During Q2, Cary closed out the previous fiscal year. The audit of Cary’s financial statements for FY 2023 concluded with the preparation of the Annual Comprehensive Financial Report, or ACFR. The financial statements and supporting details demonstrate Cary remains in excellent financial condition.
For the first time for citizen consumption, Cary also prepared a Popular Annual Financial Report, or PAFR, which is a condensed and more user-friendly version of the ACFR. For further details on Cary’s financial reports, visit carync.gov/financials.

Cary’s financial performance remained consistent compared with Q2 of last year. This report presents a financial snapshot of the General and Utility funds as of the end of Q2, which is 50% of FY 2024. The financial summaries provide comparative data for all revenues and expenditures for these respective funds.

As of Dec. 31, there is no significant or unusual activity to note. Revenues remain on par with FY 2023, and expenditures increased from the previous year due to planned considerations, such as inflation and personnel costs, but continue to remain within budget boundaries. Financial results continue to be in line with budgeted expectations.

In addition, financial planning and budgeting for FY 2025 commenced this quarter. Cary’s team continues to consider the holistic financial picture of past and present performance, which strengthens the ability to develop a recommended budget that Cary can sustain into the future.

Overall, expenditures surpassed revenues this quarter. Revenues are largely consistent with the prior year, decreasing by less than 1%. Expenditures increased overall by 4%, primarily due to a 26% increase in operating expenses partially offset by a decrease in nonoperating expenses. 

Overall, FY 2024 General Fund revenues decreased by 1% compared with the same period in FY 2023. While most of Cary’s revenues remained fairly consistent when compared with last year, revenues can fluctuate year to year due to, among other things, the timing of allocations from state and federal sources. 

Operating Revenues

Property tax revenue is 45% of total budgeted revenue and is the largest revenue source for the General Fund. Taxes are based on an ad valorem tax levy on real and personal property. Real property are items such as land and buildings, while personal property are items such as vehicles and commercial business equipment. Real property taxes were billed in July 2023 and are due no later than Jan. 5, 2024. Therefore, most real property tax revenue will be received during Q2. Conversely, personal property tax revenue is collected throughout the year based on the state of North Carolina’s Tax and Tag program, which combines the vehicle ad valorem tax collection with the state’s vehicle license renewal process. The property tax rate remained unchanged at $0.345 for FY 2024. Revenues through Q2 totaled $92.1 million, which is on par with what was received by Q2 of FY 2023. 

The FY 2024 budget for real property tax is $113.9 million. Q2 ended less than a week before the property tax due date, and by the end of the second quarter, Cary had received $88.6 million, or 78%, of the real property tax revenue budget.

The personal property tax budget for this fiscal year is $8.1 million, and as of Q2, Cary had received $3.5 million, or 43%. Additionally, Cary received $107.3 million, or 87.9% of the budget for total property tax revenue, as of Jan. 5, the property tax deadline. Though there was a slight decrease in property tax revenues compared with Q2 of FY 2023, based on historical trends, Cary expects to meet budget by the end of the fiscal year.

Permits and fees revenue saw a decrease of 19% compared with the prior year due mainly to a significant decline in watershed maintenance fees paid in the same period in FY 2023. Watershed maintenance fees are collected from developers when projects are completed. Permits and fees revenue is highly dependent on development within Cary. Development activity fluctuates, and the associated permits and fees revenue will be in line with that fluctuation.

General Fund operating expenditures increased 26% compared with FY 2023. The $10.2 million increase in general government is mainly driven by annual software renewals in information technology, software maintenance and contracted services costs, and townwide initiatives led by the town manager’s office, including in Downtown Cary Park, research and development, and marketing. The increases in IT and the town manager’s office allow Cary to continue to create a connected workforce and community. A $6.8 million increase in public safety and a $4.8 million increase in operations (public works and parks, recreation, and cultural resources) were primarily due to vehicle purchases. 

