1211 agile drive knightdale nc

Government And Not-For-Profit Accounting Chapter 4 Homework CAFR

Review the Comprehensive Annual Financial Report (CAFR) attached and answer the following:

1. What are the main sources of the government's revenues, including those from both governmental and business-type activities?

2. How are revenues from property taxes accounted for, i.e., as a single amount, or in multiple categories? Identify the various categories and indicate the percentage breakdown (e.g., residential property taxes are 50 percent of the total property tax revenues).

3. Which of the entity's governmental functions or activities had the greatest amount of directly identifiable revenues?

4. Does the report discuss the accounting basis for recognizing revenues?

5. Does the government's government-wide statement of net position or governmental-fund balance sheet report "deferred revenue" (or deferred inflows of resources)? If so, what is the most likely reason this amount has been deferred?

6. What is the government's property tax rate?

7. At what percentage of fair market value is real property assessed?

8. When are property taxes due? When do interest and penalties begin to accrue?

9. By what percentage did each of the three largest sources of tax revenue increase over the last ten years?

10. Did the government generate revenue from traffic fines? As best you can tell, are these revenues reported in the government-wide statements as program revenues (e.g., associated with police or public safety) or as general revenues?

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDING JUNE 30, 2018

NORTH CAROLINA

TOWN OF CARY www.townofcary.org Page 1Page 1

COMPREHENSIVE ANNUAL FINANCIAL REPORT

TOWN OF CARY, NORTH CAROLINA

AS OF AND FOR THE YEAR ENDED JUNE 30, 2018

PREPARED BY THE TOWN OF CARY FINANCE DEPARTMENT:

Karen A. Mills, CPA, Chief Financial Officer Kimberly O. Branch, CPA, Assistant Finance Director

Mary Beth Huber, Deputy Treasurer Gregory L. Jenkins, II, Revenue Manager

Jessica Murphy-Rhem, CPA, Accounting Supervisor Seth E. Larson, CPA, Senior Accountant

Michelle C. Brooks, CPA, Financial Operations Analyst Jessica L. Randal, Accounting Manager

Judith K. DeNardis, Financial Reporting Analyst

TOWN OF CARY www.townofcary.org Page 3

TITLE PAGE __________________________________________________________________________________________ 1

TABLE OF CONTENTS _____________________________________________________________________________ 3 – 6

INTRODUCTORY SECTION LETTER OF TRANSMITTAL _________________________________________________________________________ 7 – 8

FY 2018 OVERVIEW ____________________________________________________________________________ 9 – 40

MEMBERS OF TOWN COUNCIL _______________________________________________________________________ 41

TOWN OF CARY MISSION STATEMENT AND STATEMENT OF VALUES ________________________________ 42

APPOINTED AND ADMINISTRATIVE STAFF __________________________________________________________ 43

ORGANIZATIONAL CHART___________________________________________________________________________ 44

RESPONSIBILITIES OF TOWN GOVERNMENT BY DEPARTMENT _________________________________ 45 – 51

TOWN BOARDS AND COMMISSIONS ________________________________________________________________ 52

CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING _______________________ 53

FINANCIAL SECTION

REPORT OF INDEPENDENT AUDITOR ___________________________________________________________ 55 – 56

MANAGEMENT’S DISCUSSION AND ANALYSIS _________________________________________________ 57 – 66

BASIC FINANCIAL STATEMENTS EXHIBIT

ENTITY-WIDE FINANCIAL STATEMENTS

A STATEMENT OF NET POSITION ___________________________________________________________ 68 – 69

B STATEMENT OF ACTIVITIES ____________________________________________________________________ 70

GOVERNMENT FUND FINANCIAL STATEMENTS

C BALANCE SHEET – GOVERNMENTAL FUNDS _____________________________________________ 72 – 73

D RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION _________________________________________________ 74

E STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS _______________________________________________________________________ 75

F RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES _________________________________________________________________________________ 76

G GENERAL FUND – BUDGETARY COMPARISON STATEMENT ______________________________ 77 – 83

H TRANSIT SPECIAL REVENUE FUND – BUDGETARY COMPARISON STATEMENT _________________ 84

I EMERGENCY TELEPHONE SYSTEM SPECIAL REVENUE FUND – BUDGETARY COMPARISON STATEMENT ______________________________________________________ 85

PROPRIETARY FUND FINANCIAL STATEMENTS

J STATEMENT OF NET POSITION – PROPRIETARY FUNDS __________________________________ 88 – 89

K STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION – PROPRIETARY FUNDS ________________________________________ 90 – 91

L STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS ___________________________________ 92 – 93

NOTES TO THE BASIC FINANCIAL STATEMENTS ________________________________________ 95 – 138

TABLE OF CONTENTS

TOWN OF CARY www.townofcary.org Page 4

REQUIRED SUPPLEMENTARY INFORMATION LAW ENFORCEMENT SEPARATION ALLOWANCE REQUIRED SUPPLEMENTAL INFORMATION _______ 140

LOCAL GOVERNMENT EMPLOYEE RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL INFORMATION ___________________________________________________________________ 141

OTHER POST-EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTAL INFORMATION _________________ 142

SUPPLEMENTARY INFORMATION SCHEDULE

CAPITAL PROJECT FUND

1 CAPITAL PROJECT FUND - SUB-FUND COMBINING BALANCE SHEET__________________________ 144

2 CAPITAL PROJECT FUND – SUB-FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES _________________________________________ 145

3 STREET PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ___________________________ 146 – 150

4 DOWNTOWN PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ____________________________ 151 – 152

5 PARKS, RECREATION AND CULTURAL RESOURCES PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ________________________________________________________________ 153 – 156

6 FIRE PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ____________________________ 157 – 158

7 GENERAL GOVERNMENT PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ___________ 159 – 161

8 GENERAL CAPITAL RESERVE SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ___________________________________ 162

UTILITY SYSTEM ENTERPRISE FUND

9 UTILITY SYSTEMS ENTERPRISE FUND - SUB-FUND COMBINING SCHEDULE OF NET POSITION ________________________________________________________________________ 164 – 165

10 UTILITY SYSTEMS ENTERPRISE FUND - SUB-FUND COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION ___________________________________________ 166

11 UTILITY SYSTEM OPERATIONS SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) __________ 167 – 171

12 WATER PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) __________ 172 – 176

13 SEWER PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) __________ 177 – 182

14 UTILITY SYSTEM CAPITAL RESERVE SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ________________________________________________________________________ 183

INTERNAL SERVICE FUNDS

15 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF NET POSITION _____________________ 186

16 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION ______________________________________________________ 187

17 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF CASH FLOWS ________________ 188 - 189

18 FLEET MANAGEMENT INTERNAL SERVICE FUND – SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ________________________________________________________________________ 190

19 HEALTH INSURANCE INTERNAL SERVICE FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) __________________________________________________________________ 191 – 192

TABLE OF CONTENTS

TOWN OF CARY www.townofcary.org Page 5

TABLE OF CONTENTS OTHER FUND SCHEDULES

20 COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND BUDGETARY COMPARISON STATEMENT – MULTI-YEAR _______________________________ 193 – 194

21 ECONOMIC DEVELOPMENT SPECIAL REVENUE FUND BUDGETARY COMPARISON STATEMENT – MULTI-YEAR ___________________________________________________ 195

STATISTICAL SECTION (UNAUDITED)

TABLE

1 NET POSITION BY COMPONENT, LAST TEN FISCAL YEARS ___________________________________ 200

2 CHANGES IN NET POSITION, LAST TEN FISCAL YEARS ________________________________ 201 – 202

3 FUND BALANCES, GOVERNMENTAL FUNDS, LAST TEN FISCAL YEARS ________________________ 203

4 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS, LAST TEN FISCAL YEARS ___ 204 – 205

5 GOVERNMENTAL FUND EXPENDITURES BY FUNCTION, LAST TEN FISCAL YEARS _____________ 206

6 UTILITY SYSTEM ENTERPRISE FUND EXPENDITURES BY FUNCTION, LAST TEN FISCAL YEARS ____________________________________________________________________ 207

