1.25% of the true cash value of assessed property.

6. The District will continue to maintain effective communications with bond rating agencies to keep them informed of its financial condition, and to obtain a review of its bond rating when it is indicated that a regrade would be prudent.

7. The District will maintain its policy of full financial disclosure on financial reports and any bond prospectus.

8. A separate debt service fund will be maintained for the District’s bonded obligations.

FINANCIAL INFORMATION

AWARDS

The District is nationally recognized for its financial stability and management, and has received the Government Finance Officers Association’s (GFOA) Award of Excellence in Financial Reporting since 1987, the GFOA’s Distinguished Budget Presentation Award since 1988 and the GFOA’s Award for Outstanding Achievement in Popular Annual Financial Reporting since 2013.

BUDGETING PROCESS AND CONTROLS

The District prepares an annual budget in accordance with the Oregon Local Budget Law. Chapter 294 of the Oregon Revised Statutes provides standard procedures for the preparation, presentation, administration and appraisal of budgets for all Oregon local governments. The law mandates public involvement in the budget preparation and public exposure of its proposed programs. The law also requires that the budget be balanced.

The District’s Budget Officer and internal budget team evaluate the budget requests of the department managers of the District to determine the funding levels. The annual budget is funded and prepared under the guidelines of the District’s long term financial plans. The budget is presented to the public through public hearings held by a budget committee consisting of Board members and laypersons. After due consideration to the input received from the citizens, the Board adopts a resolution that adopts the budget, authorizes the levying of taxes and sets appropriations. The budget resolution must be adopted not later than June 30 of each Fiscal Year. The budget is submitted to each of the three County Assessor’s offices before July 15 so that the tax levy may be certified.

Unexpected additional resources or unanticipated expenditures may be added to the budget through the use of a supplemental budget and appropriation resolution. Supplemental budgets that are less than 10% of the fund’s original budget may be adopted by the Board of Directors at a regular board meeting. For supplemental budgets greater than 10% of the fund’s original budget or that do not meet a legal budget law exception, a longer process is required. A special hearing must be held by the governing body and the proposed supplemental budget must be published before this hearing. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by the Board of Directors.

The District builds reserves to ensure it can maintain five months of budgetary basis General Fund operating fund reserves before receiving property taxes in November each year and builds reserves in other funds for purposes of apparatus and equipment purchases, land purchases and station construction and major station repairs or improvements, among other items. For audited 2016 financial statement purposes, the budgeted General Fund ($37.5 million), the General Fund PERS rate reserve ($6.6 million), Apparatus Fund ($5.1 million), and Capital Improvement Fund ($8.4 million) and other funds, are combined for generally accepted accounting principles basis reporting as the General Fund. Fund Balances as of June 30, 2016 totaled over $76 million and included $58 million in the General Fund, $13 million in the Property and Building Fund, and $5 million in Non-major Funds (the Capital Projects Fund and the Debt Service Fund).

Unaudited preliminary Fiscal Year 2017 financial statements provide that the budgeted General Fund ($40.4 million), the General Fund PERS rate reserve ($7.1 million), Apparatus Fund ($5.1 million) and Capital Improvement Fund ($7.9 million) and Volunteer LOSAP fund ($0.3 million), are combined for generally accepted accounting principles basis reporting as the General Fund. Fund Balances as of June 30, 2017 are expected to total over $74.8 million and included $60.8 million in the General Fund, $12.7 million in the Property and Building Fund, and $1.3 million in Non-major Funds (the Debt Service Fund). The District does not expect to have audited Fiscal Year 2017 financial statements available until October 2017.

The District staff, management and Board regularly update future financial forecasts, planning to address expected future staffing levels, development and assessed value growth. The District expects to begin to utilize the accumulated PERS rate reserve fund in Fiscal Year 2018 and in future years to assist in absorbing the impact of forecasted PERS contribution rate changes each biennium. See “Retirement Plans” below for more information regarding the District’s PERS liability.

OTHER REVENUE SOURCES

The District actively seeks to develop additional revenue sources to supplement operations. The District has been active in the development and passage of Oregon’s Ground Emergency Medical Transportation (“GEMT”) legislation (2016 House Bill 4030) and rule development for the State of Oregon, which when fully implemented, will allow public EMS providers the ability to collect a percentage of their uncompensated costs for providing care to Medicaid patients. This is expected to provide significant new revenue in future years. In 2017, the District was awarded the Staffing for Adequate Fire and Emergency Response Grants (“SAFER”) funding which allowed the District to add 12 positions in the City of Newberg and WCFD2 service areas. This two year grant pays for their salaries and wages through January 2019. Additionally, in response to growing transports within the emergency response system, the District negotiated and implemented a new Paramedic position with the union at a lower cost and that allowed the staffing of an additional medic unit with the cost savings. While the District has been serving as a transport agency in Clackamas County under an existing franchise, the addition of the ASA in Fiscal Year 2017, as part of the intergovernmental agreement with the City of Newberg, increased revenue for transports in the District and allowed the District to implement and execute a new transport billing system and process, resulting in an increase of transport revenues to a new total of $2.8 million dollars during Fiscal Year 2017.

BASIS OF ACCOUNTING

The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

The governmental fund financial statements are accounted for using a current financial resources measurement focus whereby only current assets and liabilities generally are included in the Balance Sheet, and the Statement of Revenues, Expenditures and Changes in Fund Balance present increases and decreases in those current net assets. Governmental funds use the modified accrual basis of accounting where revenues are recognized when susceptible to accrual (i.e. when they become both measurable and available). “Measurable” means the amount can be determined and “available” means collectible within the current period or soon enough thereafter (60 days) to be used to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due.

The District’s accounting practices conform to Generally Accepted Accounting Principles (GAAP) as interpreted by the Governmental Accounting Standards Board (the “GASB”).

See Appendix A for more information.

FISCAL YEAR

The District’s fiscal year runs from July 1 through June 30 (the “Fiscal Year”).

CASH AND INVESTMENTS

ORS 294.035 authorizes Oregon municipalities to invest in obligations, ranging from U.S. Treasury obligations, to municipal obligations, bankers’ acceptances, commercial paper, certificates of deposit, corporate debt and guaranteed investment contracts, all subject to certain size and maturity limitations. No municipality may have investments with maturities in excess of 18 months without adopting a written investment policy that has been reviewed by the Oregon Short Term Fund Board. The District has no investments that exceed 18 months in duration.

Currently municipalities are also authorized to invest approximately $47.4 million in the Local Government Investment Pool of the Oregon Short Term Fund (“LGIP”), which is managed by the State Treasurer’s office. Such investments are managed in accordance with the “prudent person rule” and administrative regulations of the State Treasurer that may change from time to time. Eligible investments presently include all of those listed above, as well as repurchase agreements and reverse repurchase agreements. A listing of investments held by the Oregon

Short-Term Fund is available on the Oregon State Treasury website under “Other OSTF Reports – OSTF Detailed Monthly Reports” at http://www.oregon.gov/treasury/Divisions/Investment/Pages/Oregon-Short-Term-Fund- (OSTF).aspx#report.

The District currently invests its funds in the LGIP and bank money market deposits. For more information see Appendix A.

RETIREMENT PLANS

Oregon Public Employees Retirement System (PERS)

General. The District participates in a retirement pension benefit program under the State of Oregon Public Employees Retirement System (“PERS” or the “System”). After completion of six full months of employment and 600 hours of service, all employees of the District participate in PERS.

T1/T2 Pension Programs. Employees hired before August 29, 2003 participate in the “Tier 1” or “Tier 2” pension programs (the “T1/T2 Pension Programs”). The benefits provided through the T1/T2 Pension Programs are based primarily on a defined benefit model and provide retirement and disability benefits, annual cost-of-living adjustments, and death benefits to members and their beneficiaries. Different benefit structures apply to participants depending on their date of hire. Effective January 1, 2004 and in addition to their defined benefit pension plans, T1/T2 Pension Program employee (“Participant”) contributions fund individual retirement accounts under the separate defined contribution program known as the Individual Account Program (the “IAP”). Participant contributions may be paid by the employee or the employer, depending on the individual contract negotiated between the two. See “FINANCIAL INFORMATION – Retirement Plans – Oregon Public Employees Retirement System (PERS) - Employer Contribution Rates” herein.

OPSRP. Employees hired on or after August 29, 2003 participate in the Oregon Public Service Retirement Plan (“OPSRP”) unless membership was previously established in the T1/T2 Pension Programs. OPSRP is a hybrid defined contribution/defined benefit pension plan with two components. Employer contributions fund the defined benefit program and employee contributions fund individual retirement accounts under the IAP. Participant contributions may be paid by the employee or the employer, depending on the individual contract negotiated between the two. See “FINANCIAL INFORMATION – Retirement Plans – Oregon Public Employees Retirement System (PERS) - Employer Contribution Rates” herein.

Actuarial Valuation. Oregon statutes require an actuarial valuation of the System at least once every two years. PERS’ current actuary is Milliman, Inc. (“Milliman”). Under current practice, actuarial valuations are performed annually, but only valuations as of the end of odd-numbered years (such as 2013 and 2015) are used by the Oregon Public Employees Retirement System Board (the “PERB”) to establish the contribution rates that employers will pay to fund the T1/T2 Pension Programs, OPSRP and the PERS-sponsored Retirement Health Insurance Account program (“RHIA”) described herein. Actuarial valuations as of the end of even-numbered years (such as 2014) are used for advisory purposes only.

Actuarial valuations are performed for the entire System (the “System Valuation”), and for each participating employer, including the District (the “District Valuation”). Valuations are released nine to eleven months after the valuation date. Current payroll rates are based on the actuarial valuations as of December 31, 2015, and those rates extend through June 30, 2019.

Valuation Date Release Date Rates Effective December 31, 2013 September 2014 July 1, 2015 – June 30, 2017 December 31, 2014 November 2015 Advisory only December 31, 2015 October 2016 July 1, 2017 – June 30, 2019

Valuations are based on complex models which utilize assumptions on rates of return, payroll growth rates and demographic trends. Should those assumptions prove inaccurate, liabilities of the system may be higher or lower than estimated.

Actuarial Assumptions – 2013 Valuation. Significant actuarial assumptions and methods used in the actuarial valuation report for the System as of December 31, 2013 (the “2013 System Valuation”), which covered payroll rates paid through June 30, 2017, included (a) the Entry Age Normal method, (b) asset valuation method based on market value, (c) the assumed earnings rate (the “Assumed Rate”) on the investment of present and future assets of 7.75%, (d) payroll growth rate of 3.75%, (e) consumer price inflation of 2.75% per year, (f) UAL amortization method of a level percentage of payroll over 20 years (fixed) for all T1/T2 UALs derived from the 2013 Valuation and thereafter, and through 2033 for all T1/T2 UALs derived from the 2007, 2009 and 2011 valuations, and 16 years (fixed) from the date of the first rate-setting valuation at which the UAL is recognized for OPSRP, and (g) a rate collar to limit increases or decreases in employer contribution rates from biennium to biennium (the “Rate Collar”) (see “FINANCIAL INFORMATION – Retirement Plans – Oregon Public Employees Retirement System (PERS) - Employer Contribution Rates” below).

Actuarial Assumptions – 2014 and 2015 Valuations. At their July 31, 2015 Board meeting, the PERB adopted revisions to its actuarial assumptions and methods based upon recommendations from Milliman. These changes include: (a) lowering the Assumed Rate to 7.50%; (b) reducing the payroll growth rate from 3.75% to 3.50%; and (c) updating the mortality assumptions to increase projections of life expectancy. The revised assumptions were incorporated into the December 31, 2014 (advisory only) and December 31, 2015 (rate-setting for 2017-19 biennium) actuarial valuations.

Actuarial Assumptions – 2016 and 2017 Valuations. On July 28, 2017, the PERB approved lowering the Assumed Rate further to 7.20%. This action, in combination with certain other changes to actuarial assumptions, is expected to cause unfunded actuarial liabilities to grow by approximately $2.3 billion, and System average employer contribution rates to rise by approximately 1.90% of payroll. However, increases in the payroll rate are not expected to take effect until the 2019-21 biennium. Detailed estimates of the impact on the System’s UAL, funded status and projected employer contribution rates will be available in the System actuarial valuation report as of December 31, 2016, which is expected to be released in fall of 2017. The actuarial valuation report as of December 31, 2017, which will set employer contribution rates for the 2017-21 biennium, is expected to be released in fall of 2018.

Employer Assets, Liabilities, and Unfunded Actuarial Liabilities. An employer’s unfunded actuarial liability (“UAL”) is equal to the excess of the actuarially determined present value of the employer’s benefit obligations to employees over the existing assets available to pay those benefits.

2015 System Valuation. The actuarial valuation report for the System as of December 31, 2015 Valuation (the “2015 System Valuation”) was released on September 27, 2016. The 2015 System Valuation indicated that the System-wide funded status decreased from approximately 76% at December 31, 2014 to 71% as of December 31, 2015, without taking into account offsets for deposits made by individual employers from bond proceeds or cash on hand in side accounts. The System-wide UAL increase from approximately $17.9 billion as of December 31, 2014 to $21.8 billion as of December 31, 2015 is largely attributable to actual investment returns of 2% during 2015, substantially less than the 7.50% assumed rate of return.

District’s UAL. For the T1/T2 Pension Programs, the District is pooled with State agencies, Oregon local governments and community college public employers (the “State and Local Government Rate Pool” or “SLGRP”). The District’s portion of the SLGRP’s assets and liabilities is based on the District’s proportionate share of the SLGRP’s pooled payroll (the “District’s Allocated T1/T2 UAL”). Changes in the District’s relative growth in payroll will cause the District’s Allocated T1/T2 UAL to shift. The District’s Allocated T1/T2 UAL may increase if other pool participants fail to pay their full employer contributions. As of December 31, 2015, the SLGRP funded status was 72% without taking into account offsets for deposits made by individual employers from bond proceeds or cash on hand in side accounts. This funded status is expected to decline because of changes to the Assumed Rate recently adopted by the PERB. See “Actuarial Assumptions – 2016 and 2017 Valuations” herein.

OPSRP’s assets and liabilities are pooled on a program-wide basis and therefore OPSRP is a multiple-employer cost-sharing defined benefit plan. These assets and liabilities are not tracked or calculated on an employer basis.

The District’s allocated share of OPSRP’s assets and liabilities is based on the District’s proportionate share of OPSRP’s pooled payroll (the “District’s Allocated OPSRP UAL”). Changes in the District’s relative growth in payroll will cause the District’s Allocated OPSRP UAL to shift. As of December 31, 2015, the OPSRP funded status was 64% without taking into account offsets for deposits made by individual employers from bond proceeds or cash on hand in side accounts. This funded status is expected to decline because of changes to the Assumed Rate recently adopted by the PERB. See “Actuarial Assumptions – 2016 and 2017 Valuations” herein.

The District’s net unfunded pension UAL is the total of the District’s Allocated T1/T2 UAL and the District’s Allocated OPSRP UAL offset in part by the District’s allocated pre-SLGRP pooled surplus and the District’s Transition Surplus. The District’s net unfunded pension UAL as reported in the District’s actuarial valuation report as of December 31, 2013 (the “2013 District Valuation”) and as reported in the District’s actuarial valuation report as of December 31, 2015 (the “2015 District Valuation”) are shown in the following table.

District’s Net Unfunded Pension UAL

2013 Valuation(1) 2015 Valuation(2) Allocated pooled SLGRP T1/T2 UAL $ 32,414,429 $ 95,736,574 Allocated pre-SLGRP pooled liability/(surplus)(3) (8,259,341) (8,217,289) Transition liability/(surplus)(3) (17,913,776) (16,833,926) Allocated pooled OPSRP UAL 3,022,784 7,106,497 District Side Account 0 0 Net unfunded pension actuarial accrued liability $ 9,264,096 $ 77,791,856 ______(1) Reflects the legislative changes of the 2013 PERS Bills, showing savings that were anticipated from the 2013 PERS Bills, but will not be realized because most of the 2013 PERS Bills were invalidated. See “— Invalidated 2013 Changes to PERS.” Also reflects actuarial assumptions adopted by the PERB for the 2013 valuation. See “— Actuarial Assumptions – 2013 Valuation.” (2) Reflects the Oregon Supreme Court decision discussed below. See “— Invalidated 2013 Changes to PERS.” Also reflects actuarial assumptions adopted by the PERB for the 2014 and 2015 valuations. See “— Actuarial Assumptions – 2014 and 2015 Valuations.” (3) The pre-SLGRP pooled liability/(surplus) is the liability or surplus that existed when the State/Community College pool and the LGRP were discontinued and the SLGRP was formed. These are pooled liabilities/(surpluses). The transition liability/(surplus) is the liability or surplus that was created when the individual employer joined the SLGRP and is solely the individual employer’s. Source: 2013 District Valuation and 2015 District Valuation.

The funded status of PERS and of the District as reported by Milliman will change over time depending on a variety of factors, including the market performance of the investments in which the Oregon Public Employees Retirement Fund (“OPERF”) is invested, future changes in compensation and benefits of covered employees, demographic characteristics of members, methodologies and assumptions used by the actuary in estimating the assets and liabilities of PERS, and other actions taken by the PERB. For example, the District’s UAL reported in the table above is expected to increase due to the recent action by the PERB to reduce the Assumed Rate. See “Actuarial Assumptions – 2016 and 2017 Valuations” herein.

Employer Contribution Rates. Employer contribution rates are calculated as a percent of covered payroll. The rates are based on the current and projected cost of benefits and the anticipated level of funding available from the OPERF, including anticipated investment performance of the fund. Contribution rates are subject to future adjustment based on factors such as the result of subsequent actuarial valuations, litigation, decisions by the PERB and changes in benefits resulting from legislative modifications. Pursuant to ORS 238.225, all participating employers are required to make their contribution to PERS based on the employer contribution rates set by the PERB. Employees are required to contribute 6% of their annual salary to the IAP. Employers are allowed to pay the employees’ contribution in addition to the required employers’ contribution. The District has elected to make the employee contribution.

Rate Collar. In January 2010, the PERB adopted the Rate Collar to smooth the impact of significant increases or decreases from one valuation to the next. The Rate Collar limits increases in employer contribution rates before rate reductions from side accounts are deducted, and does not cover charges associated with RHIA and Retiree Health Insurance Premium Account (“RHIPA”). Under normal conditions, the Rate Collar is the greater of 3% of payroll (the “3% parameter”) or 20% of the current base rate (the “20% parameter”). If the funded status of an employer or the pool in which the employer participates is below 70% (or above 130%), the Rate Collar increases by 0.3% of payroll if under the 3% parameter, or 2% of payroll if under the 20% parameter, for every percentage point under the 70% (or above 130%) funded level (the “Collar Ramp”) until it reaches 6% of payroll, or 40% of the current rate base at the 60% (or above 140%) funded level (the “Double Rate Collar”).

If the projected rate necessary to fully fund the system (the “Uncollared Rate”) causes an increase or decrease in rates that exceeds the Rate Collar, the excess increase or decrease is deferred to future rate cycles.

The District’s Contribution Rates. The 2015-17 biennial employer contribution rates for the Pension Programs incorporated the impacts of changes to the Pension Programs approved by the 2013 Legislature, many of which were later reversed by the Supreme Court (see “FINANCIAL INFORMATION – Retirement Plans – Oregon Public Employees Retirement System (PERS) - 2013 Legislative Changes” below). The Supreme Court’s actions did not affect the 2015-17 rates. The increases shown in the 2017-19 biennial rates below are largely a factor of the reversal of this legislation, as well as changes made by the PERB to actuarial assumptions.

The District’s employer contribution rates for the 2015-17 biennium based on the 2013 District Valuation, and current contribution rates for the 2017-19 biennium based on the 2015 District Valuation are provided in the following table.

Pension Contribution Rates

2015-17 Biennium 2017-19 Biennium OPSRP OPSRP OPSRP OPSRP

T1/T2 General P&F T1/T2 General P&F Normal cost rate 16.11% 7.33% 11.44% 19.51% 8.02% 12.79% T1/T2 UAL rate 4.50 4.50 4.50 6.03 6.03 6.03 OPSRP UAL rate 0.61 0.61 0.61 1.27 1.27 1.27 Pre-SLGRP pooled liability rate (1.81) (1.81) (1.81) (1.73) (1.73) (1.73) Transition liability/(surplus) rate (3.91) (3.91) (3.91) (3.54) (3.54) (3.54) Side account rate relief 0.00 0.00 0.00 0.00 0.00 0.00 Retiree Healthcare rate (RHIA)(1) 0.53 0.45 0.45 0.50 0.43 0.43 Total net contribution rate 16.03% 7.17% 11.28% 22.04% 10.48% 15.25% ______(1) Contribution rates to fund RHIA benefits are included in the total District employer contribution rate, but are not a pension cost. See “FINANCIAL INFORMATION - Other Post-Employment Benefits – Retirement Health Insurance Account” below. Source: 2013 District Valuation and 2015 District Valuation.

The District’s employer contribution rate increases in the 2017-19 and future bienniums are mitigated in part by the District’s changing workforce. Due to earlier retirement ages for firefighters, the District’s workforce is comprised of a growing share of OPSRP employees. As T1/T2 firefighters retire and are replaced with OPSRP employees with lower contribution rates, the District’s overall blended workforce PERS employer contribution rate and the 6% employee contribution, which the District covers, are estimated at 23.99% against a prior biennium blended rate of 19.93%. This represents a 4% increase in contributions, which is in line with expected property tax assessed value growth. This is projected to continue in the future years.

In 2004, the District established a PERS rate reserve. Amounts in the PERS rate reserve are utilized to absorb the anticipated employer contribution rate increases. As of June 30, 2017, the PERS rate reserve contained approximately $7.1 million. The District expects to utilize approximately $850,000 in Fiscal Year 2018 and expects to have sufficient funding through the 2023-25 biennium to smooth rate increases in an absorbable manner such that

the District can support operations and staffing in a financially stable manner. For additional information on the PERS rate reserve, see, “FINANCIAL INFORMATION – Budgeting Process and Controls.”

District Contributions. The District’s historical and estimated annual contributions to PERS are provided in the following table.

Pension Contributions

Fiscal District Year Contribution(1) 2011 $ 6,446,000 2012 8,015,000 2013 8,243,000 2014 8,487,000 2015 9,194,036 2016 9,443,184 2017 10,881,000 ______(1) District’s contribution to PERS which includes the employee contribution. Source: District’s Audited Financial Statements and District.

GASB 67 and GASB 68. GASB Statements No. 67 and No. 68 modify the accounting and financial reporting of pensions by state and local governments and pension plans. Statement No. 67 (“GASB 67”), Financial Reporting for Pension Plans, addresses financial reporting for state and local government pension plans. Statement No. 68 (“GASB 68”), Accounting and Financial Reporting for Pensions, establishes new accounting and financial reporting requirements for governments that provide their employees with pensions. The PERS System is subject to GASB 67; each participating employer, including the District, is subject to GASB 68. GASB 68 was effective for Fiscal Year 2015 and has been incorporated in the District’s financial statements for Fiscal Years 2015 and 2016. PERS has contracted with Milliman to provide information for local governments to use in their financial statements. See Appendix A - “District’s Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2016” for more information.

Invalidated 2013 Changes to PERS. In 2013, the Legislative Assembly enacted the 2013 PERS Bills that were expected to: limit annual benefits cost of living adjustments (“COLAs”) for PERS retirees, eliminate a benefit increase for out-of-state retirees based on Oregon income tax, exclude certain salary increases from the pension benefits calculation, and reduce legislators’ participation in PERS. The 2013 PERS Bills were expected to reduce future benefit payments, resulting in a reduction of the System’s unfunded actuarial liability by approximately $5 billion. Lawsuits were filed challenging provisions of the 2013 PERS Bills, including the changes to the COLA adjustment and the elimination of a benefit increase for out-of-state retirees based on Oregon income tax. In April 2015, the Oregon Supreme Court announced a decision that upheld the elimination of the benefit increase for out-of- state retirees. The COLA reductions were declared unconstitutional as applied to benefits earned prior to the June 1, 2013 effective date of the 2013 PERS Bills. However, the reduced COLA could be applied to the benefits earned after the 2013 PERS Bills became effective.

Single-Employer Defined Benefit Pension Plan

The District maintains a single-employer defined benefit pension plan (the “Plan”) for those former employees of Washington County Fire Protection District No. 1 (a merged district) who retired prior to July 16, 1981. Compensation levels and years of service were frozen for benefit purposes as of June 30, 1981. As of June 30, 2017, participants in the Plan include five beneficiaries currently receiving benefits and one retiree.

The Plan is administered by the Fire Chief. Benefits under this Plan consist of payments to retirees and beneficiaries. Amendments to the Plan may be made at the discretion of the Board. There are no remaining assets

of the Plan. The total actuarial present value of accumulated plan benefits as of June 30, 2016, the date of the latest actuarial valuation, was $1,659,564. All benefits are vested. Significant assumptions used in the valuation included (a) rate of return of 3.2%, (b) cost of living increases of 1.5 to 2.0% for the 1976 retirees and 2.0 to 3.5% for the 1973 Plan retirees, and (c) mortality based upon the RP2014 Blue Collar generation tables projected forward using Scale MP 2015.

For Fiscal Year 2016, the District recognized a pension expense for the Plan of $332,534 and the District’s total pension liability for the Plan was $1,659,564. Due to the age of the Plan participants, the District does not intend to make further contributions to the Plan, but rather, make transfers from the General Fund in the amount necessary to pay the pension benefits as they come due. The Plan does not issue stand-alone financial reports. For more information see Appendix A.

Volunteer Length of Service Award Plan

The District maintains two volunteer Length of Service Award Programs (“LOSAP”) benefiting its volunteer firefighters. The District’s current volunteers participate in a defined contribution plan implemented effective January 1, 2012 and a closed defined benefit plan for some prior volunteers under a 1992 plan. The 1992 plan is accounted for as a single employer defined benefit plan and provides length of service award benefits of a lump sum amount based upon years of service. As of June 30, 2016, the District recognized pension revenue of $53,875. For more information see Appendix A.

OTHER POST-EMPLOYMENT BENEFITS

Health Benefit Retiree Program

The District’s Health Benefit Retiree Program has two components: the Explicit Benefit Plan and the Self-Pay Health Plan. The Explicit Benefit Plan is comprised of several agreements made between the District and various employees and employee groups. Under the Explicit Benefit Plan, four remaining pre-2000 retirees are eligible for an explicit benefit in the form of either a monthly stipend or subsidized medical benefits, generally until age 65. The Explicit Benefit Plan is closed to current active employees and at June 30, 2017, only $4,560 of future payments remain. The District accounted for the resources and expenditures associated with funding this single employer program through the General Fund. The Self-Pay Health Plan is provided in accordance with ORS 243.303, which requires that local government retirees be allowed to continue their health care coverage at their own expense at the same rates as active employee plan members until eligible for federal Medicare coverage. Since union actives continue their coverage through the Union Trust, only non-union actives are eligible to continue their coverage under the District’s health plan after retirement. The difference between retiree claims costs, which because of the effect of age is generally higher in comparison to all health plan members, and the amount of retiree healthcare premiums represents the District’s implicit employer contribution.

GASB 45 requires the District to determine the extent of its liability for post-employment benefits (“OPEB”) and record the liability in its financial statements on an actuarial basis. The District received its actuarial report related to GASB 45 prepared by the Silverstone Group that determined the Annual Required Contribution (ARC) and Annual OPEB Cost under GASB 45 for Fiscal Year 2016. The actuarial report indicated that as of June 30, 2016, the District’s unfunded actuarial accrued liability (UAAL) for its non-PERS OPEB was approximately $1,114,085, which includes costs related to both implicit and explicit medical benefits. The report indicated that the annual OPEB cost for Fiscal Year 2016 was $80,587 with the District contributing $107,110, resulting in a net OPEB asset of $123,858 for the Fiscal Year. The District currently pays its non-PERS OPEB on a “pay-as-you-go” basis and currently plans to continue to pay this OPEB on a “pay-as-you-go” basis.

Retirement Health Insurance Account

Retirement Health Insurance Account. PERS retirees who receive benefits through the Tier 1 and Tier 2 plans and are enrolled in certain PERS administered health insurance programs, may receive a subsidy towards the payment of health insurance premiums. Under ORS 238.420, retirees may receive a subsidy for Medicare supplemental health insurance of up to $60 per month towards the cost of their health insurance premium under the RHIA plan. The

RHIA program’s assets and liabilities are pooled on a system-wide basis and are not tracked or calculated on an employer basis. According to the 2015 System Valuation, this program had a UAL of approximately $46.3 million. The District’s allocated share of the RHIA program’s assets and liabilities is based on the District’s proportionate share of the program’s pooled payroll. According to the 2015 District Valuation, the District’s allocated share of the RHIA program’s UAL was $242,725.

GASB 45. GASB 45 requires the District to determine the extent of its liabilities for post-employment benefits and record the liability in its financial statements on an actuarial basis. This includes the requirement under ORS 243.303 of offering the same healthcare benefits for current employees to all retirees and their dependents until such time as the retirees are eligible for Medicare. GASB 45 refers to this as an “implicit subsidy” and requires that the corresponding liability be determined and reported. The District has implemented this pronouncement.

DEFERRED COMPENSATION PLANS

The District offers all employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457(b). The plan permits employees to defer a portion of their salary until future years. Participation in the plan is optional. Under terms of the bargaining agreement, and in accordance with Internal Revenue Code Section 401(a), participating employees who meet a length of service requirement receive a District matching contribution of approximately 5% of base wages. The District makes a similar match for non-bargaining employees. The District’s contribution during Fiscal Year 2016 was $2,019,980, of which $1,502,927 was made for the bargaining unit employees.

PENSION AND OTHER POST-EMPLOYMENT BENEFITS RELATED TO EXPANSION OF DISTRICT SERVICE AREA

Annexation of Washington County Fire District No. 2

As of July 1, 2016, all 13 employees of WCFD2 were transferred to the District. See “THE DISTRICT – Expansion of District Service Area – Annexation of Washington County Fire District No. 2.” As such, the District’s actuarial valuation report for the year ending December 31, 2016 will incorporate the combined valuation payroll, including the transferred WCFD2 employees. The following is recent WCFD2 pension and OPEB information prior to the transfer of the WCFD2 employees.

WCFD2 participated in PERS and was pooled with the SLGRP. WCFD2’s UAL as reported in its actuarial valuation report as of December 31, 2013 (the “2013 WCFD2 Valuation”) and as reported in WCFD2’s actuarial valuation report as of December 31, 2015 (the “2015 WCFD2 Valuation”) is shown in the following table.

WCFD2’s Net Unfunded Pension UAL

2013 Valuation 2015 Valuation Allocated pooled SLGRP T1/T2 UAL $ 979,542 $ 2,559,722 Allocated pre-SLGRP pooled liability/(surplus) 0 0 Transition liability/(surplus) 100,075 95,763 Allocated pooled OPSRP UAL 91,346 190,007 District Side Account 0 0 Net unfunded pension actuarial accrued liability/(surplus) $ 1,170,963 $ 2,845,492 ______Note: The pre-SLGRP pooled liability/(surplus) is the liability or surplus that existed when the State/Community College pool and the LGRP were discontinued and the SLGRP was formed. These are pooled liabilities/surpluses. The transition liability/(surplus) is the liability or surplus that was created when the individual employer joined the SLGRP and is solely the individual employer’s. Source: 2013 WCFD2 Valuation and 2015 WCFD2 Valuation.

During Fiscal Year 2017, WCFD2 paid in full the actuarial balance of the transition liability, such that for future valuations, the combined District’s actuarial valuation will reflect the actuarial allocation of the SLGRP T1/T2 and OPSRP UAL based upon the combined valuation payroll to that of the applicable pool.

WCFD2’s employer contribution rates for the 2015-17 biennium under the 2013 WCFD2 Valuation are provided in the following table. WCFD2 had elected not to make the 6% employee contribution.

Pension Contribution Rates

2015-17 Biennium(2) OPSRP OPSRP

T1/T2 General P&F Normal cost rate 15.88% 7.33% 11.44% T1/T2 UAL rate 4.50 4.50 4.50 OPSRP UAL rate 0.61 0.61 0.61 Pre-SLGRP pooled liability rate 0.00 0.00 0.00 Transition liability/(surplus) rate 0.72 0.72 0.72 Side account rate relief 0.00 0.00 0.00 Retiree Healthcare rate (RHIA)(1) 0.53 0.45 0.45 Total net contribution rate 22.24% 13.61% 17.72% ______(1) Contribution rates to fund RHIA benefits are included in the total WCFD2 employer contribution rate, but are not a pension cost. (2) No contributions were made after July 1, 2016, other than the payment of the transition liability as there were no WCFD2 employees and, thus, no WCFD2 payroll after July 1, 2016. Source: 2013 WCFD2 Valuation and 2015 WCFD2 Valuation.

WCFD2’s historical annual contributions to PERS are provided in the following table.

Pension Contributions

Fiscal WCFD2 Year Contribution(1) 2011 $167,969 2012 237,971 2013 243,267 2014 249,016 2015 256,992 2016 255,697 2017(2) 0 ______(1) WCFD2’s contribution to PERS which does not include the employee contribution. (2) All WCFD2 employees were transferred to the District as of July 1, 2016 and WCFD2 had no payroll for Fiscal Year 2017. Source: WCFD2’s Audited Financial Statements.

