Week 4 Assignment 2 - Financial Reporting Review of Local Government

Town_of_Cary_FY2020_CAFR.pdf

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NORTH CAROLINA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDING JUNE 30, 2020

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COMPREHENSIVE ANNUAL FINANCIAL REPORT

TOWN OF CARY, NORTH CAROLINA

AS OF AND FOR THE YEAR ENDED JUNE 30, 2020

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, Financial Reporting Manager Michelle C. Brooks, CPA, Financial Operations Analyst

Judith K. DeNardis, Financial Reporting Analyst

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TABLE OF CONTENTS TITLE PAGE ______________________________________________________________ 1

TABLE OF CONTENTS __________________________________________________ 3 – 8

INTRODUCTORY SECTION

LETTER OF TRANSMITTAL _______________________________________________ 9 - 10

FY 2020 ANNUAL REPORT ______________________________________________ 11 - 51

MEMBERS OF TOWN COUNCIL _____________________________________________ 52

TOWN OF CARY MISSION STATEMENT AND STATEMENT OF VALUES ___________________53

APPOINTED AND ADMINISTRATIVE STAFF ______________________________________ 54

TOWN OF CARY ORGANIZATION CHART ______________________________________ 55

RESPONSIBILITIES OF TOWN GOVERNMENT BY DEPARTMENT ___________________ 56 - 64

TOWN BOARDS AND COMMISSIONS ________________________________________ 65

CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING __________ 66

FINANCIAL SECTION

REPORT OF INDEPENDENT AUDITOR ______________________________________ 67 - 68

MANAGEMENT’S DISCUSSION AND ANALYSIS ______________________________ 69 - 76

BASIC FINANCIAL STATEMENTS

EXHIBIT

ENTITY-WIDE FINANCIAL STATEMENTS

A STATEMENT OF NET POSITION ______________________________________ 78 - 79

B STATEMENT OF ACTIVITIES ____________________________________________ 80

GOVERNMENT FUND FINANCIAL STATEMENTS

C BALANCE SHEET – GOVERNMENTAL FUNDS ___________________________ 82 - 83

D RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION _____________________________ 84

E STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS _____________________________________________ 85

F RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES _____________________________________________________ 86

G GENERAL FUND – BUDGETARY COMPARISON STATEMENT _________________ 87 - 92

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TABLE OF CONTENTS H TRANSIT SPECIAL REVENUE FUND – BUDGETARY COMPARISON STATEMENT _____ 93

I EMERGENCY TELEPHONE SYSTEM SPECIAL REVENUE FUND – BUDGETARY COMPARISON STATEMENT _________________________________ 94

PROPRIETARY FUND FINANCIAL STATEMENTS

J STATEMENT OF NET POSITION – PROPRIETARY FUNDS ___________________ 96 - 97

K STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION – PROPRIETARY FUNDS ________________________ 98 - 99

L STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS ___________________ 100 - 101

NOTES TO THE BASIC FINANCIAL STATEMENTS ____________________ 103 - 154

REQUIRED SUPPLEMENTARY INFORMATION

LAW ENFORCEMENT SEPARATION ALLOWANCE REQUIRED SUPPLEMENTAL INFORMATION _____________________________________________ 156

LOCAL GOVERNMENT EMPLOYEE RETIREMENT SYSTEM REQUIRED SUPPLEMENTAL INFORMATION _________________________________________ 157 - 158

OTHER POST-EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTAL INFORMATION ______ 159

SUPPLEMENTARY INFORMATION

SCHEDULE

CAPITAL PROJECT FUND

1 CAPITAL PROJECT FUND - SUB-FUND COMBINING BALANCE SHEET ___________ 162

2 CAPITAL PROJECT FUND - SUB-FUND COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ____________ 163

3 STREET PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL _______________ 164 - 168

4 DOWNTOWN PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL _______________ 169 - 170

5 PARKS, RECREATION AND CULTURAL RESOURCES PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ____________________________________________ 171 - 174

6 FIRE PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ________________ 175 - 176

7 GENERAL GOVERNMENT PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ___________________________________________ 177 - 180

8 GENERAL CAPITAL RESERVE SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL _______________________________________________ 181

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TABLE OF CONTENTS UTILITY SYSTEM ENTERPRISE FUND

9 UTILITY SYSTEMS ENTERPRISE FUND - SUB-FUND COMBINING SCHEDULE OF NET POSITION _____________________________________ 184 - 185

10 UTILITY SYSTEMS ENTERPRISE FUND - SUB-FUND COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION ____ 186

11 UTILITY SYSTEM OPERATIONS SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) _________________________________ 187 - 191

12 WATER PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ________________________________ 192 - 195

13 SEWER PROJECT SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ________________________________ 196 - 200

14 UTILITY SYSTEM CAPITAL RESERVE SUB-FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ____________________________________ 201

INTERNAL SERVICE FUNDS

15 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF NET POSITION _________ 204

16 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION _________________________________ 205

17 INTERNAL SERVICE FUNDS - COMBINING SCHEDULE OF CASH FLOWS _____ 206 - 207

18 FLEET MANAGEMENT INTERNAL SERVICE FUND – SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ____________________________________ 208

19 HEALTH INSURANCE INTERNAL SERVICE FUND - SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND NET POSITION - BUDGET AND ACTUAL (NON-GAAP) ________________________________ 209 - 210

OTHER FUND SCHEDULES

20 COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND BUDGETARY COMPARISON STATEMENT – MULTI-YEAR ___________________ 211 - 213

21 ECONOMIC DEVELOPMENT SPECIAL REVENUE FUND BUDGETARY COMPARISON STATEMENT – MULTI-YEAR _______________________ 214

STATISTICAL SECTION (UNAUDITED)

TABLE

1 NET POSITION BY COMPONENT, LAST TEN FISCAL YEARS ___________________ 218

2 CHANGES IN NET POSITION, LAST TEN FISCAL YEARS __________________ 219 - 220

3 FUND BALANCES, GOVERNMENTAL FUNDS, LAST TEN FISCAL YEARS ___________ 221

4 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS, LAST TEN FISCAL YEARS ________________________________________ 222 - 223

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TABLE OF CONTENTS 5 GOVERNMENTAL FUND EXPENDITURES BY FUNCTION, LAST TEN FISCAL YEARS ___ 224

6 UTILITY SYSTEM ENTERPRISE FUND EXPENDITURES BY FUNCTION, LAST TEN FISCAL YEARS _____________________________________________ 225

7 GOVERNMENTAL FUND REVENUES BY SOURCE, LAST TEN FISCAL YEARS ________ 226

8 UTILITY SYSTEM ENTERPRISE FUND REVENUES BY SOURCE, LAST TEN FISCAL YEARS _____________________________________________ 227

9 ASSESSED VALUE OF TAXABLE PROPERTY, LAST TEN FISCAL YEARS____________ 230

10 COMPARISON OF TOWN OF CARY AND COUNTY ASSESSED VALUES, LAST TEN FISCAL YEARS ______________________________________________ 231

11 PROPERTY TAX RATES-DIRECT AND OVERLAPPING GOVERNMENTS, LAST TEN FISCAL YEARS _____________________________________________ 232

12 PRINCIPAL PROPERTY TAXPAYERS, NINE YEARS AGO AND CURRENT YEAR ______ 233

13 PROPERTY TAX LEVIES AND COLLECTIONS, LAST TEN FISCAL YEARS ____________234

14 AD VALOREM TAXES RECEIVABLE, CURRENT YEAR AND LAST NINE FISCAL YEARS _ 235

15 ANALYSIS OF CURRENT TAX LEVY ______________________________________ 236

16 RATIOS OF OUTSTANDING DEBT BY TYPE, LAST TEN FISCAL YEARS _____________ 238

17 RATIO OF NET GENERAL BONDED DEBT TO ASSESSED VALUE AND BONDED DEBT PER CAPITA, LAST TEN FISCAL YEARS ___________________ 239

18 COMPUTATION OF LEGAL DEBT MARGIN, LAST TEN FISCAL YEARS _____________ 240

19 COMPUTATION OF DIRECT AND OVERLAPPING DEBT ________________________ 241

20 BOND COVERAGE COMBINED ENTERPRISE SYSTEM BONDS, LAST TEN FISCAL YEARS ______________________________________________242

21 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR BONDED DEBT TO TOTAL GENERAL EXPENDITURES, LAST TEN FISCAL YEARS ________________ 243

22 DEMOGRAPHIC CHARACTERISTICS, LAST TEN FISCAL YEARS ________________ 246

23 PRINCIPAL EMPLOYERS, NINE YEARS AGO AND CURRENT YEAR ______________ 247

24 COMMERCIAL ACTIVITY, LAST TEN FISCAL YEARS __________________________ 248

25 EMPLOYEE POSITION AUTHORIZATION BY DEPARTMENT, LAST TEN FISCAL YEARS _____________________________________________ 250

26 OPERATING INDICATORS BY FUNCTION/PROGRAM, LAST TEN FISCAL YEARS _________________________________________ 251 - 252

27 CAPITAL ASSETS BY FUNCTION/PROGRAM, LAST TEN FISCAL YEARS ___________ 253

28 INSURANCE IN FORCE, JULY 1, 2019 – JUNE 30, 2020___________________ 254 - 256

29 TOP TEN UTILITY CUSTOMERS ________________________________________ 257

30 UTILITY RATE INFORMATION, APPROVED OPERATING BUDGET ORDINANCE __ 258 - 261

31 DEVELOPMENT FEE REVENUE _________________________________________ 262

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TABLE OF CONTENTS COMPLIANCE SECTION

FEDERAL AND STATE AWARDS COMPLIANCE

SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS ______________ 263 - 265

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS __________ 266

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 __________________________________ 267

REPORT OF INDEPENDENT AUDITOR ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE OMB UNIFORM GUIDANCE AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT __________________ 268

REPORT OF INDEPENDENT AUDITOR 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 _____________________________________________ 269

SCHEDULE OF FINDINGS AND QUESTIONED COSTS _________________________ 270 - 271

SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS _________________________ 272

COVENANT COMPLIANCE

REPORT OF INDEPENDENT AUDITOR ON REVENUE BOND COVENANT _______________ 273

REVENUE BOND STATEMENT OF REVENUES, EXPENSES, DEBT SERVICE, AND DEBT SERVICE COVERAGE _______________________________________ 274 - 275

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INTRODUCTORY SECTION

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November 20, 2020

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 (“Cary”) documents Cary’s financial position and results of operations as of and for the fiscal year ended June 30, 2020. This report has been prepared in accordance with Generally Accepted Accounting Principles (GAAP), set forth by the Governmental Accounting Standards Board.

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 Cary’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, Cary’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, Cary’s financial position and changes in financial position. The goal for the audit is to provide reasonable assurance that the financial statements of are free of material misstatement.

To enhance 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 the government by department, and a certificate of achievement for excellence in financial reporting. This section also includes an annual report that outlines the financial planning and strategy that affect financial outcomes for Cary as well as the impacts of the local and national economy. Additionally, the overview highlights important accomplishments to demonstrate how Cary citizen resources were invested in citizen services and projects as well as employees to support the vision outlined in the Imagine Cary Community Plan. These stories are organized to match the Community Plan sections on Work, Shop, Live, 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. Management’s Discussion and Analysis immediately follows the independent auditors’ report and is designed tocomplement this letter

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of transmittal and the overview, and should be read in conjunction with it. The Financial Section also includes Required Supplementary Information which provides details on components of financial activity including capital project activity, the utility system enterprise fund, internal service funds, and special revenue funds.

The Statistical Section provides meaningful ten year trend information on Cary’s financial performance, revenue capacity, debt capacity, demographic and economic indicators as well as operating information.

The Compliance Section reports federal and state grants and awards compliance, as well as revenue bond covenant compliance. Three compliance audit reports on federal and state financial assistance are required under the Federal Single Audit Act of 1984 and the State Single Audit Implementation Act. Another annual audit of a defined calculation of debt service coverage is required by the trust agreements entered into by Cary as a condition of the Cary’s revenue bonds. Cherry Bekaert LLP also conducted each of the required compliance audits.

This report will be submitted by the January 31 due date for regulatory review by the North Carolina State Treasurer’s office. The traditional October 31 deadline was extended by the State Treasurer’s office to recognize the challenges posed by the pandemic.

Other interested readers such as grantor agencies, Cary’s bond holders and the three major bond rating agencies will use the information to reach conclusions about Cary’s financial affairs.

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Cary for its comprehensive annual financial report for the fiscal year ended June 30, 2019. This was the thirty-fifth consecutive year that Cary received this award. The Certificate of Achievement recognizes the Cary CAFR for voluntarily meeting the highest standards established by experts in government finance.

The FY 2020 report was also designed to meet the same standards of excellence in reporting.

I am sincerely grateful for and proud of the dedicated work of staff in the Finance Department to prepare this report. It summarizes millions of transactions in compliance with complex accounting and reporting regulations that ensure readers that Cary’s financial results can be fairly compared with other governments and analyzed year to year. Town Manager’s office staff contributed the summary of the organization’s accomplishments to fulfill the Imagine Cary Community Plan. None of this would be possible without the work and cooperation of staff throughout the organization who manage the financial affairs so well and with prudence throughout the year. The foundation for all of these accomplishments lies with the Town Manager, Mayor and the members of Town Council in their unfailing support of the highest standards of professionalism in the management of Cary’s finances and operations.

Respectfully submitted,

Karen A. Mills, CPA Chief Financial Officer

complement this letter of transmittal and the overview, and should be read in conjunction with it. The Financial Section also includes Required Supplementary Information which provides details on components of financial activity including capital project activity, the utility system enterprise fund, internal service funds, and special revenue funds TThhee SSttaattiissttiiccaall SSeeccttiioonn provides meaningful ten year trend information on Cary’s financial performance, revenue capacity, debt capacity, demographic and economic indicators as well as operating information. TThhee CCoommpplliiaannccee SSeeccttiioonn reports federal and state grants and awards compliance, as well as revenue bond covenant compliance. Three compliance audit reports on federal and state financial assistance are required under the Federal Single Audit Act of 1984 and the State Single Audit Implementation Act. Another annual audit of a defined calculation of debt service coverage is required by the trust agreements entered into by Cary as a condition of the Cary’s revenue bonds. Cherry Bekaert LLP also conducted each of the required compliance audits. This report will be submitted by the January 31 due date for regulatory review by the North Carolina State Treasurer’s office. The traditional October 31 deadline was extended by the State Treasurer’s office to recognize the challenges posed by the pandemic. Other interested readers such as grantor agencies, Cary’s bond holders and the three major bond rating agencies will use the information to reach conclusions about Cary’s financial affairs. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Cary for its comprehensive annual financial report for the fiscal year ended June 30, 2019. This was the thirty-fifth consecutive year that Cary

received this award. The Certificate of Achievement recognizes the Cary CAFR for voluntarily meeting the highest standards established by experts in government finance. The FY 2020 report was also designed to meet the same standards of excellence in reporting. I am sincerely grateful for and proud of the dedicated work of staff in the Finance Department to prepare this report. It summarizes millions of transactions in compliance with complex accounting and reporting regulations that ensure readers that Cary’s financial results can be fairly compared with other governments and analyzed year to year. Town Manager’s office staff contributed the summary of the organization’s accomplishments to fulfill the Imagine Cary Community Plan. None of this would be possible without the work and cooperation of staff throughout the organization who manage the financial affairs so well and with prudence throughout the year. The foundation for all of these accomplishments lies with the Town Manager, Mayor and the members of Town Council in their unfailing support of the highest standards of professionalism in the management of Cary’s finances and operations. Respectfully submitted,

Karen A. Mills, CPA Chief Financial Officer

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FY 2020 ANNUAL REPORT

THIS MANAGEMENT OVERVIEW INCLUDES THE FOLLOWING:

■ Executive Summary ■ An Introductory Profile of the Town of Cary ■ Key FY 2020 Financial Results, Statistics and

Financial Plans ■ Financial Management Strategies and Practices ■ Key Organizational Accomplishments

The Executive Summary provides insights into the organizational culture that defines Cary. The Profile introduces the legal framework, demographics and geography as well as the history of Cary. Additional insights into organizational culture are provided. The third section describes the financial results coupled with information on how FY 2020 results and the COVID-19 pandemic impacted the financial plans for FY 2021. This section is consistent with interim executive updates for management purposes which differs from the regulatory prescribed style and content of Management’s Discussion and Analysis included in the audited financial statements. A section on strategies and practices demonstrates how Cary executes financial plans. Finally, the entire organization accomplishments provide examples of how citizen and customer financial resources were invested to serve the community set forth by the vision in the Imagine Cary Community Plan.