7 GOVERNMENTAL FUND REVENUES BY SOURCE, LAST TEN FISCAL YEARS ___________________ 208

8 UTILITY SYSTEM ENTERPRISE FUND REVENUES BY SOURCE, LAST TEN FISCAL YEARS ______ 209

9 ASSESSED VALUE OF TAXABLE PROPERTY, LAST TEN FISCAL YEARS ________________________ 212

10 COMPARISON OF TOWN OF CARY AND COUNTY ASSESSED VALUES, LAST TEN FISCAL YEARS _____________________________________________________________________ 213

11 PROPERTY TAX RATES-DIRECT AND OVERLAPPING GOVERNMENTS, LAST TEN FISCAL YEARS ____________________________________________________________________ 214

12 PRINCIPAL PROPERTY TAXPAYERS, NINE YEARS AGO AND CURRENT YEAR _________________ 215

13 PROPERTY TAX LEVIES AND COLLECTIONS, LAST TEN FISCAL YEARS ________________________ 216

14 AD VALOREM TAXES RECEIVABLE, CURRENT YEAR AND LAST NINE FISCAL YEARS __________ 217

15 ANALYSIS OF CURRENT TAX LEVY ___________________________________________________________ 218

16 RATIOS OF OUTSTANDING DEBT BY TYPE, LAST TEN FISCAL YEARS _________________________ 220

17 RATIO OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND BONDED DEBT PER CAPITA, LAST TEN FISCAL YEARS _______________________________________________________ 221

18 COMPUTATION OF LEGAL DEBT MARGIN, LAST TEN FISCAL YEARS __________________________ 222

19 COMPUTATION OF DIRECT AND OVERLAPPING DEBT ________________________________________ 223

20 BOND COVERAGE COMBINED ENTERPRISE SYSTEM BONDS, LAST TEN FISCAL YEARS _______ 224

21 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR BONDED DEBT TO TOTAL GENERAL EXPENDITURES, LAST TEN FISCAL YEARS _________________________________________ 225

22 DEMOGRAPHIC STATISTICS, LAST TEN FISCAL YEARS _______________________________________ 228

23 PRINCIPAL EMPLOYERS, NINE YEARS AGO AND CURRENT YEAR ____________________________ 229

24 COMMERCIAL ACTIVITY, LAST TEN FISCAL YEARS ___________________________________________ 230

25 EMPLOYEE POSITION AUTHORIZATION BY DEPARTMENT, LAST TEN FISCAL YEARS __________ 232

26 OPERATING INDICATORS BY FUNCTION/PROGRAM, LAST TEN FISCAL YEARS ________ 233 – 234

27 CAPITAL ASSETS BY FUNCTION/PROGRAM, LAST TEN FISCAL YEARS ________________________ 235

28 INSURANCE IN FORCE, JULY 1, 2016 - JUNE 30, 2017 _______________________________ 236 – 238

29 TOP TEN UTILITY CUSTOMERS _______________________________________________________________ 239

30 UTILITY RATE INFORMATION, APPROVED OPERATING BUDGET ORDINANCE __________ 240 – 243

31 DEVELOPMENT FEE REVENUE ________________________________________________________________ 244

TOWN OF CARY www.townofcary.org Page 6

TABLE OF CONTENTS COMPLIANCE SECTION

FEDERAL AND STATE AWARDS COMPLIANCE

SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS _____________________ 245 – 247

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS _________________ 248

REPORT OF INDEPENDENT AUDITOR ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ___ 249

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; WITH THE OMB UNIFORM GUIDANCE AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT _______________________________________________________ 251

REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR STATE PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT _________________ 253

SCHEDULE OF FINDINGS AND QUESTIONED COSTS ___________________________________ 255 – 258

SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS ____________________________________ 259

COVENANT COMPLIANCE

REPORT OF INDEPENDENT AUDITOR ON REVENUE BOND COVENANT ________________________ 261

REVENUE BOND STATEMENT OF REVENUES, EXPENSES, DEBT SERVICE, AND DEBT SERVICE COVERAGE _______________________________________________________ 263 – 264

INTRODUCTORY SECTION

October 31, 2018 The Honorable Mayor Harold Weinbrecht Members of the Town Council Citizens Town of Cary 316 N. Academy Cary, North Carolina 27513 Dear Mayor, Members of the Town Council, and Citizens: The Comprehensive Annual Financial Report of the Town of Cary, North Carolina (“the Town”) documents the Town’s financial position and results of operations as of and for the fiscal year ended June 30, 2018. This report is published in accordance with Generally Accepted Accounting Principles (GAAP), set forth by the Governmental Accounting Standards Board. Town management is responsible for both the accuracy of the data and the completeness and fairness of the report. To ensure reliability of the information, management has established a comprehensive framework of internal control. Internal controls protect the Town’s assets from loss, theft and misuse and help ensure that information is reliable for the preparation of this report. Because the cost of internal controls should not outweigh their benefits, the Town’s controls have been designed to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. On behalf of the management team, to the best of our knowledge and

belief, this financial report is complete, accurate and reliable in all material respects. Cherry Bekaert LLP, concluded in an unmodified (commonly referred to as “clean”) opinion that the financial statements present fairly in conformity with GAAP, in all material respects, the financial position and changes in financial position for the Town of Cary, North Carolina, as of June 30, 2018. The goal for the audit is to provide reasonable assurance that the financial statements of are free of material misstatement. To provide further accountability, this report includes notably more information and analysis than just the basic financial statements, and as such is titled the Comprehensive Annual Financial Report, commonly referred to as the CAFR. The report is comprised of four primary sections. The Introductory Section includes this letter of transmittal, Town Council introductions, an organization chart and responsibilities of Town government by department, and a certificate of achievement for excellence in financial reporting. New this year is a FY 2018 Overview. This management overview provides the reader a high level review of the financial planning and strategy that affect financial outcomes for the Town of Cary. The impacts of the local and national economy are also addressed. Additionally, the overview highlights some of the year’s best stories that demonstrate how Town resources were invested in employees, services and projects to support the vision outlined in the Imagine Cary Community Plan. These stories are organized to match the Community Plan sections on Work, Shop, Engage, Shape, Move, Serve, and Act. The Financial Section includes the report of the independent auditors, Management’s Discussion and Analysis (MD&A), the basic financial statements, including the government-wide financial statements comprised of the Statement of Net Position and the Statement of Activities and the accompanying notes to the financial statements.

www.townofcary.org

TOWN OF CARY www.townofcary.org Page 9

FY 2018 OVERVIEW New in FY 2018, this overview highlights key financial results and financial management practices as well as how Town resources have been invested to accomplish the vision set forth in the Imagine Cary Community Plan.

EXECUTIVE SUMMARY The Town of Cary remains in excellent financial condition following another year of positive financial results. The foundation is in place to continue to provide excellent services and future capital investments that will best fulfill the vision and highest priorities in the Imagine Cary Community Plan. This assessment is consistent with Cary’s top bond ratings which reflect the opinions of independent government finance experts on Cary’s financial management. Cary has maintained AAA ratings from all three bond rating agencies for the Town’s general obligation bonds and the Town’s utility system revenue bonds. This crucial benchmark of excellence is a source of pride for Town Council and staff. Cary’s financial management is designed to maintain these high marks.

The Town is in the midst of a transformation to better prepare for the future. A strong foundation is in place, but the development growth patterns that generated notable revenue growth in the past are changing. The community continues to grow, however, at a slower pace. Along with aging infrastructure, the pressure on decision makers to choose their highest priorities for community improvements will increase. Staff is working with new energy to collaboratively break down silos, imagine and implement new efficiencies, improve decision making tools, and develop employees to create a new model of local government that will ensure Cary remains successful in the future.

PROFILE OF THE TOWN OF CARY

Cary is a thriving community of approximately 164,000 citizens in the heart of the Triangle area of North Carolina. Cary and the Triangle area have repeatedly ranked among the top regions in the country to live, work, start a business, raise a family and retire. Cary encompasses approximately 60 square miles in Wake and Chatham counties in the Piedmont region of the state. Cary adjoins the City of Raleigh, which is the state capital and the county seat, at the Town’s southwestern boundary. At the Town’s northwestern boundary, the Town adjoins renowned Research Triangle Park (“RTP”).

TOWN OF CARY www.townofcary.org Page 10

Cary is a diverse community primarily composed of young, affluent and well- educated people. According to the 2010 US census, the median age of Cary’s population is 35.9 years. According to the American Community Survey, over 60 percent of Cary’s adult population has a college degree, and over 19 percent were born in another country.