WCFD2 maintains two LOSAP plans for its volunteer firefighters. Prior to Fiscal Year 2000, WCFD2’s volunteers participated in a defined benefit plan (the “WCFD2 DB LOSAP”) established in 1990. The WCFD2 DB LOSAP is closed and unfunded. Effective Fiscal Year 2000, WCFD2’s volunteers participated in a defined contribution plan (the “WCFD2 DC LOSAP”), which was administered by the Oregon Fire District Directors Association. The District made the WCFD2 DB LOSAP payments for Fiscal Year 2017 and will continue to do so. As such, the actuarial liabilities will transfer to the District for those WCFD2 DB LOSAP volunteers. As of June 30, 2016, the

most recent actuarial valuation date, eight former volunteers were covered by the WCFD2 DB LOSAP plan, and WCFD2 recognized pension liability of $149,038 and a pension expense of $4,789. Volunteers under the WCFD2 DB LOSAP now receive benefits under the District’s LOSAP defined contribution plan. See “RETIREMENT PLANS – Volunteer Length of Service Award Plan” above. WCFD2 contributed to the RHIA for each of its eligible employees as part of its PERS contribution through June 30, 2016. WCFD2 also had a deferred compensation plan created in accordance with Internal Revenue Code Section 457(b). The plan permitted employees to defer a portion of their salary until future years. All active employees who were transferred to the District transferred their plan assets to District carriers.

Agreement with City of Newberg and Newberg Rural Fire Protection District

As of July 1, 2016, 28 employees of the City of Newberg were conditionally transferred to the District pursuant to an intergovernmental agreement between the parties. Newberg Rural does not have, and therefore did not transfer, any employees. See “THE DISTRICT – Expansion of District Service Area – Fire and Emergency Services Agreement for City of Newberg and Newberg Rural Fire Protection District.” The intergovernmental agreement specifies that all prior PERS unfunded actuarial liabilities and/or surplus for the City of Newberg employees will remain with the City. Thus, for future valuations, the District’s actuarial valuation will be based upon the District’s combined payroll, including the newly hired former City employees, and its proportionate share of the applicable actuarial rate pool.

RISK MANAGEMENT

The District is exposed to various risks of loss related to torts, theft of or damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The District, through its general fund, purchases commercial insurance. Deductibles are generally at $5,000 or less and natural disasters have a deductible of $100,000. Settled claims have not exceeded commercial coverage in any of the last three Fiscal Years.

The District’s industrial accident insurance policies since Fiscal Year 2014 have been written under a guaranteed cost plan.

Tort Claims Against Oregon Governments

The District’s risk of exposure is mitigated by statutory municipal tort limit laws of the State of Oregon (the “Oregon Tort Claims Act” or “OTCA”) which are described below. The OTCA (ORS 30.260 to 30.300) limits certain claims against the District for personal injury, death and property damage or destruction as described below. Claims under federal jurisdiction are not subject to such limitations and the State is subject to different limits.

Personal Injury and Death Claim

Under ORS 30.272, the liability of a local public body and its officers, employees and agents acting within the person’s employment or duties, to any single claimant for covered personal injury or death claims (and not property claims) arising out of a single accident or occurrence may not exceed $706,000 for causes of action arising on or after July 1, 2017, and before July 1, 2018. The liability limits to all claimants for covered personal injury or death claims (and not property claims) arising from a single accident or occurrence is $1,412,000 for the same period. For causes of action arising on or after July 1, 2018, the liability limits for both a single claimant and all claimants will be adjusted based on a determination by the State Court Administrator of the percentage increase or decrease in the cost of living for the previous calendar year as provided in the formula in ORS 30.272. The adjustment may not exceed 3% for any year.

Property Damage or Destruction Claim

Under ORS 30.273, the liability of a public body and its officers, employees and agents acting within the scope the person’s employment or duties, for covered claims for damage to and destruction of property, including consequential damages, that arise from a single accident or occurrence causes of action arising on or after July 1, 2017, and before July 1, 2018, are as follows: (a) $115,800 for any single claimant and (b) $579,000 to all

claimants. These liability limits are adjusted based on a determination by the State Court Administrator of the percentage increase or decrease in the cost of living for the previous calendar year as provided in the formula in ORS 30.273. The adjustment may not exceed 3% for any year.

INDEPENDENT AUDIT REQUIREMENT

Each Oregon municipal corporation must obtain an audit and examination of its funds and account groups at least once each year pursuant to the Oregon Municipal Audit Law, Oregon Revised Statutes 297.405 to 297.555.

The District’s audited financial statements for Fiscal Years 2012 through 2016 were audited by Talbot, Korvola & Warwick LLP, Certified Public Accountants & Consultants, Lake Oswego, Oregon (the “District’s Auditor”). The audited reports indicate the financial statements present the District’s financial picture fairly, in all material respects, and are in conformance with generally accepted accounting principles.

The District’s Auditor has not been engaged to perform, and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. The District’s Auditors also have not performed any procedures relating to this Official Statement.

The District’s Comprehensive Annual Financial Report Fiscal Year 2016, containing its most recent audit, is attached hereto as Appendix A.

The following pages in this section are excerpted from the District’s Comprehensive Annual Financial Reports for Fiscal Years 2014 through 2016.

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TUALATIN VALLEY FIRE AND RESCUE STATEMENT OF NET POSITION For the Year Ended June 30

Governmental Activities 2014 2015 2016 Assets Cash and cash equivalents $ 72,735,277 $ 73,016,515 $ 79,371,555 Investments 277,578 Property taxes receivable 4,110,240 3,992,465 4,567,303 Accounts receivable 218,841 476,718 581,516 Prepaid items 1,250,432 1,326,977 1,513,807 Supplies inventory 305,764 341,601 318,368 Other post-employment benefit asset 80,449 97,335 123,858 LOSAP net pension asset 179,851 188,841 PERS net pension asset 13,390,794 Restricted assets: Cash and cash equivalents 9,248,576 9,475,252 4,708,054 Capital assets, not being depreciated: Land 12,747,885 12,747,885 14,262,133 Other capital assets 225,000 225,000 231,000 Construction in progress 6,477,187 1,841,486 5,664,398 Capital assets, net of accumulated depreciation: Buildings and improvements 44,721,917 51,832,747 51,228,031 Fire Apparatus and other vehicles 11,765,519 11,520,212 10,570,755 Furniture, fixtures and equipment 3,147,791 3,074,322 2,844,592 Total assets 167,214,729 183,548,150 176,262,948 Deferred Outflows of Resources Deferred refunding charge 880,143 779,555 Pension related deferred outflows 6,170,579 8,423,093 Total deferred outflows of resources 7,050,722 9,202,648 Total Assets and Deferred Outflows $ 167,214,729 $ 190,598,872 $ 185,465,596

LIABILITIES Accounts payable $ 1,995,085 $ 1,903,762 $ 1,591,760 Accrued salaries and benefits payable 5,481,394 5,841,337 6,658,402 Accrued interest payable 344,018 357,632 237,560 Accrued compensated absences: Due within one year 6,475,083 6,877,892 7,111,979 Due in more than one year 1,450,677 2,165,853 3,838,973 Net pension obligation due in more than one year 568,896 503,150 Bonds payable, net of unamortized premium/discount: Due within one year 3,567,585 4,284,367 4,444,367 Due in more than one year 53,348,878 55,560,104 51,115,737 Total pension liability (LOSAP) 180,853 Total pension liability (Pension Plan) 1,659,564 Total pension liability (PERS) 34,235,839 Total liabilities $ 73,231,616 77,494,097 $ 111,075,034 Deferred Inflows of Resources Pension proportionate contribution difference 13,747 Deferred pension investment 25,838,807 Pension-related deferred inflows 7,529,380 Total deferred inflows of resources $ 25,852,554 $ 7,529,380

NET POSITION Net investment in capital assets $ 31,417,412 $ 30,872,433 $ 33,700,603 Restricted for debt service 1,541,173 1,355,457 1,432,449 Unrestricted 61,024,528 55,024,331 31,728,130 Total net assets $ 93,983,113 $ 87,252,221 $ 66,861,182 ______Source: District’s Audited Financial Statements.

TUALATIN VALLEY FIRE AND RESCUE GENERAL FUND – BALANCE SHEET For the Year Ended June 30

2014 2015 2016 ASSETS Cash and cash equivalents $ 60,905,881 $ 60,688,722 $ 64,661,452 Investments 277,578 Property taxes receivable 3,824,371 3,728,913 4,264,685 Accounts receivable 218,841 295,433 434,621 Due from other funds 73,546 Supplies inventory 305,764 341,601 318,368 Total assets $ 65,254,857 $ 65,054,669 $ 70,030,250

LIABILITIES Accounts payable $ 886,338 $ 910,736 $ 1,112,319 Accrued salaries and benefits payable 5,481,394 5,841,337 6,658,402 Deferred revenue/Unearned revenue 6,878 Total liabilities $ 6,368,610 $ 6,752,073 $ 7,770,721

DEFERRED INFLOWS OF RESOURCES Unavailable revenue – property taxes $ 3,520,342 $ 3,416,089 $ 4,027,374 Unavailable revenue – transport services 118,268 89,797 Unavailable revenue – HazMat and conflagrations 39,610 72,911 Unavailable revenue - MERRC 138,785 Total deferred inflows of resources $ 3,520,342 $ 3,573,967 $ 4,328,867

FUND BALANCES Non-spendable $ 305,764 $ 341,601 $ 318,368 Committed to capital purchases 12,093,873 12,326,380 13,560,410 Committed to emergency management 18,980 19,464 Committed to post-employment health benefits 42,681 Committed to Volunteer LOSAP 323,424 Unassigned 42,904,607 42,041,184 43,728,460 Total fund balances $ 55,365,905 $ 57,728,629 $ 57,930,662 TOTAL LIABILITIES AND FUND BALANCES $ 65,254,857 $ 65,054,669 $ 70,030,250 ______Source: District’s Audited Financial Statements.

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TUALATIN VALLEY FIRE AND RESCUE GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Year Ended June 30

2014 2015 2016 REVENUES Program Revenues: Charges for services $ 1,938,937 $ 2,026,509 $ 2,179,400 Program fees 500,393 Grants and contributions 124,153 413,520 168,720 General Revenues: Taxes 76,851,403 80,427,928 93,204,211 Interest 174,926 185,103 242,642 Insurance dividends and refunds 881,244 520,569 380,216 Miscellaneous 64,356 105,904 94,415 Total revenues $ 80,035,019 $ 83,679,533 $ 96,769,997 EXPENDITURES Current: Public safety $ 75,652,183 $ 81,616,482 $ 87,713,655 Capital outlay 1,364,042 1,662,877 2,091,662 Total expenditures 77,016,225 83,279,359 89,805,317 Excess of revenues over expenditures $ 3,018,794 $ 400,174 $ 6,964,680 OTHER FINANCING SOURCES (USES) Proceeds from sales of surplus property $ 42,741 $ 116,472 $ 16,241 Transfers in 149,113 Transfers out (1,000,000) (1,153,922) (4,101,085) Total other financing sources (808,146) (1,037,450) (4,084,844) Net change in fund balances/net position $ 2,210,648 $ (637,276) $ 2,879,836 FUND BALANCES/NET POSITION Beginning of year $ 53,155,257 $ 55,365,905 $ 54,728,629 Restatement of beginning of year 322,197 Beginning of year, as restated 55,365,905 55,050,826 End of year $ 55,365,905 $ 54,728,629 $ 57,930,662 ______Source: District’s Audited Financial Statements.

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TUALATIN VALLEY FIRE AND RESCUE ALL FUNDS SUMMARY OF BUDGETS

Adopted 2016-17 Adopted 2017-18 RESOURCES Beginning fund balance $ 66,279,572 $ 70,318,149 Property tax, current year 101,268,156 107,664,723 Property tax, prior year 1,477,979 1,126,222 Other taxes and interest on tax 31,526 37,720 Interest on investments 227,984 375,290 Program revenue 11,193,681 6,212,743 Special service charges 2,000 2,000 Program fees 400,000 500,000 Regional hazardous response 5,000 5,000 Accounting service revenues 500 350 Training center revenues 5,000 10,000 Rental income 85,600 75,600 Insurance refund 225,400 232,500 Donations and grants 1,893,526 2,634,028 Transfers from other funds 6,500,000 7,480,286 Surplus property 607,500 462,500 Other revenues 91,594 110,500 TOTAL REVENUES $ 190,295,018 $ 197,247,611 EXPENDITURES Personnel services $ 97,148,646 $ 102,201,265 Materials and services 14,034,590 14,427,312 Capital outlay 19,921,415 26,259,907 Debt service 6,273,986 6,462,236 Operating transfers out 6,500,000 7,480,286 Operating contingency 9,090,531 9,175,307 Ending fund balance 37,325,850 31,241,298 TOTAL REQUIREMENTS $ 190,295,018 $ 197,247,611 ______Source: District’s Annual Budget Documents.

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TAXES AND STATE FUNDING

Most local governments, school districts, education services districts and community college districts (“local governments”) have permanent authority to levy property taxes for operations (“Permanent Rates”) up to a maximum rate (the “Operating Tax Rate Limit”). Local governments that have never levied property taxes may request that voters approve a new Operating Tax Rate Limit.

Local governments with operating tax rates may not increase the Operating Tax Rate Limits; rather they may request only that voters approve limited term levies for operations or capital expenditures (“Local Option Levies”) or levies to repay general obligation bonded indebtedness (“General Obligation Bond Levies”). The District’s Operating Tax Rate is Limit is $1.5252 per $1,000 of assessed property value.

Local Option Levies that fund operating expenses are limited to five years, and Local Option Levies that are dedicated to capital expenditures are limited to ten years. See “TAXES AND STATE FUNDING - Local Option Provisions” herein.

Local governments impose property taxes by certifying their levies to the county assessor of the county in which the local government is located. Property taxes ordinarily can only be levied once each Fiscal Year, which is July 1 through June 30. The local government ordinarily must notify the county assessor of its levies by July 15.

Valuation of Property – Real Market Value. “Real Market Value” is the minimum amount in cash which could reasonably be expected by an informed seller acting without compulsion, from an informed buyer acting without compulsion, in an “arms-length” transaction during the period for which the property is taxed.

Property subject to taxation includes all privately owned real property (land, buildings and improvements) and personal property (machinery, office furniture and equipment) for non-residential taxpayers. There is no property tax on household furnishings, personal belongings, automobiles, crops, orchards, business inventories or intangible property such as stocks, bonds or bank accounts, except for centrally assessed utilities, for which intangible personal property is subject to taxation.

Property used for charitable, religious, fraternal and governmental purposes is exempt from taxation. Special assessments that provide a reduction in the taxable Real Market Value may be granted (upon application) for veterans’ homesteads, farm and forest land, open space and historic buildings. The Real Market Value of specially assessed properties is often called the “Taxable Real Market Value” or “Measure 5 Real Market Value.” The assessment roll, a listing of all taxable property, is prepared as of January 1 of each year.

Valuation of Property – Assessment. Property taxes are imposed on the assessed value of property. The assessed value of each parcel cannot exceed its Taxable Real Market Value, and ordinarily is less than its Taxable Real Market Value. The assessed value of property was initially established in 1997 as a result of a constitutional amendment. That amendment (now Article XI, Section 11, often called “Measure 50”) assigned each property a value and limited increases in that assessed value to 3% per year, unless the property is improved, rezoned, subdivided, or ceases to qualify for exemption. When property is newly constructed or reassessed because it is improved, rezoned, subdivided, or ceases to qualify for exemption, it is assigned an assessed value that is comparable to the assessed value of similar property.

The Oregon Department of Revenue (“ODR”) appraises and establishes values for utility property, forestland and most large industrial property for county tax rolls. It collects taxes on harvested timber for distribution to schools, county taxing districts, and State programs related to timber. Certain properties, such as utilities, are valued on the unitary valuation approach. Under the unitary valuation approach, the taxpaying entity’s operating system is defined and a value is assigned for the operating unit using the market value approach (cost, market value and income appraisals). Values are then allocated to the entities’ operations in Oregon, and then to each county the entity operates in and finally to site locations.

Generally speaking, industrial properties are valued using an income approach, but ODR may apply additions or retirements of the property value through a cost of materials approach. Under the income and cost of materials approaches, property values fluctuate from year-to-year.

Tax Rate Limitation – Measure 5. A tax rate limitation was established in 1990 as a result of a constitutional amendment. That amendment (now Article XI, Section 11b, often called “Measure 5”) separates property taxes into two categories: one to fund the public school system (kindergarten through grade twelve school districts, education service districts and community college districts, collectively “Education Taxes”) and one to fund government operations other than the public school system (“General Government Taxes”). Education Taxes are limited to $5 per $1,000 and General Government Taxes are limited to $10 per $1,000 of the Taxable Real Market Value of property (the “Measure 5 Limits”). If the taxes on a property exceed the Measure 5 Limit for Education or General Government, then tax rates are compressed to the Measure 5 Limit. Local Option Levies compress to zero before there is any compression of Permanent Rates.

The District loses a small amount of tax revenue to compression in Washington County (estimated at $240,170) and Clackamas County (estimated at $84) as a result of the tax rate limitation for the 2016-17 tax year. There is no compression loss for the District in Multnomah County for the same period. The District’s permanent taxing rate is $1.5252/$1,000 of its taxable assessed value and the current local option levy tax rate is $.45/$1,000 of its taxable assessed value.

Taxes imposed to pay the principal and interest on the following bonded indebtedness are not subject to Measure 5 Limit: (1) bonded indebtedness authorized by a specific provision of the State Constitution; and (2) general obligation bonds that are approved by the voters and issued to pay for capital costs; and (3) general obligation bonds issued to refund previously issued general obligation bonds. The Bonds are exempt from Measure 5 limits.

Property Tax Collections. The County Assessor is required to deliver the tax roll to the County Tax Collector in sufficient time to mail tax statements on or before October 25 each year. All tax levy revenues collected by the County for all taxing units within the County are required to be placed in an unsegregated pool, and each taxing unit shares in the pool in the same proportion as its levy bears to the total of all taxes levied by all taxing units within the County. As a result, the tax collection record of each taxing unit is a pro-rata share of the total tax collection record of all taxing units within the County combined.

Under the partial payment schedule, taxes are payable in three equal installments on the 15th of November, February and May of the same Fiscal Year. The method of giving notice of taxes due, the county treasurer’s account for the money collected, the division of the taxes among the various taxing districts, notices of delinquency, and collection procedures are all specified by detailed statutes. The lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law, the County may not commence foreclosure of a tax lien on real property until three years have passed since the first delinquency.

A Senior Citizen Property Tax Deferral Program (1963) allows certain homeowners to defer taxes until death or sale of the home. A similar program is offered for Disability Tax Deferral (2001), which does not have an age limitation.

The following tables represent relevant historical tax information for the District.

TUALATIN VALLEY FIRE AND RESCUE TAX RATE HISTORY AND TAX COLLECTION RECORD

Percent Fiscal Real Market Total Assessed Total Levy Collected Collected Year Value Value Tax Levy Rate(1) Year of Levy As of 6/30/16 2007 $58,151,193,403 $35,116,244,669 $ 62,860,513 $1.82 95.13% 97.00% 2008 65,042,424,035 36,996,882,581 67,886,825 1.87 94.78 96.68 2009 66,962,436,366 38,833,157,921 70,168,538 1.84 94.08 96.22 2010 62,570,272,885 40,282,997,183 74,662,973 1.90 94.29 96.88 2011 58,384,405,761 41,390,794,808 76,954,903 1.88 94.49 97.56 2012 55,648,116,411 42,524,654,403 81,106,617 1.93 94.92 96.75 2013 54,887,460,963 43,663,325,886 82,413,293 1.91 95.31 97.07 2014 58,515,841,178 45,241,214,986 84,922,515 1.91 95.07 97.22 2015 64,892,361,532 47,245,888,745 87,970,033 1.89 95.48 97.41 2016 69,940,122,868 49,554,196,913 102,942,662 2.11 95.48 96.82 2017 77,836,940,023 51,820,193,428(2) 106,825,084 2.10 NA NA (1) Levy Rate is comprised of District’s permanent rate, local option levy, and general obligation bond levy. (2) Over 79% of the District’s assessed value is derived from residential properties. Sources: District’s 2015-16 Audited Financial Statements and the District.

LOCAL OPTION PROVISIONS

Local governments are authorized to ask voters for limited term taxes levied and collected outside the limits of Article XI, Section 11, but subject to the limits of Article XI, Section 11b (the “local option levy”). The local option levy requires voter approval. The District currently levies a local option tax of $.45 per $1,000 of assessed value under a voter-approved local option levy which will expire after the November 2019 levy. The local option levy provides funding for existing and additional firefighters, response units and stations.

TAX LEVY

The process of ascertaining and declaring the amount of taxes to be raised from taxpayers is termed “certifying the levy.” Authority to levy property taxes is vested with the governing body of each local government unit.

The governing body determines the levy annually before July 15 as part of the budget process. Annual budgets for local units are based on a Fiscal Year which begins on July 1 and ends the following June 30. Constitutional and statutory provisions limit the amount that a governing body may levy.

The table below sets forth representative 2016-17 tax rates for a portion of the District and other taxing jurisdictions that overlap the District within a given tax code area in Washington County. The levy rates are calculated by dividing the tax levy by the assessed value (see “Valuation of Property – Assessment” herein).

PROPERTY TAX EXEMPTIONS

A property tax exemption is a legislatively approved program that relieves qualified individuals or organizations from all or part of their property taxes. Exemptions can be either full or partial, depending on the program requirements and the extent to which the property is used in a qualifying manner. Oregon statutes authorize a wide variety of exemptions, including exemptions for property owned or used by cities, counties, schools and other local governments, property of the federal government, property used by religious and charitable entities, property used for low-income housing, historical property and transit oriented property. Most exemptions are determined at the state level, but certain exemption programs may be sponsored by or approved by a city or county in accordance with state law. The property in the District is subject to several locally-sponsored exemption programs, including the Enterprise Zone, the Vertical Housing Zone and the Low Income Rental Housing Tax Exemption. See “Strategic Investments Program and Gain Share” for a discussion of the Strategic Investment Program and Gain Share.

TUALATIN VALLEY FIRE AND RESCUE WASHINGTON COUNTY 2016-2017 CONSOLIDATED TAX RATE PER $1,000 REPRESENTATIVE TAX CODE AREA: 051-50 (AV $11,789,037,207)

Permanent Local Option Total Unlimited Bond Combined Rate Levy Rate Limited Rate Levy Rate Rates

General Government Washington County $ 2.2484 $ 0.6400 $ 2.8884 $ 0.0709 $ 2.9593 Enhanced Sheriff Patrol 0.6365 0.6800 1.3165 1.3165 Urban Road Maintenance 0.2456 0.2456 0.2456 Clean Water Services 0.0000 Tualatin Hills Park & Recreation 1.3073 1.3073 0.3119 1.6192 Tualatin Valley Fire & Rescue 1.5252 0.4500 1.9752 0.1226 2.0978 Port of Portland 0.0701 0.0701 0.0701 Metro 0.0966 0.0960 0.1926 0.2044 0.3970 TriMet 0.0000 Tualatin Valley Water District 0.0000 Total Government $ 6.1297 $ 1.8660 $ 7.9957 $ 0.7098 $ 8.7055

Schools NW Regional ESD $ 0.1538 $ 0.1538 $ 0.1538 Portland Community College 0.2828 0.2828 $ 0.3957 0.6785 Beaverton School District 4.6930 $ 1.2500 5.9430 1.9775 7.9205 Total Schools $ 5.1296 $ 1.2500 $ 6.3796 $ 2.3732 $ 8.7528

Total Consolidated Tax Rate $11.2593 $ 3.1160 $ 14.3753 $ 3.0830 $17.4583 ______NOTE: County assessors report levy rates by tax code. Levy rates apply to taxable “assessed” property value. Tax rate limitations are based upon “real market” value and are reported in total dollar amount of compression, if any, for each taxing jurisdiction. (See “Tax Rate Limitation – Real Market Value” herein). (1) There are several tax code areas in Washington County within the District of which tax code area 051-50 has the highest reported total assessed value, and represents approximately 28.15% of District’s assessed value within Washington County. Reported assessed values per tax code area comprising the District within Washington County range from $7,770 to $11,789,037,207, with total consolidated tax rates ranging from $13.1557 to $20.9847 per $1,000 of taxable assessed value after necessary reductions, if any. Source: Washington County Department of Assessment and Taxation, Fiscal Year 17 Summary of Assessment & Tax Roll.

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TUALATIN VALLEY FIRE AND RESCUE 2016-2017 MAJOR TAXPAYERS WITHIN WASHINGTON COUNTY(1)

Percent Taxpayer Service or Business Assessed Value Total AV(2) Nike, Inc. Corporate Headquarters $ 554,903,560 1.07% Comcast Corporation(3) Cable/Telecommunications 349,799,300 0.68 Portland General Electric Co. Electric Utility 277,292,521 0.54 Pacific Realty Associates Commercial/Industrial Property Developers & Owners 247,560,027 0.48 Northwest Natural Gas Co. Gas Utility 227,164,170 0.44 Intel Corporation Computer Chip Production 173,736,260 0.34 PPR Washington Square LLC Leasing and Property Management 146,992,934 0.28 BV Centercal LLC Shopping Center 138,496,812 0.27 Frontier Communications Telecommunications 137,936,000 0.27 Lam Research Corporation Semiconductor Processing Equipment 111,939,596 0.22 Total $2,365,821,180 4.57%

______(1) Table reflects top District taxpayers within Washington County. The District lies predominately in Washington County, with approximately 81% of its 2016-17 assessed value within Washington County. Moreover, over 70% of the assessed value of Washington County is within the District. (2) Based on District’s total assessed value of $51,820,193,428. (3) Comcast has outstanding property value appeals within Washington and Clackamas Counties (the “Counties”). While the contested value is included on the tax rolls, is the Counties are not billing the amount owed on the value that is being appealed. Therefore, if the appeal is decided in the favor of the appellant, the overlapping municipal entities will not be required to repay taxes on the contested value, but the assessed value could decline. A favorable ruling to any or all of the appellants is not expected to have a material adverse impact on the District’s finances. House Bill 2407, signed by the Governor in July 2017, allows County Assessors to bill and collect such contested taxes in future property tax years. The Counties would segregate such funds and interest earned would go to the prevailing party at the conclusion of the litigation. Thus, the legislation would also not have a material impact on the District’s finances. Source: Washington County Department of Assessment and Taxation.

STRATEGIC INVESTMENTS PROGRAM AND GAIN SHARE

The Strategic Investment Program (“SIP”) was authorized by the Oregon Legislature in 1993 to provide tax incentives for capital intensive investments by firms in Oregon’s key industries, particularly in the high technology and metals industries. For a SIP Project, the first $100 million ($25 million for projects located in a rural area) in real market value as provided by law, increased annually for growth at the rate of 3%, shall be taxed at its assessed value as provided by law. Property within a SIP Project in excess of this amount shall be exempt from ad valorem taxation as provided by State law and rules. The tax abatement period is 15 years.

SIP recipients are required to pay an annual Community Service Fee equal to 25% of the value of the property taxes exempted in each tax year, subject to a statutory cap of $2 million per year ($500,000 per year for projects located in a rural area). The Community Service Fee is not considered a property tax and thus is outside of the constitutional property tax rate limitations. The District receives a pro rata share of the Community Service Fee paid to Washington County.

As a partial trade-off for limiting local property taxes, the State of Oregon provides eligible local governments a share of the personal income tax revenue generated by the retention and creation of SIP-related jobs. This share, referred to as “Gain Share” payments, has begun the process of balancing the local risk and cost of property tax abatement with the state benefit of increased income tax revenue.

Currently, Washington County has SIP agreements with Intel (2005 and 2014) and Genentech. The District derives SIP Community Service Fee and Gain Share revenue sharing funds through Washington County from the 2005 agreement and will also derive funds from the 2014 agreement. Genentech is not in the District.

Intel Agreements

The 2005 Intel SIP Agreement provides a framework for potential additional Intel investment of up to $25 billion over a 15-year period. The 2005 agreement went into effect on July 1, 2010 and will end in Fiscal Year 2025. Upon Intel receiving a SIP property tax exemption pursuant to this Agreement, Intel shall owe to Washington County a total sum of $28.7 million, payable in guaranteed annual payments on December 1 of each year, starting in 2015. In addition, in each year that the Project receives a SIP property tax exemption, Intel shall pay to Washington County a Fee In Lieu of Property taxes, that in no event shall be less than the amount of property taxes that would have been due on any land and buildings within the Project assuming no tax exemption.

The 2014 Intel SIP application provides for up to a $100 billion investment in Washington County that can begin no later than August 26, 2024. Once the SIP Project is initiated, the agreement provides for an annual Community Service Fee which is distributed based upon an agreement between the County and affected local taxing districts, including the District.

ECONOMIC AND DEMOGRAPHIC INFORMATION

GENERAL

The District, located in northwestern Oregon State, encompasses approximately 210 square miles within Washington, Multnomah and Clackamas counties. The July 1, 2017 annexation of WCFD2 adds another 118 miles and the service contract with the City of Newberg and Newberg Rural adds 61 miles, largely in Yamhill County, to the overall service area. The District lies predominantly in Washington County, with approximately 81% of the District’s 2016-17 assessed value within Washington County, while the remaining 17% and 2% are in Clackamas and Multnomah Counties, respectively. These percentages exclude property values for WCFD2, which was not annexed into the District until July 1, 2017. The area served by the District, which includes the cities of Beaverton, Durham, King City, Newberg, Rivergrove, Sherwood, Tigard, Tualatin, West Linn and Wilsonville, covers an estimated population of 491,376 people (including the former WCFD2, the City of Newberg and Newberg Rural), and lies within one of the fastest growing regions of the State of Oregon. It is an area encompassing densely populated suburbs, rural farmlands, retail and commercial establishments and growing industrial complexes.

While the area began as a suburb of Portland, over the past two decades it has rapidly developed its own diversified economic base and is currently home to the world headquarters of a Fortune 500 Corporation: NIKE Inc. The area still, however, contains prime agricultural land and has retained its strong underlying agricultural base despite its rapidly expanding economy.

The economy of the area reflects the diversification of industry characteristic of the entire Portland metropolitan area and, for employment statistics, is included in seven-county area known as the Portland-Vancouver-Hillsboro Metropolitan Statistical Area (“PMSA”). These seven counties are Washington, Multnomah, Clackamas, Yamhill and Columbia in Oregon, and Clark and Skamania in Washington.

POPULATION

The District’s population is expected to continue to grow over the next decades. The District continues to work proactively with other governments and regional planning groups to ensure continued ability to service this future population. Washington County is the second largest populated county in the State when measured by population (583,595 in 2016).

Population Estimates

State of Washington Clackamas Multnomah July 1 PMSA(1) Oregon County County County TVFR 2007 2,159,720 3,745,455 511,075 372,270 710,025 418,673 2008 2,191,785 3,791,075 519,925 376,660 717,880 422,987 2009 2,217,325 3,823,465 527,140 379,845 724,680 427,346 2010 2,230,578 3,837,300 531,070 376,780 736,785 432,106 2011 2,246,083 3,857,625 536,370 378,480 741,925 436,513 2012 2,266,573 3,883,735 542,845 381,680 748,445 440,966 2013 2,292,725 3,919,020 550,990 386,080 756,530 445,464 2014 2,326,397 3,962,710 560,465 391,525 765,775 450,008 2015 2,364,954 4,013,845 570,510 397,385 777,490 454,600 2016 2,409,884 4,076,350 583,595 404,980 790,670 459,200 2017 N/A N/A N/A N/A N/A 446,374(2) ______(1) Portland State University Population Research Center defines the PMSA as Multnomah, Washington, Clackamas, Columbia and Yamhill counties in Oregon and Clark and Skamania Counties in Washington. (2) Excludes WCFD2, which was not annexed until July 1, 2017. Also excludes the City of Newberg and Newberg Rural served under a service contract. Source: Population estimates for the PMSA, the State and the counties were performed by The Center for Population Research and Census at Portland State University. TVFR population estimates for 2007 through 2010 were performed by demographic consultants hired by the District. TVFR population estimates for 2011-2017 were performed in house.

LABOR FORCE AND EMPLOYMENT

The District, through its broad geographic base, serves a strong area of Oregon’s economic base. The three counties served by the District are three of the top six counties Oregon in 2016 providing employment of 75,000 or more people.

The metropolitan area’s manufacturing employment has led high technology and related employment growth throughout the State in the manufacturing – durable goods industry classification. Durable goods include the sectors of fabricated metal product manufacturing, machinery manufacturing, high tech manufacturing including computers and electronic product manufacturing, and transportation equipment manufacturing.

The District’s service area lies predominately within Washington County, where over 40% of the population 25 years or older has a bachelor’s degree or higher and over 90% are high school graduates or higher. Washington County’s poverty rate is less than 11% and, as shown below, the County’s unemployment rate is below State and national averages.

PMSA(1) Labor Force, Unemployment & Total Employment by Place of Residence

Unemployment Resident Civilian Percent of Total Year Labor Force Number Labor Force Employment 2007 1,144,909 56,925 5.0% 1,087,984 2008 1,170,355 71,136 6.1 1,099,219 2009 1,184,164 128,971 10.9 1,055,193 2010 1,207,840 123,713 10.2 1,084,127 2011 1,214,756 108,919 9.0 1,105,837 2012 1,198,728 95,632 8.0 1,103,096 2013 1,178,347 84,036 7.1 1,094,311 2014 1,199,695 73,892 6.2 1,125,803 2015 1,229,127 64,295 5.2 1,164,832 2016 1,275,663 59,775 4.7 1,215,888 ______(1) Includes non-agricultural wage and salary, self-employed, unpaid family workers, domestics, agricultural workers and labor disputants. Source: Oregon Employment Department.

