Revenue and funding sources and related historical trends for the Fiscal Year 2008 capital improvements budget are discussed below. Revenue and funding sources are grouped by the project category to which they are assigned. Graphs are included for the major revenue and funding sources. Each graph presents nine years of actual data, FY 2007 estimated revenues and FY 2008 budgeted revenues.

UTILITY CAPITAL

Utility capital revenue and funding sources support utility related capital projects including the following:

Water · Water Lines · Water Storage Tanks · Studies · Water Plant Expansions

Sewer · Sewer Lines · Pump Stations · Studies · Water Reclamation Facility Expansions

• Debt Proceeds: $112,177,238

The FY 2008 utility capital improvements budget reflects $23,504,000 in revenue bond debt proceeds as a funding source for utility capital projects. $6.8 million of this total is in support of water projects while the remaining $16.7 million is directed toward sewer projects.

Revenue Bonds

Water Projects $6,800,000

$6,800,000 Automated Meter Reading System

Sewer Projects $16,704,000

$5,825,000 Biosolids Aeration System Improvements

$3,600,000 Force Main Inspection and Rehabilitation

$2,306,000 Northwest Area Reclaimed Water Project – Phase II

$ 800,000 Wastewater Pump Station Improvements

$ 739,000 Replacement/Rehabilitation of Existing Sewer Mains

$ 710,000 Wastewater Pump Station Parallel Force Mains

$ 590,000 Morrisville Public Works & Perimeter Park Barscreen Addition

$ 525,000 Northwest Area Reclaimed Water Project – Phase III

$ 490,000 Swift Creek Regional Pumping Station Improvements (Existing Equipment Improvements)

$ 415,000 Upper Camp Branch Interceptor

$ 315,000 Walnut Creek Pump Station Electrical Improvements

$ 140,000 Western Cary Collection System Odor Control

$ 139,000 Wastewater SCADA Project

$ 110,000 Town Hall Drive Pump Station Elimination

The FY 2008 utility capital improvements budget also reflects $88,673,238 in general obligation bond debt proceeds as a funding source for utility capital projects. $7.4 million of this total is in support of water projects, while the remaining $81.3 million is directed toward Cary and Morrisville’s portions of the Western Wake Regional Wastewater Management Facility. Upon the merger of the Town of Morrisville’s utility system with the Town of Cary’s system in April 2006, the Town of Cary assumed responsibility for both municipalities’ roles in the development of the Western Wake Regional Wastewater Management Facility.

2001 General Obligation Water Debt

Water Projects $7,410,000

$7,410,000 Cary/Apex Water Treatment Plan – Phase II Residuals and Chemical Feed Facilities

2005 General Obligation Sewer Debt

Western Wake Regional Wastewater Management Facility Projects $81,263,238

$71,155,066 New Water Reclamation Facility – CARY

$10,108,172 New Water Reclamation Facility – MORRISVILLE

· Development Fees (Water and Sewer): $13,168,472

Water and sewer development fees were created in FY 1999 to replace water and sewer acreage and connection fees. The figures on the above graph include acreage and connection fee revenues for FY 1998.

Water and sewer development fees are levied against all taxable property at the time of permit issuance in order to help cover costs associated with water and sewer infrastructure and/or capacity needs of new development. These fees vary based on residential, commercial and multi-family development type and size.

In February 2004, Town Council voted to decrease all development fee charges (water, sewer, and transportation) by 30% effective March 1, 2004. The decision to decrease these fees was based upon a desire to help spur declining levels of development within the Town. While the Town experienced double-digit growth in the 1990s, growth dropped to only 3% in FYs 2003 and 2004.

FY 2004 actual receipts of $7,886,766 represent a 101% increase from the prior year. This increase is primarily attributed to the development of a 300 unit apartment complex permitted in the spring of FY 2004, as well as the decrease in development fees which may have helped create a small spike in permit issuance. At $6,489,188, FY 2005 saw fewer receipts than FY 2004 but still recorded more development fee revenue than had been earned in FYs 2002 and 2003. FY 2006 receipts of $15,635,968 are 81% higher than FY 2005 actuals. A strengthening economy and healthy development market brought a 38% increase in building permit issuance when comparing FY 2006 to FY 2005. FY 2007 water and sewer development fee revenue is estimated to be $13,575,744. While development within the Town remains strong, estimates for the year indicate a 13% decrease from the fifteen year high of $15,635,968 in FY 2006.