EXECUTIVE SUMMARY Cary remains in excellent financial condition following another year of positive financial results. The General Fund was sustained by robust sales tax receipts in the first eight months of the year which offset revenue shortfalls resulting from the economic impacts of the COVID-19 pandemic. During the pandemic domestic utility usage shifted from commercial buildings to residential. Together with a dry fall in 2019 that led to higher irrigation demand than anticipated, these impacts resulted in positive results for the Utility Fund.

A strong financial foundation remains in place to continue to provide quality services and to invest in capital infrastructure that will best fulfill the vision and highest priorities in the Imagine Cary Community Plan. This conclusion is consistent with Cary’s top bond ratings which reflect the opinions of independent experts on Cary’s financial position and management. Cary has maintained AAA ratings from three bond rating agencies, Fitch, Moody’s and Standard and Poor’s, for the Cary’s general obligation bonds and 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.

Recognizing that many changes lie ahead, Cary continued its focus in FY 2020 on preparations for the future. The community population continued to grow. Slower natural revenue growth along with aging infrastructure pressures decision makers to fund only their highest priorities for community improvements. Using Dr. John Nalbandian’s framework of values, Cary Town Council and staff make difficult choices considering competing values for:

■ Representation and Participation ■ Efficiency and Professionalism ■ Social Equity, and ■ Individual Rights.

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Also, with increased collaboration and self-awareness, staff continues to work with new energy to break down silos, imagine, innovate and implement new efficiencies, improve decision making tools and strengthen decision making skills, 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 171,000 citizens in approximately 60 square miles in the heart of the Triangle region of North Carolina. Cary is primarily located in Wake County and extends into Chatham county in the Piedmont region of the state. Cary adjoins the City of Raleigh, which is the state capital and the county seat, at Cary’s eastern boundary. The Triangle region is known for its strength in higher education anchored by its three largest universities, North Carolina State University, Duke University and the University of North Carolina at Chapel Hill. These universities contribute to the success of the renowned Research Triangle Park (“RTP”) which adjoins Cary’s northwestern boundary.

Raleigh

Atlantic Ocean

CARY Durham

Greensboro Winston-Salem

Charlotte

Asheville

Cary has a reputation for its continued well-managed, high-quality, growth and development. Robust development regulations help ensure that Cary is an attractive community. Along with historically strong employment, higher education opportunities, warm climate, low crime rates and easy access to outstanding recreational and cultural amenities, Cary citizens enjoy a high quality of life. Cary and the Triangle area continue to earn recognition from numerous rankings such as the best places to launch a new business, best places for creating and keeping jobs and quality of life measures. In recent years, Cary has also been recognized as a place to retire. People of retirement age are the fastest-growing group in Cary. As a result, Cary is a diverse community primarily composed of affluent and well-educated people. According to the 2017 American Community Survey the median age of Cary’s population is 39.9 years, over 65 percent of Cary’s adult population has a college degree, and over 20 percent are Asian. Information about Cary’s continued development are highlighted 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. His primary business was a sawmill.

Frank Page was Cary’s first developer, mayor, postmaster and railroad agent. Page also 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

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Historic Places. He named his development after Samuel Fenton Cary, a prohibition leader from Ohio whom Page admired. 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 3, 1871, the Town of Cary was incorporated. Plans to celebrate Cary’s 150th birthday in 2021 are underway.

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 a nearby corporate research park in the 1960s, known internationally as Research Triangle Park, Cary began to grow into a bedroom community from a quiet town of a few thousand people. In 1963, the Cary 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 again in both the 1980s and 1990s, the population as of June 30, 2020, is estimated to be 170,322, representing a 26 percent increase from the April 1, 2010, U.S. Census estimate.

TOWN OF CARY GOVERNMENT

Cary 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 including budget approval and appointing the Town Manager, Town Attorney and Town Clerk. The Town Manager is responsible for implementing Council policies and Town Ordinances, and appointing department directors who lead and oversee the management of daily operations.

Cary 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 Cary’s activities in delivering and administering these services.

TRANSFORMATION CONTINUES

To implement the Imagine Cary Community Plan, Cary is amid 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 through exceptional service.” Cary and the region consistently receive multiple accolades from independent publications. Cary also earns recognition and accreditation from formal authorities such as bond rating agencies and peer associations. Citizens value Cary’s rankings as one of the safest places to live for a community of its size. Cary has been recognized as a Gold Medal community for parks, recreation, and cultural resources and has an ISO Class 1 fire rating. Police, Fire and Parks and Recreation services are all accredited.

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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. Cary is at the top of that arc now. 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.

Cary 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 exist.

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.

K E E P I N G C A R Y C A R Y

WWW.TOWNOFCARY.ORG/QUARTERLY

This strong financial foundation will help Cary remain successful along with plans for financial sustainability that will finance Cary’s future. Understanding the FY 2019 financial results is a key component of planning and preparation.

FINANCIAL FRAMEWORK

North Carolina local government finance is regulated by North Carolina General Statutes, primarily 159-7, also known as the North Carolina Local Government Budget and Fiscal Control Act. Compliance with these regulations is overseen by the State Treasurer’s Office State and Local Government Division and Cary’s external auditors.

Town Council establishes direction in budget and financial planning through financial policies, its statement of values, a long-term community plan, and its commitment to maintaining Cary’s AAA bond ratings. These policies are consistent with state laws that require balanced budgets for North Carolina

Within the organization, the Financial Strategy Office guides budget development of the Town Manager’s recommended budget. Other Finance Department staff guide execution of the budget through procurement, accounting and reporting in collaboration with all Cary colleagues and Cary’s external auditors and in accordance with state and federal laws and other commitments such as bond covenants and grantor requirements.

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FY 2020 KEY FINANCIAL RESULTS, STATISTICS AND FINANCIAL PLANS

THIS SECTION INCLUDES REPORTING ON:

■ General Fund ■ Utility Fund ■ Capital Investments ■ Cash and Investment Management ■ Long Term Bonded Debt ■ Other Financial Insights ■ A Look Ahead at the FY 2021 Budget ■ Economic Development

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 2020 General Fund operating revenues and expenditures maintained a growth trend, although moderate due to the economic impacts of the COVID-19 pandemic, as shown in the five-year perspective below.

COVID-19’s economic effects significantly impacted Cary’s revenues. Overall, General Fund revenues increased less than 1 percent compared to the prior year thanks to the positive economic results of the first eight months of FY 2020. Had the economy and operations continued at the same pace, total revenues could have been as much as 3 or 4 percent over the prior year and totaled at least $6 million more in the final, year- end audited results.

PROPERTY TAXES

As the largest revenue source for the General Fund, property tax revenue represents 55 percent of total budgeted operating revenue. The economic effects of COVID-19 were limited to small reductions of collections for vehicle property taxes in Q4. Successful collections of taxes on real property occurred before the COVID-19 pandemic and offset these small losses so that property tax revenue met budget. In FY 2020, $96.2 million was budgeted for property tax collections (both real and personal property) based on an anticipated property tax base growth of 3 percent over the prior year. By year end property tax revenue grew just under 3 percent compared to FY 2019.

Taxes are based on an ad valorem tax levy on real property 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 2019 and were due no later than January 6, 2020. Conversely, personal property tax revenue is collected throughout the year based on the State of North Carolina’s Tax and Tag program, which combines the vehicle ad valorem tax collection with the State’s vehicle license renewal process.

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SALES TAX

Sales tax revenue, the largest single component of the Other Taxes and Licenses category, represents 21 percent of total General Fund budgeted revenue.

Monthly sales tax revenue averaged 9 percent growth over the prior year in the first eight months of FY 2020. As a result, those increased revenues offset decreases in sales taxes in March, April and May of 2020 such that sales tax revenue exceeded the annual budget. In total, Cary received $37.6 million compared to the $36.6 million budgeted for sales tax revenue, which is about 3 percent greater than the FY 2020 budget and FY 2019 actual results. March, April and May 2020 sales tax revenue declined compared to the same months in 2019 as a direct result of the stay-at-home orders issued at the beginning of the pandemic.

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SALES TAX REVENUE PERCENT CHANGE FROM FY 2019

OTHER GENERAL FUND REVENUES

Intergovernmental revenue makes up 6 percent of total budgeted General Fund operating revenues. Sales taxes on electricity, natural gas and wireless communications comprise 91 percent of the budgeted revenue sources for intergovernmental revenue. Utility sales taxes were budgeted at $10.2 million in FY 2020, but due to lower receipts in the fourth quarter, total revenue was 4 less than budget, a shortfall of just over $400,000. Prior to the pandemic, these revenues were on target to meet budget.

Revenues in the restricted intergovernmental category exceed budget by over $900,000 due to pandemic related grants from Wake and Chatham counties in Q4.

Although construction continued throughout the year, permits and fee revenues were under budget by $800,000 as a result of the mix of construction activity that generated less charges than in the previous year.

Overall, the Sales and Services category decreased 8 percent compared to the prior year. Revenue losses of approximately $3.2 million from pandemic-related cancellations of Parks, Recreation, and Cultural Resources programming and the closing of special venues offset increased revenues of $1.7 million for solid waste fees. Solid waste revenue grew compared to FY 2019 as a result of a $2.50 per month residential fee increase to cover increased recycling costs. Solid waste fees are billed and collected as part of water and sewer utility billing. During the pandemic, utility billing remained on schedule. However, Cary paused efforts to collect delinquent utility bills, consistent with North Carolina Gov. Roy Cooper’s executive orders. While the solid waste fees were earned for services delivered during FY 2020, collections for delinquent accounts will be delayed over as many as 15 months beyond fiscal year end because delinquent accounts were set up on a 12-month payment plan after fiscal year end.

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GENERAL FUND OPERATING EXPENDITURES

Operating expenses increased $5.7 million, or 4 percent, compared to the prior year. The majority of the increase, $4.2 million, was in public safety due to personnel expense growth, in part due to the pandemic.

SOURCES AND USES

The sources and uses of FY 2020 General Fund operating resources are shown as a percentage of the whole for perspective below. Total Governmental Fund ten-year historical comparisons by revenue source and expenditures are included in the Statistical Section in Table 7 and 5, respectively.

NET RESULTS

The final FY 2020 budget authorized a draw of $16.2 million from the General Fund’s fund balance, primarily to provide resources for capital projects. With positive operating results, fund balance increased $.4 million. As in the past, revenues exceeded budget, and expenditures came in under budget for a net positive budget variance of $15.1 million or eight percent. Other financing activities accounted for a budget variance of $.3 million.

FY 2020 GENERAL FUND OPERATING RESOURCES

MISCELLANEOUS 2%

INVESTMENT EARNINGS 2%PERMITS AND FEES

SALES AND SERVICE 10%

INTERGOVERNMENTAL 7%

TAXES AND LICENSES 77%

FY 2020 GENERAL FUND OPERATING EXPENDITURES & DEBT SERVICE

GENERAL GOVERNMENT 17%

UTILITIES & INSURANCE

DEBT SERVICE 10%

DEVELOPMENT & INFRASTRUCTURE

9% OPERATIONS (PW & PRCR)

29%

PUBLIC SAFETY 32%

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GENERAL FUND FINANCIAL POLICY BENCHMARKS

Cary’s financial planning ensures that adequate unreserved fund balance is available to ensure consistent cash flow, generate interest income, and eliminate the need for short term borrowings. Unreserved fund balance also provides flexibility for unanticipated opportunities and needs during emergencies.

Since 2015 Cary’s General Fund reserve policy set a minimum total fund balance policy of 40 percent and accessible fund balance of 25 percent of operating expenditures. The policy sets forth that General Fund accessible fund balance can only be used in excess of the regular policy at the discretion of the full Town Council in dire financial circumstances. It further states that when adopting an appropriation of accessible fund balance that reduces reserves to a level below policy, Cary must also adopt a plan of specific actions to be taken to restore the accessible fund balance to the level set forth in this policy in the following fiscal year if feasible or within three fiscal years at most. Cary has consistently maintained fund balance levels above policy minimums, and these practices contribute to Cary’s high quality credit ratings. Subsequent to year end Town Council updated the fund balance policy to set a minimum total fund balance of four months of expenditures. Given that the policy in effect at the time of this report is most meaningful to judge the capacity of fund balance for the future, the chart below shows FY 2020 year end fund balance against the policy that will guide the future use of resources. Cary also followed a debt policy for the General Fund to ensure that debt service does not exceed 15 percent of Town operating budget. In FY 2020 actual debt service was 10.2 percent of actual total general fund expenditures. Table 21 in the Statistical section provides a ten-year history of this ratio. After FY 2020 fiscal year end Town Council raised the General Fund debt limit for future budgets to 20 percent of expenditures.

$36.8M OVER 4 MONTH POLICY

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TOTAL FUND BALANCE AT JUNE 30

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UTILITY FUND Utility operations exceeded budget expectations by $11.8 million. Revenue from service charges increased 4 percent. Demand increased primarily due to increased irrigation demand in the fall of calendar year 2019, and rates were increased by 2 percent. Revenue exceeded a conservative budget that anticipated volatility in demand due to weather. Like the General Fund, permit related fees did not meet budget expectations due to the mix of development. Penalties for late payments also came in under budget primarily due to the waiver of all penalties since the beginning of the COVID-19 pandemic in March. Utility operating expenditures and debt service were essentially equal to FY 2019 expenditures, and consistent with historical results, were about 8.5% below budget.

The FY 2020 financial plan for the utility included a $1.8 million contribution from operations to active capital projects and a $6.6 million contribution to the net position of the utility to finance future capital expenditures. Given the positive FY 2020 results that exceeded budget, operations contributed over $18 million to the net position that which will ultimately support future capital needs in lieu of debt. The Utility Fund operating margin has grown primarily through rate increases designed to finance a larger component of the utility’s capital maintenance requirements from operational revenues rather than debt. This approach recognizes that an increasing component of utility capital spending is for capital maintenance rather than for new utility capacity.

UTILITY FUND BUDGETARY* REVENUES AND EXPENDITURES (IN MILLIONS)

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FY 2019

FY 2018

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EXPENDITURESREVENUES *NON-GAAP

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

UTILITY DEMAND

The meter population has grown over 6 percent in the last five years. Annual billed utility demand has varied from almost 2 percent decreases to almost 5 percent increases over the same period. Continued water efficiency improvements in appliances, citizen environmental awareness and price elasticity have all impacted water usage. The chart below demonstrates the variability of weather impacts as well. Cary’s financial models take these changing patterns into consideration. The lack of consistent growth in billed demand along with fixed cost increases creates short term pressure to increase rates

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but contributes to long term financial sustainability by extending the life of the capacity of Cary’s utility plants given Cary’s ongoing population and business growth.

PERCENT CHANGE UTILITY DEMAND VS. METER

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DEMAND CHANGE METER GROWTH

UTILITY OPERATIONS FINANCIAL POLICY BENCHMARKS

One metric for Utility Fund is the debt service coverage ratio, a measurement of revenue available to pay current debt service obligations. While Cary is legally obligated by bond covenants to ensure that revenue bond debt service is covered 1.2 times by revenue and total debt service is covered 1.0 times by revenue, Cary’s debt policy specifies debt coverage ratios of 1.4 and 1.1. Cary consistently exceeds these coverage benchmarks easily in part because Cary has also used general obligation debt for utility projects to access the lowest possible interest rates. Although general obligation bonds for utility projects are legally secured by Cary’s taxing authority, the Utility Fund is self- sufficient and pays all utility related debt service, regardless of the legal security pledge. A separate report of the independent auditors on the revenue bond covenant is in the Compliance Section of this report and a ten-year history of these two benchmarks is included in the Statistical section on Table 20.

A second metric for the Utility Fund calculates days cash on hand. Cary’s Council policy sets a target of 365 days cash on hand with a minimum floor of 274 days, or nine months. At June 30, 2020 the Utility Fund had $70.6 million, 510 days cash on hand, which is $20 million over the 365 day target. These excess resources are intended to finance utility capital investments, which limits the need for future debt, which in turn limits future rate requirements. Capital maintenance is an appropriate use for these resources which were generated by current ratepayers to match the future maintenance needs of the utility created by current operations.

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CAPITAL INVESTMENTS Capital investments in infrastructure are a significant component of Cary’s financial affairs and citizen service. The high standards set for quality construction and maintenance of community assets are a hallmark of quality of life. Cary invested over $84 million in capital planning and infrastructure in FY 2020 for streets, parks, fire, general government, downtown and utility purposes. For fiscal year end, these projects total almost $800 million in authorized spending and were funded with debt, grants, fund balance and utility net position and capital reserve funds. Development fees generated by growth also provide capital resources. Ten years of development fee revenue history is provided in Table 31 and each project is listed in the financial schedules.