Several attributes contribute to continued growth in commercial and residential construction. Cary’s attractive development, diversity, historically strong employment, higher education opportunities, warm climate, low crime rates and easy access to outstanding recreational and cultural amenities provide citizens with a high quality of life.

Cary and the surrounding area continue to perform very well in numerous rankings such as the best places to launch a new business, best places for creating and keeping jobs, and quality of life measures. New residential development statistics are highlighted in the Live section of this overview, and commercial activity is addressed in the Shape section of this overview.

HISTORY A settlement called Bradford’s Ordinary was founded in this location in 1750. In 1854, a farmer and lumberman named Allison Francis “Frank” Page and his wife, Catherine “Kate” Raboteau Page bought three hundred acres of land and established several enterprises.

He named his development after Samuel Fenton Cary, a prohibition leader from Ohio whom Page admired. Frank Page was Cary’s first developer, mayor, postmaster and railroad agent. Page, whose main business was a sawmill, laid out the first streets of Cary and built a hotel. What became known as the Page- Walker Hotel is now an arts and history center on Town Hall campus and is listed on the National Register of Historic Places. The extension of the railroads through Cary and a junction of the Seaboard and North Carolina railroads enabled the town to flourish, and on April 6, 1871, the Town of Cary was incorporated.

One of Frank and Kate Page’s sons is Cary’s most famous son. Walter Hines Page (1855-1918) was an editor, publisher, social reformer and proponent of public education. He was ambassador to Great Britain during World War I. The British honored him with a tablet in Westminster Abbey.

A prestigious, private boarding school developed here in the late 1800’s and this school later became famous as the first public high school in North Carolina. The school was located on the site now occupied by the Cary Arts Center, a vibrant and robust center for arts activity for the residents of Cary.

With the development of Research Triangle Park in the 1960s, Cary began to grow as a bedroom community from a quiet town of a few thousand people. In 1963, the charter was amended by the State Legislature to provide for a Council- Manager form of Government. Growth escalated during the 1970s, with the population nearly tripling to 21,763. After doubling during the 1980s and 1990s, the population as of June 30, 2018, is estimated to be 163,930, representing a

Raleigh

Atlantic Ocean

CARY Durham

GreensboroWinston-Salem

Charlotte

Asheville

N

TOWN OF CARY www.townofcary.org Page 11

21% increase from the April 1, 2010, U.S. Census estimate.

TOWN OF CARY GOVERNMENT The Town has a Council-Manager form of government. The seven- member Council is the legislative body of Town government. Two council members and the mayor are elected at-large, and one council member is elected from each of four voting districts. The Council is responsible for setting overall policy, budget approval and appointing the Town Manager, Town Attorney and Town Clerk. The Town Manager is responsible for implementing Council policies and Town Ordinances, managing daily operations, and appointing department directors.

The Town provides its citizens with a full range of services, including police and fire protection, solid waste and recycling services, the construction and maintenance of streets, curbs, gutters, sidewalks and other infrastructure, recreation and cultural activities, fixed route and demand-response transit service, and water, reclaimed water and sewer service. This Comprehensive Annual Financial Report (CAFR) includes all the Town’s activities in delivering and administering these services.

TRANSFORMATION Careful planning and a proactive approach have been hallmarks of the Town’s culture and are responsible for the attractive character of the Town, adequate public infrastructure, impressive service levels and fiscal prudence. The Imagine Cary Community Plan, adopted January 24, 2017, sets out a long-term vision, policies and strategic actions with a time horizon to 2040. The Imagine Cary Community Plan can be found on the Town’s website at www.townofcary.org .

To implement the Imagine Cary Community Plan, Cary is in the midst of an exciting challenge: creating a model of local government that doesn’t yet exist. Creating next-generation service models based on an adaptive mindset and a new way of thinking will ensure that Cary will stay ahead of the curve on trends affecting the community.

This bold mission is an opportunity for a community that, by all objective measures, is at the top of its game. Cary is defined by exceptional citizen service. The Cary Way, as it has come to be known inside the organization, is defined as, “Working together to change lives by exceptional service.” Cary is consistently ranked one of the safest places to live for a community of its size and is a Google Fiber City. The Town has been recognized as a Gold Medal community for parks, recreation, and cultural resources and has been designated an ISO Class 1 Fire Department.

The techniques that allowed Cary to thrive over the past 30 years will not keep Cary successful over the next 30 years. To illustrate, Cary’s leadership has adopted the concept of an arc. Now, Cary is at the top of that arc. Cary has decided to stay at the top rather than risk the path of decline that characterizes other once-great communities that did not maintain their place at the top.

At the same time Cary enjoys a number of positive attributes, the community also faces distinct challenges: an aging population, aging infrastructure, and limited land for development. These challenges can only be addressed with agile, adaptable, and technology-savvy approaches that support risk-taking and creativity in the pursuit of innovation. Commitment to excellence is a defining characteristic of Cary thanks to a culture of excellence set by the Council and, ultimately, Cary citizens.

The Town must remain true to its values while finding ways to change and grow to allow Cary to stay ahead of the curve, on top of the arc, and to become the local government that does not yet exist.’

TOWN OF CARY www.townofcary.org Page 12

FY 2018 FINANCIAL RESULTS GENERAL FUND

Cary’s strong finances have long been a pivotal tool in the development of a remarkable community. Current year results and resources will contribute to continued success. FY 2018 General Fund operating revenues and expenditures maintained a positive growth trend as shown in the five-year perspective below.

A summary of General Fund results on a budgetary basis compared to the final adjusted budget and FY 2017 actual results reflects a complete picture of the FY 2018 outcome. Traditional growth factors such as new development and a growing economy account for the increases in FY 2018 General Fund revenues. Similarly, increases in expenditures reflect expanded and enhanced programs.

The final FY 2018 budget authorized $30.1 million of investment from the General Fund’s fund balance primarily to provide resources for capital projects. The positive operating results caused fund balance to decrease only $12.9 million. As in the past, revenues exceeded budget, and expenditures came in under budget for a net positive budget variance of $17.8 million or 10.7%. Other financing activities accounted for a budget variance of $.6 million.

The sources and uses of FY 2018 General Fund operating resources are shown as a percentage of the whole for perspective. Ten year historical comparisons by revenue source are included in the Statistical Section in Table 7.

FY2018 GENERAL FUND FY2017 to

FY2018 FY2018 % of FY2017 FY2018 % Adj. Budget Actual Budget Actual Variance Variance

Revenues 163.0$ 166.7$ 2% 161.7$ 5.0$ 3%

Expenditures General Government 30.4 25.2 (17%) 19.6 5.6 29% Public Safety 50.2 47.4 (6%) 46 1.4 3% Operations 51 47.4 (7%) 45.7 1.7 4% Development & Infrastructure 18.6 16.6 (11%) 16.7 (0.1) (1%) Debt Service 16.5 16 (3%) 13.5 2.5 19% Total Expenditures 166.7 152.6 (8%) 141.5 11.1 8%

Revenues Over (Under) Expenditures (3.7) 14.1 (481%) 20.2 (6.1) (30%)

Other Financing Sources (Uses) (26.4) (27.0) 2% (21.6) (5.4) 25%

Appropriation from Fund Balance 30.1 -- (100%) -- --

Revenues & Other Sources Under Expenditures & Other Uses -- (12.9) (1.4) (11.5) 821%

Fund Balance - Beginning of Year 101.3 102.7

Fund Balance - End of Year 88.4$ 101.3$

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

General Fund Revenues and Expenses (in Millions)

Revenues Expenses

FY 2018 GENERAL FUND

TOWN OF CARY www.townofcary.org Page 13

Ten year historical comparisons by expenditure function are included in the Statistical Section in Table 5.

The Town’s financial planning ensures that an adequate unreserved fund balance is available to ensure consistent cash flow, generate interest income, and eliminate the need for short term borrowings. Additionally, it provides flexibility for unanticipated opportunities and needs during emergencies. As of June 30, 2018, there was $18.8 million in the General Fund’s fund balance above the Town’s minimum policy of 40% (approximately five months) of the expenditures. In the FY 2019 budget, $5.1 million was appropriated for capital investment.

