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Cary remains in excellent financial condition. Cary has capital resources, revenue capacity and an expense management culture to provide Council with choices on how best to fulfill the vision and highest priorities in the Imagine Cary Community Plan.
FY 2019 second quarter net results differ from FY 2018, primarily because of a difference in the timing of capital transfers and a $17 million bond sale transaction in FY 2018. Routine operating revenues and expenditures are consistent when comparing the second quarter year to date results in FY 2019 to the prior year’s second quarter year to date results. Details on notable revenue and expenditures by category follow.
The 11 percent decline in Permits & Fees reflects a reduction in development compared to FY 2018. The three percent increase in Sales & Services is the result of the increase from $16 to $17 in the monthly sanitation fee adopted in the FY 2019 budget. Non-operating Revenues in FY 2019 include an increase in interest income as a result of higher interest rates; however, when compared to FY 2018, they are overshadowed by the revenue generated by the $17 million bond sale.
FY 2019 real property taxes were billed in July and were due no later than January 7, 2019. As of the end of Q2, 84 percent of budgeted real property tax had been received. The FY 2019 year to date Q2 revenues increased five percent compared to Q2 FY 2018. The increase in real property taxes reflects growth in the property tax base because the tax rate was the same in FY 2019 and FY 2018.
Personal property tax revenue primarily includes taxes on vehicle value. Cary receives vehicle property tax revenue throughout the year based on the State of North Carolina’s Tax and Tag program that marries vehicle ad valorem tax collection with the State’s vehicle license renewal process. In Q2, Cary vehicle property tax revenues increased two percent compared to FY 2018. However, they are three percent less than the same period in FY 2017. Financial updates in FY 2018 noted concerns about decreased vehicle property tax revenues despite population and economic growth. Since the Tax and Tag vehicle tax system was implemented in FY 2014, revenues have trended upward on average; however, concerns remain regarding the variances in vehicle property taxes year over year.
Variances have been noticed by other jurisdictions as well. During Q2, a DMV Stakeholder Taskforce was created with representatives from Cary, Raleigh, Wake County, NC Department of Revenue, NC League of Municipalities, NC Department of Motor Vehicles, and the Change and Control Board to address these concerns.
Based on the prior two years’ Q2 results, sales tax revenue has represented approximately 24 percent of the total actual revenues. Q2 FY 2019 sales tax revenues are on target with past years’ results at 24 percent of the budget. They have increased four percent over Q2 revenues in FY 2018. This upward trend can be directly linked to the strong economy
Utility Fund net results in FY 2019 are notably different than FY 2018 because of the impact of a $117 million bond sale in FY 2018. Timing differences in capital transfers and other non-operating expenditures further account for the differences between the two fiscal years. An analysis of revenues and expenditures is below.
Overall operating revenues are in line with budget. At the same time last year, operating revenues comprised 47 percent of budget compared to 46 percent in FY 2019. The decrease in water service revenue is a result of a decrease in irrigation sales of $650,000, or 21 percent, in FY 2019. The rain generated by two hurricanes in FY 2019 contributed to a decline in irrigation demand.
Consistent with the trend noted in the General Fund expenditure discussion, decreases in functional areas reflect the movement of telephone, utility, and insurance to non-departmental accounts shown in Other Operating Expenditures. The increased expenditures at the Water Treatment Plant are the result of a large routine chemical supply purchase. Non-operating Expenditures reflect capital transfers and the bond sale discussed in the Utility Fund Summary section.
On December 31, 2018, Cary had 397 active capital projects. Utility projects with a total budget of $525 million comprise 61 percent of the capital spending authorization. General capital projects total $340 million, or 39 percent, of the total $865 million capital authorization.
Capital project spending totaled $39.1 million through Q2. Because the mix of capital projects changes over time, there are no discernable patterns in capital spending.
- Crabtree Creek and White Oak Greenways – completed 3.5 miles of new greenway segments that close strategic links in the regional greenway and trail system
- CAWTF Raw Water Pipeline – completed a new source water pipeline connection from Jordan Lake to the
- CAWTF that will improve resiliency and meet demands for decades to come
- Kilmayne Drive Water Storage Tank – completed a new two-million-gallon storage tank to improve water system control and resiliency
- Holly Brook Water and Sewer Extensions – completed utility service extension to annexed neighborhood of 86 homes
- Annual Water Line Replacements – proactively replaced 22,000 feet of aging water lines, primarily in neighborhoods, to improve reliability
- Annual Street Improvements – resurfaced 16 miles of streets, or approximately three percent of Cary-maintained streets, in the first half of FY 2019
- Cary Parkway/High House Road Intersection Improvements – open for traffic with new turn lanes; pedestrian, decorative features and a bus shelter in progress
- Carpenter Fire Station Road Realignment and Railroad Grade Separation
- Fire Station No. 9
- Morrisville Parkway/NC540 Interchange
Mid-Year AppropriationsA total of $1.8 million was included in the FY 2019 operating budget to support emerging or unforeseen needs arising during the fiscal year. Through Q2, Council has appropriated $690,000 for the following initiatives:
- $390,000 Koka Booth Lighting Improvements
- $150,000 Design of Pedestrian Tunnel under Weston Parkway
- $150,000 Green Infrastructure and Stormwater “Internet of Things” Devices
Approximately $1.1 million in mid-year funding remains available for Council appropriation in FY 2019. In addition, Council has adjusted the budget after consideration of staff recommendations as follows:
- Transferring funds from Public Works (PW) and Parks, Recreation and Cultural resources (PRCR) to Manager’s Office for grant consulting services related to their functions
- Transferring personnel costs of the Public Safety Director from the Public Safety function to the General
Citizens are invited to share their budget priorities throughout the year specifically via social media, voicemail, and email. There were 15 budget public input comments in Q2.
Following the property tax receipts in Q2, over $67 million was invested at an average yield of 2.9 percent. The 2.9 percent average yield compares favorably to the earnings rate on $21.7 million of investments that matured with an average yield to maturity of just over one percent. Cary continues to enjoy an increase in interest earning rates as the federal funds rate increased. Current projections indicate that entity-wide interest earnings will be approximately $2 million above budget for FY 2019.