CAPITAL PROJECT TO DATE SPENDING JUNE 30, 2020

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PROJECT AUTHORIZATIONLIFE TO DATE SPENDING

A few of the highest priority projects that were active during FY 2020 follow:

■ Cary-maintained streets were improved including milling and resurfacing; patching and street rejuvenation

■ Construction continued on the Carpenter Fire Station Road and CSX Rail Grade Separation project.

■ Design continued on the Downtown Park ■ Construction was completed on Fire Station No. 9 ■ Construction was completed on a 42-inch third pipeline to provide

raw water transmission capacity and redundancy ■ Wake County completed construction of the new downtown Cary

regional library and the associated parking deck primarily funded by Cary.

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CASH AND INVESTMENT MANAGEMENT Cary manages the cash resources of all funds in one pool to maximize investment earnings and efficiency. At year end the book balance of cash and investments was over $532 million with a market value of $545 million.

Realized interest earnings totaled $10.9 million in FY 2020, which is an increase of over $1.3 million, or 15 percent, compared

to FY 2019. Cary’s annual yield increased from 1.79 percent in FY 2019 to 1.97 percent in FY 2020 due to rising interest rates in the market when a large share of the portfolio was purchased. Interest rates began to fall in late FY 2019 and securities that were purchased in FY 2020 generate a much lower rate of return.

These investment earnings are allocated to each of the funds based on average share of the total pool. The General Fund comprises approximately 20 percent of Cary’s cash and investments. Just under $2.2 million of the interest income was attributed to the General Fund, which is about $33,000 over budget. About two-thirds of Cary’s cash and investments are attributed to the capital funds for resources committed but unspent for general and utility capital projects.

In accordance with accounting standards, Cary reports the market value of all investments every fiscal year end to reflect the impact on the financial results in the unlikely case that Cary had to sell all its investments at fiscal year-end market prices. This acknowledgement of year-end market value is referred to as a “mark to market” adjustment.

TOWN OF CARY POOLED CASH AVERAGE ANNUAL YIELD FY 2010 – FY 2020

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FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

The adjustment increases or decreases interest earnings reported depending on market interest rates on June 30. In a rising rate environment, as interest rates go up, the price of a fixed-income security goes down. Likewise, when interest rates fall, as the market is currently experiencing, the price of a fixed-income security goes up. Cary’s mark to market adjustment for FY 2020 reflects an increased value of $13 million more than book value which increases interest earnings for FY 2020’s share of the market value on the audited financial statements by $9 million. While Cary is required to report this adjustment on the financial statements, Cary will not realize this gain in interest earnings because Cary generally holds investments until maturity to meet future cash flow needs.

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LONG TERM BONDED DEBT A portion of street, parks and fire capital projects have been funded with debt authorized by Cary voters in the 2012 referendum. Cary began FY 2020 with remaining voter debt authorization of $13.7 million in street bonds, $1.8 million in parks and recreation bonds and $500,000 in fire bonds. In July 2019, Cary issued the remaining 2012 bond authority of $16,050,000 following a competitive sale with bids from 10 financial institutions. The bonds will be repaid over 20 years at an average interest rate of 2.18 percent. An interest only payment is budgeted in FY 2020 and principal payments will begin in FY 2021. For comparison, similar 2017 bonds bear an average interest rate of 2.5 percent and 2014 bonds bear an average interest rate of almost three percent.

The three primary bond rating agencies, Moody’s, Fitch and Standard and Poor’s, updated and confirmed Cary’s general obligation bond AAA ratings as part of the bond sale process.

No new bonded debt or asset backed debt was issued or authorized for utility purposes in FY 2020.

CAPITAL PROJECT TO DATE SPENDING JUNE 30, 2020

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PROJECT AUTHORIZATIONLIFE TO DATE SPENDING

2019 REFERENDUM

On October 8, 2019 Cary held a bond referendum for general capital projects. Citizens approved a $112 million parks bond proposal and a $113 million transportation bond proposal. The transportation bond consists of $113 million for traffic improvement, resurfacing, intersection improvements, streetscape improvements, new traffic signal system software, sidewalks, and road widening.

The parks bond consists of $112 million for new parks including Phase 2 of the Downtown Park; two new parks in western Cary; a nine-acre park on Tryon Road; playground upgrades; historic properties preservation; open space preservation; and improvements to existing parks.

Subsequent to year end Cary refinanced Utility revolving loans, and portions of general obligation and revenue bonds to reduce future

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debt service by approximately $8million. The refinancing transaction, which included the issuance of Cary’s first taxable bonds, will primarily benefit the Utility Fund by reducing future rate requirements for debt service. Three rating agencies, Moody’s, Standard & Poor’s and Fitch, each confirmed their top ratings for both Cary’s general obligation and revenue bonds. Note 16 to the financial statements provides more detail.

OTHER FINANCIAL INSIGHTS An in-depth analysis of the financial position and FY 2020 activities is also included in Management’s Discussion and Analysis (MD&A), a component of Cary’s basic financial statements. The format and content of the MD&A is prescribed by governmental accounting standards and is highly technical. Some information in this overview is also discussed in the MD&A.

The CAFR contains many more insights into Cary’s operations, values and trends than those found in the basic financial statements. The Statistical Section near the end 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, Table 12 in the Statistical Section lists Cary’s top 15 taxpayers. The list demonstrates strength in the diversity of the Cary tax base. Because the top 15 taxpayers constitute less than six percent of the total base of taxpayers, the financial distress of any one taxpayer would not impair the stability of Cary’s tax revenues.

Like the largest taxpayers, Table 29 in the Statistical Section lists the largest utility ratepayers. The top 10 FY 2020 utility ratepayers account for only six percent of the utility retail revenues. More notable is the fact that only four of the top 10 are industrial and office uses that generate less than four percent of the utility revenue. The remaining six 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.

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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 fiscal year activity is included in the Shape section of this overview. Key indicators from FY 2020 include:

■ Cary’s population is estimated to be 170,322 at year end, an increase of 1.6 percent from June 30, 2019. Table 22 in the Statistical Section of this report includes demographic details.

■ Assessed value grew $734 million (2.7 percent), to $27.8 billion, detailed in Table 9 in the Statistical section of this report.

■ The Chatham County portion of Cary’s assessed value grew to 3.0 percent of Cary’s total compared to 1.5 percent 10 years ago. See Table 9.

■ Construction permit value in FY 2020 was $664 million, a 33 percent increase over FY 2019. See Table 24.

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

■ The local economy was notably strong in the first eight months of FY 2020, and Cary was experiencing an average of nine percent growth in sales tax. After decreases in sales tax revenues beginning in March due to the stay at home orders resulting from the COVID-19 pandemic, Cary still experienced a net 3.8 percent increase in sales tax revenue compared to FY 2019.

■ Cary’s unemployment rate, historically less than the county, state and national average, was 5.7 percent in June 2020 compared to 3.2 percent in June 2019 due to the economic impacts of the pandemic. See Table 22 and the discussion of local employers in the Work section of this report.

■ In the first eight months of FY 2020, Cary continued to bring in visitors for amateur and professional sports. The quality of Cary facilities and service draw NCAA, ACC, USA Baseball and USTA events at its soccer, baseball and tennis venues. NC Futbol Club and the Carolina Courage, an American professional women’s soccer team, are at home in Cary at the WakeMed Soccer Park. Cary also welcomes the SAS Championship, a golf tournament on the Champions Tour played annually at Prestonwood Country Club. Most events were canceled in the final quarter of the fiscal year due to the pandemic.

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A LOOK AHEAD – THE FY 2021 BUDGET The FY 2021 $427.6 million budget allocates $283.9 million for operations and $143.7 for capital improvements. The FY 2021 budget focuses on maintaining services in the wake of Cary’s ongoing pandemic response and pushes forward with commitments to projects to maintain and enhance Cary’s transportation and transit systems, fire needs, parks, recreation and cultural resources, the downtown area, and other general government needs. The capital project budget includes several projects approved by 80 percent of Cary voters in the Shaping Cary’s Tomorrow bond referendum held in October 2019. The remaining bond projects are included in the capital plan.

Following the Wake County property reassessment as of January 1, 2020, as part of the budget, the Council unanimously supported a property tax rate of $0.35 per $100 valuation. This tax rate, while higher than the revenue-neutral rate of $0.30, remains the lowest among Wake County’s municipalities. The additional $16 million of tax revenue generated by this rate will offset revenue losses due to the pandemic and set Cary’s finances on a sustainable path in preparation for future debt service approved in the Shaping Cary’s Tomorrow bond referendum.

Council left solid waste fees unchanged at $19.50 per month and decreased utility volumetric rates 4 percent. For the second consecutive year, the budget included no new staff positions. The FY 2021 budget does not include any employee merit pay or cost of living increases.

The FY 2021 Annual Operating Budget document’s executive summary addresses Cary’s economic outlook, financial pressure points and the key demographics influencing the budget. An important factor in Cary’s financial future includes the results of Wake County’s most recent property revaluation. Revaluation, or reappraisal, is conducted every four years in Wake County and refers to the process of updating property

values to reflect fair market value. This process re-establishes equity and fairness in tax requirements between properties which typically change in value at different rates based on location and property type.

Approximately 97% of Cary’s tax base lies within Wake County. Updated property valuations became effective January 1, 2020 and inform the calculation of tax bills for the 2021 fiscal year beginning July 1, 2020. The annual operating budget executive summary describes the details of the 21% Wake County property tax value growth and its implications for tax rates. It also describes the factors that led to Cary’s Council difficult decision to maintain the existing tax rate.

The budget document also addresses the short and long-term economic effects of the COVID-19 pandemic with a focus on sales tax and parks, recreation and cultural resource program revenues. Management remains confident that Cary’s financial position is extremely strong and resilient based on the regional economy, a robust financial position, manageable debt, stable property taxes in a strong regulatory framework and adaptive management strategy.

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ECONOMIC DEVELOPMENT

Cary’s future will be heavily influenced by three key development projects. Two of these are in the Eastern Cary Gateway Special Planning Area. The Eastern Cary Gateway serves as one of the main regional gateways into Cary and is accessed via two Interstate 40 interchanges located on the Town’s eastern border. Nearly 50 percent of commuters entering and leaving Cary each day for work travel through this area.

Fenton is an $850 million mixed-use project that will include over 2.5 million square feet of retail, office, restaurant, hotel and multi—family space on 92 acres.

In downtown Cary the One Walker One Walnut development includes 102,000 square feet of office, 34,000 square feet of retail and 153 residential units wrapping three sides of a 600-space downtown parking deck built for the new Cary Regional Library, the Cary Arts Center, and the Downtown Cary Park.

Carolina Yards is a project to redevelop 87 acres of the existing Cary Towne Center with a mixed-use development project allowing up to 1.2 million square feet of office, 360,000 square feet of commercial uses, 450 hotel rooms and 1,800 residential units on approximately 87 acres.

Each of these projects, in conjunction with Cary’s own projects like the second phase of the Downtown Park and others supported by the Shaping Cary’s Tomorrow bonds, demonstrate the commitment to bringing the long-term vision, policies and strategic actions of the Imagine Cary Community Plan to life.

CGI rendering courtesy of Academy Park, LLC

CGI rendering courtesy of Columbia Development

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IN CONCLUSION, CARY’S FINANCIAL POSITION Cary remains in excellent financial condition. Cary has capital resources, revenue capacity and an expense management culture that provide Council with choices on how best to fulfill the vision and highest priorities in the Imagine Cary Community Plan. As with any citizen-centric local government, the vision and desire to provide even higher service levels makes resource allocation decisions difficult. Setting priorities for capital investments and the quest for operational efficiencies requires essential discipline and reflects the integrity of intention in this human endeavor to serve citizens now and those in the future.

The core building blocks of AAA-rated financial management are in place. Cary finances are based on a solid foundation of fund balance, cash reserves, and manageable debt. Cary’s infrastructure is well maintained and in good condition. 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 continue to provide quality services and maintain Cary’s well-deserved reputation as a desirable place to live, work and play.

FINANCIAL MANGEMENT STRATEGIES AND PRACTICES Strong financial results rely on strong management systems, policies and oversight. The following section provides an overview of Cary’s approach to managing the following areas to achieve the goals of the Imagine Cary Community Plan:

■ Cash and Investment Management ■ Debt Management, ■ Pensions and Other Post Employment Benefits ■ Procurement, ■ Financial Systems

■ Risk Management, ■ Capital Program ■ Budget Process, ■ Long Term Financial Planning ■ Citizen Feedback, ■ Financial Reporting

OUR GUIDING VISION

Cary is focused on meeting the needs of its citizens and achieving the goals of our guiding policy document, the Imagine Cary Community Plan which can be found here: www.townofcary.org/imaginecary. This plan, which was adopted in January 2017, is the result of several years of work, unprecedented community input and dozens of meetings and community workshops. It sets out a long-term vision, policies and strategic actions for our community with a time horizon through the year 2040. The document consolidates and replaces several individual plans that guided Cary’s growth over the past 20 years and covers the entire Cary planning area. The Imagine Cary Community Plan is the road map to the future. Cary’s annual operating and capital budget and plans set forth the funding needed and then financial management and execution are integrated with operations and project management to bring those strategies to life.

CASH AND INVESTMENT MANAGEMENT

Cash resources for all funds are pooled to maximize efficiency and interest earning potential. At least $40 million is maintained in bank accounts to ensure immediate access to funds. The remainder is invested in securities that, first, ensure the safety of the principal; second, provide quick access to additional funds for any unforeseen needs (liquidity); and finally, earn the maximum interest income. Although prudent, by prioritizing safety, Cary’s ability to earn investment income is limited.

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The majority of funds are invested in low-risk, fixed-income securities such as federal agency obligations. These securities typically provide a slightly higher yield compared to federal treasury bill securities. Staff seeks opportunities to invest in AAA-rated North Carolina local government debt to diversify the portfolio. At any one time, the portfolio includes approximately 150 different investments that are scheduled to mature approximately every three to seven days over the next three to four years to match projected disbursements for payroll and other expenses.

CASH AND INVESTMENTS BY TYPE OTHER NC MUNICIPAL

BONDS 1%

CASH AVAILABLE 11%

FEDERAL TREASURY BILL SECURITIES

19%

FEDERAL AGENCY SECURITIES

69%

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 investments. Equity or speculative securities are not allowed.

A weekly cash forecasting model and investment plan balances Cary’s portfolio of investments to ensure cash flow and diversity of securities. This approach results in a laddered portfolio with 688 average days to maturity, 1.9 years. The portfolio maturity extends to April 2025 with approximately three million dollars of investments maturing weekly. In all but the rarest of circumstances, investments are held to maturity. As a result, Cary 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 is benchmarked against a simpler cash management approach of investing routinely into two-year US Treasury securities. In FY 2020 the portfolio did not meet the benchmark in the rising rate environment.

Cary uses an independent financial advisor to project cash flow and to monitor and report quarterly on portfolio management. More details about Cary’s deposits and investments are included in Note 1.D.1, Note 1.D.4 and Note 3 to the financial statements.

DEBT MANAGEMENT

Cary has used bonded debt throughout its history to build the infrastructure that made Cary the community it is today. Cary citizens have been consistently supportive of capital plans and general obligation debt proposed in referendums. Cary also uses small bank loans and capital leases to finance some capital assets. Both revenue bonds and general obligation bonds have been used to finance utility capital projects. Although utility general obligation debt is secured by Cary’s taxing authority, all utility general obligation bonds are repaid with utility revenues. A ten-year history of outstanding debt by type is in Table 16 in the Statistical Section of this report.

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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 debt finance capital improvements.

DEBT POLICY

Cary’s budgets and financial plans ensure that General Fund debt service does not exceed Town Council policy for debt as a percent of budgeted operating expenditures. In FY 2020 this policy was 15 percent of General Fund expenditures. In FY 2020 the actual ratio was 10.1 percent, and Table 21 in the Statistical Section provides a 10-year history of General Fund annual debt service. After fiscal year end Town Council increased the debt limit to 20 percent which will guide FY 2022 budgets and beyond. The debt limit was raised to recognize citizen support for ongoing investments in Cary quality of life reflected in the strong voter approval in the Shaping Cary’s Tomorrow bond referendum that was held in October 2019.

Cary follows a utility debt policy that exceeds the revenue bond covenants established in the underlying trust agreements. Utility rate setting models are based on targets that exceed policy to ensure that the policy limits are met given utility revenue volatility due to weather. The coverage calculations are included in the compliance section.

UTILITY FUND PARITY DEBT COVERAGE TOTAL DEBT

SERVICE COVERAGE

Revenue Bond Covenants 1.2 1.0

Town Policy 1.4 1.1

Planning Model Target 1.5 1.2

FY 2020 Actual Results 7.9 2.3

BONDED DEBT AMORTIZATION

Debt payments in the General Fund decline over time because general obligation bonded debt is repaid more aggressively than a traditional home 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 and citizens. 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 chart of existing debt service at year end in the debt activity analysis of financial results section of this overview demonstrates these amortization patterns.