UTILITY FUND

Utility operations exceeded budget expectations by $7.3 million. Utility revenues increased following a three percent rate increase and modest increases in consumption. The FY 2018 financial plan for the utility included a $33.1 million net contribution from operations to capital projects. This purposeful undertaking helped avoid additional debt and limited utility rate increases. Given the positive FY 2018 results, operating equity decreased only $25.8 million and has capacity to support additional capital needs in the future. The Utility Fund operating margin has grown primarily through rate increases designed to finance a larger component of the utility’s capital maintenance requirements.

Public Safety 31%

Public Works 20%

General Government 17%

Parks, Recreation and Culture

11%

Debt Service 10%

Development 6%

Infrastructure 5%

Where Does the Money Go?

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

Utility Fund Revenues and Expenses (in Millions)

Revenues Expenses

Ad Valorem Taxes 55%

Other Taxes and Licenses 22%

Sales and Services 11%

Unrestricted Intergovernmental 7%

Permits and Fees 3%

Miscellaneous 1%

Restricted Governmental 1%

Investment Earnings 0%

Where Does the Money Come From?

Ad Valorem Taxes 55%

Other Taxes and Licenses

22%

Sales and Services 11%

Unrestricted Intergovernmental

7% Permits and Fees

3% Miscellaneous

1%Restricted Governmental 1%

Investment Earnings 0%

Where Does the Money Come From?

TOWN OF CARY www.townofcary.org Page 14

In the Statistical Section Tables 6 and 8 provide ten-year historical Utility Enterprise Fund comparisons of operating and capital revenues and expenditures.

Cary invested over $81 million in capital planning and infrastructure in FY 2018 for streets, parks, fire, general government, downtown and utility purposes.

An in-depth analysis of the financial position and FY 2018 activities is included in Management’s Discussion and Analysis (MD&A), a component of the Town’s basic financial statements. The format and content of MD&A is prescribed by governmental accounting standards and is highly technical. Some information in this overview is also discussed in MD&A.

The CAFR contains many more insights into Cary’s operations, values and trends than basic financial statements. One section of the report contains statistical data and 10 year trends. These details provide context and history about Cary’s financial position and direction. For example, Cary’s tax base has increased 34% in 10 years to $26.4 billion. Table 12 in the Statistical Section lists Cary’s top 15 taxpayers in FY 2018. The list demonstrates strength in the diversity of the Cary tax base. Because the top 15 taxpayers constitute less than seven percent of the total base of taxpayers, the financial distress of any one taxpayer would not impair the stability of Cary’s tax revenues.

Similar to the largest taxpayers, Table 29 in the Statistical Section lists the largest utility consumers. The top 10 FY 2018 utility ratepayers account for less than eight percent of the utility retail revenues. More notable is the fact that only five of the top 10 are industrial and office uses that generate less than four percent of the utility revenue. The remaining five ratepayers represent institutional and stable uses for schools, hospital, airport and multifamily residential. This positive characteristic of the utility provides confidence that the consumer base is diverse, and the reduction in demand of any one consumer would not impair the financial position of the utility.

ECONOMIC GROWTH Development and population growth have been the main drivers for Cary’s revenue growth for many years. An analysis of the development process and the volume of activity provides insight to current tax base growth. Development “in the pipeline” demonstrates potential for continued growth in the next few years because the process for developers from concept to permitted occupancy can take three years or more. A more detailed analysis of the development process and the FY 2018 activity is included in the Shape section of this overview. Key indicators from FY 2018 include:

Cary’s population is estimated at 163,930 at year end, an increase of 2.2 percent from June 30, 2017.

Assessed value grew $562 million (2.2%), to $26.4 billion, detailed in Table 9 in the Statistical section of this report.

Chatham County value grew to constitute 2.7% of Cary’s total compared to 2.2% in FY 2017. See Table 9.

Construction permit value, less certain other permit values, in FY 2018 was $662.6 million, a 27% increase over FY 2017. That was the second highest annual value in the past 10 years. See Table 24.

Other economic factors affect the Town’s revenue directly or indirectly, including the state and national economies.

The local economy improved in FY 2018, and Cary experienced a 4.8% increase in sales tax revenue compared to FY 2017.

Cary’s unemployment rate, historically less than the county, state and national average, fell to 3.2% in June 2018. See Table 22 and the discussion of local employers in the Work section of this report.

The Town continued to bring in visitors for amateur and professional sports. The quality of Town facilities and service draw NCAA, ACC, USA Baseball and USTA events at its soccer, baseball and tennis venues. NC Football Club and the Carolina Courage, an American professional women’s soccer team, are at home in Cary at the WakeMed Soccer Park. The Town also welcomes the SAS Championship, a golf tournament on the Champions Tour played annually at

TOWN OF CARY www.townofcary.org Page 15

Prestonwood Country Club.

CARY’S FINANCIAL POSITION Cary remains in excellent financial condition. Cary has capital resources, revenue capacity and an expense management culture that will provide Council with choices on how best to fulfill the vision and highest priorities in the Imagine Cary Community Plan. The vision and desire to provide even higher service levels continues upward on an exponential path. Setting priorities for capital investments and the quest for operational efficiencies have become essential discipline.

The core building blocks of AAA rated financial management are in place. Town finances are based on a solid foundation of fund balance, cash reserves, and manageable debt. Well maintained infrastructure and revenue capacity exists in the tax base and in model citizens who are here by choice. These assets provide Cary’s elected officials the resources to protect Cary’s position and to continue to provide quality services.

CASH MANAGEMENT Cary manages the cash resources of all funds in one pool to maximize investment earnings and efficiency. At the end of the year the market value of Cary’s pooled cash and investments for all funds totaled $550.3 million. Investment income is allocated monthly to each fund based on average cash balances.

Throughout the year Cary maintains a minimum of $40 million in bank accounts to ensure that Cary has immediate access to funds. The remainder of the portfolio is invested in securities that ensure the safety of the principal and earn maximum interest income.

Cary’s cash management policy complies with state law, which specifies the types of securities that may be purchased for investment. Permissible investments essentially include only highly rated securities to ensure the preservation of principal. Securities such as treasury obligations of the US government, its agencies and sponsored corporations as well as highly rated corporate and municipal bonds are allowable. Equity or speculative securities are not allowed. Cary’s investments mature in less than five years.

A weekly cash forecasting model and investment plan considers Cary’s balance of investments to ensure cash flow and diversity of securities. This approach results in a laddered portfolio with 660 average days to maturity. The portfolio maturity extends to April 2022 with approximately $3.5 million maturing weekly. In all but the rarest of circumstances, investments are held to maturity. As a result, the Town does not incur any gains or losses due to market price fluctuations that are reported in the financial statements.

This approach prevents Cary’s interest income from decreasing quickly in a falling rate environment. Conversely, in a rising rate environment, Cary’s average investment portfolio yield rises more slowly than market rates. The portfolio investment earnings compare favorably against a benchmark of a simpler cash management approach based on investing routinely into two-year US

Liquid Cash $70.3 13%

Municipal Bonds $10.5

2%

Fixed Income Securities

$369.9 67%

Treasuries $99.6 18%

Cash and Investments by Type (in millions)

TOWN OF CARY www.townofcary.org Page 16

Treasury securities. Cary’s managed approach has consistently outperformed the benchmark by 10 to 20 basis points. Measured conservatively on a $400 million portfolio, 10 basis points provides an additional $400,000 in investment income for Cary.

The Federal Reserve increased federal funds interest rates twice during FY 2018. These rate hikes impacted market interest rates, and the average rate on Cary’s investment portfolio increased from 1.03% for FY 2017 to 1.31%. Moreover, the rate hikes impacted the Town’s earnings on cash accounts.

Cary uses an independent financial advisor to project cash flow and to monitor and report quarterly on portfolio management. These financial advisors also support Cary’s debt management program.

More details about Cary’s deposits and investments are included in Note 2 to

the financial statements.

DEBT MANAGEMENT Cary’s long-term obligations are explained in detail in Note 9 to the financial statements. A component of those long-term obligations is in the form of bonds issued to finance capital improvements. In FY 2018 Cary incurred new general obligation debt and refinanced both general obligation bonds and revenue bonds to reduce future interest expense.