TUALATIN VALLEY FIRE AND RESCUE Average Annual Unemployment as a Percent of Labor Force

Washington State of Year County PMSA Oregon USA 2007 4.3% 5.0% 5.2% 4.6% 2008 5.3 6.1 6.5 5.8 2009 9.5 10.9 11.3 9.3 2010 9.0 10.2 10.6 9.6 2011 7.7 9.0 9.5 8.9 2012 7.1 8.0 8.8 8.1 2013 6.3 7.1 7.9 7.4 2014 5.6 6.2 6.8 6.2 2015 4.7 5.2 5.6 5.3 2016 4.2 4.7 4.9 4.9 ______Source: State of Oregon Employment Department.

PMSA Employment by Industry

2012 2013 2014 2015 2016 Total 872,029 893,716 919,607 951,545 978,623

Total Private Natural resources and mining 12,177 12,931 12,945 12,758 12,472 Construction 39,506 41,881 44,907 44,682 48,952 Manufacturing 101,607 102,408 104,311 108,300 109,060 Trade, transportation & utilities 167,948 166,780 171,393 176,254 178,630 Wholesale trade 49,685 45,750 45,861 46,682 47,680 Retail trade 88,908 91,503 94,657 97,340 97,812 Transportation, warehousing, & utilities 29,355 29,526 30,874 32,231 33,138 Information 20,057 19,990 20,010 20,558 20,967 Financial activities 49,770 50,722 50,696 51,132 51,981 Professional and business services 123,630 135,872 143,244 150,434 155,136 Education and health services 120,888 123,485 125,925 130,839 134,772 Leisure and hospitality 86,879 90,285 93,810 98,383 102,676 Other Services 34,338 35,071 36,392 38,799 41,759 Government 114,914 114,125 115,926 119,243 121,992 ______Source: State of Oregon, Employment Department.

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The table below shows the estimated 2016 largest employers in the PMSA.

PMSA Major Area Employers

2016 Estimated Employer Product or Service Employment(1) Intel Corporation Semiconductor integrated circuits 19,500 Providence Health & Services Healthcare & health insurance 17,378 Oregon Health and Science University Healthcare & education 15,424 State Government Government 15,005(2) Federal Government Government 14,820(2) Fred Meyer Stores Grocery & retail variety chain 11,200 Kaiser Permanente Healthcare 10,269 Legacy Health System Nonprofit health care 9,300 Nike Inc.(3) Sports shoes and apparel 8,500 Portland Public Schools Education 7,678 Multnomah County Government 6,189 City of Portland Government 5,667 Beaverton School District Education 4,903 Wells Fargo Banking and finance 4,350 PeaceHealth Healthcare 4,253 Portland State University Higher education 4,135 U.S. Bank Banking and finance 3,876 Portland Community College Higher education 3,837 Vancouver Public Schools Education 3,300 New Seasons Market Retail grocery stores 3,231 TriMet Regional public transit agency 2,837 Daimler Trucks North America Commercial vehicles 2,800 Hillsboro School District Education 2,605 Portland General Electric Electric utility 2,320 The Standard Insurance and financial services 2,262 ______(1) Total may include part-time, seasonal and temporary employees. (2) Source: Oregon Employment Department; data for 2016; may include part-time, seasonal and temporary employees. (3) Nike recently announced it will cut its global workforce by 2% (estimated at 1,400 positions) as part of a broad restructure. It is unclear how many of the eliminated positions will be in the PMSA. Source: The Oregonian. Source: Portland Business Journal, Book of Lists 2016-17.

LOCAL AREA PERSONAL AND PER CAPITA INCOME

Income Estimates

Total Personal Income Per Capita Income Washington County PMSA Washington State of Year (000) (000) County PMSA Oregon USA 2006 $20,109,788 $ 81,466,482 $40,041 $38,735 $34,721 $38,144 2007 21,288,122 86,184,373 41,836 40,314 35,858 39,821 2008 22,405,740 91,015,463 43,438 41,888 37,149 41,082 2009 21,553,989 86,727,054 41,079 39,301 35,409 39,376 2010 21,771,434 88,150,843 40,950 39,486 35,692 40,277 2011 23,759,750 93,931,598 44,011 41,554 37,392 42,461 2012 25,483,103 100,257,000 46,508 43,802 39,109 44,282 2013 25,628,991 101,689,188 46,123 43,936 39,521 44,493 2014 27,911,782 108,801,434 49,553 46,326 41,720 46,464 2015 29,812,561 115,690,881 51,909 48,422 43,830 48,190 2016 N/A N/A N/A N/A 45,049 49,571 ______Source: U.S. Bureau of Economic Analysis.

HOUSING

According to the Portland Metropolitan Area Multiple Listing Service, as of May 2017, the average sales price of a home in the Beaverton-Aloha area was $354,200, the Lake Oswego-West Linn area was $649,500 and the Tigard- Wilsonville area was $423,100. As of May 2017, the median sales price of a home in the Beaverton-Aloha area was $342,300, the Lake Oswego-West Linn area was $540,000 and the Tigard-Wilsonville area was $412,400.

MANUFACTURING

Intel, Inc., a major computer chip manufacturer, has four campuses with a total of 2.6 million square feet of space and approximately 16,700 employees in Washington County. Intel completed several facilities in recent years including the first and second buildings of the firm’s fifth campus. Total costs are expected to amount to $2 billion with all construction completed. Intel has received tax exemptions under the Strategic Investments Program (“SIP”) from Washington County for these projects and applied for an extension of the tax breaks until 2025. In August 2014, Hillsboro and Washington County officials approved a 30-year deal with Intel that will grant Intel more than $2 billion in potential property tax breaks on up to $100 billion in local investment. This would be Intel’s fifth deal under the SIP program. Intel’s current SIP had been due to run as long as 15 years, but the company’s spending accelerated in 2010 as it began construction of a new, multibillion-dollar research factory called D1X. Intel forecasts it will hit the $25 billion ceiling on its current SIP in 2016, nine years ahead of schedule. The first phase of D1X is just entering production now; a second phase is under way and due to begin manufacturing microprocessors in two or three years.

The second largest manufacturing employer in Washington County is Nike, Inc. with its 286-acre Beaverton campus. Nike world headquarters (“WHQ”) consists of ten general office buildings, two fitness centers, one conference center, one childcare facility, one maintenance facility, one multi-level parking structure, an outdoor track, outdoor multi-sport facilities and two running trails and five restaurants. The entire WHQ campus currently houses more than 8,700 employees and represents a more than $300 million investment by Nike in its world headquarters. In April 2013, Nike announced that it would build two new buildings, expand parking and make road and other campus improvements in Washington County. This expansion was slated to create 500 new jobs within five years and an investment of at least $150 million in the State in exchange for an income tax certainty agreement with the State. Current planning documents show Nike will add 1.3 million square feet of new space to its campus

and has already added 2,000 workers at its headquarters since 2012 exceeding its agreement with the State of Oregon. Construction began January 2015.

SHOPPING AND RETAIL

Retail sales constitute an important sector of Washington County’s economy. One major regional shopping center, and several other large shopping centers are located in the County.

Washington Square, a 1.2 million square-foot regional shopping mall with over 170 stores, is located along Highway 217 in the eastern part of the County. Major tenants include Nordstrom, Macy’s, Dick’s Sporting Goods, Sears, and J.C. Penney. Cascade Plaza Shopping Center, developed in 1988, is located south of Washington Square and has 125 stores, including two department stores and several smaller shops.

Bridgeport Village, opened in 2005 in one the region’s most affluent areas and consists of approximately half a million square feet of retail, entertainment, restaurant and office space. The 75 store center is anchored by Saks Fifth Avenue, MAC Cosmetics, Eileen Fisher, Tommy Bahama, Crate & Barrel Home Store, The Container Store and other specialty retailers and includes an 18-screen, 82,500-sq. ft. Regal Cinema. Other regional shopping centers include The Round at Beaverton, Progress Ridge Townsquare with 350,000 square feet of mixed-use tenants and Cedar Hills Crossing with 750,000 square feet of space and a Century Theater. The developer has announced plans for a five year, five phase $70 million redevelopment, calling for the construction of 16 new buildings totaling 300,000 square feet. The Streets of Tanasbourne, another high end shopping mall consists of retail, restaurants and specialty stores and is located in Hillsboro, Oregon. The $55 million center is an open-air complex with 55 store locations in 368,000 square feet of retail floor.

TRANSPORTATION

Two major freeways, U.S. 26 (the Sunset Highway) and State Highway 217 connect the County to Interstate 5 (north-south) and to Interstate 84 (east). Two major railroads -- the Burlington Northern Santa Fe and Union Pacific -- plus the Amtrak passenger train system, serve the metropolitan area. Transportation is facilitated by a highway system that includes U.S. 26 that travels west to the Oregon coast and east to Gresham and Mt. Hood, State Highway 217 and Interstate 5, the primary north-south highway artery of the West Coast.

The Tri-County Metropolitan Transportation District of Oregon (“TriMet”), the regional public transit agency, provides rail and bus service through the 575 square miles in the area. TriMet’s light rail system (“MAX”) connects the cities of Portland, Gresham, Beaverton, Milwaukie and Hillsboro, and Portland through 60 miles of track and 97 stations. The Port of Portland is a port district encompassing Multnomah, Clackamas and Washington counties. The district provides public facilities including extensive marine terminals and cargo-handling facilities, grain storage and handling facilities, ship dry dock and repair facilities, industrial properties, Portland International Airport and satellite general aviation airports at Troutdale fifteen miles east of Portland, at Hillsboro west of Portland in Washington County, and at Mulino south and east of Portland in Clackamas County.

Portland International Airport handles almost 19 million passengers annually. Portland is served by 21 passenger and 9 freight carriers providing about 600 flights daily.

UTILITIES

NW Natural supplies natural gas to the area; electricity is provided by Portland General Electric Company. The Portland market is open to competition from various telecommunication service companies and a variety of providers now offer services.

PUBLIC FACILITIES

Clean Water Services is a wastewater and stormwater utility serving more than 551,000 customers in Washington County through agreement with its 12 member cities including Beaverton, Tigard, Tualatin, King City, Sherwood,

Durham and unincorporated areas within the District. Other cities in the District own and operate the sewerage collection systems within their boundaries.

Several cities in the District own and operate their own municipal water systems. Tualatin Valley Water District serves almost 220,000 customers in a greater than 44 square mile service area that includes portions of Beaverton, Hillsboro, Tigard, and unincorporated Washington County.

PUBLIC SAFETY

Cities within the District own and operate their own police departments. The majority of the unincorporated area of the District is served by the Washington County Sheriff’s Office.

The non-emergency and 911 emergency communications and dispatch system to the area is administered by the Washington County Consolidated Communications Agency.

HIGHER EDUCATION

Within the Portland Metropolitan Area are several postsecondary educational systems, including Portland Community College (“PCC”). PCC’s enrollment is more than 78,000 full-time and part-time students annually. The community college offers its classes at educational centers located at several locations including Washington County. Combined enrollment at the main campus of the science and technology graduate center for Oregon Health & Science University (OHSU), is approximately 3,454 annually. Portland State University (“PSU”) has an enrollment of more than 29,000 annually. Oregon State University and the University of Oregon have field offices and extension activities in the Portland metropolitan area.

Independent colleges in the metropolitan area include Lewis & Clark College, the University of Portland, Reed College, and Marylhurst University, and four small church-affiliated schools, Warner Pacific College, Concordia University, Pacific University and Columbia Christian College. Western States Chiropractic College is also located in the metropolitan area. The Division of Continuing Education of the Oregon University System offers a diversified program for adult education in the metropolitan area, principally through evening classes but also through correspondence classes and other services.

HEALTH CARE

Major health care facilities available to residents of the District include St. Vincent Medical Center, Forest Grove Community Hospital, Tuality Community Hospital, Kaiser Permanente, Oregon Health Sciences University and Meridian Park Hospital. Tuality Community Hospital and Meridian Park Hospital along with local clinics and medical services complete a wide range of health care opportunities locally. Kaiser Westside Medical Center is a hospital in the Tanasbourne neighborhood in Hillsboro and Kaiser’s first LEED (Leadership Energy & Environmental Design) Gold-certified facility. The hospital features 126 beds, eight operating rooms, 27 treatment rooms in the emergency department and the regional center for total joint replacement surgeries and robotic surgeries.

RECREATION/TOURISM

Rolling hills, forests, rivers and wetlands abound in the area. The District’s location in northwestern Oregon puts it within a two-hour driving distance of the Pacific Coast and the Cascade Mountains. Visitors and residents alike take advantage of numerous sporting and recreational opportunities offered by the ocean beaches and mountain terrain including hunting, boating, fishing, hiking, camping, skiing, water-skiing and wind surfing.

Within the area, parks and recreation are provided by the cities and the Tualatin Hills Park and Recreation District, which serves Beaverton and the surrounding area. In the City of Beaverton alone, there are more than 100 parks encompassing 1,000 acres, 30 miles of hiking trails and a 25-mile network of bike paths.

INFORMATION SOURCES

Historical data have been collected from generally accepted standard sources, usually from public bodies. In Oregon data are frequently available for counties and also, to a somewhat lesser degree, for cities. Because the

District is located within the PMSA, this official statement presents data for that area, as well as for primary cities within the District and Washington County, when available. THE INITIATIVE AND REFERENDUM PROCESS

General. The State Constitution, Article IV, Section 1, reserves to the people of the State (1) the initiative power to amend the State constitution or to enact State legislation by placing measures on the statewide general election ballot for consideration by the voters and (2) the referendum power to approve or reject at an election any act passed by the Legislative Assembly that does not become effective earlier than 90 days after the end of the legislative session. The Legislative Assembly may also refer an act to the voters for approval or rejection.

State law permits any person to file a proposed initiative with the Secretary of State’s office without payment of fees or other burdensome requirements. Although a large number of initiative measures are submitted to the Secretary of State’s office, a much smaller number of petitions contain sufficient signatures to be placed on the ballot. Because many proposed initiative measures are submitted that do not qualify for the ballot, the District does not formally or systematically monitor the impact of those measures or estimate their financial effect prior to the time the measures qualify for the ballot. Consequently, the District does not ordinarily disclose information about proposed initiative measures that have not qualified for the ballot.

Proposed Initiative Measures that Qualify to Be Placed on the Ballot. To be placed on a general election ballot, the proponents of a proposed initiative must submit to the Secretary of State’s office, initiative petitions signed by a number of qualified voters equal to a specified percentage of the total number of votes cast for all candidates for governor at the gubernatorial election at which a Governor was elected for a term of four years next preceding the filing of the petition with the Secretary of State. For the 2016 general election, the requirements were 8% (117,578 signatures) for a constitutional amendment measure and 6% (88,184 signatures) for a statutory initiative. Any elector may sign an initiative petition for any measure on which the elector is entitled to vote.

The initiative petition must be submitted to the Secretary of State’s office not less than four months prior to the general election at which the proposed measure is to be voted upon. As a practical matter, proponents of an initiative have approximately two years in which to gather the necessary number of signatures. State law permits persons circulating initiative petitions to pay money to persons obtaining signatures for the petition. If the person obtaining signatures is being paid, the signature sheet must contain a notice of such payment.

Once a sufficient number of signatures have been gathered for an initiative measure and qualified for placement on the ballot, the State is required to prepare a formal estimate of the measure’s financial impact. Typically, this estimate is limited to an evaluation of the direct dollar impact only.

Historically, a larger number of initiative measures have qualified to be placed on the ballot than have been approved by the electors. According to the Elections Division of the Secretary of State, the total number of initiative petitions that have qualified for the ballot and the numbers that have passed in recent general elections are as follows:

Number of Number of Year of Initiatives that Initiatives that General Election Qualified Passed 2002 7 3 2004 6 2 2006 10 3 2008 8 0 2010 4 2 2012 7 2 2014 4 2 2016 4 3 ______Source: Elections Division, Oregon Secretary of State

TAX MATTERS

Opinion of Bond Counsel

In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the District, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code, and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code and is not included in the adjusted current earnings of corporations for purposes of calculating the alternative minimum tax. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the District in connection with the Bonds, and Bond Counsel has assumed compliance by the District with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

In addition, in the opinion of Bond Counsel to the District, under existing statutes, interest on the Bonds is exempt from State of Oregon personal income tax.

Bond Counsel expresses no opinion regarding any other federal or state tax consequences with respect to the Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or changes in law or in interpretations thereof that may hereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Bonds, or under state and local tax law.

Certain Ongoing Federal Tax Requirements and Covenants

The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the federal government. Noncompliance with such requirements may cause interest on the Bonds to become included in gross income for federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The District has covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral federal income tax matters with respect to the Bonds. It does not purport to address all aspects of federal taxation that may be relevant to a particular owner of a Bond. Prospective investors, particularly those who may be subject to special rules, are advised to consult their own tax advisors regarding the federal tax consequences of owning and disposing of the Bonds.

Prospective owners of the Bonds should be aware that the ownership of such obligations may result in collateral federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is excluded from gross income for federal income tax purposes. Interest on the Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Original Issue Discount

“Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a Bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the first price at which a substantial amount of the Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, the issue price for each maturity of Bonds is expected to be the initial public offering price set forth on the cover page of the Official Statement. Bond Counsel further is of the opinion that, for any Bonds having OID (a “Discount Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for federal income tax purposes to the same extent as other interest on the Bonds.

In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition of such Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment.

Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds.

Bond Premium

In general, if an owner acquires a Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Bond after the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates), that premium constitutes “bond premium” on that Bond (a “Premium Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the Premium Bond determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the bond premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Premium Bonds.

Information Reporting and Backup Withholding

Information reporting requirements apply to interest paid on tax-exempt obligations, including the Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Bonds from gross income for federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s federal income tax once the required information is furnished to the Internal Revenue Service.

Miscellaneous

Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under federal or state law or otherwise prevent beneficial owners of the Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Bonds.

Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters.

RATING

The Bonds have received a rating of “Aaa” by Moody’s Investors Service. Such rating reflects only the views of Moody’s Investors Service and any desired explanation of the significance of such ratings should be obtained from the rating agency at the following addresses: Moody’s Investors Service, Inc., 7 World Trade Center at 250 Greenwich Street, New York, New York, 10007. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance that any such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal may have an adverse effect on the market price of the Bonds.

UNDERWRITING

______, as purchaser, successfully bid for the Bonds in a competitive sale on ______, 2017. The bid provides that the purchaser will purchase all of the Bonds, if any Bonds are purchased, at a price of ___.__ percent of the par value of the Bonds. The Bonds will be re-offered at an average price of ___.__ percent of the par value of the Bonds. After the initial public offering, the public offering prices may vary from time to time.

CONTINUING DISCLOSURE UNDERTAKING

Pursuant to SEC Rule 15c2-12, as amended (17 CFR Part 240, § 240.15c2-12) (the “Rule”), the District, as the “obligated person” within the meaning of the Rule, will execute and deliver a Continuing Disclosure Certificate, substantially in the form herein as Appendix C for the benefit of the Owners of the Bonds. To the best of its knowledge, the District has not failed to comply in any material respect with its undertaking for the prior five years.

LITIGATION

There is no litigation pending or, to the best of the knowledge of the officers of the District, threatened against the District that would affect the validity of the Bonds. There is no litigation pending or, to the best of the knowledge of the officers of the District, threatened against the District that would impair the District’s ability to pay the Bonds when due, nor which would materially and adversely affect the financial condition of the District.

CERTAIN LEGAL MATTERS

Upon the delivery of the Bonds, Hawkins Delafield & Wood LLP, Bond Counsel, will render an opinion as to the validity of the Bonds and the exclusion from gross income for federal income tax purposes of the interest on the Bonds. The proposed form of legal opinion is included as Appendix B. Hawkins Delafield & Wood LLP, Portland,

Oregon, is also serving as Disclosure Counsel to the District in relation to this Official Statement. Disclosure Counsel is not obligated to undertake and has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement.

MUNICIPAL ADVISOR

The District has retained PFM Financial Advisors LLC as Municipal Advisor in connection with the authorization and issuance of the Bonds.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Official Statement, including the appendices, do not reflect historical facts but are forecasts and “forward-looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, words such as “estimate,” “forecast,” “anticipate,” “expect,” “intend,” “plan,” “believe,” and similar expressions are intended to identify forward-looking statements. All projections, forecasts, assumptions and other forward-looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement.

MISCELLANEOUS

This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District, since the date hereof.

TUALATIN VALLEY FIRE AND RESCUE

By Debra L. Grabler, CPA, CITP, CGMA Chief Financial Officer

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A

DISTRICT’S COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK] Tualatin Valley Fire and Rescue A Rural Fi re Protection District, Tigard, Oregon Comprehensive Annual Financial Report For the Year Ended June 30, 2016

Tualatin Valley Fire and Rescue 11945 S.W. 70th Avenue Tigard, Oregon 97223 Phone: (503) 649-8577

www.tvfr.com

Cover photo courtesy of Claire Cooper Prepared by the Finance Department

Table of Contents

INTRODUCTORY SECTION Letter of Transmittal 3 Certificate of Achievement for Excellence in Financial Reporting 10 Organization Chart 11 Elected and Appointed Officials 12 FINANCIAL SECTION Independent Auditor’s Report 15 Management’s Discussion and Analysis 21 Basic Financial Statements: 35 Government-wide Financial Statements: Balance Sheet – Governmental Funds/Statement of Net Position 37 Statement of Governmental Fund Revenues, Expenditures, Other Financing Sources (Uses), and Changes in Fund Balances/Statement of Activities 39 Fund Financial Statements: Statement of Revenues, Expenditures, Other Financing Sources (Uses), and Changes in Fund Balances – Budget and Actual – General Fund 40 Statement of Net Position – Proprietary Fund 42 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Fund 43 Statement of Cash Flows – Proprietary Fund 44 Notes to the Basic Financial Statements 45 Required Supplementary Information: 81 Schedule of Funding Progress – Health Benefit Retiree Program 83 Schedule of the District’s Proportionate Share of the Net Pension (Asset)/Liability 84 Schedule of the District’s Pension Plan Contributions 85 Schedules of Single-Employer Defined Benefit Pension Plan 86 Schedules of LOSAP Plan 87 Notes to the Required Supplementary Information 88 Other Supplementary Information: 91 Schedule of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance – Budget and Actual – Property and Building Fund 93 Combining Balance Sheet – Nonmajor Governmental Funds 95 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 96 Schedules of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual: Grants Fund 97 Debt Service Fund 98 Capital Projects Fund 99 Insurance Fund 100 Combining Balance Sheet – General Fund 102 Combining Schedule of Revenues, Expenditures, Other Financing Sources (Uses) and Changes in Fund Balances – General Fund 103 Schedules of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance – Budget and Actual: Apparatus Fund 104 Capital Improvements Fund 105

i Table of Contents

Financial Section, continued Other Supplementary Information, continued: Emergency Management Fund 106 Pension Fund 107 Volunteer LOSAP Fund 108 Schedule of Property Tax Transactions and Outstanding Balances 109 STATISTICAL SECTION Financial Trends: Net Position by Component 112 Changes in Net Position 113 Fund Balances, Governmental Funds 114 Changes in Fund Balances, Governmental Funds 115 Revenue Capacity: Assessed and Market Value of Taxable Property 116 Property Tax Rates – Direct and Overlapping Governments 117 Principal Taxpayers – All Washington County Property 118 Property Tax Levies and Collections 119 Debt Capacity: Ratio of Net General Bonded Debt to Assessed Value and General Bonded Debt per Capita 120 Computation of Overlapping Net Direct Debt 121 Legal Debt Margin Information 122 Demographic and Economic Information: Demographic and Economic Statistics 123 Major Employment Industries 124 Operating Information: Full-Time Equivalent Employees by Function 125 Operating Indicators by Function 126 Capital Assets Statistics by Function 127 INDEPENDENT AUDITOR’S REPORT REQUIRED BY OREGON STATE REGULATIONS

ii Introductory Section

www.tvfr.com

October 25, 2016

To Board President Hovies and Members of the Board of Directors of Tualatin Valley Fire and Rescue

We are pleased to submit the Comprehensive Annual Financial Report of Tualatin Valley Fire and Rescue (District) for the fiscal year ended June 30, 2016. The responsibility for the completeness, fairness, and accuracy of the data presented and all accompanying disclosures rests with the District. To provide a reasonable basis for making these representations, the District’s management has established a comprehensive internal control framework that is designed both to protect the District’s assets from loss, theft, or misuse; and to compile sufficient reliable information for the preparation of the District’s financial statements in conformity with accounting principles generally accepted in the United States of America. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

Tualatin Valley Fire and Rescue is a special district established to provide a full range of fire protection and emergency response services to its citizens. This report has been prepared in accordance with accounting principles generally accepted in the United States of America and follows guidelines recommended by the Government Finance Officers Association of the United States and Canada.

State of Oregon Revised Statutes, ORS 297.405 to 297.555, require an annual audit of the fiscal affairs of the District by independent public accountants selected by the Board of Directors. This requirement has been complied with and the Independent Auditor’s Report has been included at the front of the financial section of this report.

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. MD&A complements this letter of transmittal and should be read in conjunction with it.

North Operating Center Command & Business Operations Center South Operating Center Training Center 20665 SW Blanton Street and Central Operating Center 8445 SW Elligsen Road 12400 SW Tonquin Road th Aloha, Oregon 11945 SW 70 Avenue Wilsonville, Oregon Sherwood, Oregon 97078-1042 Tigard, Oregon 97223-8566 97070-9641 97140-9734 503-649-8577 503-649-8577 503-649-8577 503-259-1600 June 30, 2016

The Reporting Entity and Its Services

The District operates under Oregon Revised Statutes Chapter 478 as a separate municipal corporation and is managed by a Board of Directors comprised of a President and four Directors including a Vice-President and a Secretary-Treasurer. The Board hires a Fire Chief to manage the day-to-day operations of the District. The governing Board appoints members of the community to serve on boards and commissions, which include the Budget Committee and the Civil Service Commission.

Tualatin Valley Fire and Rescue, a Rural Fire Protection District, was formed in 1989, through the legal merger of Washington County Fire Protection District No. 1 and Tualatin Rural Fire Protection District. Since that time, the District has expanded through the mergers of two additional fire districts, Multnomah County Rural Fire Protection District Nos. 4 and 20, and the annexation of the Valley View Water District on July 1, 1995. The District continued to grow by the annexation of the City of Beaverton to the District’s service territory effective July 1, 1996 and the City of West Linn, which was legally annexed on July 1, 2004. Effective July 1, 2016, the District will begin serving two new service areas through fire protection contracts intended to lead to annexation of Washington County Fire District No. 2 to the west, and the combined City of Newberg and Newberg Rural Fire Protection District to the southwest at the end of the respective contract periods. The District’s total service area encompasses approximately 210 square miles but with the two new service contract areas, will expand to approximately 390 miles with the addition of District 2 (118 square miles) and the combined City of Newberg and Newberg Rural Fire Protection District (61 square miles).

The District currently operates 22 career and volunteer fire stations with a complement of fire engines, ladder trucks, aerial pumpers, hazardous materials response units, technical rescue units, one heavy CBRNE unit (chemical, biological, radiological, nuclear, and explosives), water tenders, brush rigs, and several other pieces of equipment, including medics, response cars, water rescue units, a mobile command unit, and an additional fleet utilized to supplement response needs. District employees - 490 in 2016 - were supplemented by approximately 50 volunteer firefighters. The two new service areas will add two fire stations each.

The District has been and continues to be focused on providing the taxpayers the highest level of service in an efficient and effective operation. The District continues to implement operational improvements in order to accomplish its strategic goals.

4 June 30, 2016

The District’s legal boundaries cover northeast Washington County, northwest Clackamas County, and the western edge of Multnomah County. The District is a special service district supported by the property owners within its boundaries.

The District serves a population of an estimated 459,200 people. Assessed valuation continues to grow and to provide additional tax revenue. The District’s funding is based upon a permanent tax rate of $1.5252 levied per $1,000 of assessed valuation. Increases in assessed valuation result in increased tax revenue to the District. Assessed valuation increased from approximately $47.2 billion in the 2014-15 to almost $49.6 billion in the 2015-16 fiscal year. In addition, the District depends upon an additional local option levy to supplement the permanent levy rate, currently $.45 per $1,000 of assessed value through June 30, 2020.

Capital funding continues to be primarily funded through the remaining amounts of general obligation bond sales from a 2006 voter approval to issue $77.5 million of general obligation bonds to provide funding for new stations, significant seismic reconstruction of existing stations, a command center, and for the purchase of emergency response apparatus throughout the District. As the proceeds of the bonds are being utilized on final planned projects, the District is shifting capital project funding to property tax funding from the local option levy.

The area served in fiscal year 2015-16, which includes the cities of Beaverton, Durham, King City, Rivergrove, Tigard, Tualatin, Sherwood, West Linn, and Wilsonville and unincorporated portions of three counties, Washington, Clackamas, and Multnomah, lies within one of the fastest growing regions of the state. The District is an area encompassing densely populated suburbs, rural farmlands, retail and commercial establishments, and growing industrial complexes.

Fire stations are strategically placed throughout the District to protect property and the District population. The District utilizes defined response time standards, projected population densities and aging demographics, urban growth projections, as well as actual and planned traffic conditions to determine the best station sites to optimize response times to our citizens through our interconnected network of fire stations. Our planning includes the need to continue to deploy additional emergency response units and stations within the service area.

As a result of the high quality of services provided, training standards, equipment, staffing, and related support functions, the District is among the leaders in the State of Oregon in obtaining a favorable insurance classification, Class 2, according to the standards set forth by the Insurance Services Office, Inc. To the property owners in the District, this classification results in very low premium rates for fire insurance.

The District is a multi-service district with services and programs tailored to meet the needs of the community. The District is committed to creating safer communities through education, prevention, preparedness, and emergency response. Emergency response services include fire suppression, emergency medical services, water, high angle, and heavy rescue. For several years, the District has served as a Regional Hazardous Material Response provider for the State of Oregon, with a service response area ranging from the City of Portland boundary on the east to the Pacific Ocean on the west and from the District’s northern boundary in Multnomah County southerly to Marion County.

5 June 30, 2016

The District’s Integrated Operations staff is dedicated to meeting all of the state mandates regarding fire investigations, commercial and retail occupancy inspections, and educating District citizens. To deal with emergencies, both fire and medical, the District staffs a team of professional firefighters and paramedics 24-hours a day with skills and equipment necessary to deal with a wide variety of emergencies. Over 58%, or 207, of the District’s professional line firefighters are certified as Paramedic, while 100% of the remaining fire suppression personnel are certified at either the Basic or Intermediate Emergency Medical Technician levels. Under the guidance of physician advisors, emergency medical service personnel (all of whom are firefighters) maintain high skill levels through several specialized programs.

Modern training facilities, including a six-story training tower, a burn building for live fire training, a 19-acre training center, and a live TV studio and media center, provide personnel with constant training to keep their skills at the highest level. The TVF&R Training Center facility, which was constructed in several phases using public funding and private donations, provides advanced training opportunities in flammable liquids and gases and usage of live props, including a tanker truck, a vehicle driving course, propane rail cars, a bridge, and excavation tunnels. The Training Center provides private businesses, District employees, and other customers a site to train for actual emergency situations and to meet federally mandated training requirements. The Training Center’s facility and grounds are used for the many intensive District training operations, as well as District employers requiring specialized training.

Economic Condition and Outlook

The District, through its broad geographic base, serves a strong area of Oregon’s economic base. Two of the three counties served by the District are in the top six counties in Oregon in 2015 providing employment of 75,000 or more people. Washington County ranked in the top third (#38) of the nation’s counties in average weekly wages, with average weekly wages of $1,285 a week, and Multnomah County ($1,099, 87th of 342) as compared to $1,082 nationally. Clackamas County, a smaller county, has average weekly wages of $988, second highest of smaller counties in Oregon.1

The District monitors property tax valuation matters closely and has worked extensively with regional officials to monitor trends and forecasts of this critical revenue source and with county assessors to closely analyze property type trends. Assessed valuation of existing property is limited to three percent increases a year; and growth in the District’s assessed valuation is largely expected to come from legally allowed increases in assessed valuation, which is at 61 percent of market value District-wide as of the 2015-16 fiscal year. For 2015-16, the assessed value of the District grew 4.9 percent to almost $49.6 billion dollars.

The District’s assessed valuation continues to grow, reaching almost $49.6 billion dollars in 2015-16 with market values exceeding $80.8 billion dollars. Market values have recovered to 2009 levels at year-end with continuing improvements reported. Projections for assessed value and real market value growth in the years ahead are continuing to show improvement with recently reported Washington County assessed value growth for the District for 2016-17 at 4.5%.

1 http://www.bls.gov/regions/west/news-release/countyemploymentandwages_oregon.htm 6 June 30, 2016

The District’s population is expected to grow in the next 20 years. Staff is working proactively and cooperatively with other governments and regional planning groups to ensure continued ability to serve this future population. This includes participating in neighborhood and street planning, emergency access and road construction planning processes, as well as evaluating and working across jurisdictional boundaries to ensure closest force response to population centers regardless of where city and county boundary lines fall.