As pledged in legal bond documents all ongoing disclosure requirements are met or exceeded in accordance with federal law on the Municipal Securities Rulemaking Board’s electronic service known as “EMMA” (Electronic Municipal Market Access) at www.emma.msrb.org. Cary complies with all applicable US Internal Revenue Service and US Treasury arbitrage requirements to preserve the tax-exempt status of Cary bonds.

PENSIONS AND OTHER POST EMPLOYMENT BENEFITS

Cary values employees as one of its most important resources and invests significant resources, averaging 35 to 40 percent of annual salary per employee each year, on a competitive, comprehensive benefit program.

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Cary is a participating employer in the statewide Local Government 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. An in-depth description of the plan is included in Note 12.

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 2020 those expenditures totaled $2.8 million.

Cary’s future obligations totaling $175 million for OPEB are reported in the entity wide financial statements. Note 12 provides details about the program and obligation.

Cary has specifically set aside a total of $3.9 million for its OPEB liability in the Health Insurance Internal Service Fund. Additional resources of at least $9 million exist in the $15.3 million net position of the Health Insurance Internal Service Fund that are being studied as a potential commitment to OPEB. A study to examine alternatives to manage current and future liabilities is underway and was delayed by staff turnover. 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 $9.9 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 Note 12 as well as in the Required Supplementary Information sub-section of the Financial Section of the CAFR.

PROCUREMENT

Cary procurement policies and procedures are designed to facilitate the procurement of quality goods and services at the lowest price, ensuring that vendors have fair access to earning Cary’s business and complying with regulations that set standards for the process.

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FINANCIAL SYSTEMS

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. Details are included on Table 13. Cary received 99.7 percent of the levied real property taxes in FY 2020. 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 conjunction with monthly utility billing.

Utility Fund revenues are collected by staff through the preparation and delivery of approximately 63,000 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. Prior to the economic challenges that developed because of the pandemic, almost 100 percent of active Cary utility ratepayers met their obligations on a timely basis.

Online bill inquiry and payment systems are hosted by third party providers with talent and controls to address technology security regulations such as those of the payment card industry.

Cary’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.

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.

Cary’s financial software is dated and inefficient compared to modern systems’ functionality. Work is underway to replace the financial, human resources and utility billing systems. New parks, recreation and cultural resources software has been developed for Cary on a Salesforce platform.

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 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 15,16, 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 2020.

CAPITAL PROGRAM

Cary’s capital program is of notable size compared to peer municipal governments of similar population. The capital program reflects citizen values and priorities for continued growth in transportation network, transportation maintenance and recreational amenities. The capital

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program is managed through collaboration among departments to set priorities, and to manage projects, financing and programming. Cary is focused on strengthening asset management planning for maintenance as infrastructure that was built during Cary’s booming growth in the 1980’s and 1990’s is due for larger maintenance or replacement. As an example, in the past few years, Cary built two new fire stations to replace Fire Station 2 and establish a new fire service area 9.

BUDGET PROCESS

Budget planning and development occurs year-round with finalization of the recommended operating and capital budgets taking place between January and May. The Manager’s Recommended Budget is presented to Council for consideration in May with adoption occurring at the last Council meeting in June. The new budget takes effect, in accordance with state law, on July 1.

Typically, this process is highly collaborative with department directors working together to analyze requests, consider priorities and craft a unified budget recommendation to the Town Manager. The Town Manager reviews the materials and incorporates adjustments to form the Manager’s Recommended Budget which is ultimately submitted to Town Council for consideration.

What Cary has experienced as an organization and as a community since March 2020 and the onset of the COVID-19 pandemic has been anything but typical. Management has committed to maximize safety to care for staff and the community. Everyone has been contending with economic uncertainty on both personal and community-wide levels and staff has been challenged to move forward in an environment where usual certainties are absent. As a result, the FY 2021 budget was not developed in Cary’s traditional manner but reflects one of the many ways the organization has adapted to our COVID-19 environment.

The FY 2021 budget document’s executive summary discusses the most important changes and processes. The budget documents - the Annual Operating Budget, the Capital Improvements Budget and Plan and the Budget in Brief, are available online at www.townofcary.org.

Part of the management strategy includes the use of multi-year financial modeling for both the utility and general fund operations. These models project revenue, expenditures, fund balance and rate requirements for 10 years.

The capital budget authorizes capital spending for the new fiscal year and is supplemented by a capital plan that extends 20 years into the future to strengthen planning for maintenance as Cary matures and ages. Projects included in the CIB/CIP are typically assets with a value of more than $25,000 and a useful life of over three years. Proposed revenues are matched to capital needs for the first five years of the plan.

Another component of budgetary management strategy includes flexibility for adjustments that allows Cary to be nimble when opportunities arise. Funding is included for changes so that Council can employ these resources by approving a budget amendment at any Council meeting or through what management has termed a “rolling budget.” Each quarter during a worksession, staff reviews quarterly financial results and proposes budget amendments. Additional flexibility in the budget is provided in staff authority granted by Council to redirect resources to other functions with subsequent reporting to Council.

LONG TERM FINANCIAL PLANNING

To ensure Cary maintains its AAA rating and remains in a strong financial position, Cary employs a financial forecasting model that projects the general fund financial position for five years. The model demonstrates 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

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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. Projections for consumption, other revenues and expenditures and debt service generate rate requirements to meet financial targets. 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. Over the past three years the model has been adjusted to reflect decreasing per capita demand based on Cary’s experience and national trends. Changing demand patterns reflect 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 customers’ hourly usage data and self-directed electronic usage alerts through Cary’s online customer portal known as Aquastar.

Work is ongoing to enhance long term planning for financial sustainability and capital investments. Cary has expanded the 10-year capital plan to a 20-year plan. Other enhancements to the capital plan include work to tie the budget together with 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.

CITIZEN FEEDBACK

Citizen satisfaction with Cary has been gauged every other year since 1998 by a consultant in a scientifically-valid citizen survey. The most recent survey occurred in FY 2020. 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 for the Town of Cary’s 2020 Biennial Citizen Survey were exceptionally positive and reflect the best ratings the Town has earned for any survey period”. 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 Cary’s website at www.townofcary.org.

Cary also solicits feedback year-round on the budget, outside of the formal budget public hearing process, through social media and traditional communication tools such as the monthly utility bill newsletter. Citizen budget feedback received from this outreach is reported to Council in the quarterly reports.

FINANCIAL REPORTING

Cary’s Comprehensive Annual Financial Report and Annual Operating Budget documents meet the standards set by the Government Finance Officers Association for excellence in reporting. Cary also publishes a Capital Improvements Budget document and a Budget In Brief brochure. FY 2020 was the third year that Cary published high quality quarterly reports including interim financial results and analysis. Municipal bond rating reports also provide perspective on Cary’s financial

position and management. All these reports are available at www. townofcary.org. Cary also meets all obligations for reporting on the Electronic Municipal Market Access website, known as EMMA, in compliance with the Municipal Securities Rulemaking Board.

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IN CONCLUSION,

Cary’s financial strategies and systems are strong. The framework provides for policy setting, budgetary control and reporting that contribute to Cary’s reputation for successful financial management.

FULFILLING THE IMAGINE CARY COMMUNITY PLAN Just over three years ago, Cary completed an ambitious long-range planning effort to update the Comprehensive Plan. The process, known as “Imagine Cary,” was built on the values, needs and aspirations of Cary citizens and resulted in several years of work, unprecedented community input, and dozens of meetings and workshops. The process set out a long-term vision, policies, and strategic actions with a time horizon out to 2040 and resulted in the January 24, 2017 adoption of the Cary Community Plan. The plan is on the Cary website.

The Cary Community Plan consolidated and replaced land use plans and specialty area plans such as the comprehensive transportation plan that guided Cary’s growth over the past 20 years.

The Imagine Cary Community Plan is divided into chapters, plus introductory Foundations and a closing Appendix. Each chapter presents background information on challenges and opportunities facing Cary, followed by policy and intent statements addressing them. Each chapter includes a set of strategic initiatives and actions to carry out the policy direction. Chapter 9, Act, combines all implementation steps in one place to guide upcoming activities.

Cary invests resources to provide services and manage programs and projects designed to fulfill the vision set out in the Imagine Cary Community Plan. Key events and accomplishments are highlighted in eight sections, which are organized to match the structure of the plan outlined below.

The following describes the eight core chapters:

LIVE: FOSTERING STRONG NEIGHBORHOODS

Cary Values: Fostering Strong and Sustainable Neighborhoods Cary will maintain existing strong residential areas as well as create new sustainable neighborhoods supported by mixed uses and activities. This includes additional residential choices for a variety of lifestyles, ages, cultures, and incomes organized in a walkable pattern.

Leveraging Cary’s Regional Context Cary will leverage its location within the region and proximity to regional assets (RTP, RDU airport, higher education institutions, and nearby communities) yet continue to differentiate Cary as a unique place to live, work, play, and conduct business. Using effective collaborations with neighboring jurisdictions and institutions, as well as improved physical connections, will make Cary and the region stronger.

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WORK: ASSURING CONTINUING PROSPERITY

Cary Values: Fostering a Prosperous Economy and Fiscal Health Cary will foster a prosperous, diverse economy that motivates and supports entrepreneurs, improves underutilized retail and office development, supports existing businesses, attracts new business development, and utilizes public-private partnerships to sustain Cary’s fiscal health.

SHOP: CREATING VIBRANT DESTINATIONS

Cary Values: Managing Future Land Use Cary will manage land to create a distinctive, attractive, physical environment for a growing and diverse community while maintaining a predominantly suburban character. Development should focus on creating and maintaining high-quality commercial areas and strong residential neighborhoods complemented by walkable mixed-use activity nodes that serve all age groups.

Encouraging Redevelopment and Infill Efforts Cary will focus redevelopment efforts on underperforming land and building assets and focus new infill development on vacant areas that are already served by existing infrastructure. Older declining commercial centers and commercial areas are key redevelopment priorities, and downtown represents a good opportunity to invest in a way that creates an active, walkable mixed-use environment which yields greater economic value and is a point of pride for Cary.

ENGAGE: EXPERIENCING THE CARY COMMUNITY

Cary Values: Creating a Vibrant Arts and Cultural Environment Cary will create a vibrant cultural and arts environment through performances, exhibits, festivals, and places.

Preserving Historic Resources Cary will preserve sites, structures and traditions that help convey the history of Cary as a source of community pride.

Providing Extensive and High-Quality Parks and Recreation Cary will provide extensive and high-quality recreation services and facilities as a signature of the community, helping to make Cary a desirable place to live, supporting strong property values, and promoting healthy living. Opportunities for recreation include a well- connected greenway network, an expansive system of parks and natural areas of all sizes, and a diversity of recreational facilities and offerings for residents and visitors of all ages and abilities.

SHAPE: GUIDING COMMUNITY GROWTH

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MOVE: PROVIDING TRANSPORTATION CHOICES

Cary Values: An Efficient System for All Users Cary will continue to provide an attractive network of streets and a wide range of functional and well-designed facilities for all mode choices – driving, walking, biking, and transit. This multimodal system will facilitate moving into, out of, and around the community with design emphasis on people and the human experience.

SERVE: MEETING COMMUNITY NEEDS

Cary Values: Respecting Nature and the Environment Cary will preserve and protect the environment. This includes being good stewards of finite natural resources. Paramount is the conservation of water resources and the protection of watersheds.

Providing Comprehensive and Top-Quality Facilities and Infrastructure Cary will provide comprehensive facilities and utility services to residents, businesses and institutions. Public infrastructure is provided in conjunction with development, coordinated with private investments, and is well-maintained.

Providing High Quality Public Services Cary will provide high quality public services and customer service that continue Cary’s legacy of excellence, including being one of the safest mid-sized communities in the nation. Cary’s quality services yield a clean and attractive community, a reputation for open communication and responsiveness, and a supportive environment for residents and businesses.

ACT: MOVING FROM VISION TO REALITY

1. Apply the Cary Community Plan Policies

2. Monitoring the Cary Community Plan Performance

3. Amending the Cary Community Plan

CONCLUSION This annual report was designed to introduce Cary and highlight key financial results and financial management practices. To provide a more complete picture of the accomplishments achieved with the financial investments summarized in the CAFR, this annual report includes stories about key projects and services that reflect current priorities. These priorities and many others

were a focus for Cary based on the vision in the Imagine Cary Community Plan and provide transparency and management accountability.

These accomplishments reflect the dedication and leadership of staff throughout the organization and executive leadership by the Town Manager and Town Council. Cary citizens remain at the top of the Cary organization chart, and their contributions and support for their local government make Cary the successful community that it is.

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LIVE: FOSTERING STRONG NEIGHBORHOODS

MERIT BADGE COLLEGE

In August 2019, more than 260 scouts and 50 adult volunteers from two dozen troops attended the first-ever Town of Cary Merit Badge College. Hosted in coordination with the Occonneechee Council of the Boy Scouts of America, the event offered the opportunity for scouts to earn merit badges related to municipal government. Demand for the 15 classes was so high that the event filled up in

just 15 minutes. Merit badge classes held on the Town Hall Campus included Citizenship in the Community, Architecture, Landscape Architecture, American Labor, Chess, Digital Technology, Disabilities Awareness, Dog Care, Fingerprinting, Crime Prevention, Journalism, and Traffic Safety.

HOUSING REHABILITATION PROGRAM

In February, Cary announced the relaunch of its Housing Rehabilitation Program, which provides funding to assist eligible Cary homeowners with critical home repairs and improvements. The new program is managed in partnership with a lead nonprofit housing rehabilitation organization, providing a single point of contact for both Cary and the homeowner. Focus has shifted from exclusively supporting

repairs to meet code requirements to making enhancements that help senior residents age in place and/or meet the accessibility needs of people with disabilities. In the first two months of the program relaunch, Cary received more than 30 applications — an increase from eight to 10 applications per year in previous years.

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STUDY: WOMEN MOST SUCCESSFUL IN CARY

Cary took the top spot in financial information website SmartAsset’s study “Cities Where Women are Most Successful.” With a perfect score of 100, Cary ranked best for women in achievements such as education, income, and business ownership. Of note, more than 68% of women in Cary have a bachelor’s degree and nearly 54% of all business owners in Cary are women.

SINGLE-FAMILY AND RESIDENTIAL ALTERATION AND ADDITION PERMITS

During FY 2020, Cary issued permits for 748 new single-family dwellings, down 27% from the previous five fiscal year average of 1,021 and down 16% from the FY 2019 total of 889. Though still strong, residential addition and alteration permits in FY 2020 were down 0.5% from the previous five fiscal year average but up 4% from FY 2019.

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CARY

WORK: ASSURING CONTINUED PROSPERITY

AMAZON AND XEROX COMING TO CARY

Throughout the year, several businesses announced plans to open a location in Cary, including Xerox and Amazon.

The Xerox project was approved for a Job Development Investment Grant by the North Carolina Economic Investment Committee. To receive the economic development incentives, Xerox agreed to make a $18.4 million capital investment and create 600 jobs with an average salary of $113,000. Cary’s council approved an incentive of $270,717 over five years to be paid out when investment and job creation requirements are met.

Amazon became a corporate citizen of Cary with its announcement to open a delivery station, a facility where orders are prepared for last mile delivery to customers.

EPIC GAMES

In October 2019, Epic Games announced plans to expand its headquarters in Cary, utilizing eight acres of property at the corner of Dillard Drive and Jones Franklin Road. The expansion proposes a new facility to accommodate up to 2,000 employees within a new office building and associated parking deck.

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SHOP CREATING VIBRANT DESTINATIONS

New Life for “The Center”

The retail strip center at 111 E. Chatham Street, now referred to by the new owners as “The Center,” was approved for Cary’s Façade Improvement Program, and many of the new storefronts, awnings, and paint are well underway. New tenants will join the existing tenant mix and bring new life and activity to this significant area of downtown Cary.

Cary Library Demolition

The week of February 24 was bittersweet as Cary witnessed the demolition of the previous Cary library. Many shed tears as the library once seemed to be a permanent fixture on Academy Street. This parcel now provides an opportunity for more new and exciting things in downtown.

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ENGAGE: EXERIENCING THE CARY COMMUNITY

LAUNCHING MYCARY

The first phase of myCary, Cary’s new recreation registration system, was launched in December 2019. Over 1,400 program registrations were processed the first day, including online, in person, and by telephone. The new system provides a more intuitive, robust, and mobile-friendly way to search and sign up for programs, classes, and camps. Developers and staff devoted over 6,000 hours of time to create this system, the first recreation registration system in the country built on the Salesforce platform. This project is part of Cary’s larger effort to move systems to a central platform.

