This financial snapshot presents a general overview of the financial operations through Q3 ending March 31, 2023, which is 75% of FY 2023. The financial summaries provide comparative data for revenues and expenditures for the General and Utility Funds. The data shows year-to-date information as compared with the same period of the prior year. 

Revenues continue to trend in a positive direction, as most revenue categories have increased from the prior year. Expenditures have also increased from the previous year due to planned factors, such as inflation and personnel costs, but they are being managed and are within budget.

During Q3, staff focused on the creation of the FY 2024 budget. A team of directors, making up the Financial Foundations Team, analyzed budget requests and evaluated revenue projections. This team reviewed and approved the requests for the town manager.

As in the past, the town manager will provide a recommended FY 2024 budget to Council in May. Following a public hearing, Council is scheduled to adopt the budget on June 22, 2023. State law requires local governments to adopt a balanced budget by June 30 of each year.

Overall net results for Q3 decreased by more than 100% compared with the prior year’s third quarter. This variance is larger due to expenditures increasing at a faster rate than the change in revenues. The following sections discuss significant changes in General Fund revenues and expenses. 

FY 2023 operating revenues changed nominally by $8.4 million, or 5%. Nonoperating revenues decreased due to bond premium revenue received in the previous year. 

Operating Revenues

Property Tax revenue is 44% 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 is 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 and were due no later than Jan. 5, 2023. Personal property tax revenue, however, 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 FY 2023 budget for real property tax is $111.7 million and for personal property tax is $7.7 million. Based on historical trends and collections received so far, the 5% increase year over year for total property taxes is in line with budget expectations.

Sales Tax revenue is 20% of budgeted General Fund revenue and is the second largest revenue source for the General Fund. Sales tax revenue through Q3 is 12%, or $3.2 million, more than last year. This revenue stream is distributed to municipalities by the N.C. Department of Revenue about two and a half months after the month when sales occurred. Through Q3, Cary received six distributions for July through December sales. During FY 2023 Cary has received some of the largest sales tax distributions in Cary’s history. This growth in sales tax revenue continues to reflect significant retail sales and rising prices in some sectors.

Collectively, Permits and Fees revenue decreased 21% compared with last year. A significant reason for this was a 20% decrease in permit fees relative to the same period last year. However, despite the reduction in revenue, Cary issued permits for notable projects, several of which are highlighted in the Shape section. 

PRCR Sales and Services revenue increased 20% compared with the same time last year. As of Q3, PRCR facilities are continuing to ramp back up to normal levels of programming. 

Other Sales and Services revenue increased 58% compared with the same time last year. This increase is primarily due to the sale of vehicles. The supply chain shortage delayed the purchase of many new vehicles until FY 2023. The purchase of the new vehicles allowed Cary to sell the older vehicles that had outlived their useful life. 

General Fund expenditures increased by 26% compared with last year’s Q3 results. Operational increases within the PRCR function are due to the resumption of festivals and outdoor programs, as well as the ramping up of Downtown Cary Park activities. Operational increases in the General Government function are primarily due to new Cary initiatives related to R&D and Marketing as well as increased IT costs.

Public Safety and Public Works also experienced increases primarily due to higher costs in normal operating activities. The increase in nonoperating expenditures is from increased debt service payments, which include the first payment on bonds issued in FY 2021.

Encumbrances represent funds that have been reserved in Cary’s financial system to satisfy a commitment to make a purchase. The following table shows the total outstanding encumbrances in the financial system that remain at the end of Q3. When including these encumbrance amounts with year-to-date spending, the General Fund has nearly $55 million of budgeted funds available for the remainder of the fiscal year.

Utility Fund net results through Q3 declined by $700,000, or 17%, compared with FY 2022, and the increase in expenditures is marginally greater than the increase in revenues. 

Utility Fund revenues increased $2.2 million, or 4%, through Q3 compared with the same period in FY 2022. The increase in revenue is due in part to the 3% increase in water and sewer rates in the FY 2023 budget. The remaining increase is due to a slight increase in consumption. Consumption changes are directly linked to the weather and new meter installations resulting from development. 

Overall, Utility Fund expenditures increased 5% when compared with the same period last year. The 15% increase in operating expenditures is largely the result of inflationary pressures, including chemical inflation. The 6% decrease in nonoperating expenditures is the result of a decline in debt service payments.

The following table shows total outstanding encumbrances for the Utility Fund at the end of Q3. Including these encumbrance amounts, the Utility Fund has roughly $30 million left in the budget for the remainder of the year.

Cary has 565 active capital projects. General capital projects, with a total budget of $690.3 million, constitute 61% of the $1.1 billion capital budget authorization. Utility capital projects total $441.6 million, or 39%, of the capital budget authorization.

Capital project spending totaled $93.9 million through Q3. Capital spending trends are affected by both the timing and the mix of capital projects in process. Among the projects with the highest levels of spending through Q3 were parks projects, $35.7 million; street improvements, $6 million; and sewer projects, $10.3 million.

Midyear Appropriations

The FY 2023 operating budget includes $1 million to support emerging or unforeseen program needs during the fiscal year. These funds have not been used as of the end of Q3. The following General Government Midyear Appropriations table identifies all fund balance appropriations approved during the year for the General Fund. 

The Capital Project Funds table notes year-to-date midyear appropriations related to general and utility capital projects. These appropriations were approved by Council and reflect both Cary funds and funds received from outside agencies for specific uses.

Q3 Delegated Budget Authority Action

Throughout the fiscal year, challenges and opportunities develop that warrant financial resources not included in the original budget. Often staff can repurpose 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. No inter-functional budget adjustments were approved during Q3 of FY 2023.

Budget Public Input and Recommendations

Citizens are invited to share their budget priorities throughout the year specifically via social media, phone, and email. Q3 yielded one budget public input comment.

At the end of Q3, Cary’s cash and investments totaled $579 million. Consistent with prior year patterns, cash balances peaked in Q3 due to the influx of property tax receipts, which were due in early January. The Federal Reserve increased the federal fund rate by 0.25% twice in Q3, resulting in higher rates on new investments as well as cash held for liquidity purposes in bank accounts. 

Due to the numerous increases in the federal fund rate during FY 2023, actual interest earnings are projected to be about $2.5 million over the FY 2023 budget. These revenues over budget will benefit all of the operating and capital funds relative to the cash balances in each fund.