GENERAL OBLIGATION BONDS Certain street, parks and fire capital projects were funded with debt authorized by Cary voters in the 2012 referendum. Cary has borrowed against the $80 million voter authorization three times. The third bond sale occurred in September 2017 for $30 million. The competitive bond sale was conducted by the NC State Treasurer’s office on behalf of Cary. The bonds sold in a low interest rate market with strong competition, demonstrated by 14 financial institutions that bid on the bonds. The winning bid was for an average interest rate of 2.5% for 20 years. For comparison, similar 2014 bonds bear an average

interest rate of almost 3%.

At the same time, Cary issued $28.8 million of refunding bonds to refinance existing general obligation bond debt. The transaction reduced future interest expense by approximately $1.4 million that benefits both the utility fund and the general fund over the next 11 years.

The bond rating agencies updated and confirmed Cary’s general obligation bond AAA ratings as part of the bond sale process.

UTILITY REVENUE BOND SALE

Late in calendar year 2017 new federal legislation was proposed to limit a specific type of tax-exempt refinancing bond sale. In anticipation of the legislation’s effective date of December 31, 2017, Cary moved quickly to refinance $92 million of utility revenue bonds. Because Cary bonds are highly rated and relatively rare within the total tax-exempt bond market, the negotiated bond sale resulted in favorable interest rates. Cary locked in $8.6 million of interest savings for the utility over the next 20 years. As part of the sale process, the bond rating agencies updated and confirmed Cary’s AAA revenue bond ratings.

TOWN OF CARY www.townofcary.org Page 17

Staff members at Town Hall watched the bond sale as it progressed.

BONDED DEBT AMORTIZATION Debt payments in the General Fund decline over time because the debt is repaid more aggressively than a traditional mortgage structure. Typically, debt incurred for general capital projects is repaid within 20 years or less and the payments shrink over time because, instead of level debt payments, the payments are structured with level principal commitments. As the debt is repaid, the interest component of the payments shrinks. This repayment structure, which is mandatory under North Carolina statutes for general government projects, creates debt capacity for the priorities of future elected officials. Utility Fund debt is structured with level payments over a longer term, which recognizes the longer life of utility assets and the capacity for future rate increases for utility service.

The Town has additional voter debt authorization of $13.7 million in street bonds, $1.8 million in parks and recreation bonds and $.5 million in fire bonds resulting from a 2012 referendum that remains unissued at June 30, 2018. Of the $16.05 million total in general obligation debt authorized but unissued at June 30, 2018, $3.4 million has been appropriated to capital projects. Future capital projects could be funded with the remaining authorization.

$0

$5

$10

$15

$20

$25

FY 20

19 FY

20 20

FY 20

21 FY

20 22

FY 20

23 FY

20 24

FY 20

25 FY

20 26

FY 20

27 FY

20 28

FY 20

29 FY

20 30

FY 20

31 FY

20 32

FY 20

33 FY

20 34

FY 20

35 FY

20 36

FY 20

37 FY

20 38

FY 20

39 FY

20 40

FY 20

41 FY

20 42

FY 20

43

FUTURE DEBT SERVICE, in Millions

General Fund Utility Fund

TOWN OF CARY www.townofcary.org Page 18

PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS Because Cary values employees are one of its most important resources, significant dollars (averaging 35%-40% of annual salary per employee) are spent each year on a competitive, comprehensive benefit program.

Cary is a participating employer in the statewide Local Governmental Employees’ Retirement System (LGERS). The defined benefit pension plan is administered by the State of North Carolina. The pension plan is considered one of the top plans in the nation because it is well funded and prepared to meet future obligations to retirees.

Other Post-Employment Benefits (OPEB) are retiree benefits for health insurance. Cary established retiree health insurance benefits to attract and retain experienced employees and recognize the significant value of long- term service. These benefits include health, dental, vision and life insurance coverage to qualified retirees until the retiree reaches the age when they are eligible for Medicare. Upon eligibility for Medicare, Cary provides a Medicare supplemental policy. Cary funds retiree OPEB annual expenditures through the operating budget, and in FY 2018 those expenditures totaled $2.0 million.

New accounting and reporting rules effective for all governments regarding future obligations for OPEB have changed Cary’s financial statements. Cary’s $146.4 million obligation for OPEB constitutes a liability which had previously been reported in the notes to the financial statements. The new rules make the OPEB liability readily apparent on the face of the entity wide statements. Note 12 provides details about the program and obligation. The new reporting requirements did not change the economic financial position of Cary or mandate OPEB funding.

Over the last two fiscal years Cary specifically set aside a total of $2.3 million for its OPEB liability in the Health Insurance Internal Service Fund. Another $1.6 million was set aside in the FY 2019 budget. Additional resources exist in the net position of the Health Insurance Internal Service Fund. A study to examine alternatives to manage current and future liabilities is underway. The study is a

collaborative effort considering both financial and human resources priorities.

Benefits for law enforcement personnel include a separation allowance. Cary has a pension liability of almost $10.9 million for this pension obligation and funds the separation allowance on a pay-as-you-go basis.

More information about these benefits is included in the Required Supplementary Information sub-section of the Financial Section of the CAFR.

RISK MANAGEMENT Cary manages insurable risks through a combination of self- insurance and the purchase of insurance policies. Risk management consultants and a competitively selected insurance broker work with Cary to analyze and establish risk coverage in a cost-effective manner. Cary also uses a third-party actuary to estimate claims incurred but not reported.

Cary self-insures workers compensation coverage and employee health and dental claims up to certain limits for risks beyond those limits, exposure is covered with third party stop-loss policies. Cary also self-insures small claims

TOWN OF CARY www.townofcary.org Page 19

and losses under the deductible limits of property and liability coverage.

Cary’s approximately $20 million health insurance program is accounted for in an internal service fund. Schedules 16, 17 and 19 in the Internal Service Fund sub-section to the Financial Section of this report provide more details about annual activities.

Note 11 to the financial statements provides details about the self- insured claims, and Table 28 provides details on property and liability insurance in force during FY 2018.

CAPITAL INVESTMENTS Each year the town adopts a capital improvement budget and prepares a 10- year capital improvement plan. Annually, newly budgeted projects are added to the inventory of work and completed projects are placed into service. In FY 2018 the Town continued to manage approximately 400 capital projects. As the Town’s infrastructure ages, a greater percentage of capital projects are for maintenance and rehabilitation.

Cary’s financial commitment to capital planning and construction is notable. In FY 2018 total capital spending was over $81 million, an average of over $1.5 million invested in infrastructure planning and construction every week. Street, water and parks projects comprised almost 80 percent of total spending. The total budget for active projects in FY 2018 was over $700 million.

During FY 2018 project spending facilitated the following accomplishments:

Four newly constructed lanes of Green Level West Road from Glenmore Road / Capistrane Drive to NC-540 opened to traffic

43 miles of Cary-maintained streets were improved including 16 miles of milling and resurfacing; 62 street segments patched totaling seven miles; and 20 miles of street rejuvenation

Design and permitting work continued on Fire Station #9

Construction continued on a 42-inch third pipeline to provide raw water transmission capacity and redundancy

Wake County broke ground on construction of the new downtown Cary regional library. The Town funded parking deck located on this site will be constructed as part of the larger project.

Streets $25.7

Water $24.3

Parks $12.3

Sewer $7.5 Downtown

$5.2

General Govt $4.9

Fire $1.1

FY 2018 CAPITAL SPENDING, in millions

TOWN OF CARY www.townofcary.org Page 20

Fire Station 9 Design

FINANCIAL SYSTEMS AND BUDGETARY CONTROL The Cary Town Council is required to adopt a balanced budget by July 1 of each year. The Town is empowered to levy a property tax on both real and personal property to fund general government activities. Water, sewer and reclaimed water rates are also levied to fund the utility enterprise system.

Most General Fund revenues are collected by other government agencies and remitted to Cary. Wake County and Chatham County bill and collect property taxes with notable success. Cary received 99.9% of the levied real property taxes in FY 2018. The NC Division of Motor Vehicles collects vehicle property taxes and license fees. The State of North Carolina collects and remits sales taxes. Cary manages revenue collection systems for fee-based services such as parks and development services. Solid waste fees are collected in concert with monthly utility billing.