ESPORTS EVENT IN CARY

Cary hosted its first major esports event at the Herb Young Community Center from February 7-9. The event attracted 1,108 gamers and spectators from across the country. In total, $9,000 was awarded to winners and another $2,000 was split by local charities Kramden Institute and Triangle Literacy Council.

CHINESE LANTERN FESTIVAL

The NC Chinese Lantern Festival continued to be a huge draw at Koka Booth Amphitheatre. In its fifth year, the festival set a new attendance record of 121,645 people. According to the Greater Raleigh Convention and Visitors Bureau, approximately 56,000 of those visitors came from locations outside of Wake County with 14,598 staying overnight. The bureau estimates the event generated a direct economic impact for Cary of more than $3.6 million. This figure represents new money coming into the local economy.

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INDOOR COMMUNITY SPORTS COMPLEX

Cary was successful with its proposal to Wake County for hotel occupancy funding for a future Indoor Community Sports Complex to be located at the Cary Towne Center site. In February, both Wake County and City of Raleigh approved $35 million in funding to be allotted over 25 years for this new facility.

DOWNTOWN PARK PROJECT NEARS END OF DESIGN

The final design of the Downtown Park is nearly complete. Nineteen years in the making, the park will total seven acres and will be centrally located in downtown Cary surrounded by Walker, Academy, Park, and Walnut streets. The park will feature a “great lawn” and a unique, tiered water feature. The lawn will be fronted by a pavilion and surrounded by a series of unique spaces, or “rooms,” linked by paved walking trails. Additional features include performance places, market spaces, public art incorporated into the landscape, food and beverage facilities, a children’s play area, interactive water features, a dog play area and walkways for strolling and relaxing. Construction is anticipated to begin in 2021 with an opening date of 2023.

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SHAPE: GUIDING COMMUNITY GROWTH

FENTON MARCHES ONWARD

While development plans, building permits and construction activity in 2019 and early 2020 focused on grading permits and retaining walls, the spring of 2020 marked the beginning of a new chapter for Fenton. A development plan that included 193,000 square feet of office, 368,000 square feet of commercial, and 355 dwelling units, was approved on April 29.

ONE WALKER, ONE WALNUT

In May, the development plan for One Walker One Walnut, also known as the Academy Park Development, was approved. The project is located at the northwest corner of the intersection of Walker and Walnut streets, adjacent to Cary’s new parking deck, Wake County’s new regional library and the Downtown Park. Two mixed-use buildings are included within the project. The One Walker building, facing the Downtown Cary Park, will include 153 multi-family residential units with 21,195 square feet of retail along Walker Street. The One Walnut building will front Walnut Street with a mix of uses, including 83,800 square feet of office space above 15,000 square feet of retail.

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NEW DOWNTOWN PARKING DECK AND LIBRARY

The Downtown Cary Parking Deck and Library dedication and grand opening was held on November 3, 2019. The new 23,450-square- foot library, the largest in the county, holds 90,000 books, 32 public computers and numerous program spaces. The first floor features the children’s collection and a large children’s program room; the second floor features the Adult Services collection, a community meeting room and a quiet study. The Cary-owned lower level rooms provide restroom facilities for downtown park users and a shell space for future programming.

STANDARD SPECS MANUAL UPDATE

Cary’s Standard Specifications and Details Manual is a valuable resource for Cary and its development community. Developers, designers, contractors and vendors routinely depend on it to plan and complete their work. In May, Cary staff updated this manual for the first time since 2017.

NON-RESIDENTIAL PERMITS

Permitted non-residential new construction in FY 2020 totaled about 1 million square feet and $765 million in value as reported by contractors at permit application. Continued redevelopment is anticipated in the Imagine Cary Community Plan for both residential and non-residential property.

REZONING AND DEVELOPMENT PLANS

During FY 2020, Cary approved 19 rezoning cases and 77 development plans. These plans can range from a development as small as three townhomes to a large mixed-use proposal.

POPULATION

At the end of the year, Cary’s population was estimated to be 170,322. During FY 2020 Cary’s population grew by 2,775 citizens, or 1.6%.

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MOVE: PROVIDING TRANSPORTATION CHOICES

CROSSING CARY VIA GREENWAY

The White Oak Creek Greenway segment between MacArthur and Davis drives was completed via a 916-foot boardwalk and a 104-foot pedestrian tunnel under the CSX rail line. This long-awaited segment is one of the last needed to complete a 15-mile connection from Umstead State Park through Bond Park to the American Tobacco Trail. In celebration of the completion of this segment and of Cary’s growing greenway network, UNC-TV featured Cary greenways in a story on its “NC Weekend” show. UNC-TV has a statewide audience providing great exposure for Cary greenways and encouraging visitors to come and explore.

DYNAMIC LEFT TURN INTERSECTION

In February, the North Carolina Department of Transportation activated the first-in-the-nation Dynamic Left Turn Intersection at Tryon Road and Cary Parkway. This application uses familiar signs, traffic signals and other equipment in a new way to make the intersection more efficient by allowing permissive movements for dual left turn lane approaches during times of the day when traffic volumes are lighter and the second left turn lane is not necessary. During those lighter volume periods, the outside left turn is closed using an overhead LED panel displaying a red X, all left turns move to the inside left-turn lane, and then those left- turns can operate with a flashing yellow arrow. When traffic is heavier, the outside left turn lane is open, and both left turn lanes operate under green left turn arrows only.

WALKER STREET IMPROVEMENTS PROJECT

In May, the intersection of Walker Street and East Chatham Street opened to traffic as the Walker Street Improvements Project reached substantial completion. This project added enhanced aesthetics and pedestrian accessibility in this area, including brick sidewalks, upgraded wheelchair ramps, new decorative traffic and pedestrian signals, as well as upgraded street lighting, utilities and storm drainage. It also provided sidewalk improvements adjacent to the First United Methodist Church and made provisions to support improvements proposed at the Rogers Building site.

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CLASS OF 2040

SERVE: MEETING COMMUNITY NEEDS

CARY COLLECTS APP

The Cary Collects app, an interactive communications tool customized for Cary’s solid waste collections programs, launched September 25, 2019. For 10 years, citizens received blue or yellow recycling calendars, loose leaf collection schedules, maps, and other information and program tips by mail. With Cary Collects, this information is available digitally. Cary Collects also allows citizens to search for items in the “Waste Wizard” to determine the correct disposal method.

GOOD HOPE WATER TANK

The Good Hope Elevated Water Storage Tank and Pump Station were put into service in the fall of 2019. The two-million-gallon tank doubles the amount of storage in the Western Pressure Zone. Located near the corner of NC 55 and Good Hope Church Road, the tank is strategically positioned along the border of the Central Pressure Zone so that water can be moved between zones to supplement demand

as needed. The piping, valves and pumps necessary to implement these transfers make the Good Hope Tank Cary’s most complex water storage tank. It also means that it is the most versatile, providing operational flexibility not found in most water systems.

TEXT TO 911 UPGRADE

On January 31, the 911 Center upgraded its Text-2-911 platform allowing callers to quickly connect with Emergency Communications Officers with a true SMS connection, which is much faster than the previous system. Additional features provided by this new platform include the ability to answer multiple Text-2-911 calls by one Emergency Communications Officer, ability to transfer Text-2-911 calls to neighboring agencies, ability to three-way Text-2-911 with the originating caller and neighboring agencies, and the ability to receive attachments such as photographs or videos from callers.

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CARY DRONE OPERATIONS

Cary utilized a new and evolving technology — drones — in several operations this year, expediting several of its operations and services, including police and surveying activities.

In March, the Police Department deployed drones to address vandalism at the new parking deck near the Cary Regional Library. Shortly after deploying, the Drone Unit located juveniles in the vicinity of the Cary Arts Center and coordinated a response from patrol officers. The juveniles were later determined to be on probation for vandalism. The Town also sent a drone in advance of a K9 team during the recovery of a stolen vehicle, where the suspects fled on foot. The technology served as an invaluable asset in searching for the suspects by allowing Cary police to safely examine without placing an officer’s life in jeopardy performing the same task.

Drones were also used for surveying — another milestone for the Town’s drone program. As part of a collaboration with the NC Department of Transportation and Epic Games to make pedestrian improvements around the Epic Games campus, staff utilized drones to survey the upgrades. This process was faster and safer than traditional survey methods since staff could complete the work without entering the busy roadway. Days of field work were reduced to a few hours. Drones are proving to be a useful tool for current needs and are expected to be even more useful in the future.

NEW FIRE STATION 9

Cary’s newest fire station opened March 20, replacing the outdated and overcrowded fire station at 875 S.E. Maynard Road, which had reached the end of its useful service life. Originally built in 1974 and designated as Fire Station 2, the facility was designed to accommodate one fire truck and three firefighters. During its 44 years of service, the number of apparatus assigned to the facility doubled while the number of personnel assigned rose to 27.

When constructed, the SE Maynard Road station served residential areas along the Walnut Street corridor between Maynard Road and Buck Jones Road. In recent years, the area expanded and transformed to represent a more mixed-use community of residential and commercial developments. To support that and other growth in Cary, citizens approved a Community Investment Bonds referendum in 2012, which funded the construction of a new Fire Station 2, located in the downtown area at 601 E. Chatham Street. Fire Station 2 opened in December 2015 to address response time issues in the downtown area. The SE Maynard Road station, then Fire Station 2, was renamed Fire Station 9 with plans to later relocate it to 1427 Walnut Street.

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The new Station 9 is a 17,500-square-foot, two-story, three-bay facility built in accordance with Cary’s Strategic Energy Action Plan. The station includes a kitchen, a day room and dormitory spaces as well as apparatus, work and training spaces. The 1,400-square-foot, multi-purpose room can be utilized for Town training, events, and Cary’s Emergency Operations Center. Cary’s first service test pits were also built on the site and consist of two 10,000 underground tanks that will allow staff to stay local instead of traveling to neighboring jurisdictions to conduct annual mandated testing of fire truck pumps. The completion of Fire Station 2 and Fire Station 9 relocation projects will ensure the Fire Department meets current and future demands associated with response time goals in the downtown and the Crossroads/U.S. 1 corridor areas.

RESPONDING TO COVID-19

In response to of the growing threat of COVID-19, staff set up Cary’s first ever Emergency Operations Center on March 15. An Emergency Operations Center, or EOC, is a central, physical or virtual location designed to support emergency response, business continuity and crisis communication activities during a disaster or crisis.

When first activated, Cary’s EOC served two primary purposes: 1) to provide leadership with the information they needed to make decisions, such as when to declare a state of emergency, and 2) to ensure continuity of operations, particularly essential municipal services like water production and distribution; wastewater collection and treatment; police and fire response; solid waste, recycling and yard waste collection; inspections; and essential door to door transit.

The EOC implemented safety measures at all open Town facilities, including temperature checks, social distancing, and providing personal protective equipment as needed. In support of its staff, Cary also set up onsite childcare services for employees responsible for essential municipal services.

To ensure the safety of all employees, EOC transitioned to mostly remote operations on April 14 with only the EOC manager, police branch and fire branch reporting to Cary Town Hall. But dealing with one emergency didn’t stop other emergencies from occurring. Cary’s EOC also responded to water main breaks and a severe thunderstorm during the first month of activation. More than 50 staff from every department participated in the EOC in the first 30 days.

To assist the EOC with operations outside of the essential services, staff set up an Organizational Framework Team, or OFT, a week later to communicate with everyone across the organization and to keep “the machine” running, ensuring that normal operations continue. The OFT, a group of four employees, produced an operational message and report every week to keep staff, particularly those working from home, informed of operational updates and to answer staff questions. Town operations continued thanks to staff coming up with new and innovative ways of doing business remotely.

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ACT: MOVING FROM VISION TO REALITY

311 LAUNCH

Culminating a multi-year, multi-departmental effort, 311 transitioned from a project to a service on January 2. The 311 number works within Cary town limits from all major wireless and landline phones; outside of Cary, citizens may dial (919) 469-4000. Two and a half months after the Town’s 311 launch, its 11 Citizen Advocates were put to their first big test responding to calls — an average of 457 per day — from their homes during the ongoing COVID-19 crisis.

CARY TOWN COUNCIL HOSTS FIRST-EVER VIRTUAL TOWN HALL

On April 30, in an effort for the Cary Council to engage virtually with citizens during the COVID-19 quarantine, Cary hosted a live, virtual Town Hall. Each council member was given the opportunity to offer words of hope to the community and respond to questions submitted in advance from citizens. Citizens submitted more than 45 comments ranging in topics from Cary’s coronavirus response to the progress of Shaping Cary’s Tomorrow bond projects, including continued efforts downtown. The event was streamed live on Cary’s website, YouTube, CaryTV, and Facebook. Overall, this was the most-watched meeting in Cary’s history.

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NANCY JONES HOUSE

Cary took ownership of the Nancy Jones House in October 2019 and began working to identify a site to relocate the structure. The Nancy Jones House, currently located on Chapel Hill Road, is the oldest remaining residential structure in Cary.

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Harold Weinbrecht, Jr. Mayor

Don Frantz District B

Mayor Pro Tem

Ed Yerha At-Large

Lori Bush At-Large

Ya Liu District D

Jennifer Robinson District A

Jack Smith District C

MEMBERS OF TOWN COUNCIL

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TOWN OF CARY MISSION STATEMENT AND STATEMENT OF VALUES

MISSION STATEMENT At the Town of Cary we focus every day on enriching the lives of our citizens by creating an exceptional environment and providing exemplary services that enable our community to thrive and prosper.

STATEMENT OF VALUES To achieve our mission, we will uphold the following values:

1. Our organization exists to serve our citizens. We will be open, ensure access, encourage involvement and be accountable to our citizens.

2. Employees are our most important resource. We will attract and retain the best employees possible and invest in their personal and professional growth.

3. We will be honest, ethical and diligent. Our actions will comply with local, state and federal laws.

4. We will treat everyone with dignity, respect and fairness.

5. We will achieve the best results through effective teamwork, strategic partnerships and community participation.

6. We will provide outstanding customer service that is polite, friendly and responsive.

7. We value creative thinking and innovation. We will continue to be nationally recognized for excellence in local government.

8. We value growth that balances desired service levels, economic benefits and continued stability for our community.

9. We are cost conscious. We spend public funds responsibly and effectively to ensure the Town’s short and long term financial strength.

10. We are committed to proactive, comprehensive planning to guide the future of our community.

11. We will preserve and protect our environment. We will be good stewards of our finite natural resources.

Adopted by Town Council August 22, 2006

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APPOINTED AND ADMINISTRATIVE STAFF

(1) Appointed by Town Council

RUSS OVERTON Deputy Town Manager

SEAN STEGALL Town Manager(1)

DANIEL AULT Assistant Town Manager

RENEE POOLE Chief Human Resources

Officer

CHRISTINE SIMPSON Town Attorney(1)

VIRGINIA JOHNSON Town Clerk(1)

KAREN MILLS Chief Financial

Officer/Treasurer(1)

SUSAN MORAN Chief of Strategic Communicatons

ALLAN CAIN Direct of Public Safety

MIKE COOPER Fire Chief

TONI DEZOMITS Police Chief

JAMIE REVELS Utilities Director

NICOLE RAIMUNDO Chief Information Officer

SCOTT BERRY Planning, Inspections &

Development Services Director

DOUG MCRAINEY Director of Parks, Recreation

& Cultural Resources

TED BOYD Director of Economic

Development

SCOTT HECHT Public Works Director

DANNA WIDMAR Director of Special Projects

JERRY JENSEN Transportation & Facilities

Director

WES EVERETT 311 Director

KERRY HARVILLE Director of Special Projects

ALLISON HUTCHINS Director of Learning &

Organizational Development

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TOWN OF CARY ORGANIZATION CHART

CARY CITIZENS

MAYOR & COUNCIL 7 members

*TOWN MANAGER’S OFFICE

69 employees

*TOWN CLERK’S OFFICE

3 employees

*TOWN ATTORNEY’S OFFICE

4 members

FIRE 245 employees

DEVELOPMENT SUPPORT SERVICES

15 employees

UTILITIES 123.38 employees

POLICE 243.5 employees INSPECTIONS &

PERMITS 44 employees

PUBLIC WORKS 327.75 employees

PLANNING 17 employees

TRANSPORTATION & FACILITIES

38 employees PARKS, RECREATION,

AND CULTURAL RESOURCES 78 employees

HUMAN RESOURCES 15.63 employees

TECHNOLOGY SERVICES

34.69 employees

*FINANCE 47.02 employees

TOWN BOARDS AND COMMISSIONS

* The Town Manager, Town Attorney, and Town Clerk are appointed by Town Council. All department directors are appointed by the Town Manager. In addition, State law requires the Town Council to appoint a treasurer. The Town Council appointed the Chief Financial Officer as Treasurer.