The area serves as the home to companies such as Nike, Mentor Graphics, Columbia Sportswear, Reser’s Fine Foods, Flir Systems Inc., Electro Scientific Industries, Inc., InFocus, Planar Systems, Touchmark Senior Living and Digimarc in addition to several fast growing companies such as Leupold & Stevens, and Vanguard EMS.1 Several of the top 100 fastest growing private companies in Oregon are located within the District’s service area, including Opus Agency in Beaverton, LMC Construction in Tualatin, and 3J Consulting Inc., in Beaverton.1 Top metropolitan area employers include Intel, Providence Health Systems, Oregon Health & Science University, Kaiser Permanente Northwest, and Fred Meyer, New Seasons Market, Target Corporation, among others.1 Nike’s world headquarters is undergoing a three-year expansion with a targeted 2018 completion date to add 3.2 million square feet of office, mixed-use and parking to the 351-acre campus. Intel has continued to invest in multi-million dollar facility expansions to manufacture state of the art computer chips, largely in the neighboring City of Hillsboro with an agreement for Intel to invest another $100 billion in Washington County over the next 30 years.2

Major Initiatives

For the Year and For the Future

In fiscal year 2016, the District focused on three planned significant areas; land acquisition, station construction, and project management of the capital projects being funded through the capital construction program and local option levy. These initiatives impact almost every division within the District and will continue to do so through at least 2020 as bond proceeds and future local option levy funds are managed. Combined efforts are required in order to manage the projects and build fire stations and purchase apparatus that will provide taxpayers the best service and value for the next 20 years. Staff has reviewed standardized station designs to incorporate seismic structural improvements, reduce overall square footage of future projects, and include environmental considerations. The District’s efforts in 2016 have been continued toward the land acquisition of additional future station sites, design, and construction of stations placed strategically to help reduce response times of emergency personnel, and seismic remodels of Fire Stations 64 and 69 as well as the remodel of the Skyline Fire Station 372. Additionally, as neighboring Washington County Fire District No. 2 and the combined City of Newberg and Newburg Rural Fire Protection District both requested to be served by TVFR beginning July 1, 2016, through fire protection administration contracts intended to lead toward annexation, significant analysis was performed by staff in order to determine the efficacy of expanding our service area and benefits to their taxpayers, and plan for implementation of the new contracts and transition of all employees to TVFR as of July 1, 2016.

1 Portland Business Journal, Book of Lists, 2015-16 2 http://www.co.washington.or.us/CAO/2014-intel-sip-proposal.cfm 7 June 30, 2016

Tractor Drawn Aerial “Tiller” purchased with general obligation bonds

Department Service Efforts and Accomplishments

During the fiscal year ended June 30, 2016, all divisions and departments of the District contributed toward the accomplishments of the 2015-2016 strategic goals. These goals, as outlined in the District’s 2015-16 Strategic Plan were:

• Reduce the number and severity of emergency incidents. Increase the communities’ participation in their safety and preparedness, and knowledge and support of the District’s services. • Enhance preparedness for catastrophic and uncommon events. • Foster an environment conducive to the health and safety of all members. Develop and enhance a workforce that understands and respects individual and group differences, and builds trust in the communities we serve. • Promote craftsmanship, innovation, and excellence throughout the organization. • Leverage use of existing resources and seek efficiencies for the greatest community good. • Ensure ongoing financial and business operations stability and predictability.

Accomplishments during the fiscal year ended June 30, 2016 as a result of these goals included deployment of additional response units and additional site acquisition efforts. Work continued to support operational enhancements through additional firefighters, response units, and fire stations, ongoing citizen public safety education and messaging, continued focus and education of citizens with a hands-only CPR program in local schools with thousands of residents trained by students, and continued station implementation of community risk reduction programs and services unique to their service areas.

8 June 30, 2016

Other Information

Awards

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Tualatin Valley Fire and Rescue for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015. This was the 29th consecutive year that the District has achieved this prestigious award. In order to be awarded a Certificate of Achievement, the District must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. The District believes that its current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and is submitting it to the GFOA to determine its eligibility for another certificate.

In addition, the District also received the GFOA’s Award for Distinguished Budget Presentation for its annual appropriated budget for the budget year ended June 30, 2016. In order to qualify for the Distinguished Budget Presentation Award, the District’s budget document was judged to be proficient in several categories including policy documentation, financial planning, and organization. This was the 28th year the District received the award.

Acknowledgments

We express our sincere gratitude to the personnel of the Finance Division who assisted and contributed to this report. We also would like to extend our appreciation to the Board of Directors, managers, employees, and citizens of the District whose continuing support is vital to the financial and community affairs of the District.

Respectfully submitted,

Tualatin Valley Fire and Rescue

9 Certificate of Achievement for Excellence in Financial Reporting

Achieving Excellence in Financial Reporting

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement to Tualatin Valley Fire and Rescue, A Rural Fire Protection District, for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015.

This was the 29th consecutive year that the District has achieved this prestigious award. In order to be awarded a Certificate of Achievement, the District must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

Organization Chart

Citizens of Tualatin Valley Fire and Rescue

Board of Directors Civil Service Board

Fire Chief’s Office / Command Directorate (20 FTE)

Integrated EMS / Training / Business Operations Finance Operations Volunteers Directorate Directorate Directorate Directorate (58 FTE) (12 FTE) (446 FTE) (36 FTE)

Integrated South North Emergency Medical Human Resources Logistics Admin Finance Operations Admin Integrated Operations Integrated Operations Services

Hazardous Materials Emergency Fleet Training Team Management Stations Stations 19 35 17 64 Technical Rescue Communications 20 52 50 65 Recruits Occupational Health Team 21 57 51 66 & Wellness 33 58 53 67 34 59 60 68 Facilities Volunteers Water Rescue Team 61 69 62 70 Media Services Information Technology Relief Pool Chaplains

Capital Projects Supply

1 Organizational Chart effective July 1, 2016

Elected and Appointed Officials June 30, 2016

Financial Section

Independent Auditor’s Report

INDEPENDENT AUDITOR'S REPORT

Board of Directors Tualatin Valley Fire and Rescue Tigard, Oregon

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Tualatin Valley Fire and Rescue, Tigard, Oregon, (the District) as of and for the year ended Talbot, Korvola June 30, 2016, and the related notes to the financial statements, which collectively & Warwick, llP comprise the District's basic financial statements as listed in the Table of Contents. Ce rtif ied Pu blic ACC OlJ ntiin ts & Consult ants MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STA TEMENTS

A eH/EVE HOllE 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 4800 Meadows Road, Suite 200 Lake Oswego, Oregon 97035-4293 internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. P503.274.2849 F503.274.2853 AUDITOR'S RESPONSIBILITY www.tkw.com 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. 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 entity'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 entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

The McGladrey Alliance is a premier affiliation of independent accounting and consulting firms. The McGladrey Alliance member firms maintain their name, autonomy and independence and are responsible for their own client fee arrangements, delivery of services and maintenance of client relationships. INDEPENDENT AUDITOR'S REPORT (Continued)

Board of Directors Tualatin Valley Fire and Rescue

OPINIONS

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund , and the aggregate remaining fund information of the District, as of June 30, 2016, and the respective changes in financial position and , where applicable, cash flows thereof and the budgetary comparison for the General Fund 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 required supplementary information, such as Management's Discussion and Analysis, Schedule of Funding Progress, Schedule of the District's Proportionate Share of the Net Pension (Asset)/Liability, Schedule of the District's Pension Plan Contributions, Schedules of Single Employer Defined Benefit Pension Plan, Schedules of LOSAP Plan, and Notes to the Required Supplementary Information, as listed in the Table of Contents, 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.

Other Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The other statements and schedules, as listed in the Table of Contents as Other Supplementary Information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Other Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves , and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Other Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

18 INDEPENDENT AUDITOR'S REPORT (Continued)

Board of Directors Tualatin Valley Fire and Rescue

OTHER MA TTERS (Continued)

Other Information The Introductory and Statistical Sections, as listed in the Table of Contents, have 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 them.

OTHER REPORTING REQUIRED BY OREGON MINIMUM STANDARDS

In accordance with Minimum Standards for Audits of Oregon Municipal Corporations, we have also issued our report dated October 21, 2016, on our consideration of the District's compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance.

TALBOT, KORVOLA & WARWICK, LLP

By: ft4L)~ ~:f2 Jui" B. Fahey, Partner

Lake Oswego, Oregon October 21, 2016

Management's Discussion and Analysis

Management’s Discussion and Analysis June 30, 2016

As management of Tualatin Valley Fire and Rescue (the District), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 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 three through nine of this report.

Financial Highlights

In the government-wide financial statements, the assets and deferred outflows of the District exceeded its liabilities and deferred inflows at June 30, 2016 by $66,861,182. Of this amount, $33,700,603 represents the District’s net investment in capital assets; $1,432,449 is restricted for debt service, and the balance of $31,728,130 will be used to meet the District’s ongoing services and commitments to its citizens and obligations to its bondholders and creditors.

The District’s total net position decreased by $18,551,487 for the year ended June 30, 2016. Unrestricted net position decreased by $21,456,649; net position of net investment in capital assets increased by $2,828,170, and restricted net position for debt service increased by $76,992.

As of June 30, 2016, the District’s governmental funds reported combined ending fund balances of $76,305,370, an increase of $1,176,690 in comparison with the prior year, which includes a positive restatement of beginning fund balance of $322,197. The General Fund’s fund balance increased by $3,202,033, which includes the restatement to aggregate former fiduciary funds into the General Fund. The Property and Building Fund increased by $2,198,254 due to a transfer-in in excess of capital outlay. Lastly net decreases in ending fund balances of nonmajor funds of $4,223,597 were a direct result of capital outlay expenditures for ongoing construction projects in a non-major capital projects fund.

At June 30, 2016, unassigned fund balance in the General Fund was $43,728,460. A portion of the General Fund unassigned fund balance is identified for mitigation of future Oregon Public Employees Retirement System rate increases and totals $6,564,348. The remaining unassigned fund balance of $37,164,112 represents 41.4% of total General Fund expenditures. This falls slightly below the District policy to maintain five months of budgetary basis General Fund expenditures as ending fund balance each year, in addition to sufficient fund balance to purchase one fire station site and construct one fire station. This policy is in place because the majority of District revenue is provided from property taxes which are not received until the end of the fifth month of each succeeding fiscal year.

The District’s total debt decreased by $4,020,000 during the current fiscal year. This was due to principal payments on the District’s six outstanding general obligation bond issues.

23 Management’s Discussion and Analysis June 30, 2016

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements of the governmental funds, and 3) notes to the basic financial statements. The government-wide and fund financial statements are combined for presentation purposes. This report also contains required supplementary information and other supplementary information in addition to the basic financial statements themselves.

Government-wide Financial Statements

The government-wide financial statements are designed to provide readers with a broad overview of the District’s finances in a manner similar to a private-sector business, and include the Statement of Net Position and the Statement of Activities.

The Statement of Net Position presents information on all of the District’s assets and deferred outflows, and liabilities and deferred inflows, with the difference between them 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 District is improving or deteriorating.

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

In the government-wide financial statements, the District’s activities are shown in one category; governmental activities. The governmental activities of the District consist solely of public safety, and are supported by property taxes and charges for services.

The combined government-wide and governmental fund financial statements can be found on pages 37 through 39 of this report.

Fund Financial Statements

The fund financial statements provide more detailed information about the District’s funds, focusing on its most significant or “major” funds. 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 District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental funds and internal service funds.

24 Management’s Discussion and Analysis June 30, 2016

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 information focuses on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances are reconciled to the government-wide Statement of Net Position and Statement of Activities in the combined presentation.

The District maintains five individual governmental funds for reporting purposes. Information is presented separately in the governmental funds’ Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund and the Property and Building Fund which are considered to be major funds. Data from three additional governmental funds are combined into a separate aggregated presentation. Individual fund data for the Property and Building Fund and for each of the remaining nonmajor governmental funds is provided as Other Supplementary Information. The District’s implementation of Governmental Accounting Standards Board Statement No. 54 combines for reporting purposes as the General Fund, six separately budgeted funds.

The District adopts an annual appropriated budget for all funds as required by Oregon Budget Law. Budgetary comparison statements/schedules have been provided to demonstrate compliance elsewhere in this report.

Internal Service Fund. The District maintains one internal service fund, the Insurance Fund, which is a proprietary fund type. This fund accounts for the accumulation of resources used for payment of claims and losses, less deductible limits, for insurance coverage. Because this fund predominately benefits governmental functions, it has been included within the governmental activities in the government-wide financial statements.

The internal service fund basic financial statements can be found on pages 42 through 44 of this report.

Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the combined government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 47 through 79 of this report.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District’s progress in funding its obligation to provide pension benefits to past employees and volunteer firefighters, and PERS schedules detailing ten years of pension (assets)/liabilities and pension contributions. Required supplementary information can be found on pages 83 through 89 of this report.

25 Management’s Discussion and Analysis June 30, 2016

Combining and individual fund statements and schedules are presented as other supplementary information and can be found on pages 93 through 108 of this report. The Schedule of Property Tax Transactions and Outstanding Balances can be found on page 109 of this report.

The District adopted Government Accounting Standard 72, Fair Value Measurement and Application, in the 2015- 16 fiscal year, which provides a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. There was no material impact to the financial statements caused by the implementation of GASB Statement 72.

The District also adopted Government Accounting Standard Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 at June 30, 2016.

GASB Statement 73 established accounting and financial reporting standards for employers, including reporting of the new pension asset or liability on the Statement of Net Position, and deferred inflows and outflows associated with the plans. GASB Statement 73 also provides guidance related to the calculation of pension expense. The District’s total pension liabilities and pension expenses have been determined and are now reflected in the District’s Statement of Net Position and Statement of Activities for fiscal year ended June 30, 2016. Fiscal year 2014-15 information reported on page 27 has been restated to conform to the new reporting and accounting standards.

Government-wide Overall Financial Analysis

As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the District, assets exceed liabilities by $66,861,182 at June 30, 2016.

A significant portion of the District’s net position (50 percent) reflects its net investment in capital assets (e.g., land, buildings and improvements, fire apparatus, and furniture and equipment); less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

Assets consist mainly of cash and cash equivalents, property taxes receivable, and prepaid items that are used to meet the District’s ongoing obligations to its citizens. Remaining assets are comprised of capital assets used in operations.

The District’s largest liability (82 percent) is for the long-term portion of general obligation bonded debt and pension liabilities. Current liabilities of the District consist largely of accounts payable, accrued salaries and benefits payable, and accrued compensated absences.

26 Management’s Discussion and Analysis June 30, 2016

Government-wide Financial Analysis Governmental Activities Increase 2015 (Decrease) from Net Position: 2016 (restated) Fiscal 2015 Current and other assets $ 91,462,039 $ 102,439,854 $ (10,977,815) Capital assets 84,800,909 81,241,652 3,559,257 Total assets 176,262,948 183,681,506 (7,418,558) Total deferred outflows of resources 9,202,648 7,050,722 2,151,926

Current liabilities 20,044,068 19,264,990 779,078 Long-term debt and pension liabilities 91,030,966 60,202,015 30,828,951 Total liabilities 111,075,034 79,467,005 31,608,029 Total deferred inflows of resources 7,529,380 25,852,554 (18,323,174)

Net investment in capital assets 33,700,603 30,872,433 2,828,170 Restricted 1,432,449 1,355,457 76,992 Unrestricted 31,728,130 53,184,779 (21,456,649) Total net position $ 66,861,182 $ 85,412,669 $ (18,551,487)

During the current fiscal year, the District’s net position decreased by $18,551,487 due largely to a recording in the change of a PERS net pension asset to a net pension liability and its related deferred inflows and outflows in the amount of $27,050,945 as a result of an Oregon Supreme Court decision in Moro v. State of Oregon as well as lower than expected investment returns. This was offset by an increase in capital assets of $3,559,257 and a decrease in long-term debt of $4,303,851.

Governmental Activities. Governmental activities decreased the District’s net position in the current year by $18,551,487. Property tax revenue increased by 17.2 percent or $14,683,347, reflecting a net increase in taxes levied and collected partially due to an increase in a local option levy. Grants and contributions decreased $314,579, and charges for services for medical transport, fleet, occupational health, and response revenue from wild-fire conflagration services increased by $639,899. There was an increase of $409,251 from a gain on sale of capital assets due to a sale of a closed fire station site.

Expenses for public safety increased by 73.9 percent or $51,601,347, reflecting personnel cost increases in wages and benefits and increased by significant increases in pension expenses recorded as part of GASB Statement 68, and the reversal of the Moro decision.

27 Management’s Discussion and Analysis June 30, 2016

Governmental activities Governmental Activities Increase (Decrease) from Changes in Net Position: 2016 2015 Fiscal 2015 Revenues Program revenues Charges for services $ 2,823,408 $ 2,183,509 $ 639,899 Grants and contributions 384,686 699,265 (314,579) General revenues: Property taxes 100,265,764 85,582,417 14,683,347 Earnings on investments 349,882 276,125 73,757 Insurance refunds 443,628 551,766 (108,138) Gain on sale of capital assets 503,754 94,503 409,251 Miscellaneous 114,426 353,105 (238,679) Total revenues 104,885,548 89,740,690 15,144,858

Expenditures/expenses Public safety-fire protection 121,399,775 69,798,428 51,601,347 Interest on long-term debt 2,037,260 1,916,016 121,244 Total expenses 123,437,035 71,714,444 51,722,591 Change in net position (18,551,487) 18,026,246 (36,577,733) Beginning of the year 85,412,669 69,225,975 16,186,694 Restatement of beginning of year (1,839,552) 1,839,552 Net position - July 1 85,412,669 67,386,423 18,026,246 Net position - June 30 $ 66,861,182 $ 85,412,669 $ (18,551,487)

Revenue Sources - Governmental Activities Fiscal Year 2016

0.3% Property Taxes

Earnings on Investments 2.7% Charges for Services 95.6% 4.4%

Grants and 0.4% Contributions

1.0% Insurance Refunds and Miscellaneous

28 Management’s Discussion and Analysis June 30, 2016

Financial Analysis of the Governmental Funds

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

Governmental Funds. The focus of the District’s governmental funds is to provide information on short-term and deferred inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

At June 30, 2016, the District’s governmental funds reported combined ending fund balances of $76,305,370, an increase of $1,176,690 in comparison with the prior year, which includes a restatement of $322,197. This increase is a result of spending down of restricted assets on capital expenditures for the construction and improvement of fire stations. A large portion of this total amount (57.30 percent) constitutes unassigned fund balance, which is a measure of the District’s liquidity; and is available for spending at the District’s discretion. The remainder of fund balance is either non-spendable (.42 percent), restricted by external parties (7.72 percent), committed by the Board (18.20 percent) or assigned to a specific purpose such as capital projects (16.36 percent).

29 Management’s Discussion and Analysis June 30, 2016

Components of Ending Fund Balance All Governmental Funds

Unassigned $43,728,460

Assigned $12,482,461

Committed $13,883,834

Restricted $5,892,247

Non-spendable $318,368

$0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000

General Fund. The General Fund is the primary operating fund of the District. As of June 30, 2016, unassigned fund balance of the General Fund was $43,728,460, with total fund balance, including $13,883,834 committed to future capital purchases, and $318,368 of non-spendable proceeds, of $57,930,662. 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 48.7 percent of total General Fund expenditures and the total fund balance represents 64.5 percent of total General Fund expenditures.

The fund balance of the District’s General Fund increased by $3,202,033, which includes a restatement of $322,197, or approximately 5.9 percent during the current fiscal year, compared to the $637,276 decrease in the prior year. Property tax revenue, which provides for the costs of operating the District, increased $12,776,283 over the prior year. This was largely due to an increase in the local option levy effective in the 2015-16 fiscal year. Program fees increased by $500,393 as the District embarked on a program to provide mobile radio coverage for responders to areas where coverage has been difficult. Charges for services increased $152,891 over the prior year as a result of the District’s management of two adjacent fire departments, and an emergency response to an unprotected area that resulted in additional revenue. Insurance dividends and refunds decreased $140,353 over the prior year and grants decreased by $244,800 as seismic grant projects slowed. Public Safety and capital outlay expenditures increased $6,525,958 as the management of the two additional fire departments increased coverage areas, and transfers out increased by $2,947,163.

Property and Building Fund. The Property and Building Fund accounts for the accumulation of resources for site acquisitions and construction costs for new and existing facilities. The District intends this fund to continue to accumulate funds to ensure continuity of construction and land purchase once the bond proceeds have been exhausted as well as fund projects that were not planned as part of the capital bond program. The ending fund balance increased by $2,198,254 to $12,482,461 at June 30, 2016, and is assigned to capital projects. The primary cause for the increase is an excess of transfers in to the fund over the expenditures for capital outlay.

30 Management’s Discussion and Analysis June 30, 2016

Budgetary Highlights

There was one budget transfer resolution to the General and Emergency Management Funds during the year. The budget transfer funded the appropriations required for personnel transitions, additional professional services approved by the Board for legislative direction, additional polling in advance of an election, significant emergency response apparatus repairs, and information technology setup for new service areas, as well as final expenditures prior to closing the Emergency Management Fund. Property tax collections increased due to an increase in a local option levy and collection rates that were stronger than expected. The District’s decision to begin managing two fire departments in 2015-16 ahead of the related election cycles increased operational expenditures and the related charges for services.

Capital Assets and Debt Administration

Capital assets. The District’s investment in capital assets consists of land and improvements, buildings and improvements, fire apparatus and other vehicles, furniture, fixtures and equipment, and construction in progress. As of June 30, 2016, the District had invested $84,800,909 in capital assets, net of depreciation, as shown in the following table and chart:

Increase Governmental Activities Capital Assets: (Decrease) from (net of depreciation) 2016 2015 Fiscal 2015 Land $ 14,262,133 $ 12,747,885 $ 1,514,248 Buildings and improvements 51,228,031 51,832,747 (604,716) Fire apparatus and other vehicles 10,570,755 11,520,212 (949,457) Furniture, fixtures and equipment 2,844,592 3,074,322 (229,730) Construction in progress 5,664,398 1,841,486 3,822,912 Other capital assets 231,000 225,000 6,000 Total $ 84,800,909 $ 81,241,652 $ 3,559,257

A comparison of capital assets from the prior year to the current year is shown below: Capital Assets (net of depreciation)

2015 2016

Land

Buildings and improvements

Fire apparatus and other vehicles

Furniture, fixtures and equipment

Construction in progress

Other capital assets

M 10M 20M 30M 40M 50M 60M

31 Management’s Discussion and Analysis June 30, 2016

Capital Assets (net of depreciation)

Land

60.4% Buildings and improvements 12.5% Fire apparatus and other 3.4% vehicles

Furniture, fixtures and 16.8% equipment

Construction in progress 6.7% 0.2% Other capital assets

During the year, the District’s investment in capital assets increased by $3,559,257, reflecting assets of $8,410,842 added during the year, offset by $4,773,498 of depreciation and $78,087 of disposals, net of related depreciation. The District’s construction in progress includes the renovation and seismic upgrades of fire stations 64, 69, and 372, seismic improvements to numerous other stations, as well as emergency response vehicles in progress, and land improvements related to future fire stations.

Additional information on the District’s capital assets can be found in the notes to the basic financial statements on page 60 of this report.

Long-term Debt. At the end of the current fiscal year, the District had total bonded debt of $55,560,104, consisting of general obligation bonds and unamortized premiums. The decrease in debt relates to the scheduled principal payments throughout the year. The District has been affirmed at an “Aaa” rating from Moody’s Investors Service. The State of Oregon mandates a general obligation debt limit of 1.25 percent of true cash value of assessed property. The District’s legal debt margin is approximately $956 million. Additional information on the District’s long-term debt can be found on pages 61 and 62 of this report.

Economic Factors and Next Year’s Budget

Population in the region is expected to continue to grow over the next few decades, which is one reason that the District has purchased land for future fire station sites and is actively seeking additional sites utilizing the increased local option levy.

The District anticipates increased property tax revenues in future years based upon projected assessed value increases which by law may increase for existing property 3% a year unless assessed value exceeds real market value. Assessed value is forecast to continue to grow at 4.9% for 2016-17 based upon continued strength in the 32 Management’s Discussion and Analysis June 30, 2016 residential and multi-family real estate market and increased commercial development. Construction and development within District boundaries is expected to continue through 2020 with numerous projects slated for the future including a multi-million dollar major expansion of the Nike World Headquarters complex. Intel has recently announced an agreement to invest $100 billion in Washington County over the next 30 years.1

The District’s replacement local option levy continues at $.45 for 2016-17 which will allow for additional response units and additional fire stations throughout the District in order to meet fast and effective response time goals as the District’s population ages and transportation routes increase in congestion. The replacement levy will provide financial stability through its term of 2019-20.

If the consolidation with one of the adjacent fire departments, Washington County Rural Fire Protection District 2 (District 2), is successful at the November, 2016 ballot, the District’s service area will expand from 210 square miles to 328 square miles and add approximately 13,700 to the existing population of approximately 460,000. A second consolidation is being considered with Newberg Fire Department and Newberg Rural Fire Protection District in the 2017-18 fiscal year.

Requests for Information

This financial report is designed to provide a general overview of Tualatin Valley Fire and Rescue’s finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Chief Financial Officer, Tualatin Valley Fire and Rescue, 11945 SW 70th Avenue, Tigard, Oregon 97223.

1 Portland Business Journal, Book of Lists 2015-16

Basic Financial Statements

Tualatin Valley Fire and Rescue Balance Sheet - Governmental Funds/ Statement of Net Position June 30, 2016

Total General Property and Nonmajor Statement of Net Governmental Adjustments Fund Building Fund Funds Position Funds

Assets Cash and cash equivalents $ 64,661,452 $ 12,639,297 $ 1,416,380 $ 78,717,129 $ 654,426 $ 79,371,555 Investments 277,578 277,578 277,578 Receivables (net of allowances): Property taxes receivable 4,264,685 302,618 4,567,303 4,567,303 Accounts receivable 434,621 146,895 581,516 581,516 Due from other funds 73,546 73,546 (73,546) Prepaid items 1,513,807 1,513,807 Supplies inventory 318,368 318,368 318,368 Other post employment benefit asset 123,858 123,858 Restricted assets: Cash and cash equivalents 4,708,054 4,708,054 4,708,054 Capital assets, not being depreciated: Land 14,262,133 14,262,133 Other capital assets 231,000 231,000 Construction in progress 5,664,398 5,664,398 Capital assets, net of accumulated depreciation: Buildings and improvements 51,228,031 51,228,031 Fire apparatus and other vehicles 10,570,755 10,570,755 Furniture, fixtures, and equipment 2,844,592 2,844,592 Total assets 70,030,250 12,639,297 6,573,947 89,243,494 87,019,454 176,262,948 Deferred Outflows of Resources Deferred refunding charge 779,555 779,555 Pension related deferred outflows 8,423,093 8,423,093 Total deferred outflows of resources 9,202,648 9,202,648

Total assets and deferred outflows $ 70,030,250 $ 12,639,297 $ 6,573,947 $ 89,243,494 $ 96,222,102 185,465,596 Liabilities Current liabilities: Accounts payable $ 1,112,319 $ 156,836 $ 321,605 $ 1,590,760 $ 1,000 1,591,760 Due to other funds 73,546 73,546 (73,546) Accrued salaries and benefits payable 6,658,402 6,658,402 6,658,402 Accrued interest payable 237,560 237,560 Non current liabilities: Long-term debt: Due within one year 11,556,346 11,556,346 Due in more than one year 54,954,710 54,954,710 Total pension liability (LOSAP) 180,853 180,853 Total pension liability (Pension Plan) 1,659,564 1,659,564 Net pension liability (PERS) 34,235,839 34,235,839 Total liabilities 7,770,721 156,836 395,151 8,322,708 102,752,326 111,075,034 Deferred Inflows of Resources Unavailable revenue - property taxes 4,027,374 286,549 4,313,923 (4,313,923) Unavailable revenue - transport services 89,797 89,797 (89,797) Unavailable revenue - HazMat and conflagrations 72,911 72,911 (72,911) Unavailable revenue - MERRC 138,785 138,785 (138,785) Pension related deferred inflows 7,529,380 7,529,380

Total deferred inflows of resources 4,328,867 286,549 4,615,416 2,913,964 7,529,380

(Continued)

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

37 Basic Financial Statements

Tualatin Valley Fire and Rescue Balance Sheet - Governmental Funds/ Statement of Net Position (continued) June 30, 2016

Total General Property and Nonmajor Statement of Net Governmental Adjustments Fund Building Fund Funds Position Funds Fund balances: Non-spendable 318,368 318,368 (318,368) Restricted for capital projects 4,459,798 4,459,798 (4,459,798) Restricted for debt service 1,432,449 1,432,449 (1,432,449) Committed to capital purchases 13,560,410 13,560,410 (13,560,410) Committed to Volunteer LOSAP 323,424 323,424 (323,424) Assigned to capital projects 12,482,461 12,482,461 (12,482,461) Unassigned 43,728,460 43,728,460 (43,728,460) Total fund balances 57,930,662 12,482,461 5,892,247 76,305,370 $ (76,305,370)

Total liabilities, deferred inflows, and fund balances $ 70,030,250 $ 12,639,297 $ 6,573,947 $ 89,243,494

Net Position: Net investment in capital assets 33,700,603 Restricted for: Debt service 1,432,449 Unrestricted 31,728,130 Total net position $ 66,861,182

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

38 Basic Financial Statements

Tualatin Valley Fire and Rescue and Changes in Fund Balances/Statement of Activities For the Year Ended June 30, 2016

Total General Property and Nonmajor Statement of Governmental Adjustments Fund Building Fund Funds Activities Funds

Revenues Program Revenues: Charges for services $ 2,179,400 $ $ $ 2,179,400 $ 644,008 $ 2,823,408 Program fees 500,393 500,393 (500,393) Grants and contributions 168,720 197,236 365,956 18,730 384,686 General Revenues: Taxes 93,204,211 6,405,403 99,609,614 656,150 100,265,764 Interest 242,642 60,198 43,272 346,112 3,770 349,882 Insurance dividends and refunds 380,216 380,216 63,412 443,628 Gain on capital assets 503,754 503,754 Miscellaneous 94,415 2,266 5,230 101,911 12,515 114,426 Total revenues 96,769,997 62,464 6,651,141 103,483,602 1,401,946 104,885,548 Expenditures/expenses Current: Public Safety 87,713,655 87,713,655 33,686,120 121,399,775 Debt service: Principal 4,020,000 4,020,000 (4,020,000) Interest 2,321,111 2,321,111 (283,851) 2,037,260 Capital outlay 2,091,662 2,572,610 4,533,627 9,197,899 (9,197,899) Total expenditures/expenses 89,805,317 2,572,610 10,874,738 103,252,665 20,184,370 123,437,035 Excess (deficiency) of revenues over (under) expenditures / expenses 6,964,680 (2,510,146) (4,223,597) 230,937 (18,782,424) (18,551,487) Proceeds on sale of surplus property 16,241 607,315 623,556 (623,556) - Transfers in 4,101,085 4,101,085 (4,101,085) - Transfers out (4,101,085) (4,101,085) 4,101,085 - Total other financing sources (uses) (4,084,844) 4,708,400 623,556 (623,556) Net change in fund balances/net position 2,879,836 2,198,254 (4,223,597) 854,493 (19,405,980) (18,551,487)

Fund balances/net position: Beginning of the year 54,728,629 10,284,207 10,115,844 75,128,680 12,123,541 87,252,221 Restatement of beginning of year 322,197 322,197 (2,161,749) (1,839,552) Beginning of year, as restated 55,050,826 10,284,207 10,115,844 75,450,877 9,961,792 85,412,669 End of the year $ 57,930,662 $ 12,482,461 $ 5,892,247 $ 76,305,370 $ (9,444,188) $ 66,861,182

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

39 Basic Financial Statements

Tualatin Valley Fire and Rescue General Fund !"R"$ For the Year Ended June 30, 2016

Original Budgeted Final Budgeted Actual Variance with Amounts Amounts Amounts Final Budget

Revenues Property taxes: Current year's levy $ 90,309,896 $ 90,309,896 $ 92,161,494 $ 1,851,598 Prior years' levies 1,470,940 1,470,940 1,024,819 (446,121) Taxes in lieu of property taxes 13,408 13,408 17,898 4,490 Interest on unsegregated property taxes 12,708 12,708 15,416 2,708 Interest on taxes 2,640 2,640 2,991 351 Interest on investments 94,978 94,978 140,939 45,961 Charges for services 909,529 909,529 1,796,012 886,483 Rental income 75,600 75,600 145,643 70,043 Program fees 7,000 7,000 Grants and contributions 450,000 450,000 168,720 (281,280) Plan review fees 2,250 2,250 4,237 1,987 Insurance dividends and refunds 201,000 201,000 380,216 179,216 Miscellaneous 20,850 20,850 94,415 73,565 Total revenues 93,563,799 93,563,799 95,959,800 2,396,001 Expenditures Current: Public Safety Command Directorate: Personnel services 3,193,932 3,427,932 3,153,712 274,220 Materials and services 1,245,512 1,575,512 1,224,844 350,668 Total Command Directorate 4,439,444 5,003,444 4,378,556 624,888

Integrated Operations Directorate: Personnel services 69,951,755 69,951,755 65,768,067 4,183,688 Materials and services 4,880,645 4,730,645 3,809,537 921,108 Total Integrated Operations Directorate 74,832,400 74,682,400 69,577,604 5,104,796

Finance Directorate: Personnel services 1,339,194 1,339,194 1,315,508 23,686 Materials and services 545,089 545,089 467,351 77,738 Total Finance Directorate 1,884,283 1,884,283 1,782,859 101,424

Business Operations Directorate: Personnel services 6,841,247 6,841,247 6,314,335 526,912 Materials and services 5,482,761 5,652,761 5,095,813 556,948 Total Business Operations Directorate 12,324,008 12,494,008 11,410,148 1,083,860

Total Public Safety 93,480,135 94,064,135 87,149,167 6,914,968

Operating contingency 5,248,500 4,664,500 4,664,500 Total expenditures 98,728,635 98,728,635 87,149,167 11,579,468 Excess (deficiency) of revenues over (under) expenditures (5,164,836) (5,164,836) 8,810,633 13,975,469

(Continued)

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

40 Basic Financial Statements

Tualatin Valley Fire and Rescue General Fund !"R Budget and Actual (continued) For the Year Ended June 30, 2016

Original Budgeted Final Budgeted Actual Variance with Amounts Amounts Amounts Final Budget

Proceeds on sale of surplus property 1,000 1,000 6,711 5,711 Transfers out (7,957,170) (7,957,170) (7,227,016) 730,154 Total other financing sources (uses) (7,956,170) (7,956,170) (7,220,305) 735,865 Net change in fund balance (13,121,006) (13,121,006) 1,590,328 14,711,334 Net position, June 30, 2015 35,893,297 35,893,297 35,892,152 (1,145) Net position, June 30, 2016 $ 22,772,291 $ 22,772,291 $ 37,482,480 $ 14,710,189

Reconciliation of Budgetary Fund Balance to GAAP Fund Balance

Fund Balance - budgetary basis $ 37,482,480

Advanced recognition of retirement obligation not a GAAP expense 6,564,348 Fund Balance - Apparatus Fund (1) 5,133,766 Fund Balance - Capital Improvements Fund (1) 8,426,644 Fund Balance - Volunteer LOSAP Fund(1) 323,424

Fund Balance - GAAP Basis $ 57,930,662

(1) Refer to page 103 for combining funds schedule.