Utility Fund revenues are collected by staff through the preparation and delivery of approximately 62,000 monthly bills for utility service to users in both Cary and Morrisville. The economic demographics of the user base are strong, and

Cary provides ratepayers with multiple ways to pay their utility bills. Almost 100% of active Cary utility ratepayers meet their obligations on a timely basis.

The Town’s budget ordinance creates a legal limit on spending authorizations and serves as the foundation for Cary’s financial planning and control. The budget is prepared by fund and function, Examples include the General Fund and Public Safety. The Town Manager is authorized by the budget ordinance to make certain limited transfers within funds to facilitate budget execution consistent with Council intent.

To manage hundreds of thousands of individual financial transactions Cary maintains a system of internal controls. Leadership from Council and management has established an effective internal control environment with clear and consistent expectations for ethical, prudent and transparent financial management and operations.

FINANCIAL REPORTING In FY 2018 Cary’s quarterly reports were strengthened with the addition of interim financial results and analysis. The reports are available at www. townofcary.org. The financial results were also presented at new quarterly meetings with Council.

TOWN OF CARY www.townofcary.org Page 21

Carolina, the retailers are already collecting and remitting sales tax. The NC Department of Revenue (DOR) reported an intent to collect sales taxes on most other internet retail sales beginning November 2018. DOR estimates an annual state revenue increase of $75 million, and a corresponding local increase of $35 million, annually. Given that the local annual increase of $35 million would be spread to units across the state, the impact on Cary will be minimal.

Investment earnings are expected to increase for all funds. The Federal Reserve raised the federal funds rate three times in calendar year 2018 from 1.50% to 2.25%. Most economists anticipate another rate hike in December 2018. Rate increases benefit Cary’s interest income earning potential on the $500 million investment portfolio, increase the interest expense on approximately $29.3 million of Cary’s variable rate debt and increase interest rates on future debt financing.

The FY 2019 capital budget relies on additional debt. Cary plans to borrow approximately $8.6 million in the fall of 2018 to finance a large portion of the construction of Fire Station #9 as well as a portion of the cost of two replacement aerial ladder trucks. The new Fire Station will be pledged as collateral for a competitively bid installment loan from a single financial institution. The debt will be repaid over 15-20 years, not to exceed the life of the respective new assets.

The FY 2019 budget document reflects a fresh perspective with modern formatting, style and generous use of pictures, charts and graphics. It represents a first step in creating a budget that integrates the Imagine Cary Community Plan, while conveying information in an inviting and easily-consumable format. The FY 2019 Annual Operating Budget and the Capital Improvements Budget/ Plan can be found on the Town’s website at www.townofcary.org.

LONG TERM FINANCIAL PLANNING To ensure Cary maintains its AAA rating and remains in a strong financial position, Cary began work in FY 2018 to develop a financial forecasting model that projects the general fund financial position for five years. The model can

LOOKING AHEAD: FY 2019 BUDGET AND ECONOMIC CONDITIONS On June 28, 2018, the Cary Town Council approved a $347 million budget for FY 2019. The budget allocates $252 million for operations and $95 million for capital projects. Highlights include:

12 new firefighters to staff a ladder truck for western Cary;

An additional $8.7 million for the Carpenter Fire Station Road widening;

$7.1 million for street improvements;

$2.7 million for stormwater assistance and drainage improvements;

$500,000 for continued downtown revitalization

$215,000 to renovate portions of two community centers.

An increased focus on employee training and the implementation of new technology to improve organizational efficiency and drive engagement are also included.

Cary’s property tax rate remained unchanged at 35 cents per $100 of real property value. However, to improve streets and sidewalks, the vehicle license fee increased from $15 to $30. And to move toward full cost recovery, the monthly solid waste fee increased a dollar – from $16 to $17 per month for residential service. Utility rates also increased three percent for a typical household.

Council adopted the FY 2019 budget based on growth patterns like 2018, with slightly increasing sales tax revenues. Subsequent to budget adoption, the North Carolina League of Municipalities (NCLM) published a quarterly revenue report that focuses on statewide revenues affecting municipalities. The September report states that “North Carolina’s economic outlook continues to be positive, though with some signs of slowing.” Multiple factors impact the outlook, but one key factor was strong job growth in the first six months of 2018.

In June 2018 the Supreme Court ruled that local sales taxes could be imposed on internet retailers in states where they have no physical presence. Because most of the top e-commerce retailers have a physical presence in North

TOWN OF CARY www.townofcary.org Page 22

demonstrate the financial impact of significant development, tax rate increases and/or capital investments and incorporates inflation indicators by expense category. Reports illustrate Cary’s actual and projected fund balance and debt capacity compared to Council policies to ensure that Cary remains in compliance with these important financial indicators.

Cary’s utility rate strategy is informed by a 10-year utility rate model. The model processes projections on consumption, other revenues and expenditures. Over the past two years the model has been adjusted to reflect decreasing per capita demand based on Cary’s experience and national trends. Industry experts attribute changing demand patterns to water efficient home appliances and environmental awareness. In Cary, price elasticity may also be a factor as well as heightened awareness due to the availability of hourly usage data through Aquastar. Reports from the model include a sophisticated dashboard of strategic indicators that are used by staff to recommend rates that meet or exceed Cary’s policies for day’s cash on hand and debt service coverage ratios.

Plans are in place to enhance long term financial planning for financial sustainability and capital investments. Annually, Cary updates the 10-year capital plan as part of the budget process. In FY 2019, the capital plan will be reviewed and reconsidered in detail to ensure that the plan matches the Imagine Cary Community Plan and priorities outlined in Cary’s Buried Infrastructure Asset Management Plan and master plans for transportation, parks, water, sewer and stormwater.

SERVICES AND PROJECT ACCOMPLISHMENTS Town resources fund operations, capital investments and other initiatives to serve citizens. Citizen satisfaction with the Town has been gauged every other year since 1998 by a consultant in a scientifically valid citizen survey. In FY 2018 approximately 400 Cary residents were asked to state their opinions on how well their government works for them. Specific topics were addressed including housing, safety, quality of life, service, flooding, communications, street repair, the environment, and recreation facilities. The executive summary of the consultant’s report begins with a summary statement that the results were “exceptionally positive” and goes on to conclude “This year’s ratings represent the best results the Town has earned, exceeding the previous “gold standard” of the year 2012.” The Cary Fire Department continued to earn the highest marks with A+ ratings for response time, competence, courteous, fairness and problem solving. The executive summary as well as the entire survey can be found on the Town’s website at www.townofcary.org

Key events and accomplishments are highlighted in the following eight sections, which are organized to match the structure of Cary’s guiding vision set out in the Imagine Cary Community Plan; Live, Work, Shop, Engage, Shape, Move, Serve and Act.

TOWN OF CARY www.townofcary.org Page 23

WORK: ASSURING CONTINUED PROSPERITY Cary was long considered successful as a bedroom community to Research Triangle Park (RTP), and the cities of Raleigh and Durham. As part of the development of the Imagine Cary Community Plan, data analysis confirmed that Cary had grown into an employment center of its own. Business days result in a net migration of citizens into Cary for work.

A highly educated workforce and a competitive cost of doing business have drawn major employers. Cary is extremely fortunate to be the home of SAS Institute, the world’s largest privately held software company. SAS Institute, Inc. has been recognized as one of the best places to work by Fortune Magazine for more than 20 years, and has provided stable, growing employment since its inception.

Other major employers within the town limits include Met Life, Verizon Business, Epic Games, Kellogg’s Snacks, Fidelity Investments, John Deere Company, Siemen’s Medical Solutions USA, HCL Technologies, ABB, Inc, American Airlines Reservations Center, and DB Global Technologies.

Notable employment news in FY 2018 included:

Trilliant, a global leader in smart grid technology, announced they were relocating their HQ from Silicon Valley to Cary.

MetLife broke ground on MetLife3 to make a place for 500 additional jobs.

Verdesian Life Sciences created 35 new jobs. Verdesian helps farmers do more with less in the cutting-edge field of ‘nutrient use efficiency’

SAS Institute opened a new fraud and security intelligence division with 70

new employees.

The Cary unemployment rate has historically been extremely low and consistently lower than state and national averages. In June 2018, Cary’s unemployment rate was 3.2%.