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RESPONSIBILITIES OF TOWN GOVERNMENT BY DEPARTMENT

LEGISLATIVE DEPARTMENT The Legislative Department includes the Town Council, the Town Clerk Division, and the Legal Division.

The Town Council is comprised of the Mayor and six Council Members and is elected by the registered voters of Cary. Council establishes policies and programs for effective delivery of Cary services, approves the annual financial plan, sets the property tax rate and all user fees, and provides all ordinances, rules and regulations for the welfare of the Town. The Council also appoints the Town Attorney, the Town Clerk, and the Town Manager.

Town Clerk’s Office ensures accessible and responsive government by preparing and keeping minutes and permanent records, providing administrative support to Council, and coordinating the Cary’s boards, commissions, committees and task forces. The Office also maintains the Charter, Code, and Land Development Ordinance and oversees the accurate and timely accumulation, preservation, and accessibility of public records. The position of Town Clerk is appointed by and reports directly to the Town Council. The office is also supported by one full- time Deputy Town Clerk and one full-time Assistant Town Clerk.

Legal Department - advises and provides legal services to the Mayor and Council, the Town Manager, and Town departmental staff. The department serves the municipal corporation that is the Town of Cary and does not provide advice to private citizens. Legal services

provided include: drafting and review of ordinances, policies, and procedures; drafting, review, and negotiation of contracts and other legal instruments; representation of Council or staff at open meetings, including quasi-judicial hearings; assistance in the enforcement of Town ordinances; and representation in claims and litigation, by the department or through appointed or retained outside counsel.

The Legal Department strives to provide exceptional legal service in support of Council policies and initiatives, including the Cary Community Plan and other Town priorities. The department operates in a manner that reflects and supports Cary’s adaptive leadership culture, and that is efficient, effective, and responsive. At all times, the Legal Department exercises independent, professional judgment in the rendering of candid advice.

The Town Attorney, a Senior Assistant Town Attorney, an Assistant Town Attorney, and a Legal Assistant serve in the Legal Department.

TOWN MANAGER’S DEPARTMENT The Town Manager’s Office includes the Town Manager, who serves as the Chief Executive Officer of the organization, along with their Deputy and Assistant. Functional areas assigned to this department include Capital Program Management, Economic Development, Organizational Development, Research and Development, and Public Safety Administration. Several program areas undergoing rapid

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change or growth to help meet the needs of our maturing community, such as Stormwater, GoCary Transit, Housing and Neighborhood Services, Historic Preservation, Special Projects, Sustainability, and our 311 Center are also managed under the umbrella of the Town Manager’s Office.

Only with a sense of purpose and vision, can any organization, either public or private, achieve its full potential, and the responsibility for articulating and ensuring the strategic implementation of Cary’s purpose and vision rests squarely in the Town Manager’s Office. The Town Manager’s Office’s job is to reflect on the most pressing issues facing our community and how we adapt our people, our services, our operations, and our approaches to turn potential liabilities into strengths.

Capital Program Management is responsible for facilitating and organizing all active capital projects into a 21-year Capital Improvement Budget/Plan (CIB/P). Through the prioritization of capital projects over 21 years, the Capital Program Management group ensures that Town resources are efficiently and effectively allocated in order to maintain the highest-quality capital assets and facilities.

Economic Development facilitates business location, relocation, expansion, and retention activities throughout Cary, including downtown. This office works closely with the Cary Chamber of Commerce, the Town’s official economic development partner, as well as state and county economic development councils, departments, bureaus, and associations in the Research Triangle region.

Organizational Development at the Town of Cary is a human endeavor to help people thrive in our culture and meet the demands of the future. Simply, the work is about our culture and our people and how those two things intersect. Our work creates pathways for developing multi-faceted employees, by maximizing strengths, harnessing life experiences, and tapping into the potential of every person.

Research and Development creatively and systematically works to invent the local government that does not exist. The division uses innovative thinking to develop new services, products and training to provide extraordinary service for internal and external stakeholders.

Public Safety Administration coordinates activities and operations between Police, Fire, and Code Enforcement. The division implements emergency management activities for disasters and large planned events. The Public Safety division also serves as the external stakeholder point- of-contact for 911 communication serves and other related services.

The Stormwater Program administers state and federally mandated activities with an adaptive approach to stormwater which includes engaging citizens and developing new tools to address the needs of a maturing community.

GoCary Transit operates a network of seven local bus routes, as well as an ADA complementary paratransit service known as GoCary Door to Door. GoCary Door to Door also serves the Town of Cary and surrounding communities with premium demand response service for town residents age 60 and over.

Housing and Neighborhood Services consolidates all Town of Cary housing-related programs and services including housing, the neighborhood improvement grant and community development grant programs, and minimum housing to provide a more holistic, effective and efficient use of resources to meet the needs of our maturing community.

Historic Preservation’s mission is to enhance the quality of life in Cary through the preservation of the historic resources that give Cary its individuality and provide the context for understanding our heritage historic resources.

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Special Projects focuses on emerging issues or challenges facing the organization and/or our community, utilizing analytical and adaptive approaches to improving the way we serve our citizens.

Sustainability collaborates with departments and citizens to enhance Cary’s operational and community-wide sustainability. The division also serves as a technical resource and point of contact for sustainability grants, energy innovation, climate mitigation, adaptation, and sustainability efforts.

The 311 Center is a citizen-centric communication and information hub blending modern software with staff knowledge of Town operations to provide citizens great customer service. With a strong foundation of powerful and interconnected technologies, the 311 Center uses a OneCary approach to citizen services—disrupting silos to better understand and meet citizens’ needs.

POLICE DEPARTMENT The Police Department’s mission is to protect life and property through community partnerships and the provision of the highest level of quality professional services. The department accomplishes its mission by focusing on education, prevention, investigation, and enforcement. Major components of the department include Field Operations, Investigations, Support Services, and Professional Standards. Additional services provided include animal control, school resource officers and emergency communications. The Cary Police Department has proven itself a leader among law enforcement agencies. Proactive policing methods and a great relationship throughout the community have allowed the department to continually move forward and help our citizens maintain a high quality of life. Cary’s Police Department has been internationally accredited since 1992 and has been awarded the Gold Standard by the Commission on Accreditation for Law Enforcement Agencies (CALEA).

FIRE DEPARTMENT The Fire Department continues Cary’s legacy of excellence by responding in an exemplary manner to present-day emergencies while anticipating future challenges. In a OneCary approach to community risk reduction and emergency service response, the Fire Department partners with departments and divisions within our organization, as well as neighboring fire departments to ensure its fire suppression and prevention efforts stay responsive and progressive. Routine fire inspections on commercial and multi-family structures are completed by fire inspectors assigned to the department on a 1-year, 2-year, and 3-year schedule based on occupancy time.

The department operates out of nine fire stations located strategically throughout the Town. The department has been internationally accredited since 1999 through the Commission on Fire Accreditation International and in 2015 the Town received an ISO rating of 1.

FINANCE DEPARTMENT The Finance Department administers Cary’s financial affairs. Financial functions are organized in three divisions: Accounting and Procurement, Financial Strategy, and Utility Accounts.

The Accounting and Procurement Division maintains accounting and financial systems, and provides payroll, accounts payable and accounts receivable services. The division provides regulatory and informational reporting and prepares a Comprehensive Annual Financial Report. Also managed within this group are cash and investments, debt, grants, and risk management. Risk related to worker’s compensation and safety are managed by Human Resources. Procurement is responsible for ensuring procurement functions are provided to all departments, as per local, state, and federal regulatory requirements, to purchase goods (apparatus, supplies, materials, and equipment), provide solicitation

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of services, and bid construction or repair work. Procurement also administers contracts, manages the Town’s warehoused inventory, manages internal couriers, and disposes of surplus property.

The Financial Strategy (Budget) Division is responsible for the planning, development, execution and evaluation of the operating and capital improvements budgets and the capital improvements plan. Other responsibilities include long-term financial planning, publishing budget documents and managing special projects. Special projects include internal performance measurement / benchmarking, operational analyses, and policy research and recommendations.

The Utility Accounts Division is responsible for utility billing and collection. The division provides customer service, manages the water meter reading system, and bills and collects for utility services. This function is accounted for in the utility fund.

HUMAN RESOURCES DEPARTMENT The Human Resources Department exists to promote Town of Cary Value Statement #2: “Employees are our most important resource. We will attract and retain the best employees possible and invest in their personal and professional growth.” Adaptively, the Human Resources Department works to drive the culture of the organization. As Cary continues to move forward becoming the local government like no other, we must provide an extraordinary work environment for employees that enhances their creativity and contributions while achieving outcomes identified in the Cary Community Plan. Technically, HR oversees a full range of responsibilities including recruitment and selection, competitive pay and benefits, employee relations, and safety and training.

MARKETING AND INFORMATION TECHNOLOGY DEPARTMENT The Marketing and Information Technology (MIT) Department provides and supports communications, information, and technology solutions to enable Town departments to serve our citizens in the manner they have come to expect. Technology solutions include software applications, geographic information services, public safety systems, radio systems, phone systems, voice mail, email, file services, desktop and laptop computers, mobile devices, internet of things (IoT) and network infrastructure.

The MIT Department is focused on building a secure and connected workforce and community through the use of cloud, platform and data management strategies. We will continue our digital transformation journey through fostering a culture of exploring and testing new concepts and technologies while promoting creativity and cross organization collaboration.

The marketing arm of the MIT team leads planning and execution of integrated, omnichannel marketing initiatives with the goal of creating a consistent citizen experience. They oversee external and internal communications including social media, web, print, graphic design, video and photography, marketing materials, media relations and news releases, and Cary TV with a citizen-first approach.

PARKS, RECREATION AND CULTURAL RESOURCES DEPARTMENT The Parks, Recreation and Cultural Resources Department consists of the Administration, Community Recreation Programs, Cultural Resources and Sports Venues divisions, and handles a wide variety of day-to-day and long-range functions.

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The Administration Division coordinates the work of all the department’s divisions, which include Sports Venues, Cultural Arts and Community Recreation. Responsibilities include management of 32 public park areas with unique offerings and 79 miles of greenways; environmental outreach; facility planning with the Transportation and Facilities department; budget, grant, and contract administration; volunteer management; customer service; sponsorships; policies and procedures; national accreditation; marketing and communications; special services, including specialized recreation and inclusion, community outreach, including Project Phoenix in coordination with the Cary Police Department.

The Community Recreation Division is divided into the following sections: community centers, senior programs (age 55+), environment education, sports, and outdoor recreation. The division delivers a wide range of sports and recreational activities for adults, children, and senior adults including dance, exercise, adventure, trips, confidence building, social interaction, camps, as well as programs in ecology, environmental stewardship, preservation and nature appreciation. The division provides youth and adult sports leagues, clinics and camps including basketball, softball, baseball, volleyball, and golf. The division hosts the Cary Road Race as well as local and state level softball tournaments. The division provides Town citizens with the opportunity to rent facilities for group functions, such as picnics, meetings, and other social occasions. Programs and rentals are offered at Bond Park, Hemlock Bluffs Nature Preserve, Herb Young Community Center, Bond Park Community Center, Middle Creek Community Center, Cary Senior Center, The Hive and other various parks throughout the Town. The division also manages the Cary Teen Council.

The Cultural Arts and Resources Division offers a wide-ranging schedule of classes in dance, visual arts, music, theatre history, architecture, film and videography to enrich the lives of Cary citizens. Division staff also provide communication, coordination and support for Town cultural

groups. Special events such as the Lazy Daze and Spring Daze arts and crafts festivals, the Christmas Tree Lighting, a variety of other downtown events and programs, the Fourth of July Celebration and various cultural festivals and events at the Sertoma Amphitheatre are managed by this division to provide an opportunity for Town citizens to come together as a community to experience artistic excellence. Applause! Cary Youth Theatre provides opportunities for area youth to participate in theatrical productions each year. The Town’s public art program is administered through the division as well as coordination of Town exhibitions. The division also has responsibilities in administering the Town’s Public Art Master Plan. The division oversees the operation of the Page-Walker Arts and History Center, the Cary Arts Center and the Cary Theater and provides general oversight for the facilities management company contracted to administer the Koka Booth Amphitheatre.

The Sports Venues Division is responsible for planning, implementing and supervising diverse youth and adult programs and special events. Programs and camps are offered in softball, baseball, tennis, soccer, lacrosse, cross country, and action sports. The division also hosts various special events such as the Division II Baseball World Series, the Tennis Campus Championships, the NCAA Soccer College Cup, sk8 Cary Contest as well as local, state and national level soccer, tennis, baseball and softball tournaments. The Town manages several signature parks including the Cary Tennis Park (a 36-court full service tennis facility providing instruction, camps, clinics, tournaments and league play), a Skate Park (a 12,000 square-foot course with ramps and other popular skating obstacles), WakeMed Soccer Park (a 150 acre facility which includes a nationally recognized cross country course, seven multi- purpose soccer fields and a 10,000 seat stadium home to the North Carolina FC professional soccer team). The USA Baseball National Training Complex at Thomas Brooks Park includes four full-size baseball fields featuring a stadium field complementing the four-field softball/ baseball complex at the park.

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PUBLIC WORKS DEPARTMENT (GENERAL AND FLEET FUNDS) There are five non-Utility Fund Public Works divisions: PW/UT Administration, Facilities Management, Fleet Management, Operations, and Solid Waste, Recycling, and Yard Waste.

The Public Works and Utilities Administration Division coordinates operations management planning, emergency management planning, work flow management, regulatory permit administration, long term strategic planning, budget preparation, expenditure system control, operations analysis, data collection and analysis, record-keeping, and personnel management for both the Public Works and Utilities Departments. Additional focus areas include call center management, telephone support, direct dispatch, and work order preparation for customer needs to be addressed by operational staff. Utility-related activity is reimbursed by the utility fund.

The Facilities Management Division is tasked with the planning and implementation of a comprehensive maintenance and repair program for all Town buildings, landscapes, parks, trails, rights-of-way, special use facilities and the cemetery. Other responsibilities include special events equipment logistics, street sweeping program, code enforcement pertaining to overgrown properties, roadway and sidewalk obstructions, hazardous tree management and related safety issues. The division also provides emergency response during weather events and logistical support for all Town events. Utility-related activity is reimbursed by the utility fund.

The Fleet Management Division is responsible for the repair and maintenance of all Town vehicles and equipment. Responsibilities include planning preventive maintenance and replacement, providing fuel for all Town vehicles and equipment, managing the pool car fleet, analyzing equipment useful life and availability rates, and maintaining

related cost data for all departments utilizing vehicle and equipment assets. The Fleet Management Division is accounted for in a separate internal service fund where services, parts, and fuels are charged to user departments.

The Operations Division performs a variety of duties serving both Utility and General Fund functions. Key areas of responsibility for General Fund functions include maintenance and repair of storm water conveyance systems, streets, sidewalks, curb and gutter, traffic signals, traffic signs and traffic markings. Other responsibilities include inclement weather response operations such as snow and ice control, storm recovery and debris removal and chipping services. The Operations group also provides program support to other divisions and departments across the Town and maintains around-the-clock response capabilities with after- hours/weekend response teams for traffic signals and construction. Utility-related activity is reimbursed by the utility fund.

The Solid Waste Management, Recycling and Yard Waste Division provides curbside household garbage collection services on a weekly basis to households and small businesses. This division is also responsible for the collection of recyclables, yard waste and special and bulky items, as well as code enforcement for debris and health and safety related issues, emptying downtown litter containers, processing and disposing of debris resulting from inclement weather, loose leaf collection and the operation of the Dixon Avenue Citizen Convenience Center / Transfer Station. This group also coordinates a solid waste education program to increase citizen understanding of waste reduction/diversion opportunities, and the development of long-range disposal operations.

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TRANSPORTATION AND FACILITIES DEPARTMENT The Transportation and Facilities Department focuses on project investments in transit, transportation and Town-wide facilities. We embrace a town-wide collaborative and adaptive effort in the development of capital projects to ensure holistic project delivery that is consistent with our Cary Community Plan. Specifically, the department is responsible for the planning, design, and construction of all Town facilities including parks, sidewalks, greenways, Town-owned buildings, streets, and bicycle routes. Real estate purchases associated with Town projects and related surveying and technical services are also overseen by this group as well as management of the traffic signal system.

PLANNING, INSPECTIONS AND PERMITS, AND DEVELOPMENT SERVICES DEPARTMENT Planning applies a combination of Cary Community Plan principles, Cary’s Land Development Ordnance regulations and adaptive leadership concepts to respond to the diverse needs of citizens, business owners and developers. Staff develops and implements comprehensive land use plans, district and corridor plans and manages annexations, rezonings, development plan review, plat approvals, variance requests and the assigning of addressing. The Development Compliance team ensures that sites are developed in compliance with approved plans and addresses zoning compliance. Planning staff assembles demographic data, maintains and enforces zoning ordinances, processes sign and other permits, and prepares maps. The staff makes detailed presentations on rezoning and special use cases to the Town Council. Staff also make presentations to and provide administrative staff support for the Zoning Board of Adjustment, the Planning and Zoning Board and the Historic Preservation Commission.

