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... INVESTORS U.S.PUBLIC FINANCE PENSIONS AND OPEB The county contributes to the North Carolina Local Government Employees Retirement System(NCLGERS),defined benefit retirementplan administered by the State of North Carolina.We determined the county's share of liability for the state-run plan in proportion to its contributions to the plan.The county also operates a small Law Enforcement Officers'Special Separation Allowance plan.The county's adjusted net pension liability,under Moody's methodology for adjusting reported pension data,is$36 million,or approximately an elevated 0.52 times operating revenues in 2017. Exhibit 5 Debt and pensions will remain manageable 3 year average ANPL 0.36%of Operating Revenues Moody's - adjusted Net Pension Liability (3-yr average) to Revenues (x) ■Net Direct Debt/Operating Revenues (x) 1.6x 1.4x 1.2x 1.Ox 0.8x 0.6x 0.4x 0.2x 0.0x 2013 2014 2015 2016 2017 Source: The county has not been fully funding OPEB annual contribution requirements the last few years as it devises a strategy to address the liability. It addresses the annual cost on a pay-go basis.The most recent actuarial valuation date,the reported unfunded actuarial accrued liability was$17.4 million. Lee County operates within a strong state institutional framework North Carolina Cities have an institutional framework score of Aaa,which is high compared to the nation. Institutional framework scores measure a sector's legal ability to increase revenues and decrease expenditures.The sector's major revenue sources are subject to a cap,which cannot be overriden.However,the cap of 15%,still allows for significant revenue-raising ability.Unpredictable revenue fluctuations tend to be minor,or under 5%annually.Across the sector,fixed and mandated costs are generally less than 25%of expenditures.North Carolina is a"right to work"state,providing significant expenditure-cutting ability to local governments. Unpredictable expenditure fluctuations tend to be minor,under 5%annually s 11 May 2018 Lee(County of)NC:Update to credit analysis This document has been prepared for the use of Mitch Brigulio and is protected by law.It may not be copied,transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.