Beyond Cary’s borders, citizens benefit from the employment base in RTP where there are approximately 50,000 jobs in high-technology fields at over 200 companies. Throughout the triangle region, state government, healthcare and three major universities round out a diverse group of employers in the region that has historically been stable and less sensitive to economic downturns. The employment community is repeatedly recognized in studies, rankings and accolades.

A comparison of Cary’s principal employers in FY 2018 and its principal employers 10 years ago in FY 2009 are listed in Table 23 in the Statistical section. SAS Institute, Inc, remains the number one employer providing over six percent of the jobs in Cary.

Cary’s own employees benefit from a positive environment that fosters their growth and job satisfaction. Cary’s Statement of Values, listed along with the Mission Statement, recognizes that employees are our most important resource. Cary’s Human Resource Department delivers a competitive, comprehensive benefits program to serve the needs of employees and their families.

NEW EMPLOYEE TRAINING ACADEMY

The Town kicked off a refreshed training program, maintaining Cary’s commitment to employee development by utilizing trainers and skills from across the organization and broadening content. Classes include topics such as public speaking, technology use, and emotional and social intelligence. Subjects also include introverts and extroverts in the workplace, women’s safety, personal budgeting, and supervisory training. Academy Shorts, a new sharing and learning concept, features one-hour opportunities for interested Town employees to share tips and skills on specific topics such as time management, organizational skills, and managing multiple priorities.

CARY

TOWN OF CARY www.townofcary.org Page 24

Since 2003, citizens have been enjoying a hands-on look at Cary’s operations behind-the-scenes through the School of Government program. OneCary classes make this content available to all employees by offering a look at the people, equipment, and facilities providing services to citizens. Employees also have access to training on the main concepts of Town’s organizational renaissance. Employees completing all OneCary classes earn recognition for their dedication to a well-rounded understanding of the Town.

EMPLOYEE RECOGNITION RECEPTION AND LUNCHEON

Cary manages a number of recognition programs, but the largest is the Town’s annual Employee Recognition Reception and Employee Luncheon. Respecting the “OneCary” effort, employees from all parts of the organization contributed time and expertise to develop various aspects of new and exciting programs in FY 2018.

In November, over 300 employees gathered in the Cary Arts Center to celebrate 11 Employee of the Year nominees and 186 service award recipients. Also recognized were employees who were celebrating 5, 10, 15, 20, 25, and 30 years with the Town. Employees appreciated the chance to socialize and congratulate their coworkers.

In December, Cary’s Mayor, Town Council members and retiree guests joined nearly 700 employees to celebrate and honor the work of staff at the annual Employee Luncheon.

SHOP: CREATING VIBRANT DESTINATIONS SMALL BUSINESS SATURDAY PROCLAMATION

The Town of Cary has officially recognized Small Business Saturday with a proclamation for the past four years. Small Business Saturday is an initiative to encourage shopping locally in small businesses on the Saturday following Black Friday. The national promotion has been successful in bringing both awareness and increased sales to small businesses across the country. Council members presented the official Small Business Saturday Proclamation as part of the Cary Chamber 2017 Business Expo.

WEGMANS

In FY 2018 construction permits were issued for Twin Lakes Shopping Center, a 158,300 square foot commercial shopping center that includes the Cary’s first highly anticipated Wegmans grocery store. A second Wegmans is planned in the Fenton development on the Town’s eastern border.

TOWN OF CARY www.townofcary.org Page 25

ENGAGE: EXPERIENCING THE CARY COMMUNITY BUILDING BRIDGES

In August 2014 an officer-involved shooting took place in Ferguson, Missouri. Over time incredible unrest developed throughout the country, specifically concerning the relationship of law enforcement and communities of color. While Cary did not see problems on this level, the incident did create conversation in the black community about the uncertainty. It was that uncertainty that drove a Cary resident, Tru Pettigrew, to the Cary Police Department. This key step was the beginning of a relationship and a partnership that would last.

Through the ensuing years, Tru and the members of the Cary Police Department have worked with diligence and persistence to ensure there is a relationship between communities of color and Cary police officers. Based on the premise that consistency builds familiarity and familiarity builds trust, opportunities were created through forums, classes, church visits and cookouts, to build and maintain close relationships. The most impactful of these efforts has been the Barbershop Rap Sessions.

Members of the police department and the black community began having regular conversations on the first Saturday morning of every month. These relationships grew in trust and familiarity and although these community members learned to trust Cary officers their trust only extended to the Town limits. To address this perception, police chiefs and police officers from other towns were invited to the discussions to help community members throughout our entire region. Police Chiefs and officers from Apex, Fuquay-Varina Morrisville, Holly Springs, Raleigh, and Knightdale, as well as Wake County

Sheriff Donnie Harrison, have all attended the Barbershop Rap Sessions, and many have taken the concept back to barbershops in their towns.

In October 2017 Tru and the police chiefs from Cary, Apex and Raleigh attended the International Association of Chiefs of Police conference. This conference, which includes nearly 17,000 police chiefs and police executives from around the world, is the largest, most well attended conference for law enforcement professionals in the world. Together, Tru and our local police chiefs presented a workshop titled, “Barbershop Rap Sessions: Are They the Key to Community Engagement”. In addition, the Commission on Accreditation for Law Enforcement funded a video that featured four of the area’s local barbers talking about how transformative the Barbershop Rap Sessions had been in their shops and communities.

Just before the session began, the group learned that the Chief of Police from Ferguson was part of the assembled crowd. The workshop was successful, and afterwards, the Chief of Police from Ferguson sought advice on bringing the program to Ferguson. Since the concerns following riots in Ferguson drove Tru through the doors of the Cary Police Department the connection was incredibly meaningful and has shaped the world beyond Town limits.

BARBERSHOP RAP SESSIONS’ INFLUENCE GROWS

Based on the success of Barbershop Rap Sessions, Cary spun off two similar

TOWN OF CARY www.townofcary.org Page 26

initiatives, Town Rap Sessions and the STARTERS Program. Like the Barbershop Rap Sessions, these two platforms promote open dialogue and foster greater understanding of others’ perspectives.

In January, rap sessions for staff started at Town Hall to provide employees a forum to discuss race relations and other sensitive issues such as generational differences, the #MeToo movement and managing change. In addition, the Cary Police Department kicked off its Students That Are Restoring Trust, Empathy, Respect, and Support, or STARTERS program. This youth-focused mentoring program was initiated by high school resource officers and students to provide a discussion forum that is mediated and moderated by students. This program tackles issues that are important to today’s youth and tomorrow’s leaders.

CARY YOUTH LEADERSHIP TOWN HALL VISIT

In March, the Town welcomed 43 high school juniors participating in a Cary Chamber of Commerce Youth Leadership program. Established in 1998, Youth Leadership Cary develops the potential of future leaders. The program helps students understand how government, business and individual leaders work together as integral community members.

CARY TENNIS PARK – ATLANTIC TIRE CHAMPIONSHIPS

The Cary Tennis Park hosted the Atlantic Tire Championships, an ATP professional tennis tournament, September 11-17, 2017. The event featured 19 participants directly from the US Open Tennis Championships in New York and brought in players from 13 countries. This created the strongest field to date with the top two seeds ranked within the top 100 tennis players in the world. The event attracted approximately 5,000 spectators, the highest attendance in the three-year history of the event. Kevin King, the winner of the 2017 Atlantic Tire Championships, is a product of the strong program at the Cary Tennis Park, where he trained between the ages of 13-17.

ENVIRONMENTAL OUTREACH

To commemorate the 9-11 Day of Service, Spruce events spanned the course of two weeks. Volunteers worked with our fire fighters to “spruce up” 20 vegetable beds at five fire stations town-wide.

TOWN OF CARY www.townofcary.org Page 27

CHINESE LANTERN FESTIVAL

The third annual Chinese Lantern Festival at Booth Amphitheatre was a success with over 84,000 attending.

CARY APPROVED TO BECOME CERTIFIED LOCAL GOVERNMENT

Cary earned a designation as a Certified Local Government (CLG) under the National Park Service’s Federal Preservation Program from the NC Department of Cultural Resources’ (NCDCR) Historic Preservation Office. This certification establishes a partnership between three levels of government (federal, state and local) for the identification, evaluation and protection of historic and archaeological resources. North Carolina’s CLGs receive expert technical historic preservation assistance from the National Park Service, the State Historic Preservation Office, and from other North Carolina CLGs. In addition, CLGs can apply for historic preservation grants available only to CLGs. To become a CLG Cary demonstrated to the State Historic Preservation Office that it has built a sound, local preservation program meeting federal and state laws and standards and established a professionally-qualified historic preservation commission. Close to 2,000 local governments participate in the CLG program across the country. In North Carolina, 51 local governments, including Cary, have been designated as a CLG.