Planning contributes to the success of the Cary through its integral role in the implementation of the Cary Community Plan. Planning staff, in

collaboration with fellow Town employees, citizens, and stakeholders strive to realize the values of the Community Plan, such as fostering strong neighborhoods, creating vibrant destinations, protecting natural resources, managing future land use, and encouraging redevelopment and infill, to meet the needs of a growing population and to ensure Cary remains Cary.

Inspections and Permits is responsible for the administration and enforcement of all residential and commercial elements of the North Carolina State Building Code and local ordinances related to the construction of buildings and other structures. This includes the installation of plumbing, electrical, heating, refrigeration, air conditioning, and fire prevention systems. This responsibility can be grouped in two main functional areas; building code plan review and building code field inspections.

Building Code Enforcement is the only municipal service mandated by the NC General Assembly (G.S. 160A-411). The division enforces the NC State Building Code—which includes Building (commercial), Accessibility, Residential, Plumbing, Mechanical, Fuel Gas, Electrical, Fire, and Energy Conservation Codes—through the activities of permitting and inspections. The plan review group reviews construction drawings for compliance with the NC State Building Code and once approved, building permits are issued by the Development Services Division staff. The inspection group ensures buildings and other structures are constructed and/or altered in accordance with the approved plans and in compliance with the NC State Building Code.

Inspections and Permits promotes life safety by ensuring state building code compliance while providing quality service and responsiveness to our citizens, contractors, and design professionals. The group leverages technology whenever possible to be more efficient and streamline work as evidenced by the implementation of electronic plan review for building permits in FY 2018.

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Development Services coordinates Cary’s development review process, with a focus on providing accurate, timely, friendly, clear and consistent service. We offer a professional presence throughout development project lifetimes — from site plan to certificate of occupancy. Development Services continuously examines models where we can proactively communicate and collaborate with those we serve, looking for ways to improve the development process.

The group is organized into the following functional areas:

■ Development Customer Service Desk and Contact Center Receives incoming telephone calls, general emails, and other electronic media, answers general questions, and routes calls appropriately. Coordinates and schedules inspections for Planning, Zoning, Minimum Housing, Inspections and Permits, Fire Code Enforcement, and building permit-related inspections by other Town departments.

■ Development Technicians Process and help facilitate the review of various development, building, water, sewer and reclaimed water applications. Calculate appropriate fees by applying current fee schedule to submitted plans. Additionally, development technicians facilitate the review of sign permits, and real estate plats. Development Technicians serve as a resource to citizens and the development community by providing assistance with Town applications, policies and procedures.

■ Development Liaisons Help customers successfully navigate the development process. Serve as liaisons between Cary and the business community, developers, architects, engineers, landowners, attorneys, citizens and contractors who are conducting development related business. Development Liaisons are a customer’s primary point of contact with the Town throughout the life of a project.

UTILITIES DEPARTMENT – (UTILITY FUND) The Utility Fund is comprised of ten divisions: Utility Administration, Utilities Pretreatment, Utilities Engineering, Utility Systems Management, Reclaimed Water, North Water Reclamation Facility, South Cary Water Reclamation Facility, Western Wake Water Reclamation Facility, Cary/ Apex Water Treatment Facility, and Remote Water Infrastructure.

Utility Administration provides operational and environmental communications support to all utility divisions.

Utilities Pretreatment implements Cary’s industrial pretreatment program, user fee program for industrial and commercial users of the sewer system, and the fats, oils, and grease (FOG) program that helps prevent blockages and overflows in the sanitary collection system. Utilities Pretreatment is the primary contact for regulatory agencies that assess the Town’s overall regulation and control of what is discharged into the sanitary sewer collection system.

Utilities Engineering plans for Cary’s long-range strategic water supply and wastewater treatment needs and protection of water quality to ensure that Cary remains highly competitive for economic development and quality of life. Water quality protection ensures that rainwater is managed well and our drinking water source, Jordan Lake, is protected from potential pollutants from both within our jurisdiction and regionally. The division prepares thorough master plans to ensure that high performing and cost-effective utility infrastructure is provided to meet these needs. Whether infrastructure is provided through Town- funded capital projects or private development, the department ensures that cohesive, quality and efficient infrastructure systems are provided to meet existing and future utility needs.

Utility Systems Management provides regulatory program oversight, maintenance management and implementation for wastewater pumping facilities, wastewater odor control, pump station SCADA and

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instrumentation, industrial wastewater flow data, and inflow/infiltration functions. This division participates in engineering studies and related system review functions.

The Reclaimed Water Division provides regulatory program oversight, operations and maintenance of the Town’s three reclaimed water distribution systems. This division participates in engineering studies and provides education and training to reclaimed water customers, cooling tower customers, and landscape contractors who use reclaimed water.

The North and South Cary Water Reclamation Facilities treat wastewater generated by Cary’s utility customers. The North Cary facility is permitted and maintains the capacity to treat up to 12 million gallons of wastewater per day. The South Cary facility is permitted and maintains the capacity to treat up to 12.8 million gallons of wastewater per day. Operations also include performing preventive, predictive, and corrective maintenance for the main plant site, biosolids removal and disposal, and reclaimed water production.

The Western Wake Water Reclamation Facility treats wastewater generated by western Cary, Morrisville, Apex, and Wake County Research Triangle Park utility customers. The facility began accepting wastewater on July 30, 2014 and began discharging treated water to the Cape Fear River on August 11, 2014. The facility is permitted and maintains the capacity to treat 18 million gallons of wastewater per day. Ongoing efforts include preventive, predictive and corrective maintenance for the facility, biosolids processing facility, treated effluent pumping station and associated discharge facilities at the Cape Fear River. Operating and future capital costs will be split between the Towns of Cary and Apex at a 66% / 34% split, respectively.

The Cary/Apex Water Treatment Facility’s (CAWTF) mission is to provide reliable and safe water service. This is achieved through ongoing efforts which include preventive, predictive and corrective maintenance

for the treatment facility, raw water intake and pumping facility, and the finished water distribution pump station. The service area for the Cary/Apex Water Treatment Facility includes: Cary, Apex, Morrisville, RDU Airport and the Wake County portion of Research Triangle Park. The Town of Apex pays a portion of the operating costs of the facility (23% of capital costs and actual usage of other costs) as 23% owner of the facility. The facility also manages the disposal of water treatment residuals and develops and manages alternative residual disposal methods. Capacity currently is 40 million gallons per day (MGD), and the current expansion project will increase the facility’s treatment capacity to 56 MGD.

The Remote Water Infrastructure Division, which is managed by the CAWTF Division, provides maintenance, instrumentation, SCADA, and logistics support for the operation of the Town’s remote water infrastructure including: six elevated water storage tanks, one ground storage tank, three booster pump stations, pressure zone control valves, and interconnections with neighboring utilities. This division participates in engineering studies and related system review functions to support water system operations.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 6 5

TOWN BOARDS AND COMMISSIONS

PUBLIC ART ADVISORY BOARD

Mr. Jim Wallace, Chair

ENVIRONMENTAL ADVISORY BOARD

Mr. Rick Savage, Chair

PLANNING AND ZONING BOARD

Mr. Ryan Eades, Chair

ZONING BOARD OF ADJUSTMENT

Mr. Charles McDarris, Chair

HISTORIC PRESERVATION COMMISSION

Mr. Bob Myers, Chair

PARKS, RECREATION AND CULTURAL RESOURCES

ADVISORY BOARD Mr. Jim Bustrack, Chair

INFORMATION SERVICES ADVISORY BOARD

Mr. Mehul Shah, Chair

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 6 6

Government Finance Officers Association

Certificate of Achievement for Excellence

in Financial Reporting

Presented to

Town of Cary North Carolina

For its Comprehensive Annual Financial Report

For the Fiscal Year Ended

June 30, 2019

Executive Director/CEO

FINANCIAL SECTION

cbh.com

Report of Independent Auditor

To the Honorable Mayor and Members of the Town Council Town of Cary, North Carolina

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Cary, North Carolina (the “Town”) as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Town’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town as of June 30, 2020, and the respective changes in financial position and cash flows thereof, and the respective budgetary comparison for the General Fund, the Transit, and the Emergency Telephone System for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and the Required Supplementary Information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a required part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The Introductory Section, Supplementary Information, Statistical Section, and Schedule of Expenditures of Federal and State Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the State Single Audit Implementation Act are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The Supplementary Information and the Schedule of Expenditures of Federal and State Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit, the procedures performed as described above, the Supplementary Information and the Schedule of Expenditures of Federal and State Awards, are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of basic financial statements and, accordingly, we do not express an opinion or provide assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 20, 2020 on our consideration of the Town’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of the report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.

Raleigh, North Carolina November 20, 2020

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 6 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

As management of the Town of Cary (Cary), we offer readers of the financial statements this narrative overview and analysis of the financial position and activities of Cary as of and for the fiscal year ended June 30, 2020. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the financial statements.

FFiinnaanncciiaall HHiigghhlliigghhttss

• Cary’s assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the close of the fiscal year by approximately $1.74 billion (net position). Of this amount, $222 million of unrestricted funds may be used to meet the ongoing obligations to citizens and creditors.

• Net position increased by $53.6 million in fiscal year 2020. The governmental net position increased $17 million and the business-type net position increased by $36.6 million. The increases in governmental and business-type net positions are the result of General Fund and Utility Systems Enterprise Fund revenues that exceeded expenses and the increase in capital assets, both from Cary constructed assets and the donation of infrastructure from developers.

• As of the close of the fiscal year, Cary’s governmental funds reported combined ending fund balances of approximately $234 million, a decrease of $9.5 million from the prior year. Total fund balance in the General Fund increased $.4 million from fiscal year 2019, partially due to slight increases in revenues that offset increases in expenditures. Capital Project Fund fund balance decreased $12.1 million due to increased spending on downtown, parks and fire projects. The fund balances in the four special revenue funds increased a total of $2.2 million. The increase was partially due to timing of the receipt of federal and local funds for transit during fiscal year 2020. A discussion pertaining to the composition of governmental fund balance is available in the Notes to the Financial Statements.

• At the end of the current fiscal year, unassigned fund balance for the General Fund was $34.3 million, or 20.4% (2.5 months) of total general fund expenditures for the 2020 fiscal year.

• Cary repaid $25.6 million of bond principal and installment financing principal during the year net of contractual capital project partner governments’ shares.

• Cary issued $16 million of general obligation public improvement bonds, Series 2019A to finance fire, parks and transportation projects that were approved as part of the 2012 Community Investment bond referendum. This was the remaining authority from the referendum.

• Cary maintained its outstanding AAA bond ratings from all three major rating agencies for general obligation bonds and revenue bonds, the highest rating possible from all three rating agencies for all three types of debt.

• Cary’s total investment earnings during the year were $20 million, an increase of $.5 million from the prior year. Realized investment earnings increased about $1.2 million from fiscal year 2019, however due to a positive mark to market adjustment a larger increase in earnings has been reported. The average yield on the investment portfolio increased from 1.79% to 1.97%. The average yield on other deposits decreased from 1.30% to 1.14%.

OOvveerrvviieeww ooff tthhee FFiinnaanncciiaall SSttaatteemmeennttss

This discussion and analysis are intended to serve as an introduction to Cary’s basic financial statements. The basic financial statements consist of three components: 1) entity- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report contains other supplemental information in addition to the basic financial statements themselves.

EEnnttiittyy--WWiiddee FFiinnaanncciiaall SSttaatteemmeennttss

The entity-wide financial statements, a Statement of Net Position and a Statement of Activities, are designed to provide readers with a broad overview of Cary’s finances in a manner similar to a private-sector business. The entity-wide statements provide short and long-term information about Cary’s financial status as a whole.

The two entity-wide statements report net position and how it has changed. Net position is the difference between total assets and deferred outflows of resources and total liabilities and deferred inflows of resources. Measuring net position is one way to gauge Cary’s financial condition.

Both of the entity-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include most basic services such as police, fire, solid waste and recycling, facilities and operations maintenance, planning, transportation and facilities, building inspections, parks, recreation and cultural programs as well as the administrative support functions. The business-type activity primarily consists of water and sewer utility services.

The Cary Economic Development Corporation is Cary’s only component unit, but has no assets, liabilities or other activity to be recorded. This corporation exists for Cary to issue and manage certificates of participation. In accordance with the Governmental Accounting Standards Board criteria for inclusion in the reporting entity, Cary has no reportable component units.

The entity-wide financial statements are Exhibits A and B of this report.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 0

FFuunndd FFiinnaanncciiaall SSttaatteemmeennttss

The fund financial statements provide more detailed information about major funds. Funds are the accounting tools used to track specific sources of funding such as those required by law or for specific purposes. Cary, like all other governmental entities in North Carolina, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements, such as the North Carolina General Statutes, the budget ordinance or revenue bond covenants. All the funds can be divided into two categories: governmental funds and proprietary funds.

GGoovveerrnnmmeennttaall FFuunnddss:: Most of Cary’s basic services are included in governmental funds which are essentially the same functions reported as governmental activities in the entity- wide financial statements. However, unlike the entity-wide financial statements, governmental fund financial statements focus on how cash and other assets are and can be used for near-term spending as well as on balances of resources available for spending at the end of the fiscal year. This information may be useful in evaluating Cary’s resources for near-term financial requirements.

Because the focus of governmental funds is narrower than that of the entity-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the entity-wide financial statements. By doing so, readers may better understand the long-term impact of the near- term financing decisions. Exhibit F describes the differences in the statement of revenues, expenditures, and changes in fund balances of governmental funds to the entity-wide statement of activities.

Cary maintains six individual governmental funds. Information is presented separately in the governmental fund Balance Sheet and in the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances for each of these funds. The General Fund and the Capital Project Fund are considered to be major funds. Although the Transit Special Revenue Fund, the Emergency Telephone System Special Revenue Fund, the CDBG Special Revenue Fund, and the Economic Development Special Revenue Fund are not considered to be major funds, they are being presented separately as major funds in the fund financial statements to provide more transparency.

Cary adopts an annual appropriated budget for its General Fund. Annual budgets have also been adopted for the Transit Special Revenue Fund, the Emergency Telephone System Special Revenue Fund and the General Capital Reserve Fund, a sub-fund of the Capital Project Fund. Multi-year budgets are maintained for the CDBG Special Revenue Fund, the Economic Development Special Revenue Fund and all the sub-funds of the Capital Project Fund except the Capital Reserve sub-fund, which is mentioned above.

The basic governmental fund financial statements can be found on Exhibits C through I.

PPrroopprriieettaarryy FFuunnddss:: Cary’s business type activities are reported in proprietary funds. Cary maintains two different types of proprietary funds. An enterprise fund is used to report the same function presented as business-type activities in the entity-wide financial statements, which is the water and sewer utility service. Internal service funds are used to accumulate and allocate costs internally among the various functions. Cary uses internal service funds to account for its fleet maintenance services and employee health insurance. Because both services predominantly benefit the governmental rather than business-type functions, their net positions have been included within governmental activities in the entity-wide financial statements.

Proprietary funds provide the same type of information as the entity-wide financial statements, only in more detail. The utility systems enterprise fund is considered to be a major fund of Cary. Because the internal service funds are not major funds, both internal service funds are combined in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in combining statements in the supplementary information section of this comprehensive annual financial report.

The basic proprietary fund financial statements can be found on Exhibits J through L of this report.

NNootteess ttoo tthhee FFiinnaanncciiaall SSttaatteemmeennttss:: The notes provide additional information that is essential to a full understanding of the information provided in the entity-wide and fund financial statements.

OOtthheerr IInnffoorrmmaattiioonn:: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning Cary’s progress toward funding its obligations to provide pension benefits related to its Law Enforcement Officers Special Separation Allowance (LEOSSA) plan, the Other Post- Employment Benefits (OPEB) plan and Cary’s share of the Local Governmental Employees’ Retirement System (LGERS) with the latter two benefiting all qualified employees.

The combining statements are presented immediately following the required supplementary information.

EEnnttiittyy--WWiiddee FFiinnaanncciiaall AAnnaallyyssiiss

As noted earlier, net position may serve over time as a useful indicator of Cary’s financial position. As of June 30, 2020, assets exceeded liabilities by $1.74 billion.