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

41 Basic Financial Statements

Tualatin Valley Fire and Rescue Statement of Net Position Proprietary Fund June 30, 2016

Governmental Activities

Internal Service Fund

Assets Current: Cash and cash equivalents $ 654,426 Total assets 654,426

Liabilities Current: Accounts payable 1,000 Total liabilities 1,000

Net Position Unrestricted total net position $ 653,426

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

42 Basic Financial Statements

Tualatin Valley Fire and Rescue Statement of Revenues, Expenses, and Change in Net Position Proprietary Fund For the Year Ended June 30, 2016

Governmental Activities Internal Service Fund Operating Revenue Insurance refunds $ 63,412

Operating Expense Insurance claims 26,877

Operating income 36,535

Nonoperating Revenue Interest income 3,770

Change in net position 40,305

Net position, June 30, 2015 613,121 Net position, June 30, 2016 $ 653,426

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

43 Basic Financial Statements

Tualatin Valley Fire and Rescue Statement of Cash Flows Proprietary Fund For the Year Ended June 30, 2016

Governmental Activities Internal Service Fund Cash Flows From Operating Activities Received from insurance reimbursements $ 63,412 Paid for insurance claims (25,877) Net cash from operating activities 37,535

Cash Flows From Investing Activities Interest received on investments 3,770

Net increase in cash and cash equivalents 41,305

Cash and cash equivalents, June 30, 2015 613,121 Cash and cash equivalents, June 30, 2016 $ 654,426

Reconciliation of operating income to net cash from operating activities Operating income $ 36,535 (Decrease) increase in accounts payable 1,000

Net cash from operating activities $ 37,535

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

Notes to the Basic Financial Statements

Notes to the Basic Financial Statements June 30, 2016

I. Summary of significant accounting policies

The financial statements of Tualatin Valley Fire and Rescue, A Rural Fire Protection District, Oregon (the District) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). GAAP statements require the application of all relevant Governmental Accounting Standards Board (GASB) pronouncements.

A. Reporting entity

The District is an Oregon municipal corporation operating under Oregon Revised Statutes Chapter 478 as a Rural Fire Protection District and provides fire protection within Washington, Clackamas, and Multnomah counties.

The power and authority given to the District is vested in a Board of Directors, each member elected for a four-year term. The Board of Directors has the statutory authority to adopt and modify the budget; levy taxes; control all assets, including facilities and properties; authorize borrowing, or long-term debt issuances; sign contracts, and develop the programs to be provided to the citizens of the District. The responsibility and accountability over all funds and fiscal matters are vested in the Board of Directors. The District is responsible for its debts and is entitled to surpluses. No separate agency receives a financial benefit from nor imposes a financial burden on the District.

The Board of Directors appoints the Fire Chief of the District. The activities under the purview of the Fire Chief are within the scope of the reporting entity and the Fire Chief is accountable to the Board of Directors for the activities being managed.

The District is the primary, special purpose government responsible for all fire protection within its service area. As a result, all significant activities have been included in the government-wide financial statements. The District’s financial statements represent those of a stand-alone government, as there are no component units.

B. Basis of presentation – government-wide and fund financial statements

Basic financial statements are presented at both the government-wide and fund financial level. Both levels of statements categorize primary activities as either governmental or business-type. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

Government-wide financial statements display information about the District as a whole. The effect of interfund activity has been removed from these statements except for interfund services provided and used and reimbursements between funds which if eliminated would distort the direct costs and program revenues reported for the various functions. These statements focus on the sustainability of the District as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. These aggregated statements consist of the Statement of Net Position and the Statement of Activities.

47 Notes to the Basic Financial Statements June 30, 2016

The Statement of Net Position presents information on all of the District’s assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference between them reported as net position.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function, or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not attributable to a specific program are reported as general revenues.

The entity-wide statements and governmental fund statements have been combined as allowed for single-purpose governmental activities. The Statement of Net Position and the Governmental Funds Balance Sheet have been combined into a single presentation, with adjustments indicated to move from fund totals to the entity-wide totals. Similarly, the Statement of Activities and the Governmental Funds Statement of Revenues, Expenditures, Other Financing Sources (Uses), and Changes in Fund Balances have also been combined. Eliminations have been made to minimize the double counting of internal activities. Governmental activities are financed primarily through property taxes, investment earnings, grants and contributions, and charges for services to other governments.

Separate financial statements are provided for governmental funds and the proprietary fund and the latter is excluded from the government-wide financial statements.

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

The government-wide financial information (Statement of Net Position and Statement of Activities) is reported using the economic resources measurement focus and the accrual basis of accounting, as are the internal service fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows.

Property taxes are recognized as revenues in the year for which they are levied. Grants are recognized as revenue as soon as all eligibility requirements have been met.

The governmental fund financial information uses a flow of current financial resources measurement focus. With this measurement focus, generally only current assets and current liabilities are included in the balance sheet. Operating statements of these funds present increases (e.g., revenues and other financing sources) and decreases (e.g., expenditures and other financing uses) in fund balance. The governmental funds are maintained using the modified accrual basis of accounting, whereby revenues are recorded in the accounting period in which they become susceptible to accrual, i.e., both measurable and available, and expenditures are recorded at the time the related fund liabilities are incurred. Exceptions to this are: (1) interfund transactions for services, which are recorded on the accrual basis; (2) interest expense on long-term debt, which is recorded as due; (3) insurance premiums and other short term

48 Notes to the Basic Financial Statements June 30, 2016

contracts benefiting more than one fiscal year are recorded when paid; and (4) accrued compensated absences, which are recorded when payment is due.

Revenue is determined to be measurable when the transaction amount is determinable and available when it is collectible within the current fiscal year or soon enough thereafter to pay liabilities of the current fiscal year. The District considers revenues available if they are collected within 60 days of fiscal year-end, with the exception of investment interest, which is recognized when earned. The most significant revenue source, which is measurable and available under the modified accrual basis of accounting, is property tax revenue. For the Internal Service Fund, a proprietary fund type, the District reports insurance refunds received and claims paid as operating revenues and expenses, respectively. Other amounts are reported as non-operating.

The District reports the following major governmental funds:

The General Fund; the District’s primary operating fund, accounts for all financial resources of the District, except those required to be accounted for, either legally or by Board direction, in another fund. The principal revenue source is property taxes. Primary expenditures are for public safety. In addition, certain funds budgeted as Special Revenue Funds are reported as part of the General Fund because their primary source of funds consists of transfers from the General Fund, and certain funds budgeted as fiduciary funds are reported as part of the General Fund as they are not considered trust funds in an official capacity, nor do they have revenue sources apart from General Fund transfers and interest earnings.

The Property and Building Fund; a capital projects fund type, accounts for site acquisitions and construction costs for new and existing facilities, and major facility maintenance projects. The principal resources are transfers from the General Fund and sales of surplus property.

Additionally, the District reports the following fund types:

Nonmajor governmental funds, including special revenue, debt service, and capital projects funds which are reported in the aggregate.

A proprietary/internal service fund includes the District’s Insurance Fund which is used to account for the accumulation of resources used for payment of claims and losses that are less than the District’s deductible limits for insurance coverage. The principal revenue sources are interest income and insurance refunds.

D. Budgetary information

The District budgets all funds in accordance with the requirements of state law. All funds are budgeted on the modified accrual basis of accounting, except for the Insurance, Pension, and Volunteer LOSAP Funds, which are budgeted on the accrual basis of accounting.

49 Notes to the Basic Financial Statements June 30, 2016

The Board of Directors adopts the original budget by resolution prior to the beginning of the District’s fiscal year (July 1 through June 30). The Board resolution authorizing appropriations for each fund sets the level by which expenditures cannot legally exceed appropriations. Total personnel services, materials and services, capital outlay, transfers out, and contingencies are the levels of control established by the resolution with the exception of the General Fund, where those same appropriation levels are further defined by directorate levels. The detailed budget document contains more specific information for the above mentioned expenditure categories, and management may revise the detailed line item budgets within appropriation categories.

Unexpected additional resources may be added to the budget through the use of a supplemental budget and appropriation resolution. Supplemental budgets less than 10 percent of the fund’s original budget may be adopted by the Board of Directors at a regular Board meeting. A supplemental budget greater than 10 percent of the fund’s original budget requires hearings before the public, publication of notice, and approval by the Board of Directors. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by the Board of Directors. The District adopted one budget transfer resolution during the year ended June 30, 2016. Appropriations lapse at fiscal year-end.

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

1. Cash and cash equivalents

The District considers cash on hand, demand deposits, and short-term highly liquid investments with a maturity of three months or less from the date of acquisition to be cash and cash equivalents. Investments maintained in the Oregon Local Government Investment Pool (LGIP) are carried at cost, which approximates fair value, and are classified as a cash equivalent. Fair value of the investments in the LGIP is the same as the value of the pool shares. Short-term investments classified as cash equivalents are carried at amortized cost.

2. Investments

Investments are stated at fair value. Fair value is based on current market prices. Changes in the fair value of investments are recognized as revenue. GASB Statement 72, Fair Value Measurement and Application, which was implemented by the District in the 2015-16 fiscal year, provides a fair value hierarchy that prioritized the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). There was no material impact to the financial statements caused by the implementation of GASB Statement 72.

50 Notes to the Basic Financial Statements June 30, 2016

3. Receivables

Property taxes, all of which are receivable from property owners within the District, are assessed on January 1 and become a lien against the property as of July 1 each year. Taxes are payable in three installments on November 15, February 15, and May 15. Taxes unpaid and outstanding on May 15 are considered delinquent. At June 30, 2016, no allowance for doubtful accounts is considered necessary for property taxes.

Ambulance transport service receivables consist of charges to patients net of allowances for contractual discounts and uncompensated care and are based on management’s estimate of collectability.

4. Inventories and prepaid items

Inventories are valued at cost using the first-in/first-out (FIFO) method and consist of expendable supplies. The cost of such inventories are recorded as expenditures when consumed (consumption method) rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the government-wide statements based on the purchases method.

5. Capital assets

Capital assets, which include property, plant and equipment, are stated at cost in the government- wide financial statements. Donated assets are recorded at their estimated fair market value at the date of donation. The District defines capital assets as assets with an initial cost of more than $5,000 and an estimated useful life greater than one year. Replacements, which improve or extend the life of property, are capitalized. Interest incurred during construction is not capitalized as a capital asset. Maintenance, repairs, and equipment replacements of a routine nature are charged to expenditures/expenses as incurred and are not capitalized. Land, construction in progress, and certain historical treasures meeting certain criteria are not depreciated.

Capital assets are depreciated using the straight-line method over the following useful lives.

Buildings and improvements 15 - 30 years Fire apparatus and other vehicles 4 - 17 years Furniture, fixtures, and equipment 4 - 10 years

51 Notes to the Basic Financial Statements June 30, 2016

6. Long-term debt

Long-term debt is reported as a liability in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the related debt using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

In the fund financial information, bond premiums and discounts are recognized when incurred. The face amount of the debt issued, premiums, and discounts received on debt issuances, are reported as other financing sources and uses. In accordance with GASB Statement 65, bond issuance costs are expensed as incurred.

7. Deferred outflows/inflows of resources

In addition to assets, the statement of financial position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District has four items that qualify for reporting in this category. Three deferred outflows relate to the District’s pension plan and consist of employer contributions to OPERS after the measurement date, experience differences, and changes in proportion. The fourth deferred outflow is the deferred charge on refunding reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt, which is nine years.

In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The District has two types of items, which arise only under a modified accrual basis of accounting, which qualifies for reporting in this category. Accordingly, one item, unavailable revenue, is reported only in the governmental funds balance sheet. The District reports unavailable revenues from four sources: property taxes, transport services, HazMat and conflagrations, and the Mobile Emergency Radio Responder Coverage program. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The other deferred inflow item relates to the District’s pension plan and consists of a deferred pension investment and a pension contribution difference. This consists of differences between projected and actual investment earnings and changes in employer proportion and differences between employer contributions and the District’s proportionate share of contributions. In the Statement of Net Position, a deferred inflow of resources related to the District’s pension plan is recognized.

52 Notes to the Basic Financial Statements June 30, 2016

8. Net position flow assumption

Sometimes the District will fund outlays for a particular purpose from both restricted (e.g. restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

9. Fund balance policies

Fund balance classifications, as reported in the governmental funds, comprise a hierarchy based primarily on the extent to which the District is bound to observe constraints imposed on the use of the resources reported. These classifications are:

• Nonspendable fund balance represents amounts that are not in a spendable form. The nonspendable fund balance represents inventories.

• Restricted fund balance represents amounts that are legally restricted by outside parties for a specific purpose (such as debt covenants, grant requirements, donor requirements, or other governments) or are restricted by law (constitutionally or by enabling legislation).

• Committed fund balance represents funds formally set aside by the governing body for a particular purpose. The Board may commit fund balance by resolution. The Board may also modify or rescind commitments by resolution.

• Assigned fund balance represents amounts that are constrained by the expressed intent to use resources for specific purposes that do not meet the criteria to be classified as restricted or committed. Intent can be stipulated by the governing body or by an official to whom that authority has been given by the governing body. Both the Fire Chief and the Chief Financial Officer have been given this authority by resolution by the Board.

• Unassigned fund balance is the residual classification of the General Fund. Only the General Fund may report a positive unassigned fund balance.

The Board of Directors has approved the following order of spending regarding fund balance categories: Restricted resources are spent first when both restricted and unrestricted (committed, assigned or unassigned) resources are available for expenditures. When unrestricted resources are spent, the order of spending is committed (if applicable), assigned (if applicable) and lastly, unassigned fund balance.

To preserve a sound financial system and to provide a stable financial base, the governing body has adopted a minimum ending fund balance policy specifying a balance in the budgetary basis General

53 Notes to the Basic Financial Statements June 30, 2016

Fund targeted at five months of operating expenditures (approximately 42%). This amount is intended to provide “dry-period financing” during the first five months of each fiscal year before the receipt of property taxes each November. Additionally, the policy requires the maintenance of a fund balance in the Property and Building Fund sufficient to purchase one piece of fire station land and construct a fire station.

F. Revenues and expenditures/expenses

1. Property taxes

Property taxes attach as an enforceable lien on real property and are levied as of July 1st. The tax levy for each property is mailed by county assessors as of October 25th, with taxes due on November 15th. Citizens who pay in full by November 15th receive a 3 percent discount. The billings are considered past due 30 days after the respective tax billing date, at which time the applicable property is subject to lien, and penalties and interest are assessed.

2. Program revenues

Amounts reported as program revenues include 1) charges for services for fleet maintenance, occupational health services, wildland firefighting, and information technology services provided to external agencies, 2) charges for certain ambulance transport services, and 3) grants and contributions that are restricted to meeting the District’s operational or capital requirements of the public safety function.

3. Accrued Compensated absences

a. Vacation and Personal Leave Accumulated accrued compensated absences for vacation and personal leave benefits are accrued when incurred in the Statement of Net Position and Statement of Activities. Due to the current financial resources focus of the governmental funds, only the portion of the accrued compensated absences related to retirements or resignations as of June 30, 2016, is recorded on the governmental funds balance sheet. The entire balance is reported on the Statement of Net Position. Also, for the governmental activities, compensated absences are generally liquidated by the General Fund.

b. Sick Leave Accumulated sick leave does not vest and is, therefore, recorded when leave is taken.

G. Pension Obligations

In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement 27, the District’s net pension (asset)/liability, deferred inflows and outflows related to pensions, and pension expense have been determined on the basis reported by Oregon Public Employees Retirement System (OPERS). 54 Notes to the Basic Financial Statements June 30, 2016

In accordance with GASB Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, the District’s total pension (asset)/liability, deferred inflows and outflows related to pensions, and pension expense have been actuarially determined and reported.

H. Retirement plans

Substantially all of the District’s employees are participants in the State of Oregon Public Employees Retirement System (PERS). Contributions to PERS are made on a current basis as required by the plan and are charged as expenses/expenditures.

The District maintains a single-employer defined benefit pension plan for certain former employees who retired prior to July 16, 1981. Contributions to the pension plan in the amount necessary to pay current benefits are funded annually by the District.

The District maintains a closed defined benefit Length of Service Award Plan (LOSAP) for past volunteer firefighters. No further contributions to the defined benefit plan are actuarially required. The District also contributes to a defined contribution plan for its current volunteer firefighters.

55 Notes to the Basic Financial Statements June 30, 2016

II. Reconciliation of government-wide and fund financial statements

A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position

Governmental fund balances differ from net position as presented in the Balance Sheet – Governmental Funds/Statement of Net Position due to the differences in measurement focus between the fund and entity-wide statements. Fund balance, as presented in the governmental funds balance sheet, reconciles to net position in the Statement of Net Position through consideration of the following:

Fund balance, Governmental Fund Balance Sheet $ 76, 305,370

Items that are not current financial resources or liabilities, and thus are not reported in the fund statements: Prepaid items 1,513,807 Capital assets, net 84,800,909 Unavailable revenue 4,615,416 Accrued compensated absences (10,950,952) Accrued interest payable on long-term debt (237,560) Long-term bonded debt (55,560,104) Deferred refunding charge on refunded bonds 779,555 Net OPEB asset 123,858 Total pension liability - Frozen Pension Plan (1,659,564) Total pension liability - LOSAP (180,853) Net pension Liability - PERS (34,235,839) PERS Pension related outflows 8,423,093 PERS Pension related inflows (7,529,380) `0H`HIG1.0IH0 653,426

Net position, Statement of Net Position $ 66,861,182

56 Notes to the Basic Financial Statements June 30, 2016

B. Explanation of certain differences between the governmental fund statement of revenues, expenditure, other financing sources and uses, and changes in fund balances and the government-wide statement of activities

Similarly, changes in fund balance reconcile to changes in net position in the Statement of Activities through consideration of the following adjustments:

Net changes in fund balances $ 854,493 Amounts that are not considered current financial resources or uses are not reported in the funds, but are considered on the full accrual basis in the Statement of Activities: Net increases in capital assets ($8,332,755) less depreciation for the year ($4,773,498) 3,559,257 Property taxes not meeting the measurable and available criteria 656,150 Payments on long-term debt and related refunded debt 4,303,851 Net increase in accrued compensated absences (1,907,207) Certain revenues recognized as measurable and available in the current year 143,615 Net increase in other post employment benefits 26,523 Net increase in total pension obligations - Frozen Pension Plan 680,216 Net increase in total pension asset - LOSAP (44,575) Expenditures in the Statement of Activities that do not require the use of current financial resources, and therefore, are not reported as expenditures in governmental funds 186,830 Net increase in net pension liability - PERS (27,050,945) Amounts considered current financial resources and reported in the funds, but which are not considered in the full accrual Statement of Activities: Change in net position of internal service fund combined with governmental activities 40,305 Net change in net position $ (18,551,487)

III. Detailed notes on all activities and funds

A. Cash, cash equivalents and investments

1. Deposits and investments

The District maintains separate accountability by fund for cash, cash equivalents, and investment accounts.

Deposits with financial institutions include bank demand deposits and bank money market deposits. The combined total book balance at June 30, 2016 was $36,639,315 and the total bank balance was $36,979,966. The District’s demand deposits are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). Any amounts in excess of FDIC insurance are secured in accordance with Oregon Revised Statutes 295 under Oregon Public Funds Collateralization Program, a collateral program administered by the Oregon State Treasurer, which is a shared liability structure for participating bank 57 Notes to the Basic Financial Statements June 30, 2016

depositories, protecting public funds though still not guaranteeing that all funds are 100 percent protected. In general, well capitalized bank depositories are required to pledge collateral valued at least 10 percent of their last-reported uninsured public funds deposits. Adequately capitalized and undercapitalized depositories are required by ORS 295 to pledge collateral valued at 110 percent of their uninsured public funds deposits.

At June 30, 2016, the District’s cash, cash equivalents, and investments are comprised of the following:

Cash, cash equivalents and investments Cash on hand $ 1,859 Cash with county assessors 276,655 Deposits with financial institutions 36, 639,315 State of Oregon Local Government Investment Pool 47,161,780 Investments: Open-ended mutual funds 277,578 Total cash, cash equivalents, and investments $ 84,357,187

Cash and investments are reflected on the basic financials statements as follows:

Governmental H0

Cash and cash equivalents: Unrestricted $ 79,371,555 Restricted 4,708,054 Investments 277,578 Total cash, cash equivalents, and investments $ 84,357,187

The Oregon State Treasury Finance Division administers the Local Government Investment Pool (LGIP). It is an open-ended no-load diversified portfolio offered to any agency, political subdivision, or public corporation of the state that by law is made the custodian of or has control of any public funds. The LGIP is commingled with the State’s short-term funds. In seeking to best serve local governments of Oregon, the Oregon Legislature established the Oregon Short-Term Fund Board. The purpose of the Board is to advise the Oregon State Treasury in the management and investment options of the LGIP. Cost approximates the District’s fair value in the LGIP.

Investments measured at fair value are presented as:

Investments Measured at Fair Value

Quoted Prices in Active Markets for Identical Assets (Level 1)

Investments- Balanced index stock fund $ 277,578 Total investments measured at fair value $ 277,578

58 Notes to the Basic Financial Statements June 30, 2016

2. Custodial credit risk

Custodial credit risk is the risk that, in the event of failure of the counterparty, the District will not be able to recover the value of its investments that are in the possession of an outside party. At June 30, 2016, the District does not have investments exposed to custodial credit risk.

3. Interest rate risk

As a means of managing its exposure to fair value loss arising from increasing interest rates, the District’s governmental funds investment policies limit maturities to 18 months. Generally, short-term investment funds will be invested for periods less than 12 months. Identified amounts in those funds may be available for investment periods up to 18 months. Investments with a maturity of 12 months or more shall be limited to U.S. Agency or U.S. Treasury securities.

4. Credit risk

State statutes govern the District’s investment policy. Permissible investments for governmental funds include general obligations of the United States government and its agencies, obligations of the states of Oregon, California, Idaho, and Washington that have a rating at settlement of AA or better, A-1 rated commercial paper and bankers’ acceptances, Aa rated corporate bonds, time deposits, repurchase agreements, and the LGIP. The Pension funds maintain a separate investment policy that allows investment in mutual funds in addition to the above investment types.

The LGIP was created to offer a short-term investment alternative to Oregon local governments. The investments are regulated by the Oregon Short-Term Fund Board, which is not registered with the U.S. Securities and Exchange Commission as an investment company, and approved by the Oregon Investment Council (ORS 294.805 to 294.898). Separate financial statements for the Oregon Short-Term Fund are available from the Oregon State Treasurer. The State of Oregon LGIP and money market account are unrated for credit quality.

B. Receivables

Receivables consist of property taxes, HazMat and fire conflagrations, medical transport and other accounts receivable at year end. Non-property tax receivables are presented net of an allowance for doubtful accounts based on management’s estimate of collectability.

59 Notes to the Basic Financial Statements June 30, 2016

C. Capital assets

Capital Assets consist of the following at June 30, 2016:

Balance Balance Increases Decreases June 30, 2015 June 30, 2016 Governmental activities: Non-depreciable capital assets: Land $ 12,747,885 $ 1,543,448 $ (29,200) $ 14,262,133 Other capital assets 225,000 6,000 231,000 Construction in progress 1,841,486 4,966,856 (1,143,944) 5,664,398 Total capital assets, not being depreciated 14,814,371 6,516,304 (1,173,144) 20,157,531

Capital assets, being depreciated: Buildings and improvements 73,670,766 1,797,984 (128,459) 75,340,291 Fire apparatus and other vehicles 28,533,453 547,615 (24,904) 29,056,164 Furniture, fixtures, and equipment 8,655,288 722,083 (362,094) 9,015,277 Total capital assets, being depreciated 110,859,507 3,067,682 (515,457) 113,411,732

Less accumulated depreciation for: Buildings and improvements (21,838,020) (2,392,720) 118,480 (24,112,260) Fire apparatus and other vehicles (17,013,240) (1,497,072) 24,903 (18,485,409) Furniture, fixtures, and equipment (5,580,966) (883,706) 293,987 (6,170,685) Total accumulated depreciation (44,432,226) (4,773,498) 437,370 (48,768,354)

Total capital assets being depreciated, net 66,427,281 (1,705,816) (78,087) 64,643,378

Total capital assets, net of depreciation $ 81,241,652 $ 4,810,488 $ (1,251,231) $ 84,800,909

All depreciation is charged to Public Safety in the Statement of Activities.

D. Interfund receivables, payables, and transfers

Interfund payables and receivables for the year ended June 30, 2016 was as follows:

Due to Due from Other Funds Other Funds General Fund $ $ 73,546 Nonmajor Funds 73,546 $ 73,546 $ 73,546

The interfund payable from the Grants Fund to the General Fund in the amount of $73,546 is to fund reimbursable expenditures in the Grants Fund.

60 Notes to the Basic Financial Statements June 30, 2016

Interfund transfers for the year ended June 30, 2016 were as follows:

Transfer In Transfer Out General Fund $ $ 4,101,085 Property and Building Fund 4,101,085 $ 4,101,085 $ 4,101,085

The District made a transfer from the General Fund to the Property and Building Fund in the amount of $4,101,085 to accumulate resources for acquisition and construction costs for new and existing facilities.

E. Operating leases

The District leases copiers under non-cancelable operating leases. The total cost for these leases amounted to approximately $65,700 for the year ended June 30, 2016. Future payments are due as follows:

Year Ending June 30, Amount

2017 $ 62,940 2018 60,824 2019 19,620 $ 143,384

F. Long-term obligations

Bonds payable The District was authorized by its voters in November 2006, to issue $77,500,000 of general obligation bonds. The District has outstanding bonds payable from the $20,000,000 issuance of 20-year bonds dated April 11, 2007, with stated interest rates on specific maturities of 4.0 percent; the $14,000,000 issuance of 15-year bonds dated March 17, 2009, with stated interest rates ranging from 3.5 percent to 4.375 percent; the $15,000,000 issuance of 20-year bonds dated June 16, 2009, with stated interest rates ranging from 4.0 percent to 4.25 percent; the $23,500,000 issuance of 20-year bonds dated June 2, 2011, with stated interest rates ranging from 3.0 percent to 5.0 percent; and the $5,000,000 of 9-year bonds dated March 25, 2015, with stated interest rates ranging from 2.25 percent to 4.0 percent. All these bond issues were for purposes of funding fire station construction and seismic improvements, command center projects, and to purchase land and emergency response apparatus.

Advance Refunding On March 25, 2015, the District issued $9,905,000 in general obligation bonds with interest rates ranging from 2.25% to 4.0%. The proceeds were used to advance refund $10,000,000 of outstanding 2007 general obligation bonds which had interest rates ranging from 4.0 percent to 4.25 percent. The net proceeds of $10,911,482 (including a $1,121,871 premium after payment of $115,389 in underwriting fees and other issuance costs) were deposited in an irrevocable trust with an escrow agent

61 Notes to the Basic Financial Statements June 30, 2016

to provide funds for the future debt service payment of the refunded bonds. As a result, the 2007 general obligation bonds with maturities after April 2017 are considered defeased and the liability for those bonds has been removed from the statement of net position.

Interest rates vary by respective maturities. The District has no variable rate debt.

Legal Debt Margin The District is subject to a debt limit that is 1.25% of Real Market Value of taxable property. At June 30, 2016, that amount was $1.0 billion. As of June 30, 2016, the total general obligation bonded debt was $53,000,000. The total outstanding debt applicable to the limit was $54.1 million which is 5.4 percent of the total debt limit.

Changes in long-term liabilities Changes in the District’s general obligation bonds and compensated absences for the year ended June 30, 2016 are as follows:

Outstanding at Outstanding at Due Within Issue Date Original Issue Additions Reductions Interest Rates June 30, 2015 June 30, 2016 One Year

General Obligation Bonds: April 11, 2007$ 20,000,000 $ 2,000,000 $ (1,000,000) $ 1,000,000 $ 1,000,000 4.00% March 17, 2009 14,000,000 8,640,000 (960,000) 7,680,000 960,000 3.5 - 4.375% June 16, 2009 15,000,000 11,530,000 (630,000) 10,900,000 655,000 4.00 - 4.25% June 2, 2011 23,500,000 19,945,000 (935,000) 19,010,000 950,000 3.00 - 5.00% March 25, 2015 9,905,000 9,905,000 (55,000) 9,850,000 235,000 2.25 - 4.00% March 25, 2015 5,000,000 5,000,000 (440,000) 4,560,000 380,000 2.25 - 4.00%

Total General Obligation Bonds 57,020,000 (4,020,000) 53,000,000 4,180,000 Unamortized Premium: 2,824,471 (264,367) 2,560,104 264,367 Compensated Absences: 9,043,746 $ 9,326,633 (7,419,427) 10,950,952 7,111,979 Total $ 68,888,217 $ 9,326,633 $ (11,703,794) $ 66,511,056 $ 11,556,346

Outstanding bond issues are callable as follows:

March 17, 2009 - at par plus accrued interest beginning March 1, 2019 June 16, 2009 - at par plus accrued interest beginning June 15, 2019 June 2, 2011 - at par plus accrued interest beginning June 1, 2021 March 25, 2015 - at par plus accrued interest beginning June 1, 2025 March 25, 2015 - at par plus accrued interest beginning June 1, 2025

62 Notes to the Basic Financial Statements June 30, 2016

Future bond maturities are as follows:

Fiscal Year Ending Principal Interest Total June 30, 2017 $ 4,180,000 $ 2,093,985 $ 6,273,985 2018 4,515,000 1,947,235 6,462,235 2019 4,580,000 1,797,835 6,377,835 2020 4,675,000 1,614,635 6,289,635 2021 4,775,000 1,427,635 6,202,635 2022-2026 19,480,000 4,268,156 23,748,156 2027-2031 10,795,000 1,236,225 12,031,225 $ 53,000,000 $ 14,385,706 $ 67,385,706

IV. Other information

A. Risk management

The District is exposed to various risks of loss related to torts, theft of or damage to and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The District, through its General Fund, purchases commercial insurance. Deductibles are generally at $5,000 or less and natural disasters have a deductible of $100,000. Settled claims have not exceeded commercial coverage in any of the last three fiscal years.

The District’s industrial accident insurance policies were modified in fiscal year 2013-14 and going forward to purchase a Guaranteed Cost/Annual Prepay Plan which provides for a fixed cost. The previously purchased policies allowed for a three-year retrospective annual premium adjustment until claims experience became available. Alternatively, the District may annually elect to close out one or more of the open claim years. The claim year for fiscal 2012 is the only one open as of June 30, 2016. The District’s maximum liability for premiums related to this open claim year is approximately $389,000 which represents the difference between the maximum possible premiums less the premiums paid. If the claims experience for this open claim year is favorable, the District could receive a refund of a portion of the premiums paid.

B. Related party transactions

The District contracts with Washington County Consolidated Communications Agency (WCCCA), an ORS 190 entity, which is an intergovernmental entity created by agreement of local governments. WCCCA functions as a 911 dispatch agency. The District is a participating member of the agreement. During the year ended June 30, 2016, the District paid $1,777,531 to WCCCA for dispatch fees.

The District also contracts with American Medical Response NW (AMR), a private provider of medical transportation services, for ambulance transport services and related medical billing. The General Manager of AMR is a current board member of the District. 63 Notes to the Basic Financial Statements June 30, 2016

C. Deferred compensation plans

The District offers all employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457(b). The plan, available to all District employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional.