PARK RENAMING FOR KAY STRUFFOLINO

In November 2017, Council renamed Meeting Place Park after Kay Struffolino, a citizen who has dedicated over 40 years of her life to the improvement of Cary. This park, near downtown, features the Meeting Place sculpture and received some finishing touches to go with its new name such as sculpture lighting, additional landscaping, and updated signage.

SHARE & CARE

Share & Care, an event now in its fourth year, provides a resource fair for persons with disabilities, their caregivers, families and friends by hosting almost 50 organizations and businesses. Agencies offering programs, services and resource information were on hand in February to network with over 200 attendees. This program has grown each year as the demand for resources for persons with disabilities increased.

TOWN OF CARY www.townofcary.org Page 28

DOWNTOWN CARY PARK

A cross departmental team worked throughout the year to hire a renowned consultant to lead the master planning process for the downtown park. The process was evidence of a new culture in the organization where employees volunteered to contribute to the process with time outside their traditional roles.

WWW.TOWNOFCARY.ORG

Cary’s website continues to evolve to provide information and allow citizens to conduct business 24/7. In FY 2018 a feature was added that allows citizens to initiate new utility service. This enhancement added to the traffic that generated almost five million views in FY 2018.

SHAPE: GUIDING COMMUNITY GROWTH The process for new development is composed of three major stages. Land rezoning creates an entitlement for property. The process can take up to 12 months and is preceded by a pre-application process with staff to evaluate how a rezoning proposal fits within the Imagine Cary Community Plan. Development plan review is another year long iterative process that, on average, completes five staff review cycles. Next, developers obtain permits to initiate construction that must be completed within five years, including inspections.

At the end of FY 2018, there were 30 cases in the rezoning process. During FY 2018, the Town approved 92 nonresidential development plans. These plans can range from a development as small as three townhomes to a large mixed-use proposal.

Single-family permits are key indicators of

economic activity in Cary. In FY 2018, the Town issued 1,128 single family permits, the highest number since FY 2014, and 4% greater than the five-year average of 1,087. Of the 1,128 single-family permits issued in FY 2018, 382 (34%) were attached/ townhomes.

TOWN OF CARY www.townofcary.org Page 29

Multi-family permits are measured by individual units rather than the number of buildings and vary across years as a reflection of apartment occupancy rates. In FY 2018, 366 multifamily units were permitted which is down 17% from the five-year average of 439.

Non-residential development is measured by square footage, and for FY 2018, totaled almost 1.9 million square feet. The permit for the third MetLife office and parking structure was a significant project and impacted the outcome, which was up 39% from the five-year average of almost 1.3 million.

Permits for additions and alterations also contribute to growth in the Town’s tax base. Permitted construction in FY 2018 totaled $662 million in value as reported by contractors at permit application. Quarterly reports, available at

TOWN OF CARY www.townofcary.org Page 30

www.townofcary.org include more details about specific projects throughout the year. Table 24 in the Statistical section of this report includes 10 years of history for building permit counts and values.

Cary is empowered by state statute to extend its corporate limits by annexation. Just over 113 acres became part of the Town of Cary through 11 voluntary annexations in FY 2018, resulting in an increase of $12.7 million to the tax base. These annexations are typically a step in the development process during the development plan review phase.

ELECTRONIC PLAN REVIEW FOR BUILDING PERMITS GOES LIVE

In FY 2018, Cary implemented electronic plan review for building permits. Electronic plan review saves design professionals, contractors and citizens printing costs for plans and reduces travel to Town Hall since plans can be submitted remotely, 24/7. In addition, the program improves staff efficiency during the review process and allows staff to access approved plans electronically from the field. This initiative has received overwhelmingly positive feedback from everyone involved.

TOTAL INSPECTIONS

Once permits are issued and construction begins, the inspection process begins. Inspections in FY 2018 totaled just over 77,200, which is up just slightly from the five-year average of approximately 76,049. The chart below demonstrates the cyclical nature of inspection activity. Variances in the volume of work reflect the impact of outdoor temperatures and weather on construction.

EASTERN CARY GATEWAY

The Eastern Cary Gateway is an 800-acre special planning area located on the Town’s eastern border, adjacent to Raleigh along the interstate 40 corridor. Nearly one third of the area is undeveloped. The Town has focused on the area to ensure that new development and redevelopment fulfill the vision of the Imagine Cary Community Plan. A web page for the Eastern Cary Gateway (http:// bit.ly/EasternCaryGateway) was created in FY 2018 to provide a consolidated point of information about development activity.

TOWN OF CARY www.townofcary.org Page 31

Eastern Cary Gateway Strategy Team

A multi-departmental Strategy Team is in place to discuss, plan, and ultimately implement a strategy that will ensure the success of the Eastern Cary Gateway Special Planning Area vision. Sub-groups have been formed to discuss high level strategies for implementing the vision. These sub-groups include Mobility, Soccer, Development, Relationships, Economic Development, and Town Participation. Staff from across the organization and almost every department as well as Cary Chamber of Commerce staff participate in the sub-group discussions. This team can ultimately be the model for proactively ensuring that Council’s vision of the Special Planning Area becomes reality and a model for other high priority initiatives.

Fenton Rezoning

Progress toward the construction of Fenton, a proposed mixed-use development located in the Eastern Cary Gateway Special Planning Area, was a major focus area for the Town throughout the fiscal year. The Fenton project is an approximately 92-acre site on the north side of Cary Towne Boulevard between I-40 and Adams Elementary School.

The Preliminary Development Plan (PDP) proposes vertically mixed uses designed around an “L-shaped” main street where residential and/or office uses are located on top of ground-floor retail tenants. The PDP provides a variety of pedestrian corridors. A total of eight parking decks are proposed, with many of the buildings wrapping around and screening the decks. Several office buildings and one or more hotels are proposed as part of the project. Six community gathering areas are also integrated into the development to provide both passive and active opportunities for residents and visitors.

LIVE: FOSTERING STRONG NEIGHBORHOODS LAURA DUNCAN ROAD/LAUREL PARK ELEMENTARY

In October 2017, a 10-year-old girl left Laurel Park Elementary School and was crossing the street to go home when she was hit by a car on Laura Duncan Road. Fortunately, she suffered only minor injuries. There was no crosswalk at this location. Laurel Park Elementary School is in Cary; the neighborhood across the street is in Apex town limits. Laura Duncan Road is a state road in Wake County. The Apex Police Department handled the law enforcement response, and the Cary Fire Department assisted as medical first responders. Following this near tragedy, citizens requested increased enforcement efforts and a crosswalk.

When Apex and Cary were looking at safety improvements in the aftermath of this incident, it became clear that neither jurisdiction had authority to do so. To ensure that jurisdictional authority is clear and to protect the safety of the public in the future, Cary supported an Apex legislative request to annex this section of roadway because Apex owns utilities within the right of way. The General Assembly approved legislation to make the annexation effective on

TOWN OF CARY www.townofcary.org Page 32

June 30.

STORMWATER

The Town initiated an adaptive stormwater management pilot program downtown in the Walnut Creek Basin, located east of Academy Street in the downtown Maynard Road. Future development of the Downtown Park and redevelopment opportunities throughout downtown, acted as a catalyst in choosing this location to initiate the pilot. The results and findings of this program will serve as a template for managing stormwater throughout Town.

Based on the outcome of the 2018 Council/Staff retreat, an Adaptive Stormwater Steering Committee was formed including five strategic work groups to focus on:

Downtown Stormwater Citizen Working Group

Basin Model Pilot Development

Stormwater Ordinance Revisions

Stormwater Infrastructure Maintenance Program

Open Space Preservation

The Stormwater Steering Committee strives to achieve a 360-degree view of stormwater in Cary by drawing on expertise from a multi-departmental group of staff. To break the traditional autonomous program development mold, the Town added value by incorporating the perspectives of our Downtown Stormwater Citizen Working Group.