The police department is focused on creating a single-assigned vehicle fleet program to serve as a positive recruitment tool and a force multiplier during critical situations. Vehicle purchases townwide were delayed in FY 2023 due to supply chain shortages. During Q2 of FY 2024, Cary was able to purchase vehicles that could not be purchased in the previous fiscal year. In addition, development and infrastructure saw a 12% increase in expenditures due to the reallocation of facilities department expenses from general government. 

Nonoperating expenditures decreased because of lower transfers for capital needs and fewer debt service payments in FY 2024, as payoffs of the 2010 and 2012 limited obligation bonds were made in Q2 of 2023.

Encumbrances represent funds that have been reserved in Cary’s financial reporting system to satisfy a commitment to make a purchase. The following table shows the total outstanding encumbrances that are remaining at the end of Q2. After accounting for year-to-date spending and the encumbrances listed below, the General Fund has about $104.7 million of budgeted funds available for the remainder of the fiscal year.

Utility Fund net results in FY 2024 remained in line when compared with FY 2023. Both revenues and expenditures experienced minor increases as of Dec. 31, 2023.  

Utility revenues in FY 2024 have increased slightly compared with FY 2023 levels. The marginal increases in water and sewer revenue align with the 3% rate increase to water and sewer rates in the FY 2024 budget. The implications of this increase on a family of four is an increase of $2.57 per month in their total utility bill. 

Nonoperating revenues in FY 2024 were greater than the previous year’s Q2 due to an increase in investment earnings as interest rates have steadily increased since FY 2023. 

Utility operating spending increased by 8% in FY 2024. The main factor driving this increase is increased personnel expenses in field operations. 

The following table shows the total outstanding encumbrances for the Utility Fund remaining at the end of Q2. After accounting for year-to-date spending and the encumbrances, the Utility Fund has about $43.7 million in the budget for use for the remainder of the year.

As of Q2, Cary has 513 active capital projects. Utility capital projects, with a total budget of $419.2 million, constitute 38% of the capital budget authorization. General capital projects total $696.6 million, or 62%, of the total $1.1 billion capital budget authorization.

Capital project spending totaled $65.4 million through Q2 of FY 2024. The fluctuation in capital spending is due to the timing in which projects become active or near completion. The three largest investments in capital for the community in 2024 so far are $11 million for construction of a new GoCary multimodal bus station, $5.2 million for construction of a new downtown parking deck, and $5.3 million for the construction of the Winding Pine Regional Pump Station. Because the mix of capital projects changes over time, there are no discernible patterns in capital spending.

Midyear Appropriations

The FY 2024 operating budget includes $1 million to support emerging or unforeseen needs arising during the fiscal year. There were no midyear appropriations by Council this quarter, leaving the full $1 million available for use during the remainder of the fiscal year. Additionally, Q2 saw no appropriations of General or Utility Capital Reserve Fund balance for capital needs.

Q2 Delegated Budget Authority Action

Throughout the fiscal year, challenges and opportunities develop that warrant financial resources not included in the original budget. Staff can often redirect existing resources to address the highest-priority initiatives. The budget ordinance authorizes the town manager to approve inter-functional budget adjustments and requires reporting to Council. There were no inter-functional budget adjustments approved during Q2 of FY 2024. 

Budget Public Input and Recommendations

Citizens are invited to share their budget priorities throughout the year, including via social media, voicemail, and email. There were no budget public input comments received via these channels in Q2. 

At the end of Q2, Cary’s cash and investments totaled $519.1 million, which included $33.4 million restricted in unspent bond proceeds. Cary maintains its cash and bond proceeds in daily liquidity accounts to ensure immediate access to funds and support bond-funded capital expenditures. Commensurate with prior years, cash balances increased in Q2 and will peak in the early part of Q3 due to the influx of property tax receipts. 

Due to current market conditions, higher interest rates are available for investments. In Q2 of FY 2024, Cary invested funds at an average rate of 5.2%, compared with 2.79% in Q2 of FY 2023. Cary intends to invest additional funds in Q3 and anticipates available returns will be higher than in recent years. Likewise, Cary’s bank accounts are also yielding higher than anticipated interest rates, with some account yields in the 5.4% to 5.5% range. As of the end of Q2, it is anticipated that overall investment returns may exceed budgeted expectations for this fiscal year.