Under terms of the bargaining agreement, and in accordance with Internal Revenue Code Section 401(a), participating employees, who meet length of service requirements, receive a District matching contribution of five percent of base wages. The District made a similar match of five percent for non- bargaining employees. The District’s contribution during fiscal year 2016 was $2,019,980 of which $1,502,927 was made for the bargaining unit employees.

D. Employee retirement systems and pension plans

1. Employee Retirement Pension Plan

Plan Description - The District is a participating employer in the Oregon Public Employees Retirement System (OPERS), a cost-sharing multiple-employer public employee retirement system established under Oregon Revised Statutes 238.600 that acts as a common investment and administrative agent for public employers in the State of Oregon.

ORS 238 Defined Benefit Plan Benefits - OPERS is a defined benefit pension plan that provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to members and their beneficiaries. Benefits are established by state statute. This defined benefit pension plan portion of OPERS is closed to new members hired on or after August 29, 2003.

Benefits under the defined benefit pension plan program include a retirement allowance payable monthly for life. It may be selected from thirteen retirement benefit options. These options include survivorship benefits and lump-sum refunds. The basic benefit is based on years of service and final average salary. A percentage (2 percent for police and fire employees, 1.67 percent for general service employees) is multiplied by the number of years of service and the final average salary. Benefits may also be calculated under either a formula plus annuity computation (for members who were contributing before August 21, 1981), or a money match computation if a greater benefit results.

Death Benefits - Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of the member’s account balance (accumulated contributions and interest). In addition, the beneficiary will receive a lump-sum payment from employer funds equal to the account balance, provided one or more of the following conditions are met: (1) member was employed by a OPERS employer at the time of death; (2) member died within 120 days after termination of OPERS-covered employment; (3) member died as a result of injury sustained while employed in a OPERS-covered job; or (4) member was on an official leave of absence from a OPERS-covered job at the time of death.

64 Notes to the Basic Financial Statements June 30, 2016

Disability Benefits - A member with ten or more years of creditable service who becomes disabled from other than duty-connected causes may receive a non-duty disability benefit. A disability resulting from a job-incurred injury or illness qualifies a member for disability benefits regardless of the length of OPERS- covered service. Upon qualifying for either a non-duty or duty disability, service time is computed to age 58 (55 for police and fire members) when determining the monthly benefit.

Benefit Changes after Retirement - Members may choose to continue participation in a variable equities investment account after retiring and may experience annual benefit fluctuations due to changes in the market value of equity investments.

Under ORS 238.360 monthly benefits are adjusted annually through cost-of-living changes. The cap on the cost-of-living changes in fiscal year 2016 and beyond will vary based on the amount of the annual benefit and years in which the benefit was earned.

ORS 238A OPSRP Defined Benefit Plan Benefits - This portion of the defined benefit pension plan of OPERS provides benefits to members hired on or after August 29, 2003. Benefits under this portion of OPSRP provide a life pension funded by employer contributions. Benefits are calculated with the following formula for members who attain normal retirement age.

For police and fire members, 1.8 percent is multiplied by the number of years of service and the final average salary. Normal retirement age for police and fire members is age 60 or age 53 with 25 years of retirement credit. To be classified as a police and fire member, the individual must have been employed continuously as a police and fire member for at least five years immediately preceding retirement.

For general service members, 1.5 percent is multiplied by the number of years of service and the final average salary. Normal retirement age for general service members is age 65 or age 58 with 30 years of retirement credit.

Members become vested on the earliest of the following dates: the date the member completes 600 hours of service in each of five calendar years, the date the member reaches normal retirement age, and, if the pension program is terminated, the date on which termination becomes effective.

Death Benefits - Upon the death of a non-retired member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would otherwise have been paid to the deceased member.

Disability Benefits - A member who has accrued ten or more years of retirement credits before the member becomes disabled or a member who becomes disabled due to job-related injury shall receive a disability benefit of 45 percent of the member’s salary determined as of the last full month of employment before the disability occurred.

Benefit Changes after Retirement - Under ORS 238A.210 monthly benefits are adjusted annually through cost-of-living changes. The cap on the cost-of-living changes in fiscal year 2016 and beyond will vary based on the amount of the annual benefit. 65 Notes to the Basic Financial Statements June 30, 2016

Contributions - OPERS funding policy provides for monthly employer contributions at actuarially determined rates. These contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay benefits when due. This funding policy applies to the OPERS Defined Benefit Plan and the Other Postemployment Benefit Plans.

Employer contribution rates during the period were based on the December 31, 2013 actuarial valuation, which became effective July 1, 2015. The State of Oregon and certain schools, community colleges, and political subdivisions have made unfunded actuarial liability payments, and their rates have been reduced. The District’s rates for the year ended June 30, 2016 were 16.03 percent for OPERS and 7.17 percent for OPSRP – general service employees, and 11.28 percent for OPSRP – fire employees, of salary covered under the plan. These rates are reported inclusive of the retiree healthcare rates disclosed in a separate note disclosure. The contribution requirements for plan members and the District are established by ORS Chapter 238 and may be amended by an act of the Oregon Legislature.

Employer contributions for the year ended June 30, 2016, were approximately $6,482,000, exclusive of the 6% “pick-up”. Covered employees are required to contribute 6% of their salary to the Plan, but the employer is allowed to pay any or all of the employees’ contribution in addition to the required employers’ contribution. The District has elected to contribute the 6% “pick-up” or $2,961,184 of the employees’ contribution.

Plan Audited Financial Report - Both OPERS and OPSRP are administered by the Oregon Public Employees Retirement Board (OPERB). The comprehensive annual financial report of the funds administered by the OPERB may be obtained by writing to Oregon Public Employees Retirement System, P.O. Box 23700, Tigard, OR 97281-3700, by calling (503) 598-7377, or by accessing the OPERS web site at www.pers.state.or.us.

Pension Assets/Liabilities, Pension Expense, and Deferred Outflows and Inflows of Resources Related to Pensions

Proportionate Share Allocation Methodology - The basis for the employer’s proportion is actuarially determined by comparing the employer’s projected long-term contribution effort to the Plan with the total projected long-term contribution effort of all employers. The contribution rate for every employer has at least two major components; Normal Cost rate and Unfunded Actuarial Liability (UAL) Rate.

Since the December 31, 2013 actuarial valuation, the system-wide actuarial accrued liability has increased primarily due to the Moro decision and assumption changes, along with interest on the liability as current active members get closer to retirement. The Oregon Supreme Court decision in Moro v. State of Oregon, issued on April 30, 2015, reversed a significant portion of the reductions the 2013 Oregon Legislature made to future system Cost of Living Adjustments (COLA) through Senate Bills 822 and 861. This reversal increased the benefits projected to be paid by employers compared to those developed in the prior actuarial valuation, and consequently increased plan liabilities. The employers’ projected long-term contribution effort has been adjusted for the estimated impact of the Moro decision. In accordance with statute, a biennial review of actuarial methods and assumptions was completed in 2015 to be used for the December 31, 2014 actuarial valuation. After completion of this review and subsequent to the 66 Notes to the Basic Financial Statements June 30, 2016

measurement date, the PERS Board adopted several assumption changes, including lowering the investment return assumption to 7.50%, effective January 1, 2016 which will be used for rates beginning July 1, 2017.

At June 30, 2016, the District reported a liability of $34,235,839 for its proportionate share of the plan pension liability. The net pension liability was measured as of June 30, 2015 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2013 and updated for the effect of the Moro decision. The District’s proportionate share was based on a projection of the District’s long-term share of contributions to the pension plan relative to the projected contributions of all participating members of the cost sharing pool, actuarially determined. At June 30, 2016 and 2015 the District’s proportion was 0.59629138 percent, and 0.59075779 percent, respectively.

For the year ended June 30, 2016, the District recognized pension expense of $33,640,420 for the defined benefit portion of the pension plan. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual experience $ 1,846,170 $ Net difference between projected and actual earnings on pension plan investments 7,176,608 Changes in District's proportionate share 95,007 Differences between District contribution and proportionate share of system contributions 352,772 District contributions subsequent to the measurement date 6,481,916 Total $ 8,423,093 $ 7,529,380

Amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense/ (income) as follows:

Year ended June 30: 2017 $ 3,418,169 2018 (3,063,747) 2019 (3,063,747) 2020 3,457,658 2021 145,380 Total $ 893,713

67 Notes to the Basic Financial Statements June 30, 2016

Actuarial Valuations - The employer contribution rates effective July 1, 2015, through June 30, 2016, were set using the entry age normal actuarial cost method.

For the ORS 238 Tier One/Tier Two component of the OPERS defined benefit plan, this method produced an employer contribution rate consisting of (1) an amount for normal cost (the estimated amount necessary to finance benefits earned by the employees during the current service year), and (2) an amount for the amortization of unfunded actuarial accrued liabilities, which are being amortized over a fixed period with new unfunded actuarial accrued liabilities being amortized over twenty years.

For the ORS 238A OPSRP Pension Program component of the OPERS Defined Benefit Plan, this method produced an employer contribution rate consisting of (1) an amount for normal cost (the estimated amount necessary to finance benefits earned by the employees during the current service year), (2) an actuarially determined amount for funding a disability benefit component, and (3) an amount for the amortization of unfunded actuarial accrued liabilities, which are being amortized over a fixed period with new unfunded actuarial accrued liabilities being amortized over sixteen years.

Actuarial Methods and Assumptions -

Valuation Date 12/31/13 Measurement Date 6/30/15 Experience Study 2014, published September 2015 Actuarial cost method Entry Age Normal Amortization method Amortized as a level percentage of payroll; Tier One/Tier Two UAL (20 year) and OPSRP Pension UAL (16 year); Amortization periods are closed. Actuarial assumptions: Inflation rate 2.75 percent Long-term expected rate of return 7.75 percent Discount rate 7.75 percent Projected salary increases 3.75 percent Cost of living adjustment Blend of 2.00% COLA and graded COLA (1.25% / 0.15%) in accordance with Moro decision; blend based on service. Mortality Healthy retirees and beneficiaries: RP-2000 table. Active members: a percentage of healthy retiree rates. Disabled retirees: males 65%, females 90% of the RP-2000 static combined disabled table.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Experience studies are performed as of December 31 of even numbered years. 68 Notes to the Basic Financial Statements June 30, 2016

Discount Rate - The discount rate used to measure the total pension liability was 7.75 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers are made at the contractually required rates, as actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the District’s Proportionate Share of the Net Pension Asset to Changes in the Discount Rate - The following represents the District’s proportionate share of the pension asset calculated using the discount rate of 7.75 percent, as well as what the District’s share of the net pension asset would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:

1% Decrease Discount Rate 1% Increase (6.75%) (7.75%) (8.75%) District's proportionate share of net pension (asset)/liability$ 82,626,923 $ 34,235,839 $ (6,545,132)

Long-Term Expected Rate of Return - The long term expected rate of return is based on a consistent set of underlying assumptions for each asset class and includes adjustment for the inflation assumption. These assumptions are not based on historical return, but instead are based on a forward-looking capital market economic model. To develop an analytical basis for the selection of the long-term expected rate of return assumption, in July 2013 the PERS Board reviewed long-term assumptions developed by both Milliman’s capital market assumptions team and the Oregon Investment Council’s (OIC) investment advisors. Each asset class assumption is based on a consistent set of underlying assumptions, and includes adjustment for the inflation assumption. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following tables:

Target Allocation Asset Class Low Range High Range Target

Cash 0.0 % 3.0 % 0.0 % Debt Securities 15.0 25.0 20.0 Public equity 32.5 42.5 37.5 Private Equity 16.0 24.0 20.0 Real Estate 9.5 15.5 12.5 Alternative Equity 0.0 10.0 10.0 Opportunity Portfolio 0.0 3.0 0.0 100.0 %

69 Notes to the Basic Financial Statements June 30, 2016

Compound Annual Asset Class Target Return (Geometric)

Core Fixed Income 7.20 % 4.50 % Short-Term Bonds 8.00 3.70 Intermediate-term Bonds 3.00 4.10 High Yield Bonds 1.80 6.66 Large Cap US Equities 11.65 7.20 Mid Cap US Equities 3.88 7.30 Small Cap US Equities 2.27 7.45 Developed Foreign Equities 14.21 6.90 Emerging Market Equities 5.49 7.40 Private Equity 20.00 8.26 Hedge Funds/Absolute Return 5.00 6.01 Real Estate (Property) 13.75 6.51 Real Estate (REITS) 2.50 6.76 Commodities 1.25 6.07

Assumed Inflation - Mean 2.75

Depletion Date Projection – GASB 68 generally requires that a blended discount rate be used to measure the Total Pension Liability. The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan’s Fiduciary Net Position is projected to cover benefit payments and administrative expenses. GASB 68 does allow for alternative evaluations of projected solvency, if such evaluation can reliably be made.

The following circumstances justify an alternative evaluation of sufficiency for OPERS:

PERS has a formal written policy to calculate an Actuarially Determined Contribution (ADC), which is articulated in the actuarial valuation report. The ADC is based on a closed, layered amortization period, which means that payment of the full ADC each year will bring the plan to a 100% funded position by the end of the amortization period if future experience follows assumption. GASB 68 specifies that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan’s funded position.

Based on these circumstances, it is our independent actuary’s opinion that the detailed depletion date projections outlined in GASB 68 would clearly indicate that the Fiduciary Net Position is always projected to be sufficient to cover benefit payments and administrative expenses.

Payable to OPERS - At June 30, 2016, the District‘s payable to OPERS for defined benefit contributions was $868,020. This amount represents legally required contributions to the plan for services incurred in the current fiscal year.

70 Notes to the Basic Financial Statements June 30, 2016

Individual Account Program - In the 2003 legislative session, the Oregon Legislative Assembly created a successor plan for OPERS. The Oregon Public Service Retirement Plan (OPSRP) is effective for all new employees hired on or after August 29, 2003, and applies to any inactive OPERS members who return to employment following a six month or greater break in service. The new plan consists of the defined benefit pension plans and a defined contribution pension plan (the Individual Account Program or IAP). Beginning January 1, 2004, all OPERS member contributions go into the IAP portion of OPSRP. OPERS’ members retain their existing OPERS accounts, but any future member contributions are deposited into the member’s IAP, not the member’s OPERS account. Those employees who had established an OPERS membership prior to creation of OPSRP will be members of both the OPERS and OPSRP system as long as they remain in covered employment.

2. Single-Employer Defined Benefit Pension Plan

Plan Description - The District maintains a single-employer defined benefit pension plan for those former employees of Washington County Fire Protection District No. 1 (a merged District), who retired prior to July 16, 1981. Compensation levels and years of service were frozen for benefit purposes as of June 30, 1981. The amortization period for this plan is closed. The plan is accounted for on a flow of economic resources measurement focus and uses the accrual basis of accounting. Benefits are recognized when incurred.

The Plan is maintained for two retired employees and four beneficiaries currently receiving benefits. Benefits paid are based upon the former employees’ years of service and a percentage of their average monthly compensation prior to June 30, 1981.

The Plan is administered by the Fire Chief. Benefits under this plan consist of payments to retirees and beneficiaries. Amendments to the plan may be made at the discretion of the Board. The plan is not administered through a trust or equivalent arrangement; therefore, the provisions of GASB Statements 67 and 68 do not apply, however, GASB Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 was implemented at June 30, 2016.

71 Notes to the Basic Financial Statements June 30, 2016

Actuarial Methods and Assumptions - The total Pension Liability and components of Pension Expense as of June 30, 2016, were determined using the date of the latest actuarial valuation of June 30, 2016. All benefits are vested. Significant actuarial assumptions used in the valuation included:

A 3.2% interest discount based on the June 2016 rate in the 20-Year General Obligation Municipal Bond Index published by the Federal Reserve. Cost of Living Adjustments o 2.0% to 3.5% for 1973 Plan Retirees o 1.5% to 2.0% for the 1976 Plan Retirees Mortality – RP2014 Blue Collar generation tables projected forward using Scale MP 2015.

Liabilities are valued by discounting expected future cash flows at the assumed discount rate of 3.2%. Plan expenses other than benefit payments are not valued. The Plan is currently “unfunded” in accordance with relevant GASB statements.

The Plan does not issue stand-alone financial reports.

For the year ended June 30, 2016, the District recognized pension expense of $332,534 for the defined benefit pension plan.

The change in Total Pension Liability for the year ended June 30, 2016 is as follows:

Change in Total Pension Liability Total Pension Liability, beginning of year, as restated $ 2,339,780 Benefit payments (347,682) Interest on Total Pension Liability 69,310 Change in assumptions (46,913) Experience (Gain) (354,931) Total Pension Liability, end of year $ 1,659,564

Sensitivity of the Total Pension Liability to Changes in the Discount Rate - The following represents the total pension liability calculated using the discount rate of 3.2 percent, as well as what the total pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:

Current 1% Decrease Discount Rate 1% Increase (2.2%) (3.2%) (4.2%) Total Pension Liability on 6/30/16$ 1,731,957 $ 1,659,564 $ 1,593,417

72 Notes to the Basic Financial Statements June 30, 2016

3. Volunteer Length of Service Award Program (LOSAP)

Plan Description - The District maintains two Volunteer Length of Service Award Programs (known as the LOSAP Plans), for its volunteer firefighters. The District’s current volunteers participate in a defined contribution plan implemented effective January 1, 2012 which is administered by the Oregon Fire District Directors Association. The District maintains a closed defined benefit plan for some prior volunteers under a 1992 plan. The District Finance Division administers investments for the 1992 program and the investment mix consists primarily of investments in the Oregon Local Government Investment Pool and open-end mutual funds. The 1992 program was closed for crediting of additional future benefits on July 1, 1998.

The closed 1992 program is accounted for as a single employer defined benefit plan and provides length of service award benefits of a monthly amount based upon years of service. The Fire Chief, as the Plan Administrator, administers the plan and the Board of Directors provides oversight. Amendments to the plan may be made at the discretion of the Board. Vesting occurred after five years of service and service benefits were limited to 10 years certain and life annuity payable at the normal retirement age of 62.

Neither the closed 1992 program nor the defined contribution plans are administered through a trust or equivalent arrangement; therefore, the provisions of GASB Statements 67 and 68 do not apply, however, GASB Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 was implemented at June 30, 2016.

Actuarial Methods and Assumptions – Beginning with the fiscal year ended June 30, 2016, the District accounts for plan liabilities in accordance with GASB Statement 73. Significant actuarial assumptions used in the June 30, 2016 actuarial valuation, the latest available, included:

Interest Discount rate of 3.2% Retirement rates – paid when a volunteer reaches age 62 Form of benefit - 10 year certain and life annuity Mortality - RP2014 Blue Collar generation tables projected forward using Scale MP 2015.

As required by the standards, the Entry Age Normal level Cost Method is used to determine the Total Pension Liability and the Service Cost. The present value of benefits for current retirees plus the accumulated value of all prior Service Costs is the Total Pension Liability. Under this method the actuarial gains (losses), as they occur, reduce (increase) the total Pension Liability while leaving the Service Cost unchanged.

Plan assets are held by the District in a trustee capacity. Assets are invested in cash, cash equivalents and mutual funds and are valued at market value. Liabilities are valued by discounting expected future cash flows at the assumed investment rate earned by assets. Plan expenses other than benefit payments are netted against investment income. Financial gains and losses are amortized over a 5 year period when calculating Pension Expense. All other gains and losses are recognized immediately.

73 Notes to the Basic Financial Statements June 30, 2016

The plan does not issue stand-alone financial reports.

For the year ended June 30, 2016, the District recognized pension (expense)/revenue of $53,875 for the LOSAP plan.

The change in Total Pension Liability for the year ended June 30, 2016 is as follows:

Change in Total Pension Liability Total Pension Liability, beginning of year, as restated $ 136,278 Benefit payments (9,300) Interest on Total Pension Liability 4,212 Change in assumptions 40,688 Experience (Gain)/Loss 8,975 Total Pension Liability, end of year $ 180,853

Current 1% Decrease Discount Rate 1% Increase (2.2%) (3.2%) (4.2%) Total Pension Liability on 6/30/16$ 208,290 $ 180,853 $ 158,749

E. Other post-employment benefits (OPEB)

1. Health Benefit Retiree Program

Plan Description - The District’s Health Benefit Retiree Program has two components: the Explicit Benefit Plan and the Self-Pay Health Plan. The Explicit Benefit Plan results from past agreements made between the District and various employees and employee groups. Under the plan, certain union and non-union retirees are eligible for an explicit benefit in the form of a monthly stipend until age 65 or Medicare eligible. This plan was closed effective July 1, 2000, to current active employees. The District accounted for the resources and expenditures associated with funding this single-employer program through the General Fund. The Self-Pay Health Plan is provided in accordance with ORS 243.303, which requires that retirees, including those ineligible for an explicit benefit, be allowed to continue their health care coverage at their own expense. Since union actives continue their coverage through the Union Trust, only non-union actives are eligible to continue their coverage under the District’s health plan after retirement. The difference between retiree claims costs, which because of the effect of age is generally higher in comparison to all plan members, and the amount of retiree healthcare premiums represents 74 Notes to the Basic Financial Statements June 30, 2016

the District’s implicit employer contribution. The District did not establish an irrevocable trust (or equivalent arrangement) to account for the plan. Funding Policy – Under the Explicit Benefit Plan, the benefit was determined by the retiring employee’s years of service and ranges from $50 to $100 per month. Under the Self-Pay Health Plan, the District makes no explicit contributions. As of June 30, 2016, the date of the most recent actuarial valuation, there were 97 active employees and 30 retirees and surviving spouses included in both components of the Health Benefit Retiree Program.

Annual OPEB Cost and Net OPEB Asset - The District’s annual other post-employment benefit cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance within the parameters of GASB 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The following table shows the components of the OPEB asset at the end of the year:

Health Benefit Retiree Program Annual Required Contribution $ 78,541 Interest on OPEB (2,920) Adjustment for OPEB 4,966 Annual OPEB Cost 80,587 Expected Contributions (107,110) Increase (Decrease) in Net OPEB Obligation (26,523) Net OPEB Obligation (Asset) - beginning of year (97,335) Net OPEB Obligation (Asset) - end of year $ (123,858)

Funded ratio (actuarial value of plan assets/AAL) 0.0% Covered payroll (active plan members) $ 9,828,699 UAAL as a percentage of covered payroll 11.34%

The District’s annual OPEB cost, the contribution, the percentage of annual OPEB cost contributed to the plans, and the net OPEB obligation (asset) for the past three years were as follows:

Three-Year Trend Information % of Annual Net OPEB Annual OPEB Fiscal Year Ending OPEB Cost Obligation Cost Contributed (Asset) 2016 $ 80,587 132.91 % $ (123,858) 2015 103,049 116.39 (97,335) 2014 102,484 126.24 (80,449)

Funded Status and Funding Progress - As of June 30, 2016, the District’s actuarial accrued liability (AAL) for benefits was $1,114,085, and the actuarial value of plan assets was zero, resulting in an unfunded 75 Notes to the Basic Financial Statements June 30, 2016

actuarial accrued liability (UAAL) of $1,114,085 on a covered payroll of $9,828,699. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. For the governmental activities, OPEBs are generally liquidated by the General Fund.

Actuarial Methods and Assumptions – Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events into the future. Examples include assumptions about future employment, mortality, claim cost, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The actuarial cost method used to determine the Annual Required Contribution (ARC) for this plan was the Entry Age Normal (EAN) method. The actuarial assumptions included a discount rate of 3 percent and an assumption that 40 percent of retirees will elect medical coverage at retirement. They also assume medical and vision premiums would increase at 6 percent inflation for 2017, grading down to an annual increase of 5 percent per year, which is consistent with expectations for long-term health care cost inflation. Dental premiums are assumed to be 4 percent in 2017, grading down to an annual increase of 3 percent over three years. The Unfunded Actuarial Accrued Liability is amortized over an open 30-year period on a level dollar basis. An assumed general inflation rate of 2.5 percent is used for all future years. The demographic assumptions, such as mortality rates, retirement rates, and withdrawal rates, are the same as those used by Oregon PERS.

2. PERS Retirement Health Insurance Account (RHIA)

Plan Description – As a member of Oregon Public Employees Retirement System (PERS) the District contributes to the Retirement Health Insurance Account (RHIA) for each of its eligible employees. RHIA is a cost-sharing multiple-employer defined benefit post-employment healthcare plan administered by PERS. RHIA pays a monthly contribution toward the cost of Medicare companion health insurance premiums of eligible retirees. Oregon Revised Statute (ORS) 238.420 established this trust fund. Authority to establish and amend the benefit provisions of RHIA resides with the Oregon Legislature. The plan is closed to new entrants hired on or after August 29, 2003. PERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to PERS, PO Box 23700, Tigard, OR 97281-3700.

Funding Policy – Given that RHIA was created by enabling legislation (ORS 238.420), contribution requirements of the plan members and the participating employers were established and may be amended only by the Oregon Legislature. ORS requires that an amount equal to $60 or the total monthly cost of Medicare companion health insurance premiums coverage, whichever is less, shall be paid from the RHIA established by the employer, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS 238.410. To be eligible to receive this monthly payment toward the premium cost the member must: (1) have eight years or more of qualifying service in PERS at the time of retirement or receive a disability allowance as if the member 76 Notes to the Basic Financial Statements June 30, 2016

had eight years or more of creditable service in PERS, (2) receive both Medicare Parts A and B coverage, and (3) enroll in a PERS-sponsored health plan. A surviving spouse or dependent of a deceased PERS retiree who was eligible to receive the subsidy is eligible to receive the subsidy if he or she (1) is receiving a retirement benefit or allowance from PERS or (2) was insured at the time the member died and the member retired before May 1, 1991.

Participating employers are contractually required to contribute to RHIA at a rate assessed each year by OPERS, and the District currently contributes .53 percent of annual covered Tier 1 and Tier 2 payroll and .45 percent of OPSRP payroll. The OPERS Board of Trustees sets the employer contribution rates based on the annual required contribution (ARC) of the employers, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the plan over a period not to exceed thirty years. The District’s contributions to RHIA for the years ended June 30, 2016, 2015, and 2014 were approximately $265,500, $258,000, and $247,000, respectively, and were included as part of the required PERS contributions.

3. Retiree Health Plan for Local 1660 Members

Plan Description – Tualatin Valley Fire and Rescue (TVF&R) contributes to the IAFF Local 1660 Union Health Trust, a cost-sharing multiple-employer defined benefit post-employment healthcare plan administered by Local 1660. The Health Trust provides medical benefits to active and retired employees of participating fire districts. The authority to establish and amend benefit provisions remains with Local 1660. The Health Trust issues a publicly available financial report that includes financial statements and required supplementary information for the retiree health plan. That report may be obtained by writing to Mr. Rocky L. Hanes, President, IAFF Local 1660, P.O. Box 1904, Lake Oswego, OR 97035.

Funding Policy – Local 1660 sets the contribution requirements for the retirees of the participating employers and they may be amended by the Local 1660 board of trustees. Currently, retires must self-pay for their retiree health coverage, and health coverage is only available until attainment of age 65. Retired members and beneficiaries receiving benefits contribute an average of $1,280 per month for medical coverage and $150 per month for dental coverage to age 65.

Participating fire districts are contractually required to contribute at a monthly per-employee rate negotiated with Local 1660. The negotiated per employee rate reflects the ongoing net claims costs for retired members but is not directly based on the annual required contribution (ARC) of the employers, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the plan over a period not to exceed thirty years.

The District’s contributions to the Union Health Trust for retiree benefits for the plan years ended June 30, 2016, 2015 and 2014 were $840, $840, and $2,165 respectively, which equaled the required contributions as negotiated for each year. 77 Notes to the Basic Financial Statements June 30, 2016

F. Commitments and contingencies

As of June 30, 2016, the District is committed under various accepted bid agreements and contracts for approximately $7.7 million for goods, services and construction of facilities. This includes $7.4 million in construction commitments and seismic work at various stations.

G. Subsequent events

Beginning on July 1, 2016 the District began providing fire protection services to the Washington County Rural Fire Protection District 2 (District 2) service area through a one-year service contract. There is intent by the District 2 Board to request its voters approve annexation into the District effective July 1, 2017.

Similarly, the City of Newberg and Newberg Rural Protection District opted to contract for fire protection and emergency medical services with the District under a two-year contract with the intent to ask Newberg voters to annex into the District at the end of year two of the contract. If the vote is successful, the annexation would be effective July 1, 2018.

On July 29, 2016, the District was notified that it was awarded a federal grant from the Department of Homeland Security. This grant, Staffing for Adequate Fire Emergency Response (SAFER), is in the amount of almost $3.3 million over a 24-month period beginning in January, 2017.

On September 30, 2016, the PERS board approved employer rates for the 2017-19 biennium based on the 2015 Actuarial Valuation presented on July 29, 2016. District rates for Tier 1/Tier 2 employees will increase 6.01% of salary, OPSRP General Service rates will increase 3.31% of salary, and OPSRP Police & Fire rates will increase 3.97% of salary.

H. Restatement of Beginning Net Position and Fund Balance

In accordance with GASB Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, the District is now required to record its pension related amounts in its statement of net position and statement of activities for the Single-Employer Defined Benefit Pension Plan and the LOSAP Plan.

This statement includes the definitions of balances to be included in deferred inflows and deferred outflows of resources. Those definitions include the following:

Total Pension Liability - Previous standards defined pension liabilities in terms of the annual required contribution. GASB Statement 73 defines the total pension liability as the portion of the actuarial present value of projected benefit payments that is attributed to past periods of employee service.

78 Notes to the Basic Financial Statements June 30, 2016

The District’s total pension liability and pension expense have been determined and are now reflected in the District’s statement of net position and statement of activities for fiscal year ended June 30, 2016. This new guidance requires the restatement of the prior year net position. Accordingly, in accordance with the requirements of GASB Statement 73, below are the restated fund balances due to aggregation into the General Fund of funds not meeting the criteria for separate reporting under GASB Statement 73, and restated net position for the Single-Employer Defined Benefit Pension and LOSAP Plans as of June 30, 2015:

General Fiduciary Fund Funds

Fund Balances, as of June 30, 2015, as previously reported$ 54,728,629 $ 322,197 Restatement of fiduciary fund balance 322,197 (322,197) Fund Balances, as of June 30, 2015, as restated $ 55,050,826 $ -

Net position as of June 30, 2015, as previously reported $ 87,252,221 Restatement of prior period net position for the net effect of implementing GASB 73 for the Pension Plan: (1,836,630) Restatement of net position due to assets accumulated for providing pensions that are not administered through a trust for the LOSAP Plan: 322,197 Restatement of prior period net position for the net effect of implementing GASB 73 for the LOSAP Plan: (325,119) Total restatement (1,839,552) Net position as of June 30, 2015, as restated $ 85,412,669

Required Supplementary Information

Required Supplementary Information June 30, 2016

Tualatin Valley Fire and Rescue Schedule of Funding Progress Health Benefit Retiree Program

Actuarial Date Funded Covered AVA (1) EAN AAL (2) (UAAL)(3) UAAL (4) June 30, Ratio Payroll

2016 $0 $ 1,114,085 $ (1,114,085) 0 %$ 9,828,699 11.34 % 2013 0 1,391,312 (1,391,312) 0 9,758,266 14.26 2011 0 1,806,831 (1,806,831) 0 8,460,763 21.36

(1) Actuarial Value of Plan Assets (2) Actuarial Accrued Liability (3) Funded/Unfunded Actuarial Accrued Liability (4) As a Percentage of Covered Payroll

83 Required Supplementary Information June 30, 2016

Tualatin Valley Fire and Rescue Schedule of the District's Proportionate Share of the Net Pension (Asset)/Liability Oregon Public Employee Retirement Pension Plan (OPERS) Last Ten Fiscal Years

District's Plan Fiduciary Net District's District's District's Proportionate Share Fiscal Position as a Proportion of the Proportionate Share Covered of the Net Pension Year Percentage of the Net Pension of the Net Pension Employee (Asset)/Liability as a Ended (1) Total Pension (Asset)/Liability (2) (Asset)/Liability (2) Payroll Percentage of its (Asset)/ Liability (2) Covered Payroll 2007 2008 2009 2010 2011 2012 2013 2014 0.59075779 %$ 30,147,236 $ 40,213,636 74.97 % N/A % 2015 0.59075779 (13,390,794) 44,696,865 (29.96) 103.60 2016 0.59629138 34,235,839 45,800,597 74.75 91.88

(1) Data not available prior to 2014. Ten-year trend information required by GASB Statement 68 will be presented prospectively. (2) Actuarial information provided by the actuary for OPERS.

84 Required Supplementary Information June 30, 2016

Tualatin Valley Fire and Rescue Schedule of the District's Pension Plan Contributions Oregon Public Employee Retirement Pension Plan (OPERS) Last Ten Fiscal Years

Contributions in Contributions as a Contractually Relation to the Contribution Fiscal Year District's Covered Percentage of Required Contractually Deficiency Ended(1) Employee Payroll Covered Employee Contributions (2) Required /(Excess) Payroll Contributions

2007 2008 2009 2010 2011 2012 2013 2014 $ 5,390,098 $ 5,804,879 $ (414,781) $ 44,696,865 12.99 % 2015 6,170,579 6,445,863 (275,284) 45,800,597 14.07 2016 6,481,916 6,555,982 (74,066) 49,353,156 13.28

(1) Data not available prior to 2014. Ten-year trend information required by GASB Statement 68 will be presented prospectively. (2) Actuarial information provided by the actuary for OPERS.