FY 2008 is budgeted at $13,168,472 or 3% below FY 2007 estimated. Water and sewer development fee revenues will fluctuate as the economic climate and/or the level of permit activity changes. In the event of increased levels of development and respective water and sewer development fee revenues in the future, changes in funding can be initiated to ensure that incoming revenues are utilized to the highest degree possible.

· Interest Earned: $3,857,683

Interest Earned revenue represents the amount of money the Town earns on its invested funds held within the utility capital reserve fund. These earnings are allocated between water and sewer projects based on existing project funding levels with water projects receiving 75% of this income and sewer projects receiving 25%.

FY 2007 interest revenue is estimated at $3,900,246. This represents a 55% increase from FY 2006 earnings. This increase is attributed to more favorable interest rates than originally anticipated. FY 2004 saw the lowest level of interest earnings in eleven years. A general decline in economic conditions is primarily responsible for that year’s reduced rate of return on investments.

FY 2008 interest earnings are projected to be $3,857,683 or 1% less than estimated FY 2007 earnings. Considerable cash reserve appropriations to water and sewer projects in FY 2008 account for this slight decrease in interest earnings.

· Town of Apex Reimbursement for Cary/Apex Water Treatment Plant: $3,741,870

The Cary/Apex Water Treatment Plant is jointly owned by the towns of Cary and Apex. Under the terms of the arrangement, the Town of Cary staffs and manages the facility and bears 77% of all operating and capital costs while the Town of Apex is responsible for the remaining 23%. The Town of Cary budgets for 100% of the operating and capital costs associated with the plant and requests reimbursement from the Town of Apex annually for its 23% share. The FY 2008 total capital appropriation for Cary/Apex Water Treatment Plant projects is $16,269,000. The 23% Town of Apex reimbursement amount related to these capital appropriations is $3,741,870.

· Municipal Partner Reimbursements: $43,555,448

The Town of Cary has partnered with the towns of Apex, Morrisville and Holly Springs to construct a regional wastewater facility (the Western Wake Regional Wastewater Management Facility - WWRWMF) and its related infrastructure in western Wake County. The Town of Cary has been named the lead agency for the project by the municipal partners. As such, Cary is responsible for managing all aspects of the project. The total cost of the project is shared by the municipal partners based on the percentage of the facility that each partner will ultimately utilize. Municipal partners are responsible for annually funding their portions of the project undertaken in a given fiscal year. As the Town of Morrisville’s utility system merged with the Town of Cary’s system in April 2006, the Town of Cary now assumes responsibility for Morrisville’s cost share in the WWRWMF. The total project appropriation for WWRWMF projects in FY 2008 is $126,606,268. The total municipal reimbursement to be received in FY 2008 is $43,555,448.

GENERAL CAPITAL

General capital revenue and funding sources support transportation, fire, parks and general capital projects such as the following:

Transportation

· New roads

· Road widening

· Repaving

· Sidewalks

Fire

· Fire stations

· Pumper trucks

· Aerial ladder trucks

Parks, Recreation and Cultural Resources

· Community centers

· Greenways

· Parks

General Government

• Vehicle replacements
• Town government building construction/expansion

· Debt Proceeds: $28,766,000

The FY 2008 general capital improvements budget reflects $28,766,000 in debt proceeds as a funding source for general capital projects. $22.4 million of this total supports transportation projects, $5.6 million supports parks, recreation and cultural arts projects, while the remaining $765 thousand is directed toward the replacement/upgrade of a service ladder fire truck.

2003 General Obligation Bonds – Transportation $22,363,000

2003 General Obligation Bonds – Parks $ 5,638,000

Installment Purchase $ 765,000

2003 General Obligation Bonds – Transportation

$6,763,000 McCrimmon Parkway Road Improvements

$4,600,000 Weston Parkway Pavement Rehabilitation

$3,000,000 Carpenter Fire Station Extension and Railroad Bridge

$3,000,000 Carpenter Fire Station Road Widening (NC 55 to Green Level to Durham Road)

$3,000,000 TCAP – Downtown Cary Streetscape Design

$1,000,000 Annual Sidewalk Improvements

$1,000,000 Reedy Creek Road Widening (NE Maynard Road to N Harrison Avenue)

