Overall net results for Q2 increased 7%, or $1.6 million, compared with the prior year’s second quarter.

Overall, FY 2022 General Fund revenues are up $4.1 million, or 3%, compared with the same period in FY 2021. This is primarily due to the strength of the economy and reduced pandemic impacts as reflected in increased sales tax revenues and the return of Parks, Recreation, and Cultural Resources sales and services revenue.  

Operating Revenues

Property Tax revenue is 51% 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 and due no later than January 5. Therefore, most real property tax revenue is received during Q2. 

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 real property tax is $109.5 million. Q2 ended less than a week before the property tax due date, and by the end of the second quarter, Cary had received $92.3 million, or 84%, of the real property tax revenue budget.

The personal property tax budget for this fiscal year is $6.7 million, and as of Q2, Cary had received $3.1 million, or 46%. Based on historical trends and collections received so far, both real and personal property tax revenues are expected to meet budget.

Sales Tax revenue is 19% of budgeted General Fund revenue and is the second largest revenue source for the General Fund. Sales tax revenue through Q2 is $2.2 million, or 22%, more than the same quarter of last fiscal 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 taxable sales occurred. Through Q2, Cary received three distributions for July through September sales representing the largest sales tax distributions in Cary’s history. This growth in sales tax revenue is reflective of significant retail sales, the current strength of the economy, and rising prices in some sectors.

Collectively, Permits and Fees revenue increased 27% when compared with last year. Permits for all types of construction increased 7% compared with prior year totals.

However, the most notable increase in permits is from non-residential additions and alterations, which increased 29% from the prior year. More information on the specific projects driving this increase can be found in the SHAPE section.

Parks, Recreation, and Cultural Resources sales and services increased well over 100% compared with Q2 of FY 2022. During most of FY 2021, PRCR facilities were non-operational in response to the COVID-19 pandemic. However, toward the end of FY 2021, PRCR safely reopened facilities and began offering virtual camps and classes, which has led to the significant increase in revenues.

Non-operating revenues through Q2 increased 57% compared with the same period in FY 2021. This increase is due to bond premiums received from the Q1 bond sale to cover the bond issuance costs.

Overall, General Fund expenditures increased by 3% compared with last year’s Q2 results. Operating expenditures were up 13%, while non-operating expenditures were down 17%. Operating expenditure increases are based on a return to more typical PRCR programming and facility operations as well as pandemic-related expenses, which continue to impact General Government service areas, like Human Resources. Non-operating expenditures decreased 17% as a result of smaller budgeted General Fund transfers for operating and capital needs.

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 Q2. When including these encumbrance amounts with year-to-date spending, the General Fund has nearly $103 million of budgeted funds available for the remainder of the fiscal year.

Utility Fund net results through Q2 of FY 2022 improved by 26% compared with FY 2021 due to an increase in operating revenues. Non-operating expenditures declined by 2%, which also contributed to improved net results for Q2. 

Cary has 511 active capital projects. General capital projects, with a total of budget of $598.4 million, constitute 58% of the capital budget authorization. Utility capital projects total $430.4 million, or 42%, of the total $1 billion capital budget authorization.

Mid-Year Appropriations

The FY 2022 operating budget includes $1 million to support emerging or unforeseen program needs during the fiscal year. There have been no appropriations through Q2 from these funds, leaving the full appropriation available. The following table summarizes mid-year capital appropriations year-to-date. 

Q2 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 priorities and 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 FY 2022.

Budget Public Input and Recommendations

Citizens are invited to share their budget priorities throughout the year specifically via social media, voicemail, and email. There were five budget public input comments received in Q2. 

At the end of Q2, Cary’s cash and investments totaled $568 million. Cash balances increased in Q2 and will peak in the early part of Q3 due to the influx of property tax receipts. 

In Q2 of FY 2022, Cary invested more than $67 million at an average rate of 0.95%. In comparison, Cary invested more than $75 million at 0.33% in Q2 of FY 2021. Due to the historic low rates at the time of budget development for FY 2022, an interest rate of 0.15% was used to estimate earnings on all new investments. Interest rates have increased over the last quarter, indicating that interest earnings could come in about $1 million above budget.

Cary has about $24 million of variable-rate, tax-supported bond debt. The interest rate on these bonds is reset on a weekly basis. Due to the low interest rate environment, the average interest rate paid during FY 2022 is currently 0.04% versus the average budgeted rate of 2%. As a result, year-to-date variable rate debt service is $300,000 under budget. A 10-year history of the average interest rate paid and budgeted on the variable rate debt is shown in the following table for perspective. Using variable rate obligations for a portion of Cary’s debt has been cost-effective over the life of the 2006 general obligation bonds.