85 Required Supplementary Information June 30, 2016

Tualatin Valley Fire and Rescue Single-Employer Defined Benefit Pension Plan(1) Schedule of Total Pension Liability and Schedule of Changes in Total Pension Liability Last Ten Fiscal Years

Schedule of Total Pension Liability (TPL) TPL as a Fiscal Year percentage of Ended Total Pension Covered covered June 30, Liability Payroll(2) payroll

2007 2008 2009 2010 2011 2012 2013 2014 2015$ 2,339,780 N/A N/A 2016 1,659,564 N/A N/A

Schedule of Changes in Total Pension Liability Fiscal Year TPL TPL Ended Beginning Service Interest Benefit Changes of Experience Ending June 30, Balance Costs on the TPL Payments Assumptions (Gain) or Loss Balance

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$ 2,339,780 $ - $ 69,310 $ (347,682) $ (46,913) $ (354,931) $ 1,659,564

(1) These schedules are to be presented as 10-year schedules under the requirements of GASB Statement 73; however, until a full 10 year trend has been compiled information is presented only for the years for which the required supplementary information is available. (2) The pension plan is a closed plan; therefore there is no related covered payroll.

86 Required Supplementary Information June 30, 2016

Tualatin Valley Fire and Rescue LOSAP Plan(1) Schedule of Total Pension Liability and Schedule of Changes in Total Pension Liability Last Ten Fiscal Years

Schedule of Total Pension Liability (TPL) TPL as a Fiscal Year Total percentage of Ended Pension Covered covered June 30, Liability Payroll(2) payroll

2007 2008 2009 2010 2011 2012 2013 2014 2015$ 136,278 N/A N/A 2016 180,853 N/A N/A

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016$ 136,278 $ - $ 4,212 $ (9,300) $ 40,688 $ 8,975 $ 180,853

(2) The pension plan is a closed plan; therefore there is no related covered payroll.

87 Notes to the Required Supplementary Information

1. Oregon Public Employee Retirement Pension Plan (OPERS)

Changes in Plan Provisions

The Oregon Supreme Court decision in Moro v. State of Oregon, issued on April 30, 2015, reversed a significant portion of the reductions the 2013 Oregon Legislature made to future system Cost of Living Adjustments (COLA) through Senate Bills 822 and 861 that were included in the 2013 actuarial valuation setting employer rates for July 1, 2015 through June 30, 2017. This reversal increased the benefits projected to be paid and consequently increased plan liabilities.

Changes in Assumption

Below is a summary of key changes implemented with the December 31, 2013 actuarial valuation which was used in the pension calculations and amounts reported for fiscal year ended June 30, 2016. Additional detail and a comprehensive list of changes in methods and assumptions from the December 31, 2012 actuarial valuation can be found at: 2013 PERS Actuarial Valuation.

Changes in Actuarial Methods and Allocation Procedures

There were no changes to actuarial methods and procedures in the 2013 actuarial valuation.

Changes in Economic Assumptions

There were no changes to economic assumptions in the 2013 actuarial valuation.

Changes in Demographic Assumptions

There were no changes to demographic assumptions in the 2013 actuarial valuation.

2. Single-Employer Defined Benefit Pension Plan

There are no assets accumulated in a trust that meets the criteria of GASB 73 to pay related benefits.

Valuation date: June 30, 2016 Actuarial determined contribution method: Pay-as-you-go Inflation (post retirement COLA): 2.0% Discount rate: 3.2% Investment rate of return (net of expenses): N/A plan is unfunded Mortality assumptions: RP-2014 Blue Collar generation tables projected forward using Scale MP 2015

88 Notes to the Required Supplementary Information

3. Length of Service Award Plan (LOSAP)

There are no assets accumulated in a trust that meets the criteria of GASB 73 to pay related benefits.

Valuation date: June 30, 2016 Actuarial determined contribution method: Pay-as-you-go Actuarial cost method Entry age normal Amortization method Level percentage of pay, closed Amortization period 0 Inflation (post retirement COLA): 0.0% Discount rate: 3.2% Investment rate of return (net of expenses): N/A as plan is unfunded Mortality assumptions: RP-2014 Blue Collar generation tables projected forward using Scale MP 2015

Other Supplementary Information

Tualatin Valley Fire and Rescue Property and Building Fund Schedule of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Budgeted Amounts Final Budget Amounts Revenues Interest $ 45,000 $ 60,198 $ 15,198 Miscellaneous 2,266 2,266 45,000 62,464 17,464

Expenditures Capital outlay 5,494,000 2,572,610 2,921,390 Operating contingency 1,964,600 1,964,600 Total expenditures 7,458,600 2,572,610 4,885,990 Excess (deficiency) of revenues over (under) expenditures (7,413,600) (2,510,146) 4,903,454

Other Financing Sources Transfers in 4,101,085 4,101,085 Proceeds on sale of surplus property 607,315 607,315 Total other financing sources 4,101,085 4,708,400 607,315

Net change in fund balance (3,312,515) 2,198,254 5,510,769

Fund balance - June 30, 2015 10,436,546 10,284,207 (152,339) Fund balance - June 30, 2016 $ 7,124,031 $ 12,482,461 $ 5,358,430

93 Nonmajor Governmental Funds

These funds account for the accumulation of resources for particular activities or functions from designated sources. Funds included in this category are:

Special Revenue Fund: Grants Fund - accounts for the resources used for the acquisition of items approved through awarded grants. Debt Service Fund: Debt Service Fund - accounts for payment of general obligation bond principal and interest. The principal source of revenue is property taxes. Capital Projects Fund: Capital Projects Fund - accounts for site acquisitions and construction costs for new and existing facilities, as well as the purchase of public safety emergency response apparatus. The principal resources are proceeds from debt issuance. Other Supplementary Information

Tualatin Valley Fire and Rescue Combining Balance Sheet Nonmajor Governmental Funds June 30, 2016

Fund Type Special Revenue Debt Service Capital Projects Total Nonmajor Grants Debt Capital Projects Governmental Fund Service Fund Fund Funds Assets Cash and cash equivalents $ $ 1,416,380 $ $ 1,416,380 Receivables (net of allowances): Property taxes receivable 302,618 302,618 Accounts receivable 142,895 4,000 146,895 Restricted assets: Cash and cash equivalents 4,708,054 4,708,054 Total assets $ 142,895 $ 1,718,998 $ 4,712,054 $ 6,573,947

Liabilities Accounts payable $ 69,349 $ $ 252,256 $ 321,605 Due to other funds 73,546 73,546 Total liabilities 142,895 252,256 395,151

Deferred Inflows of Resources Unavailable revenue - property taxes 286,549 286,549

Fund balances Restricted 1,432,449 4,459,798 5,892,247 Total liabilities, deferred inflows of resources, and fund balances $ 142,895 $ 1,718,998 $ 4,712,054 $ 6,573,947

95 Other Supplementary Information

Tualatin Valley Fire and Rescue Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2016

Fund Type Special Revenue Debt Service Capital Projects Total Nonmajor Grants Debt Capital Projects Governmental Fund Service Fund Fund Funds Revenues Taxes $ $ 6,405,403 $ $ 6,405,403 Interest 12,700 30,572 43,272 Grants and donations 197,236 197,236 Miscellaneous 5,230 5,230 Total revenues 197,236 6,418,103 35,802 6,651,141

Expenditures Current: Public safety: Debt service: Principal 4,020,000 4,020,000 Interest 2,321,111 2,321,111 Capital outlay 288,195 4,245,432 4,533,627 Total expenditures 288,195 6,341,111 4,245,432 10,874,738

Excess (deficiency) of revenues over (under) expenditures (90,959) 76,992 (4,209,630) (4,223,597)

Fund balances - June 30, 2015 90,959 1,355,457 8,669,428 10,115,844 Fund balances - June 30, 2016 $ $ 1,432,449 $ 4,459,798 $ 5,892,247

96 Other Supplementary Information

Tualatin Valley Fire and Rescue Grants Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Budgeted Amounts Amounts Final Budget

Revenues Grants and contributions $ 2,503,227 $ 197,236 $ (2,305,991)

Expenditures Current: Public safety: Personnel services 26,227 26,227 Materials and services 19,000 19,000 Capital outlay 2,458,000 288,195 2,169,805 Total expenditures 2,503,227 288,195 2,215,032

Excess (deficiency) of revenues over (under) expenditures (90,959) (90,959)

Fund balance - June 30, 2015 90,959 90,959 Fund balance - June 30, 2016 $ $ $

97 Other Supplementary Information

Tualatin Valley Fire and Rescue Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Final Budgeted Amounts Amounts Budget

Revenues Taxes $ 6,267,038 $ 6,404,310 $ 137,272 Taxes in lieu 350 1,093 743 Interest 14,525 12,700 (1,825) Total revenues 6,281,913 6,418,103 136,190

Expenditures Debt service: Principal 4,020,000 4,020,000 Interest 2,321,112 2,321,111 1 Total expenditures 6,341,112 6,341,111 1

Excess (deficiency) of revenues over (under) expenditures and net change in fund balance (59,199) 76,992 136,191

Fund balance - June 30, 2015 1,106,192 1,355,457 249,265 Fund balance - June 30, 2016 $ 1,046,993 $ 1,432,449 $ 385,456

98 Other Supplementary Information

Tualatin Valley Fire and Rescue Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Budgeted Amounts Amounts Final Budget

Revenues Interest $ 15,000 $ 30,572 $ 15,572 Miscellaneous 5,230 5,230 Total revenues 15,000 35,802 20,802

Expenditures Capital outlay 12,561,200 4,245,432 8,315,768 Operating contingency 389,100 389,100 Total expenditures 12,950,300 4,245,432 8,704,868

Excess (deficiency) of revenues over (under) expenditures (12,935,300) (4,209,630) 8,725,670

Fund balance - June 30, 2015 12,935,300 8,669,428 (4,265,872) Fund balance - June 30, 2016 $ $ 4,459,798 $ 4,459,798

99 Other Supplementary Information

Tualatin Valley Fire and Rescue Insurance Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Final Budgeted Amounts Amounts Budget

Revenues Interest $ 3,250 $ 3,770 $ 520 Insurance refunds 63,412 63,412 Total revenues 3,250 67,182 63,932

Expenditures Materials and services 648,428 26,877 621,551

Excess (deficiency) of revenues over (under) expenditures and net change in fund balance (645,178) 40,305 685,483

Fund balance - June 30, 2015 645,178 613,121 (32,057) Fund balance - June 30, 2016 $ $ 653,426 $ 653,426

100 General Fund

These funds account for the accumulation of resources for particular activities or functions from designated sources. Funds included in this category combine into the General Fund in the combined basic financial statements and are listed below.

General Fund: Accounts for the basic financial operations of the District.

Apparatus Fund: Accounts for the accumulation of resources for emergency service apparatus and vehicles.

Capital Improvements Fund: Accounts for the resources provided for firefighting, emergency medical service, office and fire technology and other equipment used in operations.

Emergency Management Fund: Accounts for resources provided for and used in emergency preparedness, through a regional partnership.

Pension Fund: Accounts for resources for the District’s single-employer defined benefit pension plan for employees who retired prior to July 16, 1981. The principal revenue source is employer contributions.

Volunteer LOSAP Fund: Accounts for the accumulated resources for the District’s closed Length of Service Award Plan for volunteer firefighters. The principal sources of revenue are earnings on investments. Other Supplementary Information

Tualatin Valley Fire and Rescue Combining Balance Sheet General Fund June 30, 2016

Capital Emergency Volunteer Total General Apparatus Pension Improvements Management LOSAP General Fund Fund Fund Fund Fund Fund Fund Assets Cash and cash equivalents $ 50,868,981 $ 5,136,615 $ 8,610,010 $ $ $ 45,846 $ 64,661,452 Investments 277,578 277,578 Receivables (net of allowances): Property taxes receivable 4,264,685 4,264,685 Accounts receivable 295,836 138,785 434,621 Due from other funds 73,546 73,546 Supplies inventory 318,368 318,368 Total assets $ 55,821,416 $ 5,136,615 $ 8,748,795 $ $ $ 323,424 $ 70,030,250

Liabilities Accounts payable $ 926,104 $ 2,849 $ 183,366 $ $ $ $ 1,112,319 Accrued salaries and benefits payable 6,658,402 6,658,402 Total liabilities 7,584,506 2,849 183,366 7,770,721

Deferred Inflows of Resources Unavailable revenue - property taxes 4,027,374 4,027,374 Unavailable revenue - transport services 89,797 89,797 Unavailable revenue - HazMat revenue 72,911 72,911 Unavailable revenue - GEMT revenue 138,785 138,785 Total deferred inflows of resources 4,190,082 138,785 4,328,867

Fund Balances Nonspendable 318,368 318,368 Committed 5,133,766 8,426,644 323,424 13,883,834 Unassigned 43,728,460 43,728,460 Total fund balances 44,046,828 5,133,766 8,426,644 323,424 57,930,662

Total liabilities, deferred inflows of resources, and fund balances $ 55,821,416 $ 5,136,615 $ 8,748,795 $ $ $ 323,424 $ 70,030,250

102 Other Supplementary Information

Tualatin Valley Fire and Rescue General Fund Combining Schedule of Revenues, Expenditures, Other Financing Sources (Uses), and Changes in Fund Balances For the Year Ended June 30, 2016

Capital Emergency Volunteer Total General Apparatus Pension Improvements Management LOSAP Eliminations General Fund Fund Fund Fund Fund Fund Fund Revenues Program revenues: Charges for services $ 1,945,892 $ $ $ 233,508 $ $ $ $ 2,179,400 Program fees 7,000 493,393 500,393 Grants and contributions 168,720 168,720 General revenues: Taxes 93,204,211 93,204,211 Interest 159,346 22,478 50,291 10,527 242,642 Insurance dividends and refunds 380,216 380,216 Miscellaneous 94,415 94,415 Total revenues 95,959,800 22,478 543,684 233,508 10,527 96,769,997

Expenditures Current: Public safety: Personnel services 76,477,907 252,972 347,682 9,300 77,087,861 Materials and services 10,597,545 28,249 10,625,794 Capital outlay 471,639 1,620,023 2,091,662 Total expenditures 87,075,452 471,639 1,620,023 281,221 347,682 9,300 89,805,317 Excess (deficiency) of revenues over (under) expenditures 8,884,348 (449,161) (1,076,339) (47,713) (347,682) 1,227 6,964,680

Other Financing Sources (Uses) Transfers in 1,750,000 1,000,000 28,249 347,682 (3,125,931) Transfers out (7,227,016) 3,125,931 (4,101,085) Proceeds on sale of surplus property 6,711 9,530 16,241

Total other financing sources (uses) (7,220,305) 1,750,000 1,009,530 28,249 347,682 (4,084,844) Net change in fund balances 1,664,043 1,300,839 (66,809) (19,464) 1,227 2,879,836 Fund balances - June 30, 2015 42,382,785 3,832,927 8,493,453 19,464 54,728,629 Restatement of beginning of year 322,197 322,197 Fund balances - June 30, 2015, as restated 42,382,785 3,832,927 8,493,453 19,464 322,197 55,050,826 Fund balances - June 30, 2016 $ 44,046,828 $ 5,133,766 $ 8,426,644 $ $ $ 323,424 $ $ 57,930,662

103 Other Supplementary Information

Tualatin Valley Fire and Rescue Apparatus Fund Schedule of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Actual Variance with Final Budgeted Amounts Final Budget Amounts Revenues Interest $ 17,500 $ 22,478 $ 4,978

Expenditures Capital outlay 1,470,600 471,639 998,961 Operating contingency 400,000 400,000 Total expenditures 1,870,600 471,639 1,398,961

Excess (deficiency) of revenues over (under) expenditures (1,853,100) (449,161) 1,403,939

Other Financing Sources Transfers in 1,750,000 1,750,000

Net change in fund balance (103,100) 1,300,839 1,403,939

Fund balance - June 30, 2015 3,783,430 3,832,927 49,497 Fund balance - June 30, 2016 $ 3,680,330 $ 5,133,766 $ 1,453,436

104 Other Supplementary Information

Tualatin Valley Fire and Rescue Capital Improvements Fund Schedule of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance - Budget and For the Year Ended June 30, 2016

Original and Final Actual Variance with Final Budgeted Amounts Amounts Budget

Revenues Interest $ 36,000 $ 50,291 $ 14,291 Program Fees 493,393 493,393 Total revenue 36,000 543,684 507,684

Expenditures Capital outlay 2,203,873 1,620,023 583,850 Operating contingency 1,737,600 1,737,600 Total expenditures 3,941,473 1,620,023 2,321,450

Excess (deficiency) of revenues over (under) expenditures (3,905,473) (1,076,339) 2,829,134

Other Financing Sources Transfers in 1,725,000 1,000,000 (725,000) Proceeds on sale of surplus property 3,500 9,530 6,030 Total other financing sources 1,728,500 1,009,530 (718,970)

Net change in fund balance (2,176,973) (66,809) 2,110,164

Fund balance - June 30, 2015 8,228,010 8,493,453 265,443 Fund balance - June 30, 2016 $ 6,051,037 $ 8,426,644 $ 2,375,607

105 Other Supplementary Information

Tualatin Valley Fire and Rescue Emergency Management Fund Schedule of Revenues, Expenditures, Other Financing Sources, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original Budgeted Final Budgeted Actual Variance with Final Amounts Amounts Amounts Budget

Revenues Charges for services $ 233,508 $ 233,508 $ 233,508 $

Expenditures Current: Public safety: Personnel services 211,536 254,446 252,972 1,474 Materials and services 30,000 28,249 28,249 Operating contingency 41,159 Total expenditures 282,695 282,695 281,221 1,474

Excess (deficiency) of revenues over (under) expenditures (49,187) (49,187) (47,713) 1,474

Other Financing Sources Transfers in 30,000 30,000 28,249 (1,751)

Net change in fund balance (19,187) (19,187) (19,464) (277)

Fund balance - June 30, 2015 19,187 19,187 19,464 277 Fund balance - June 30, 2016 $$$$

106 Other Supplementary Information

Tualatin Valley Fire and Rescue Pension Fund Schedule of Expenditures, Other Financing Sources, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Actual Variance with Final Budgeted Amounts Final Budget Amounts Expenditures Personnel services $ 351,085 $ 347,682 $ 3,403 Excess (deficiency) of revenues over (under) expenditures and net change in fund balance (351,085) (347,682) 3,403 Other Financing Sources Transfers in (351,085) (347,682) 3,403 Net change in fund balance Total net position, June 30, 2015 Total net position, June 30, 2016 $ $ $

107 Other Supplementary Information

Tualatin Valley Fire and Rescue Volunteer LOSAP Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual For the Year Ended June 30, 2016

Original and Final Actual Variance with Budgeted Amounts Final Budget Amounts Revenues Investment earnings $ 12,700 $ 10,527 $ (2,173)

Expenditures Personnel services 326,537 9,300 317,237

Excess (deficiency) of revenues over (under) expenditures and net change in fund balance (313,837) 1,227 315,064

Fund balance - June 30, 2015 313,837 322,197 8,360 Fund balance - June 30, 2016 $ $ 323,424 $ 323,424

108 Other Supplementary Information

Tualatin Valley Fire and Rescue Schedule of Property Tax Transactions and Outstanding Balances for the fiscal year ended June 30, 2016 Taxes Add Levy as Add (Deduct) (Deduct) Add Interest (Deduct) Taxes Uncollected Uncollected Extended by Discounts Cancellations and Received Collections June 30, 2016 June 30, 2015 Assessor Allowed Adjustments

2015-16 $ $ 102,942,662 $ (2,742,031) $ 25,111 $ (111,659) $ (98,293,871) $ 1,820,212

2014-15 1,589,667 240 46,940 (30,765) (758,801) 847,281 2013-14 831,502 31 37,139 (6,957) (242,689) 619,026 2012-13 598,774 27 53,425 (6,150) (236,901) 409,175 2011-12 372,435 5 24,662 (1,994) (95,571) 299,537 2010-11 284,586 5 6,704 (624) (19,867) 270,804 2009 and prior 315,501 10,994 (990) (24,237) 301,268

Total prior 3,992,465 308 179,864 (47,480) (1,378,066) 2,747,091

Total $ 3,992,465 $ 102,942,662 $ (2,741,723) $ 204,975 $ (159,139) $ (99,671,937) $ 4,567,303

General Fund Debt Service Fund Total Reconciliation to tax revenues on combined financial statements: Property tax collections above $ 93,262,077 $ 6,409,860 $ 99,671,937 Property taxes susceptible to accrual at June 30, 2016 237,306 16,074 253,380 Property taxes susceptible to accrual at June 30, 2015 (312,824) (21,869) (334,693) Taxes in lieu of property taxes 17,652 1,338 18,990

Tax revenues $ 93,204,211 $ 6,405,403 $ 99,609,614

Property Taxes Taxes in Lieu of Taxes Uncollected Total Current Levy Prior Years Property Taxes June 30, 2016 DISTRIBUTED AS FOLLOWS: General Fund $ 92,161,494 $ 1,025,065 $ 17,652 $ 93,204,211 $ 4,264,685 Debt Service Fund 6,331,236 72,829 1,338 6,405,403 302,618

Total $ 98,492,730 $ 1,097,894 $ 18,990 $ 99,609,614 $ 4,567,303

109

Statistical Section

This part of the District’s Comprehensive Annual Financial report presents detailed information as a context for understanding what the information in the basic financial statements, note disclosures, and required supplementary information says about the District’s overall financial health.

Contents Page

Financial Trends: 112

These schedules contain trend information to help the reader understand how the District’s financial performance and well-being have changed over time.

Revenue Capacity: 116

These schedules contain information to help the reader assess the District’s most significant local revenue source, property tax.

Debt Capacity: 120

These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future.

Demographic and Economic Information:123

These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place.

Operating Information: 125

These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant years. Statistical Section

Tualatin Valley Fire and Rescue Net Position by Component Last Ten Fiscal Years (accrual basis of accounting)

Fiscal Year

2007 2008 2009 2010 2011 2012 2013 2014 2015 (restated) 2016

Governmental Activities: Net investment in capital assets $ 25,440,690 $ 26,022,160 $ 26,836,071 $ 27,397,380 $ 30,510,984 $ 30,618,980 $ 30,971,036 $ 31,417,412 $ 30,872,433 $ $33,700,603 Restricted 1,273,796 1,321,652 544,419 1,298,395 1,312,282 1,676,044 1,626,185 1,541,173 1,355,457 1,432,449 Unrestricted 39,349,635 46,748,396 49,339,432 51,160,608 51,301,589 54,491,788 57,945,008 36,267,390 53,184,779 31,728,130

Total primary government net position $ 66,064,121 $ 74,092,208 $ 76,719,922 $ 79,856,383 $ 83,124,855 $ 86,786,812 $ 90,542,229 $ 69,225,975 $ 85,412,669 $ 66,861,182 112 Statistical Section

Tualatin Valley Fire and Rescue Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting)

Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Program Revenues Governmental activities: Charges for services (1) $ 852,678 $ 916,859 $ 758,476 $ 587,305 $ 738,171 $ 1,322,635 $ 1,383,399 $ 1,939,665 $ 2,183,509 $ 2,823,408 Operating grants and contributions 583,497 277,094 134,753 241,384 278,408 1,086,330 1,161,457 168,769 699,265 384,686 Capital grants and contributions 68,535 432,805 43,950 48,450

Total primary government program revenues 1,436,175 1,262,488 1,326,034 872,639 1,016,579 2,457,415 2,544,856 2,108,434 2,882,774 3,208,094 General Revenues Property taxes 61,211,437 66,146,305 68,254,733 72,601,267 74,905,936 79,303,750 79,853,105 82,677,581 85,582,417 100,265,764 Investment earnings 2,504,630 2,755,890 1,006,351 406,556 299,393 343,772 336,512 276,632 276,125 349,882 Insurance dividends and refunds 273,161 646,230 236,921 420,993 655,797 188,074 527,435 882,340 551,766 443,628 Miscellaneous 81,298 52,372 116,317 270,443 113,625 224,532 400,202 91,807 353,105 114,426 Total primary government general revenue 64,070,526 69,600,797 69,614,322 73,699,259 75,974,751 80,060,128 81,117,254 83,928,360 86,763,413 101,173,700 Expenses

113 Governmental activities: Public safety - fire protection 58,872,384 61,874,697 67,371,019 69,649,810 71,961,409 76,438,386 78,142,770 80,967,876 69,798,428 121,399,775 Interest on long-term debt 359,307 921,830 950,457 1,785,629 1,761,449 2,417,200 2,315,227 2,211,384 1,916,016 2,037,260 Loss on sale of capital assets 38,671 Total primary government expenses 59,231,691 62,835,198 68,321,476 71,435,439 73,722,858 78,855,586 80,457,997 83,179,260 71,714,444 123,437,035 Total primary government net expense 6,275,010 8,028,087 2,618,880 3,136,459 3,268,472 3,661,957 3,204,113 2,857,534 17,931,743 (19,055,241) Other Changes in Net Position Gain on sale of capital assets 20,567 8,834 551,304 583,350 94,503 503,754 Change in Net Position Total primary government $ 6,295,577 $ 8,028,087 $ 2,627,714 $ 3,136,459 $ 3,268,472 $ 3,661,957 $ 3,755,417 $ 3,440,884 $ 18,026,246 $ (18,551,487)

(1) Beginning in 2012, the District expanded contracting for fleet services with several local fire agencies. Statistical Section

Tualatin Valley Fire and Rescue Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year

2007 2008 2009 2010 2011 2012 2013 2014 2015 (restated) 2016

General Fund Reserved $ 236,315 $ 272,292 $ 302,466 $$$$$$$ Unreserved 30,458,483 34,934,854 36,809,276 Non-spendable 281,282 283,918 275,878 323,981 305,764 341,601 318,368 Committed 8,056,103 8,004,148 10,846,664 12,193,728 12,155,534 12,345,844 13,883,834 Unassigned 37,979,877 40,080,565 39,379,808 40,637,548 42,904,607 42,363,381 43,728,460 Total general fund $ 30,694,798 $ 35,207,146 $ 37,111,742 $ 46,317,262 $ 48,368,631 $ 50,502,350 $ 53,155,257 $ 55,365,905 $ 55,050,826 $ 57,930,662 All Other Governmental Funds Reserved $ 17,868,637 $ 11,340,917 $ 22,908,804 $$$$$$$ Unreserved, reported in Special revenue funds 4,451,489 6,706,623 7,343,692 Capital projects fund 5,848,944 5,982,171 5,959,548 Non-spendable 18,670 18,670 Restricted 12,151,239 27,722,449 22,548,912 15,967,813 9,682,369 10,115,844 5,892,247 Assigned 6,932,305 6,202,039 6,996,573 8,260,339 9,669,124 10,284,207 12,482,461 Total all other governmental funds $ 28,169,070 $ 24,029,711 $ 36,212,044 $ 19,083,544 $ 33,943,158 $ 29,564,155 $ 24,228,152 $ 19,351,493 $ 20,400,051 $ 18,374,708

(2) GASB 54 was implemented in fiscal year 2011. Fund balances were restated for fiscal year 2010 forward. 114 Statistical Section

Tualatin Valley Fire and Rescue Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenues Taxes $ 61,007,196 $ 65,684,260 $ 67,581,260 $ 72,431,406 $ 75,053,455 $ 78,390,053 $ 80,009,514 $ 82,532,795 $ 85,708,409 $ 99,609,614 Interest 2,469,936 2,720,574 992,093 402,132 296,086 340,389 332,825 273,181 272,757 346,112 Charges for services and fees 848,145 895,648 728,156 583,312 763,085 1,308,643 1,406,782 1,938,937 2,026,509 2,679,793 Insurance dividends and refunds 239,646 641,668 230,529 415,446 655,797 179,479 526,133 881,244 520,569 380,216 Grants and contributions 230,399 190,593 81,762 225,052 156,951 1,072,899 864,502 167,099 699,265 365,956 Miscellaneous 73,987 47,083 89,484 104,552 93,638 222,553 385,023 75,499 335,836 101,911 Total revenues 64,869,309 70,179,826 69,703,284 74,161,900 77,019,012 81,514,016 83,524,779 85,868,755 89,563,345 103,483,602 Expenditures Current: Public safety 55,487,788 58,494,214 61,873,639 65,697,931 67,630,668 70,506,595 73,220,646 75,695,129 81,796,957 87,713,655 Capital outlay 3,026,118 8,163,030 19,875,402 13,007,737 12,993,142 7,609,985 8,099,083 7,701,768 7,657,091 9,197,899 Debt service: Principal 1,280,000 2,375,000 2,475,000 2,115,000 2,520,000 3,395,000 3,420,000 3,450,000 3,485,000 4,020,000

115 115 Interest 170,200 931,892 841,575 1,798,179 1,738,673 2,520,412 2,419,635 2,315,835 2,005,285 2,321,111 Total expenditures 59,964,106 69,964,136 85,065,616 82,618,847 84,882,483 84,031,992 87,159,364 89,162,732 94,944,333 103,252,665 over (under) expenditures 4,905,203 215,690 (15,362,332) (8,456,947) (7,863,471) (2,517,976) (3,634,585) (3,293,977) (5,380,988) 230,937 Other Financing Sources (Uses) Proceeds from debt issuance 20,000,000 29,000,000 23,500,000 14,905,000 Premium from debt issuance 362,404 1,249,264 1,636,038 Proceeds on sale of surplus property 161,672 157,299 86,857 533,967 25,190 272,692 951,489 627,966 156,522 623,556 Payment to escrow (10,905,290) Transfers in 2,604,257 2,704,125 3,205,453 4,641,755 3,185,885 1,200,000 500,000 1,149,113 1,153,922 4,101,085 Transfers out (2,664,257) (2,704,125) (3,205,453) (4,641,755) (3,185,885) (1,200,000) (500,000) (1,149,113) (1,153,922) (4,101,085) Total other financing sources (uses) 20,101,672 157,299 29,449,261 533,967 24,774,454 272,692 951,489 627,966 5,792,270 623,556 Net change in fund balances $ 25,006,875 $ 372,989 $ 14,086,929 $ (7,922,980) $ 16,910,983 $ (2,245,284) $ (2,683,096) $ (2,666,011) $ 411,282 $ 854,493 Debt service as a percentage of noncapital expenditures 2.53% 5.29% 5.09% 5.62% 5.92% 7.74% 7.39% 7.08% 6.29% 6.74% Statistical Section

Tualatin Valley Fire and Rescue Assessed and Market Value of Taxable Property Last Ten Fiscal Years

Total Assessed to Total Real Property* Personal Property Mobile Home Property Utility Property Total Total Market District Tax Fiscal Year Assessed Value Market Value Assessed Value Market Value Assessed Value Market Value Assessed Value Market Value Assessed Value Market Value Value Rate

2016 $ 46,770,392,287 $ 77,733,939,780 $ 1,443,660,193 $ 1,579,174,513 $ 49,002,673 $ 64,618,830 $ 1,291,141,760 $ 1,463,290,805 $ 49,554,196,913 $ 80,841,023,928 61.30 %$2.11

2015 44,577,290,966 62,081,929,253 1,339,967,930 1,376,810,979 40,555,755 52,654,310 1,288,074,094 1,380,966,990 47,245,888,745 64,892,361,532 72.81 1.89

2014 42,716,027,358 55,819,620,463 1,289,133,350 1,330,709,755 37,054,528 48,696,174 1,198,999,750 1,316,814,786 45,241,214,986 58,515,841,178 77.31 1.91

2013 41,153,875,254 52,242,895,589 1,285,083,148 1,300,882,754 37,473,333 49,143,750 1,186,894,151 1,294,538,870 43,663,325,886 54,887,460,963 79.55 1.91

2012 40,033,905,433 53,094,082,885 1,242,926,832 1,254,219,436 41,878,148 54,190,090 1,205,943,990 1,245,624,000 42,524,654,403 55,648,116,411 76.42 1.93

2011 38,896,351,775 55,859,041,477 1,239,530,152 1,251,419,908 45,889,216 59,433,410 1,209,023,665 1,214,510,966 41,390,794,808 58,384,405,761 70.89 1.88

2010 37,743,268,296 60,010,991,508 1,291,172,910 1,302,244,097 54,963,237 62,488,050 1,193,592,740 1,194,549,230 40,282,997,183 62,570,272,885 64.38 1.90

2009 36,352,459,360 64,462,001,645 1,365,624,057 1,375,655,902 51,351,504 57,431,190 1,063,723,000 1,067,347,629 38,833,157,921 66,962,436,366 57.99 1.84

2008 34,641,993,583 62,615,731,611 1,280,664,739 1,292,853,444 54,128,069 59,845,740 1,020,096,190 1,073,993,240 36,996,882,581 65,042,424,035 56.88 1.87

116 2007 32,870,751,582 55,887,171,646 1,209,328,395 1,215,420,705 66,468,302 71,311,755 969,696,390 977,289,297 35,116,244,669 58,151,193,403 60.39 1.82

Information from Washington, Clackamas, and Multnomah County Assessment and Tax Roll Summaries.

* Includes Multnomah County Assessed Valuation in its entirety.