2003 General Obligation Bonds – Parks

$3,000,000 Bartley Community Park

$ 865,000 TCAP – Digital Media Center

$ 650,000 Greenway Crosswalk System

$ 443,000 Park and Greenway Renovation – FY 2008

$ 400,000 White Oak Creek Greenway – Phase IV

$ 280,000 NC 55 Trail Connection at Batchelor Tunnel

Installment Purchase

$750,000 Service Ladder Truck Replacement/Upgrade

· General Fund Transfer: $3,172,000

Fund balance transfers from the general fund typically support projects for which funding cannot be dedicated from other sources. General fund transfers in FY 2008 total $3,172,000. $1,770,000 of this total is directed to general government projects, $834,000 is directed to fire projects and $568,000 is directed to parks, recreation and cultural resources projects. Detailed information on the transfers to each of these project categories follows.

General Government $1,770,000

$600,000 Sanitation and Recycling Truck Replacement

$600,000 Storm Drainage Project – Town Properties

$500,000 Storm Drainage Project- Private Assistance

$ 70,000 Police Firing Range Upgrades

Fire $834,000

$500,000 Site Acquisition for Southwest Cary Fire Station

$150,000 Fire Station #5 Rear Entrance Driveway

$ 99,000 Service Ladder Truck Replacement – 1210

$ 85,000 Service Ladder Truck Replacement/Upgrade - 1094

Parks, Recreation and Cultural Resources $568,000

$350,000 Tryon Road Park and Greenway

$218,000 SAS Soccer Park

· Utility Fund Transfer: $1,000,000

Effective FY 2002, water rates were increased 3.1% for a typical 7,000 gallon per month residential customer. Each year, the income from this increase falls to the utility fund fund balance. The following fiscal year, that $1,000,000 is then transferred to the open space acquisition project. The proceeds from this rate increase are restricted to helping fund Cary’s open space initiative. An initial transfer of $11.1 million in FY 2002 served as “seed money” for the Open Space initiative. The annual $1,000,000 transfers began in FY 2004.

· Powell Bill: $3,443,043

Powell Bill funds are received from the State of North Carolina. These revenues are based on gasoline sales in the state of North Carolina and are distributed according to a two-part formula. The number of non-state street miles within the Town comprises one quarter of the formula (currently projected to be 380.68 miles in FY 2008), while three-quarters of the formula is calculated on a per capita basis. The North Carolina League of Municipalities provides estimates for the statewide population and mileage rates. These rates are applied in conjunction with the Town’s projected non-state street miles and population to derive the estimate of future receipts.

Expenditure of Powell Bill revenues is restricted to certain types of transportation projects. These revenues are distributed in October of each year. As such, FY 2007 revenues of $3,272,482 represent actual receipts. FY 2008 revenues are expected to be 5% higher than actual FY 2007 receipts.

· Interest Earned: $3,172,974

Interest earned represents the amount of money the Town earns on its invested funds held within the general capital reserve fund. These earnings are categorized as unrestricted but must be used to fund general capital projects.

FY 2007 interest income is estimated at $2,715,419. This represents a 23% increase from FY 2006 earnings. This increase is attributed to more favorable interest rates than originally anticipated. FY 2004 saw the lowest level of interest earnings in eleven years. A general decline in economic conditions is primarily responsible for that year’s reduced rate of return on investments.

FY 2008 interest earnings are projected to be $3,172,974 or 17% higher than estimated FY 2007 earnings. This estimate assumes that interest rates will continue to rebound and losses on investment earnings will remain constant with those anticipated for FY 2007.

· Transportation Development Fees: $1,369,721

Transportation development fees are impact fees charged by the Town at the time of permit issuance for construction and improvement of thoroughfares to help support new development within the Town. This fee was added during FY 1990 with permission of the North Carolina General Assembly. Funds from this revenue source are restricted to growth related transportation projects.

In February 2004, Town Council voted to decrease all development fee charges (water, sewer, and transportation) by 30% effective March 1, 2004. The decision to decrease these fees was based upon a desire to help spur declining levels of development within the Town. While the Town experienced double-digit growth in the 1990s, growth dropped to only 3% in FYs 2003 and 2004.

