Preliminary net Q4 General Fund results reflect $14.3 million more in expenditures than revenues. As in years past, several significant revenue sources will not be received and attributed to FY 2022 until late summer. Sales tax is a primary example given the two-and-a-half-month lag between taxes collected at the point of sale in June and receipt of actual Q4 sales tax revenue in September. Staff estimates that Cary will receive approximately $13.8 million of additional sales tax revenue.
Overall, FY 2022 General Fund revenues are down $4.1 million, or 2%, from the same period in FY 2021. Operating revenues increased $11 million, mainly due to increases in sales tax and Parks, Recreation, and Cultural Resources (PRCR) sales and services revenues. The operating revenue increase was offset by a $15.1 million decrease in non-operating revenues, which is mainly due to the refinancing of the 2014 general obligation bonds in FY 2021. When debt is refinanced, revenue in the form of debt proceeds is received that equally offsets the new debt expense.
Operating Revenues
Property Tax revenue is 49% of total budgeted revenue and is the largest revenue source for the General Fund. Property 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, boats, airplanes, and commercial business equipment. Real property taxes were billed in July 2021 and were due no later than January 5, 2022. Therefore, most real property tax revenue is received during Q2. Most 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 2022 budget for property tax is $116.2 million, and as of Q4, Cary had met it. Property tax collections remain steady when compared with FY 2021.
Sales Tax revenue is 18% of total budgeted revenue and is the second largest revenue source for the General Fund. This revenue through Q4 is $6.5 million, or 21%, more than Q4 of FY 2021. Sales tax is distributed to municipalities by the N.C. Department of Revenue about two and a half months after the month when taxable sales occurred. Cary received nine distributions for July through March sales, and these have outpaced the prior year’s Q4 results despite the effects of the COVID-19 pandemic.
Current sales tax projections suggest this revenue will end the fiscal year at $51.9 million, which would be a 19% increase over the FY 2022 budget. When Council adopted the FY 2022 budget, a significant amount of uncertainty remained related to the long-term economic impacts of the pandemic. FY 2021 had significantly outperformed expectations, but many believed this growth was tied to economic factors related to the pandemic such as additional federal unemployment benefits and economic stimulus. Instead, significant growth has continued and is anticipated to continue in FY 2023 based on a strong local economy and Cary’s continued development activity.
Overall, Other Taxes and Licenses increased 42% when compared with Q4 of the prior year. With COVID-19 restrictions being lifted across the nation, travel and tourism is increasing, and the occupancy tax Cary receives from travelers renting hotel rooms doubled in FY 2022 compared with the prior year.
Restricted Intergovernmental revenues decreased 84%. The decrease is primarily a result of $3 million in Coronavirus Aid, Relief, and Economic Security (CARES) Act funding received in FY 2021.
Permits and Fees revenue increased 22% when compared with the prior year and has met the budget for FY 2022. Watershed maintenance fee revenues doubled from FY 2021, which is driving the increase in the Permits and Fees category. In compliance with N.C. General Statutes, Cary collects watershed maintenance fees from developers at the completion of a development project, such as Fenton, to ensure that the water quality device will be maintained.
The Sales and Services category is made up of PRCR programming revenues, solid waste sales and services, and other sales and services. Solid waste revenue, the largest revenue in this category, met the $12.9 million budget with a slight increase of $800,000 over FY 2021. PRCR revenues increased $4.1 million compared with FY 2021 due to the continued opening of indoor facilities and reprisal of many in-person programs and events in response to the decline of the COVID-19 pandemic.
Overall, General Fund expenditures increased 4%. This is primarily driven by a $23 million increase in operating expenditures offset by a $14.9 million decrease in non-operating expenditures directly related to FY 2021 transfers for capital project spending. Additionally, increases resulted from increased debt payments associated with the prior year refinancing of the general obligation bonds.
As of Q4, General Fund operating expenditures are 13% less than budgeted expenditures and 17% more than FY 2021 year-to-date actuals. Cary started to resume normal operations toward the end of FY 2021. Therefore, in FY 2022, Cary experienced a full year of normal activities, such as hosting events and classes, leading to an increase in temporary and overtime salaries as well as other general operating expenses.
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 are remaining at the end of Q4. After accounting for year-to-date spending and the encumbrances listed below, the General Fund has $11 million remaining in the operations budget for expenditures not yet recorded as of this report.