Note: In May 1997, Oregon voters approved Measure 50 that revised the property tax system state-wide effective July 1, 1997. For property tax purposes, the measure changed a property's assessed valuation from real market value to a value for tax purposes. In addition, the maximum assessed value of a property was limited to a maximum of 3% growth per year. Accordingly, since that date, there is a difference between market value and assessed value. Statistical Section

Tualatin Valley Fire and Rescue Property Tax Rates - Direct and Overlapping Governments (per $1,000 of Assessed Value) Last Ten Fiscal Years For Fiscal Years Ended June 30 Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Range of property tax rates for direct and overlapping governments per $1,000 of $11.21 $ 12.37 $ 12.11 $ 12.61 $ 12.51 $ 12.59 $ 12.55 $ 13.23 $ 13.10 $ 12.98 assessed value to to to to to to to to to to $20.11 $ 20.55 $ 20.96 $ 21.97 $ 19.10 $ 19.59 $ 19.72 $ 21.06 $ 20.99 $ 20.81

Tualatin Valley Fire and Rescue $ 1.82 $ 1.87 $ 1.84 $ 1.90 $ 1.88 $ 1.93 $ 1.91 $ 1.91 $ 1.89 $ 2.11 Washington County 2.45 3.03 2.98 2.98 2.98 2.97 2.97 2.97 2.84 2.84 Clackamas County 2.87 2.40 2.85 2.86 2.98 3.22 2.86 2.96 2.95 2.95 City of Beaverton 4.21 4.18 4.12 4.20 4.20 4.83 4.24 4.37 4.38 4.33 City of Durham 1.83 1.81 1.82 1.83 1.81 1.82 1.84 1.85 1.83 1.69 City of King City 1.94 1.94 1.94 1.94 2.08 2.08 2.08 2.08 2.08 2.08 City of Sherwood 3.78 3.72 3.54 3.56 4.00 3.96 3.48 3.43 3.46 3.62 City of Tigard 2.73 2.74 2.68 2.72 2.72 3.80 2.94 2.93 2.92 2.92 City of Tualatin 2.13 2.26 2.15 2.18 2.53 2.56 2.56 2.55 2.53 2.52

117 City of West Linn 2.88 2.12 2.12 2.45 2.45 2.42 2.56 2.56 2.55 2.54 City of Wilsonville 2.32 2.25 2.20 2.17 2.69 2.69 2.12 2.14 2.13 2.10 Wilsonville Urban Renewal 0.69 0.79 0.86 2.42 2.23 2.98 3.41 3.23 3.37 3.31 Port of Portland 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.07 Tualatin Hills Parks & Recreation District 1.44 1.43 1.43 1.73 1.74 1.74 1.73 1.74 1.72 1.62 Enhanced Sheriff Patrol 1.11 1.09 1.31 1.28 1.27 1.25 1.23 1.32 1.32 1.32 Portland Community College 0.49 0.51 0.50 0.63 0.64 0.60 0.67 0.73 0.72 0.59 Clackamas Community College 2.40 0.55 0.55 0.74 0.72 0.70 0.70 0.71 0.70 0.74 Clackamas ESD 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 0.37 Multnomah ESD 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 N.W. Regional ESD 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 Hillsboro School District 6.52 2.00 7.10 7.46 7.58 7.47 7.50 7.40 7.42 7.22 Portland School District 5.28 6.53 6.53 6.53 6.53 7.27 7.27 8.36 8.35 8.36 Beaverton School District 6.29 6.74 6.56 6.88 6.78 6.86 6.77 8.05 8.04 7.96 West Linn / Wilsonville School District 9.31 7.57 9.05 9.18 9.34 9.36 9.38 9.32 9.25 9.24 Newberg School District 8.27 8.55 8.30 8.24 8.33 7.46 7.44 7.42 7.51 7.92 Tigard-Tualatin School District 6.90 6.86 7.71 7.68 7.37 7.85 7.41 7.41 7.46 7.46 Lake Oswego School District 7.04 6.85 7.15 7.16 6.90 6.85 6.85 6.84 6.81 6.79 Canby School District 4.58 4.58 6.63 6.91 6.88 4.58 6.74 6.90 6.87 6.82 Sherwood School District 7.07 8.92 8.80 8.92 8.88 9.84 8.82 8.82 8.82 8.53

Note: Tualatin Valley Fire and Rescue has approximately thirty overlapping jurisdictions with boundaries that do not coincide with the District. Therefore, tax rates within the District have a wide variation depending upon code area; i.e., which of the above jurisdictions overlap with the District within a specific area. The Washington County figure includes county-wide levies for Co-op Library, Road Improvements, and 9-1-1 Emergency.

Source: Washington and Clackamas County Assessment and Tax Roll Summaries Statistical Section

Tualatin Valley Fire and Rescue Principal Taxpayers Current Year and Nine Years Ago All Washington County Property Year Year 2016 2007

Percentage of Total Percentage of Total Taxable Assessed Taxable Assessed Taxable Assessed Taxable Assessed Value (2) Value (2) Valuation Valuation Private enterprises: Rank (1) Rank (1)

Intel Corporation 1 $ 2,218,043,675 4.48 % 1 $ 1,043,164,799 2.97 % Nike, Inc. 2 661,926,149 1.34 3 333,402,234 0.95 Pacific Realty Associates 4 339,535,573 0.69 6 245,937,009 0.70 Comcast Corporation 6 314,888,200 0.64 Frontier Communications 7 190,166,000 0.38

118 Verizon Communications 8 177,142,000 0.36 2 352,920,852 1.01 Genentech, Inc. 9 165,225,810 0.33 PPR Washington Square, LLC 10 142,625,935 0.29 Maxim Integrated Products, Inc. 7 152,395,039 0.43 Tektronix, Inc. 8 135,416,474 0.39 ERP Operating, LP 9 108,787,770 0.31 Novellus Systems, Inc. 10 105,490,595 0.30

Public utilities:

Portland General Electric 3 478,753,431 0.97 4 317,363,394 0.90 Northwest Natural Gas Co 5 319,249,270 0.64 5 262,931,030 0.75

All other taxpayers 44,546,640,870 89.88 32,058,435,473 91.29 Total Assessed Value (2) $ 49,554,196,913 100.00 % $ 35,116,244,669 100.00 %

Source: "2015-16 Top Taxpayers in Washington County, Washington County Department of Assessment and Taxation Ranked by M50 Assesssed Value" (1) Principal taxpayers are in Washington County only. (2) Total assessed value is reflective of TVF&R's portion of the totals collecible for Washington, Clackamas and Multnomah counties. Statistical Section

Tualatin Valley Fire and Rescue Property Tax Levies and Collections Last Ten Fiscal Years

Fiscal Current Tax Percent of Levy Delinquent Tax Total Tax Percent of Total Tax Total Tax Levy Year Collections Collected Collections Collections Collections to Tax Levy

2016 $ 102,942,662 $ 98,293,871 95.48% $ 1,378,066 $ 99,671,937 96.82 % 2015 87,970,033 83,994,211 95.48 1,694,488 85,688,699 97.41 2014 84,922,515 80,738,959 95.07 1,824,068 82,563,027 97.22 2013 82,413,293 78,548,654 95.31 1,446,400 79,995,054 97.07 2012 81,106,617 76,988,839 94.92 1,481,752 78,470,591 96.75 2011 76,954,903 72,714,192 94.49 2,365,805 75,079,997 97.56 2010 74,662,973 70,399,625 94.29 1,930,985 72,330,610 96.88 2009 70,168,538 66,017,433 94.08 1,498,114 67,515,547 96.22 2008 67,886,825 64,345,840 94.78 1,288,336 65,634,176 96.68 2007 62,860,513 59,799,046 95.13 1,176,222 60,975,268 97.00

119 119 Source: District financial statements, current and prior years Statistical Section

Tualatin Valley Fire and Rescue Ratio of Net General Bonded Debt to Assessed Value and General Bonded Debt Per Capita Last Ten Fiscal Years

Debt Service Ratio of Net General Assessed Value (in Gross Bonded Net General General Bonded Percentage of Fiscal Year Monies Available Bonded Debt to thousands) (1) Debt (2) Bonded Debt (2) Debt Per Capita (3) Personal Income (3) (2) Assessed Value

2016 $ 49,554,197 $ 55,560,104 $ 1,432,449 $ 54,127,655 0.11 %1 20.980.26 % 2015 47,245,889 59,844,471 1,355,457 58,489,014 0.12 131.64 0.29 2014 45,241,215 56,916,463 1,541,173 55,375,290 0.12 126.48 0.28 2013 43,663,326 60,449,048 1,606,709 58,842,339 0.13 135.70 0.32 2012 42,524,654 63,951,633 1,604,149 62,347,484 0.15 145.03 0.36 2011 41,390,795 67,429,218 1,240,387 66,188,831 0.16 154.47 0.39 2010 40,282,997 45,225,280 1,207,841 44,017,439 0.11 104.66 0.26 2009 38,833,158 47,360,402 544,418 46,815,984 0.12 110.82 0.28 2008 36,996,883 20,417,235 1,321,652 19,095,583 0.05 48.27 0.13 2007 35,116,245 22,779,528 1,273,796 21,505,732 0.06 54.41 0.15 120

Sources: (1) Washington, Clackamas, and Multnomah County Assessment and Taxation Departments (2) District financial statements, current and prior years (3) See the Schedule of Demographic and Economic Statistics for personal income and population data Statistical Section

Tualatin Valley Fire and Rescue Computation of Overlapping Net Direct Debt June 30, 2016

Net Direct Debt Percentage Applicable Amount Applicable to Jurisdiction Outstanding (1) to District District City of Beaverton $ 722,076 99.99 %$ 722,038 City of Durham 520,000 99.98 519,921 City of Hillsboro 34,975,000 0.12 42,075 City of Sherwood 28,091,621 99.99 28,087,772 City of Tigard 24,708,242 99.99 24,706,957 City of Tualatin 6,892,166 99.99 6,891,408 City of West Linn 17,740,000 100.00 17,740,000 Clackamas Community College 62,061,012 24.54 15,228,904 Clackamas County 101,775,136 18.76 19,088,639 Clackamas County ESD 22,960,637 18.29 4,200,281 Clackamas County SD 3J (West Linn/Wilsonville) 241,545,453 99.99 241,544,728 Clackamas County SD 7J (Lake Oswego) 96,022,877 5.87 5,640,576 Clackamas County SD 86 (Canby) 66,658,030 13.40 8,935,176 Columbia County SD 1J (Scappoose) 29,095,000 0.22 64,736 Metro Service District 199,855,000 27.86 55,670,210 121 Multnomah County 160,509,766 0.96 1,544,425 Multnomah County SD 1J (Portland) 710,094,161 1.53 10,894,975 Portland Community College 335,095,000 30.46 102,057,538 Rivergrove Water District 14J 627,528 18.70 117,373 Tualatin Hills Park & Recreation District 86,871,694 98.79 85,819,765 Valley View Water District 1,621,692 100.00 1,621,692 Washington County 53,679,570 71.99 38,641,400 Washington Cty Enhanced Patrol Dist. 90,020 98.47 88,643 Washington County SD 1J (Hillsboro 7 Bd) 4,583,144 12.93 592,445 Washington County SD 1J (Hillsboro) 269,460,000 13.16 35,469,020 Washington County SD 23J (Tigard-Tualatin) 86,394,152 99.90 86,306,981 Washington County SD 48J (Beaverton) 808,153,784 95.21 769,453,724 Washington County SD 88J (Sherwood) 99,865,170 99.29 99,156,926 Willamette ESD 10,750,000 0.43 46,311 Yamhill County SD 29J (Newberg) 56,392,118 4.50 2,534,882 Subtotal overlapping debt 1,663,429,521 District direct debt 55,560,104 Total direct and overlapping debt $ 1,718,989,625

Note: (1) Net direct debt includes General Obligation Bonds and Full Faith and Credit Bonds minus any fully Self-Supporting Unlimited-tax GO Bonds and self-supporting Full Faith and Credit Debt. Source: Oregon State Treasury, Debt Management Division Statistical Section

Tualatin Valley Fire and Rescue Legal Debt Margin Information June 30, 2016

Real market value of District property $ 80,841,023,928 Debt limit under ORS 478.410(2) - (1.25% of the real market value) 1,010,512,799 Amount of debt applicable to debt limit: Gross bonded debt outstanding $ 55,560,104 Assets in Debt Service Fund available for debt service (1,432,449) Total amount of debt applicable to debt limit 54,127,655 Legal debt margin $ 956,385,144

Total net debt applicable to the limit as a percentage of debt limit 5.36%

Year 2007 2,008 2009 2010 2011 2012 2013 2014 2015 2016

Debt Limit $ 726,889,918 $ 813,030,300 $ 837,030,455 $ 782,128,411 $ 729,805,072 $ 695,601,455 $ 686,093,262 $ 731,448,015 $ 811,154,519 $ 1,010,512,799

Total net debt applicable to limit 21,505,732 19,095,583 46,815,984 44,017,439 66,188,831 62,347,484 58,842,339 55,375,290 58,489,014 54,127,655

Legal debt margin $ 705,384,186 $ 793,934,717 $ 790,214,471 $ 738,110,972 $ 663,616,241 $ 633,253,971 $ 627,250,923 $ 676,072,725 $ 752,665,505 $ 956,385,144 122 Total net debt applicable to the limit as a 2.96% 2.35% 5.59% 5.63% 9.07% 8.96% 8.58% 7.57% 7.21% 5.36% percentage of debt limit

Source: District financial statements and Oregon Revised Statutes Statistical Section

Tualatin Valley Fire and Rescue Demographic and Economic Statistics Last Ten Fiscal Years

Fiscal Total Personal Income (in Population(1) Per Capita Income (2) School Enrollment (3) Unemployment (4) Year thousands) (2)

2016 459,234 $ 45,968 $ 21,110,195 56,519 4.10 % 2015 454,598 44,757 20,346,443 56,036 4.60 2014 450,008 44,396 19,978,555 57,221 5.90 2013 445,464 42,639 18,994,139 57,147 6.60 2012 440,966 40,606 17,905,865 56,410 6.90 2011 436,513 39,465 17,226,986 56,768 7.70 2010 432,106 40,188 17,365,476 55,672 9.15

123 2009 427,346 39,660 16,948,548 54,519 7.68 2008 422,987 37,969 16,060,402 54,480 4.42 2007 418,673 35,991 15,068,451 53,824 4.30

(1) US Census/Portland State University (2) Worksource Oregon Employment Department (Washington County Only) (3) Oregon Dept of Education (Washington County Only) (4) Bureau of Labor Statistics, estimated (Washington County Only) Statistical Section

Tualatin Valley Fire and Rescue Major Employment Industries Current Year and Nine Years Ago

2016 2007 Fiscal Average % of Total Fiscal Average % of Total

Natural Resources & Mining 3,120 1% 3,591 1% Construction 13,550 5% 15,428 6% Manufacturing Wood Products 1,023 1,612 Fabricated Metal Products 3,354 3,219 Food 1,882 1,603 Plastics and Rubber Products 2,009 2,382 Computer Products 28,249 27,655 Machinery 4,269 3,609 Other 7,129 7,992 Total Manufacturing 47,915 17% 48,072 19% Trade, Transportation, and Utilities Wholesale 13,076 17,790 Retail 31,109 29,632 Transportation, Warehousing, and Utilities 4,316 4,017 Total Trade, Transportation, and Utilities 48,501 17% 51,439 21% 124 Information Publishing 3,112 3,731 Telecommunications 2,124 2,098 Other (broadcasting, ISP's, etc.) 2,169 1,743 Total Information 7,405 3% 7,572 3% Financial Activities Finance and Insurance 10,586 10,817 Real Estate 3,443 3,844 Total Financial Activities 14,029 5% 14,661 6% Professional & Business Services 53,213 19% 34,710 14% Education 5,095 2% 4,573 2% Health & Social Assistance 28,014 10% 20,423 8% Leisure & Hospitality 24,500 9% 19,863 8% Other Services 9,501 3% 7,953 3% Private Non-Classified 59 0% 97 0% Total All Government 22,381 9% 20,764 9% Total Employment 277,283 100% 249,146 100%

Source: Oregon Employment Department Labor Market Information System (OLMIS) Statistical Section

Tualatin Valley Fire and Rescue Full-Time Equivalent Employees by Function Last Ten Fiscal Years

Year Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fire and Rescue Service 301 305 307 319 325 330 340 344 346 351 Fire Prevention and Training 41 40 43 37 25 22 23 24 24 24 Administrative and Support 64 67 67 76 93 89 92 90 103 115 Total 406 412 417 432 443 441 455 458 473 490

Source: Tualatin Valley Fire and Rescue Human Resources records 125 Statistical Section

Tualatin Valley Fire and Rescue Operating Indicators by Function Last Ten Calendar Years

Year Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 est. Public Safety: Code Enforement Inspections (not including night) 3,981 3,610 3,358 3,788 3,023 2,470 3,906 (1) 4,483 3,814 4,400 Re-Inspections 3,437 2,502 2,763 2,661 1,739 1,483 2,371 2,882 2,586 2,700 Night inspections 188 136 189 165 111 122 211 174 286 280 Violations Found 5,669 4,423 4,537 4,232 2,852 2,571 4,021 4,918 4,178 4,500

Incident Response Dispatched as: 1 - Fire, Explosion 4,605 4,527 4,079 3,564 3,293 3,282 3,597 3,460 3,776 3,859 3 - EMS/Rescue Call 25,262 25,381 24,092 24,671 25,539 27,119 28,737 29,829 32,062 34,548 4 - Hazardous Condition 478 502 532 543 526 630 662 783 767 870 5 - Service Call 1,542 1,517 1,241 918 937 1,081 1,209 1,260 1,334 1,413

126 6 - Good Intent 215 166 224 266 154 271 342 304 386 450 9 - Other Situation - - 341 422 435 443 539 497 551 639 Total Responses 32,102 32,093 30,509 30,384 30,884 32,826 35,086 36,133 38,876 41,779

Situations found: 1 - Fire, Explosion 949 1,042 898 784 880 987 1,028 999 1,294 1,193 2 - Overpressure 81 80 59 47 63 87 86 59 28 42 3 - EMS/Rescue Call 15,824 18,910 18,425 19,288 19,516 21,160 22,244 23,460 26,231 28,597 4 - Hazardous Condition 757 779 745 747 757 805 915 1,113 1,065 1,251 5 - Service Call 2,054 1,853 2,046 1,851 2,021 1,984 2,567 2,496 2,502 2,883 6 - Good Intent 9,953 6,623 5,768 5,457 5,855 5,918 6,156 6,013 5,681 5,493 7 - False Call 2,451 2,777 2,519 2,178 1,749 1,846 2,050 1,942 2,058 2,307 8 - Natural Condition 4 7 13 2 5 4 7 23 10 4 9 - Other Situation 29 22 36 30 38 35 33 28 7 9 Total Responses 32,102 32,093 30,509 30,384 30,884 32,826 35,086 36,133 38,876 41,779

(1) Additional inspection personnel were added to the District, which resulted in a greater number and type of inspections being performed. Statistical Section

Tualatin Valley Fire and Rescue Capital Asset Statistics by Function Last Ten Fiscal Years

Year Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Public Safety: Number of Stations 22 22 23 (1) 23 23 21 (2) 21 21 21 22 (4) Equipment: (1) Aerial/Truck/Platform 4 4 55 53 4 4 4 4 Antique Fire Equipment 3 3 33 32 3 3 5 6 Brush Rig 8 8 99 98 9 129 9 Cars 444447(3) 7 Elevated Waterway 4 4 43 33 3 3 3 3 HazMat 3 3 33 35 5 5 5 5 Medic Unit 34 43 4 101010

127 Mobile Command Unit 1 1 11 11 1 1 1 1 Pumper/Engine 31 37 35 30 30 30 30 30 28 28 Rehab Unit 22 43 2 2 2 2 Technical Rescue 6 6 46 67 7 7 7 7 Tiller 1 Water Tender 7 7 77 76 9 9 7 7

(1) Station 50 placed into service. (2) Volunteer Stations 358 and 359 no longer staffed or used. (3) Three additional CARS were placed into service. (4) Station 70 placed into service.

Independent Auditor's Report Required By Oregon State Regulations

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APPENDIX B

FORM OF BOND COUNSEL OPINION

[THIS PAGE INTENTIONALLY LEFT BLANK] October ___, 2017

Tualatin Valley Fire and Rescue, A Rural Fire Protection District 11945 S.W. 70th Avenue Tigard, Oregon 97223-9196

Re: Tualatin Valley Fire and Rescue, A Rural Fire Protection District Washington, Clackamas and Multnomah Counties, Oregon $__,000,000 General Obligation Refunding Bonds, Series 2017

Ladies and Gentlemen:

We have acted as bond counsel to Tualatin Valley Fire and Rescue, A Rural Fire Protection District located in Washington, Clackamas and Multnomah Counties, Oregon (the “District”) in connection with the authorization, sale, issuance and delivery by the District of its $__,000,000 aggregate principal amount of General Obligation Refunding Bonds, Series 2017 (the “Bonds”), which are dated October ___, 2017. The Bonds are issued pursuant to relevant provisions of Oregon Revised Statutes Chapter 287A and Resolution No. 2017-08 adopted by the Board of Directors of the District on August 22, 2017 (the “Bond Resolution”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Bond Resolution.

We have examined the applicable law, a duly certified transcript of proceedings of the District, prepared in part by us, and other documents which we deem necessary to render this opinion.

As to questions of fact material to our opinion, we have relied on the representations of the District contained in the Bond Resolution and other certified proceedings and certifications of officials of the District and others furnished to us without undertaking to verify such representations and certifications by independent investigation.

On the basis of the foregoing examination, and in reliance thereon, and on the basis of our examination of such other matters of fact and questions of law as we deem relevant under the circumstances, and subject to the limitations expressed herein, we are of the opinion, under existing law, as follows:

A. The Bonds have been legally authorized and issued under and pursuant to the Constitution and statutes of the State of Oregon, and are valid and legally binding obligations of the District enforceable against the District in accordance with their terms, subject to: (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally (whether now or hereafter in existence); (ii) the application of equitable principles and to the exercise of judicial discretion in appropriate cases; (iii) common law and statutes affecting the enforceability of contractual obligations generally; and (iv) principles of public policy concerning,

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Legal Opinion October ___, 2017 Page 2

affecting, or limiting the enforcement of rights or remedies against governmental entities such as the District.

B. The District has pledged its full faith and credit to the payment of interest on and the principal of the Bonds as the same become due and payable. The District covenants with the Bondowners to levy annually a direct ad valorem tax upon all of the taxable property within the District in an amount without limitation as to rate or amount, and outside of the limitations of Sections 11 and 11b, Article XI of the Oregon Constitution, after taking into consideration discounts taken and delinquencies that may occur in the payment of such taxes and other monies available for the payment of debt service on the Bonds, to pay interest, principal, and premium, if any, on the Bonds promptly when and as they become due.

C. Under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described below, (i) interest on the Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code and is not included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. [Bond Counsel further is of the opinion that, for any Bonds having original issue discount (a “Discount Bond”), original issue discount that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for federal income tax purposes to the same extent as other interest on the Bonds.] In rendering our opinion, we have relied on certain representations, certifications of fact, and statements of reasonable expectations made by the District and others in connection with the Bonds, and we have assumed compliance by the District with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

The Code establishes certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that, for federal income tax purposes, interest on the Bonds not be included in gross income pursuant to Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of Bond proceeds, restrictions on the investment of Bond proceeds prior to expenditure and the requirement that certain earnings be rebated to the federal government. Noncompliance with such requirements may cause interest on the Bonds to become subject to federal income taxation retroactive to their date of issue, irrespective of the date on which such noncompliance occurs or is ascertained. On the date of delivery of the Bonds, the District will execute a Tax Certificate (the “Tax Certificate”) containing provisions and procedures pursuant to which such requirements can be satisfied. In executing the Tax Certificate, the District covenants that it will comply with the provisions and procedures set forth therein and that it will do and perform all acts and things required by the Code to assure that interest paid on the Bonds will, for federal income tax purposes, be excluded from gross income. In rendering the opinion in paragraph C hereof, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and reasonable expectation, and certifications of fact contained in the Tax Certificate with respect to matters affecting the status of interest paid on the Bonds, and (ii) compliance by the District with the procedures and covenants set forth in the Tax Certificate as to such tax matters.

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D. Interest on the Bonds is exempt from State of Oregon personal income tax.

Except as stated in paragraphs C and D above, we express no opinion as to any other federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. Furthermore, we express no opinion herein as to the effect of any action hereafter taken or not taken in reliance upon an opinion of counsel other than ourselves on the exclusion from gross income for federal income tax purposes of interest on the Bonds.

We render our opinion under existing statutes and court decisions as of the issue date, and we assume no obligation to update, revise or supplement this opinion after the issue date to reflect any action hereafter taken or not taken, or any facts or circumstances, or any change in law or in interpretations thereof, or otherwise, that may hereafter arise or occur, or for any other reason.

This opinion is limited to matters of Oregon law and applicable federal law, and we assume no responsibility as to the applicability of laws of other jurisdictions.

This opinion is provided to you as a legal opinion only, and not as a guaranty or warranty of the matters discussed herein. No opinions may be inferred or implied beyond the matters expressly stated herein. No qualification, limitation or exception contained herein shall be construed in any way to limit the scope of the other qualifications, limitations and exceptions. For purposes of this opinion, the terms “law” and “laws” do not include unpublished judicial decisions, and we disclaim the effect of any such decision on the opinions expressed.

We have acted solely as bond counsel to the District regarding the sale and issuance of the Bonds and have not represented any other party in connection with the Bonds. Therefore, no attorney-client relationship shall arise by our addressing this opinion to persons other than the District.

We express no opinion as to the creditworthiness of the District, the investment quality of the Bonds or the adequacy of the security for the Bonds.

The opinions expressed herein are solely for your benefit in connection with the above referenced bond financing and may not be relied on in any manner or for any purpose by any person or entity other than the addressees listed above and the owners of the Bonds, nor may copies be furnished to any other person or entity, without the prior written consent of Hawkins Delafield & Wood LLP.

Very truly yours,

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APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

[THIS PAGE INTENTIONALLY LEFT BLANK] FORM OF CONTINUING DISCLOSURE CERTIFICATE

$__,000,000 Tualatin Valley Fire and Rescue, A Rural Fire Protection District Washington, Clackamas and Multnomah Counties, Oregon General Obligation Refunding Bonds Series 2017

This Continuing Disclosure Certificate (the “Certificate”) is executed and delivered by the Tualatin Valley Fire and Rescue, A Rural Fire Protection District located in Washington, Clackamas and Multnomah Counties, Oregon (the “Issuer”) in connection with the issuance of the Issuer’s General Obligation Refunding Bonds, Series 2017 (the “Securities”).

Section 1. Purpose of Certificate. This Certificate constitutes the Issuer’s written undertaking for the benefit of the holders of the Securities and to assist the underwriter of the Securities in complying with paragraph (b)(5) of the United States Securities and Exchange Commission Rule 15c2-12 (17 C.F.R. § 240.15c2-12) as amended (the “Rule”).

Section 2. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for purposes of this Certificate, have the meanings herein specified.

“Beneficial Owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Securities, including persons holding Securities through nominees or depositories.

“Commission” means the United States Securities and Exchange Commission.

“MSRB” means the United States Municipal Securities Rulemaking Board or any successor to its functions.

“Official Statement” means the final official statement for the Securities dated ______, 2017.

“Rule” means the Commission’s Rule 15c2-12 under the Securities Exchange Act of 1934, as it has been and may be amended.

Section 3. Financial Information. The Issuer agrees to provide or cause to be provided to the MSRB, the Issuer’s latest publicly available annual financial statements prepared in accordance with the Oregon Local Budget Law (or any successor statute) and in accordance with generally accepted accounting principles so prescribed by the Governmental Accounting Standards Board (or its successors) and generally of the type included in the Official Statement under the heading “Appendix A – District’s Comprehensive Annual Financial Report for the Fiscal Year ended June 30, 2016.”

To the extent not included in its annual financial statements and for the same period as such annual financial statements, the Issuer shall also provide information, of the type set forth in the Official Statement, containing:

C-1 1. the total real market value and total assessed value of property within the Issuer’s boundaries (as indicated in the records of the county assessors), or other statement of property valuation that reflects then current Oregon statutes pertaining to property valuation;

2. the amount or rate of property taxes levied by the Issuer for the fiscal year for both operations and debt service, and the amount of property taxes the Issuer received during the fiscal year;

3. the total principal amount of general obligation bonds and other tax- supported obligations of the Issuer which are outstanding at the end of the fiscal year; and

4. the major taxpayers within the Issuer’s boundaries as presented in the Official Statement.

Any or all of the items listed above may be set forth in one or a set of documents or may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been made available to the public on the MSRB’s website. The Issuer reserves the right to modify from time to time the format of the presentation of information provided pursuant to this section to the extent necessary or appropriate in the judgment of the Issuer, provided that, in the Issuer’s discretion, such modification shall be consistent with the Rule and the purposes of this Certificate. The Issuer shall clearly identify each such other document so included by reference.

Section 4. Timing. The information described in the preceding paragraph shall be provided on or before nine months after the end of the Issuer's fiscal year, commencing with information for the fiscal year ended June 30, 2017. The annual financial statements described in the preceding paragraph will be provided in the form of audited financial statements if they are then available, and otherwise will be provided in the form of unaudited financial statements. If audited financial statements are not then provided, the Issuer shall provide them to the MSRB when they are available. The Issuer's current fiscal year ends June 30. The Issuer may adjust this fiscal year by providing written notice of the change of fiscal year to the MSRB. In lieu of providing this annual financial information separately, the Issuer may cross-reference to other documents provided to the MSRB.

The Issuer agrees to provide or cause to be provided, in a timely manner, to the MSRB notice of its failure to provide the annual financial information described in Section 3 on or prior to the date set forth in the preceding paragraph.

Section 5. Material Events. The Issuer agrees to provide or cause to be provided to the MSRB, in a timely manner not in excess of ten business days after the occurrence of the event, notice of any of the following events with respect to the Securities:

1. Principal and interest payment delinquencies;

2. Non-payment related defaults, if material;

C-2 3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers or their failure to perform;

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the Security;

7. Modifications to the rights of Security holders, if material;

8. Bond calls, if material, and tender offers;

9. Defeasances;

10. Release, substitution or sale of property securing repayment of the Securities, if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the obligated person; (Note: For the purposes of the event identified in this paragraph 12, the event is considered to occur when any of the following occur: The appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.);

13. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

Section 6. Termination. The Issuer’s obligation to provide notices of material events shall terminate upon the legal defeasance, prior redemption or payment in full of all of the

C-3 Securities. This Certificate, or any provision hereof, shall be null and void if the Issuer (a) obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require this Certificate, or any provision of this Certificate, are invalid, have been repealed retroactively or otherwise do not apply to the Securities; and (b) notifies the MSRB of such opinion and the termination of its obligations under this Certificate.

Section 7. Amendment. Notwithstanding any other provision of this Certificate, the Issuer may amend this Certificate, provided that the following conditions are satisfied:

A. If the amendment relates to the provisions of Sections 3 or 5 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of the Issuer with respect to the Securities, or the type of business conducted; and,

B. If this Certificate, as amended, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Securities, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

C. The amendment either (i) is approved by the owners of the Securities pursuant to the terms of the Resolution as it is in effect at the time of the amendment or (ii) does not materially impair the interests of the owners or Beneficial Owners of the Securities as determined by a party unaffiliated with the Issuer.

In the event of any amendment of a provision of this Certificate, the Issuer shall describe such amendment in its next annual filing pursuant to Section 3 of this Certificate, and shall include, as applicable, a narrative explanation of the reason for the amendment and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of the amendment shall be given in the same manner as for a material event under Section 5 hereof, and (ii) the annual filing pursuant to Section 3 of this Certificate for the first fiscal year that is affected by the change in accounting principles should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 8. Securities Owner’s Remedies Under This Certificate. The right of any holder of Securities or Beneficial Owner of Securities to enforce the provisions of this Certificate shall be limited to a right to obtain specific enforcement of the Issuer’s obligations hereunder, and any failure by the Issuer to comply with the provisions of this undertaking shall not be an event of default with respect to the obligations hereunder.

Section 9. Form of Information. All information required to be provided under this certificate will be provided in an electronic format as prescribed by the MSRB and with the identifying information prescribed by the MSRB.

C-4 Section 10. Submitting Information Through EMMA. So long as the MSRB continues to approve the use of the Electronic Municipal Market Access (“EMMA”) continuing disclosure service, any information required to be provided to the MSRB under this Certificate may be provided through EMMA. As of the date of this Certificate, the web portal for EMMA is emma.msrb.org.

Section 11. Dissemination Agent. The Issuer may, from time to time, engage or appoint an agent to assist the Issuer in disseminating information hereunder (the “Dissemination Agent”). The Issuer may discharge any Dissemination Agent with or without appointing a successor Dissemination Agent.

Section 12. Choice of Law. This Certificate shall be governed by and construed in accordance with the laws of the State of Oregon, provided that to the extent this Certificate addresses matters of federal securities laws, including the Rule, this Certificate shall be construed in accordance with such federal securities laws and official interpretations thereof.

Dated as of the ____ day of ______, 2017.

Tualatin Valley Fire and Rescue, A Rural Fire Protection District Washington, Clackamas and Multnomah Counties, Oregon

______Authorized Representative

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APPENDIX D

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company A subsidiary of The Depository Trust & Clearing Corporation

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non- U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates rep resenting their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial

Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

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

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

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

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [Tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Securities to [Tender/Remarketing] Agent’s DTC account.

10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

11. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

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Tualatin Valley Fire and Rescue, A Rural Fire Protection District (Washington, Clackamas and Multnomah Counties, Oregon) • General Obligation Refunding Bonds, Series 2017