On July 1, 2005, a second decrease of 30% in transportation development fees took effect. This reduction included a restructuring of the transportation development fee system to make it a demand driven system instead of an improvements driven system. The revised system with lower fees generates the same level of road improvements for the Town, is easier to administer and is more compatible to the processes used by neighboring jurisdictions.

A number of factors were considered when estimating FY 2007 and FY 2008 transportation development fee income including: projected number of building permits to be issued during each year, the zones in which development is most likely to occur and any outstanding transportation development fee credits likely to be redeemed during these years.

FY 2008 budgeted revenue for this source is $1,369,721. This is a 3% decrease over estimated FY 2007. Transportation development fee revenues will fluctuate as the economic climate and/or the level of permit activity changes. In the event of increased levels of development and respective transportation development fee revenues in the future, changes in funding can be initiated to ensure that incoming revenue is utilized to the highest degree possible.

· Vehicle License Fees: $906,091

Vehicle license fee revenue is generated by the sale of vehicle licenses. Use of these funds is restricted to transportation projects. The FY 2008 fee is $15 per vehicle per year. This rate is the same as that charged in FY 2007. $5.00 of this $15.00 fee is restricted to help fund the Town’s mainstream transit service. Therefore, the annual revenue generated by that portion of the fee is budgeted in the transit fund. FY 2007 receipts, based on the $10 portion of the fee, are projected to be $879,700. The FY 2008 budget amount of $906,091 is 3% higher than projected FY 2007 revenues.

• Cable TV Franchise Fees (2%): $569,617

Cable TV franchise fees are paid to the Town under the Cable Television Franchise agreement. The Town receives five percent of gross annual revenues of which forty percent (or 2% of the 5%) is placed in the general capital reserve fund. The remaining 3% is placed in the general fund. The 2% funds are part of unrestricted earnings in the general capital reserve fund. FY 2007 receipts are projected to be 12% higher than FY 2006 receipts. FY 2008 budgeted revenues show 3% growth over FY 2007 anticipated receipts.

• Park Payment-in-Lieu Fees: $0

The Town of Cary’s Land Development Ordinance requires developers to donate at least 1/35^th of an acre of land for each traditional single-family dwelling unit planned in a subdivision plat or development. Should the land that a developer plan to dedicate lie within a Flood Hazard Area or have slopes of greater than 15 percent, land should be dedicated at a rate of at least 1/20 of an acre per dwelling unit.

Per the Town’s Land Development Ordinance, the payment of fees in-lieu of the dedication of land may occur at the request of the subdivider or developer. In most instances, payments-in-lieu of land dedication must be paid prior to recording any lots in the subdivision. In some cases, payment of fees in-lieu of land dedication may be required by the Town Council at the time of preliminary plat approval or master land use plan approval.

The Town does not annually budget for this revenue due to the unpredictability of receipts. Rather, receipts earned in a fiscal year are allowed to fall to general capital reserve fund balance where they are then appropriated in a future year in support of park and greenway projects. Per Town policy, 90% of these funds are directed to parks projects with the remaining 10% directed to greenways.

$1,408,127 in Parks Payment-in-Lieu fees had been received as of May 2007. This figure is 57% higher than FY 2006 actual receipts of $897,907. The strong increase in development experienced during FY 2007 accounts for the dramatic rise in payment-in-lieu receipts during that year.

• Street Payment-in-Lieu Fees: $0

The Town of Cary’s Land Development Ordinance requires that developers of subdivisions construct street and sidewalk improvements within their developments and on adjacent property frontage that conform to Town standards. A payment-in-lieu of street or sidewalk construction may be made to the Town should the developer prefer not to construct the required street/sidewalk improvement. In these instances, the developer must provide the Town with a sealed engineer’s estimate for the work to be constructed. The Town then reviews the estimate to ensure that it is in accordance with established standards. Should everything be in order, the payment-in-lieu request is approved by the Town and funds are accepted. Payments-in-lieu of improvements must be paid prior to final plat approval.

The Town does not annually budget for this revenue due to the unpredictability of receipts. Rather, receipts earned in a fiscal year are allowed to fall to fund balance where they are then appropriated in a future year in support of street improvement projects.

$423,946 in Street Payment-in-Lieu fees had been received as of May 2007. This figure is 427% higher than FY 2006 actual receipts of $80,388. The strong increase in development experienced during FY 2007 accounts for the dramatic rise in payment-in-lieu receipts during that year.