The following tables reflect net position in millions of dollars.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 1

2020 2019 2020 2019 2020 2019 Current and Other Assets $305.0 313.8 305.8 296.6 610.8 610.4 Capital Assets 954.7 907.0 860.3 848.6 1,815.0 1,755.6

Total Assets 1,259.7 1,220.8 1,166.1 1,145.2 2,425.8 2,366.0

Deferred outflows of resources 50.1 42.6 9.5 7.9 59.6 50.5

Long-Term Liabilities 336.9 304.4 321.8 330.2 658.7 634.6 Other Liabilities 48.7 47.7 8.9 13.7 57.6 61.4

Total Liabilities 385.6 352.1 330.7 343.9 716.3 696.0

Deferred inflows of resources 26.8 30.9 6.2 7.1 33.0 38.0

Net Position: Net Investment in Capital Assets 895.0 844.1 577.5 551.8 1,472.5 1,395.9 Restricted 41.8 42.2 -- .1 41.8 42.3 Unrestricted (39.4) (5.9) 261.2 250.2 221.8 244.3

Total Net Position $897.4 880.4 838.7 802.1 1,736.1 1,682.5

Total

Town of Cary Net Position

Activities Governmental Business-Type

Activities

By far, the largest portion of Cary’s net position ($1.5 billion or 85%) represents an investment in capital assets (land, buildings, machinery, and equipment), less any related outstanding debt or existing obligations that are related to those assets. Cary uses these capital assets to provide services to citizens and customers; consequently, these assets are not available for future spending. Although Cary’s net investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be reasonably used to liquidate these liabilities.

An additional portion of Cary’s net position ($41.8 million or 2%) are resources that are subject to external restrictions on how they may be used. Restrictions include stabilization by state statute as dictated by North Carolina General Statutes; unspent grant or other revenues with restrictive purposes and an endowment related to the Steven’s Nature Center. The remaining balance ($221.8 million or 13%) is unrestricted and may be used to meet Cary’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, Cary has positive balances in all three categories of net position, both for the government as a whole The same situation has held true for the past eighteen fiscal years since the net position was first computed for the entity-wide statements.

Net position increased by $53.6 million for the fiscal year ended June 30, 2020. The increase was primarily the result of the General Fund and Utility System Enterprise Fund revenues exceeding expenses and the increase in capital assets, both from Cary constructed assets and the donation of infrastructure from developers. Assets donated by developers during the year are valued at $42.3 million (including developer fee credit adjustments) for streets, land, and other general infrastructure and $9.6 million for utility infrastructure.

Net Investment in Capital Assets

85%

Restricted 2%

Unrestricted 13%

Breakdown of 2020 Total Net Position

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Town of Cary Changes in Net Position

Governmental Business-type Activities Activities Total

2020 2019 2020 2019 2020 2019 Revenues:

Program Revenues: Charges for Services $29.9 35.9 93.8 93.3 123.7 129.2 Operating Grants and Contributions 8.9 7.6 -- -- 8.9 7.6 Capital Grants and Contributions 51.2 46.4 10.4 4.5 61.6 50.9

General Revenues: Property Taxes 97.0 94.5 -- -- 97.0 94.5 Sales Tax 37.8 36.4 -- -- 37.8 36.4 Occupancy Tax 1.1 1.4 -- -- 1.1 1.4 ABC Revenue 1.2 1.1 -- -- 1.2 1.1 Other Taxes 2.0 1.7 -- -- 2.0 1.7 Grants and contributions not not restricted to specific programs 11.0 11.6 -- -- 11.0 11.6 Investment Earnings 8.9 8.8 11.1 10.6 20.0 19.4 Other 0.5 0.4 -- (0.2) 0.5 0.2

Total Revenues 249.5 245.8 115.3 108.2 364.8 354.0

Expenses: General Government 38.6 35.2 -- -- 38.6 35.2 Public Safety 61.4 55.1 -- -- 61.4 55.1 Public Works 36.2 32.9 -- -- 36.2 32.9 Parks, Recreation and Culture 25.3 23.4 -- -- 25.3 23.4 Development 10.2 9.3 -- -- 10.2 9.3 Infrastructure 56.7 74.7 -- -- 56.7 74.7 Interest on Long-Term Debt & Fees 4.1 3.8 -- -- 4.1 3.8 Water and Sewer -- -- 78.7 76.9 78.7 76.9

Total Expenses 232.5 234.4 78.7 76.9 311.2 311.3

Increase in Net Position 17.0 11.4 36.6 31.3 53.6 42.7

NET POSITION - Beginning of Year 880.4 869.0 802.1 770.8 1,682.5 1,639.8 NET POSITION - End of Year $897.4 880.4 838.7 802.1 1,736.1 1,682.5 GGoovveerrnnmmeennttaall AAccttiivviittiieess:: Governmental activities increased Cary’s net position by $17 million, accounting for 32% of the total growth in net position of Cary. Key elements of this increase are as follows: • Property taxes, the largest single revenue source, increased by $2.5 million, or 2.6%.

The tax rate remained at $.35 per hundred dollars valuation of taxable property. The revenue increase, therefore, was due to an increase in the tax base primarily from new development.

• Charges for services decreased by $6 million (16.7%) mainly due to the effect of the COVID-19 pandemic on parks and recreation sales and services revenues. Parks and recreation activities classes and events were cancelled beginning in March 2020 through fiscal year 2020.

• Capital grants and contributions revenue increased $4.8 million (10.3%) primarily because of an increase in developer donated streets and other infrastructure.

• Sales tax revenue increased $1.4 million (3.8%) partially due a strong economy in the first eight months of the fiscal year.

• Investment earnings increased $.1 million (1.1%). Realized earnings, which does not include the mark to market adjustment, increased over $.5 million due to an increase in the earnings rate on the long-term portfolio.

• Governmental expenses decreased $1.9 million. Expenses for personnel related costs (salaries, benefits and other post-employment benefit expenses) and technology initiatives increases were offset by a decrease in infrastructure costs related to a “street-swap” with the North Carolina Department of Transportation that took place in fiscal year 2019.

BBuussiinneessss--ttyyppee AAccttiivviittiieess: Business-type operational activities increased Cary’s net position by $36.6 million accounting for 68% of the total growth in net position. Key elements of the Business-type increase are as follows:

Charges for Services

12%

Grants and Contributions

24%

Property Taxes 38.9%

Sales and Other Taxes 16.9%

Unrestricted Grants and

Contributions 4.4%

Investment Earnings

3.6% Other .2%

Revenues by Source - Governmental Activities

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 3

• Charges for services revenue increased $.5 million partially due to an increase in retail water and sewer revenue (4%) offset by a decrease in water and sewer development fee revenue.

• Capital grants and contributions revenue increased $5.9 million (131%) mainly due to an increase in developer donated water and sewer lines.

• Investment earnings increased $.5 million (4%). Realized earnings, which does not include the mark to market adjustment, increased over $.7 million due to an increase in the earnings rate on the long-term portfolio.

• Water and sewer expenses increased $1.8 million (2.3%) from the prior year partially due to an increase in personnel related costs.

FFiinnaanncciiaall AAnnaallyyssiiss ooff CCaarryy’’ss FFuunnddss As noted earlier, Cary uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. GGoovveerrnnmmeennttaall FFuunnddss:: This focus on Cary’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular, available fund balance may serve as a useful measure of net resources available for spending at the end of the fiscal year. Available fund balance excludes nonspendable portions and the amount restricted for

stabilization by statute, and may include funds otherwise restricted, committed or assigned for specific purposes, but available for appropriation. As of the end of the current fiscal year, Cary’s governmental funds reported combined ending fund balances of $234 million, a decrease of $9.5 million compared to the prior year. Total governmental fund balance consists of 1) $2.9 million of nonspendable funds due to the nature of the balances, 2) $24.7 million restricted for stabilization per state statute, 3) $23 million restricted for specific purposes, but available for appropriation by Council, 4) $115.4 million already committed by Council for specific activities and projects (commitments can be changed by Council), 5) $33.7 million assigned to specific activities and areas that can be appropriated by Council and 6) $34.3 million unassigned funds that are available for appropriation by Council. For a complete breakout and explanation of fund balance categories, see Exhibit C and the Notes to the Basic Financial Statements. The General Fund is the chief operating fund of Cary. At the end of the current fiscal year, total fund balance in the General Fund was $98.1 million. Of this total, $73 million (74%) constitutes available fund balance in the General Fund, which is legally available for spending at the Cary Town Council’s discretion per state statute. Available fund balance in the General Fund consists of $28.6 million appropriated in the fiscal year 2021 budget, $10.1 million of restricted, committed or assigned funds for specific purposes and $34.3 million of unassigned funds. For more details on General Fund balance, see the Notes to the Basic Financial Statements. The fund balance of the general fund increased by $.4 million during the 2020 fiscal year. Key components of this change are as follows: • Property taxes, the largest revenue source, increased by $2.5 million (2.6%) mainly

due to an increase in the tax base. • Other taxes increased $1.1 million (2.8%) over the prior year as a result of an increase

in sales tax revenue from a strong economy the first eight months of the fiscal year. • Sales and service revenue decreased $1.7 million (8.4%) partially due to a decrease

in parks, recreational and cultural resources revenue of $3.2 million offset by revenue from a sanitation fee increase. Recreational services and cultural events were cancelled from the beginning of the COVID-19 pandemic in March 2020 through the end of fiscal year 2020.

• Investment earnings increased $.1 million (3.6%). Realized earnings, which does not include the mark to market adjustment, increased over $.2 million due to an increase in the earnings rate on the long-term portfolio.

• Operational expenditures increased $6.3 million (3.9%) from the prior year partially due to pandemic related personnel expenditures and operating costs and an increased emphasis on technology related initiatives.

• Transfers to the Capital Projects Fund increased $2.2 million (29%) mainly for downtown projects.

Charges for Services 81.4%

Grants and Contributions

10%

Investment Earnings

9.6%

Revenues by Source - Business-type Activities

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 4

The Capital Projects Fund includes street, downtown, parks and recreation, fire, and general government capital projects. At the end of the current fiscal year, total fund balance was $132 million, a decrease of $12.1 million from the prior year in part due to a $3.6 million increase in expenditures primarily for parks projects combined with decreases in parks and street payment-in-lieu and grant revenue. The Transit Special Revenue fund had an increase in fund balance of $1.9 million partially due to timing of federal grant revenue. PPrroopprriieettaarryy FFuunnddss:: Cary’s proprietary funds provide the same type information found in the entity-wide financial statements, but in more detail. While the total Net Position of the Utility Systems Enterprise Fund increased $36.6 million compared to the previous year, the unrestricted net position increased $10.8 million (4.3%) from $248.8 million at June 30, 2019 to $259.6 million at June 30, 2020. This increase is due to modest increases in water and sewer revenue from a 2% rate increase. Continued investment in sewer system upgrades contributed $8.1 million to the total increase in net investment in capital assets of $11.7 million. Refer to the discussion of business-type activities for the other primary factors that created the various fluctuations. GGeenneerraall FFuunndd BBuuddggeettaarryy HHiigghhlliigghhttss During the year, there was a $6.1 million increase in appropriations between the original and final amended budget primarily for downtown capital project and general government initiatives. Cary maintains fund balance in excess of minimal requirements as a fiscal tool to support Council goals in several ways. Timely financial flexibility is afforded by the balances as evidenced in fiscal year 2020. The original adopted budget for fiscal year 2020 anticipated an appropriation from fund balance of $10.1 million including a reserve amount of $1.1 million for mid-year appropriation. Budget adjustments, discussed above, throughout the year increased authorized spending to $16.2 million. Net variances in revenues and expenditures resulted in an increase in fund balance of $.4 million. Due to economic conditions, Cary remained conservative in estimating numerous revenues for fiscal year 2020, including ad valorem taxes, other taxes and unrestricted intergovernmental revenue which together were $1.9 million more than the budgeted amount. Total expenditures were less than the revised budget by $15.1 million. Both the conservative measures in estimating revenues and the efforts to reduce expenditures helped to compensate for negative variances in a few miscellaneous revenue accounts. CCaappiittaall AAsssseett aanndd DDeebbtt AAddmmiinniissttrraattiioonn CCaappiittaall aasssseettss:: Cary’s investment in capital assets for its governmental and business-type activities as of June 30, 2020, totals $1.82 billion net of accumulated depreciation. This investment in capital assets includes land, buildings, roads, bridges, machinery and equipment, vehicles, software, park facilities, utility plants, water distribution systems and wastewater collection systems. The increase in total capital assets, net of depreciation,

over the prior fiscal year was $59.4 million (3.4%). Of this increase, 80% was in governmental activities and 20% in business-type activities. Major capital asset changes during the year included the following:

• Addition of general infrastructure and land assets of $41.6 million (including developer fee credit adjustments) for developer donated streets and park land;

• Construction-in-progress decreases for the completion of general government projects and increases for streets, downtown, parks, fire and utility projects;

• Addition of utility infrastructure assets of $9.6 million such as water lines, sewer collection lines and sewer pump stations.

TToowwnn ooff CCaarryy CCaappiittaall AAsssseettss,, iinn mmiilllliioonnss ((nneett ooff ddeepprreecciiaattiioonn))

Governmental Business-type Activities Activities Total

2020 2019 2020 2019 2020 2019 Land and Improvements $282.9 $272.8 26.7 26.7 309.6 299.5 Construction-in-Progress 88.0 65.6 198.9 190.3 286.9 255.9 Buildings and Improvements 80.2 82.6 128.2 131.6 208.4 214.2 Machinery and Equipment 13.5 13.8 5.0 4.9 18.5 18.7 Vehicles 14.3 13.8 2.7 2.4 17.0 16.2 Infrastructure 462.7 449.9 498.8 492.6 961.5 942.5 Intangible Assets (Software) 13.1 8.5 --- 0.1 13.1 8.6 Total Assets $954.7 $907.0 860.3 848.6 1,815.0 1,755.6

Additional information on capital assets can be found in Note 6 of the Basic Financial Statements.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 5

LLoonngg--tteerrmm DDeebbtt:: As of June 30, 2020, Cary had total debt outstanding of $385 million ($412.3 million net of deferred adjustments). Of this, $161.7 million is debt backed by the full faith and credit of Cary in the form of general obligation bonds. Another $53 million of the general obligation debt is born by the utility system revenues although Cary’s taxing authority is the true security to the bond holders. $15.1 million in debt is in the form of asset backed debt and is secured by the town hall campus and other property. The $179.4 million of revenue bonds are secured solely by the utility system revenues. State Revolving Loans from the State of North Carolina represent both federal and state financing for wastewater and water utility projects. As of June 30, 2020, the amount due for these loans totaled $28.8 million, which is net of interlocal agreements with the Town of Apex to share in project costs and loan repayment. Total debt is adjusted for deferred balances related to discounts, premiums and refunding accounting losses associated with specific debt issuances.

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Cary maintained AAA ratings from Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings for both the general obligation bonds and revenue bonds. These bond ratings are a clear indication of the sound financial condition of Cary. Cary is one of few municipalities in the country that maintains the highest ratings possible for all types of debt issued from all three major rating agencies. This achievement is a primary factor in keeping interest costs low on Cary’s outstanding debt. In August 2019, Cary issued $16 million of general obligation bonds to be financed over 20 years with interest rates ranging from 2% to 5%. The bonds will fund fire, transportation and parks capital projects. North Carolina general statutes limit the amount of general obligation debt that a unit of government can issue to 8% of the total assessed value of taxable property located within that Cary’s boundaries. The legal debt margin for Cary is $1.8 billion. Practically, these statutory limits exceed the realistic debt capacity. At June 30, 2020, Cary has additional voter debt authorization of $113 million in street bonds and $112 million in parks and recreation bonds from 2019 referenda that remain unissued. Of the $225 million total in general obligation debt authorized but unissued at June 30, 2020, $78.5 million has been appropriated to capital projects. Additional information regarding Cary’s long-term debt can be found in Note 9 of the Basic Financial Statements.

Land and Improvements

17%

Construction-in- Progress 15.8%

Buildings and Improvements

11.5% Machinery,

Equipment, & Vehicles 2%

Intangible Assets .7%

Infrastructure 53%

Entity-Wide Capital Assets as of June 30, 2020

Governmental Business-type Activities Activities Total

2020 2019 2020 2019 2020 2019

General Obligation Bonds $108.7 102.5 53.0 59.0 161.7 161.5 Limited Obligation Bonds 7.2 9.6 -- -- 7.2 9.6 Certificates of Participation and Installment Purchase Contracts 7.9 8.5 -- -- 7.9 8.5 Revenue Bonds -- -- 179.4 183.7 179.4 183.7 State Revolving Loans, net -- -- 28.8 31.2 28.8 31.2

Total 123.8 120.6 261.2 273.9 385.0 394.5 Deferred Adjustments, net 7.8 7.6 19.5 20.7 27.3 28.3 Total, net $131.6 128.2 280.7 294.6 412.3 422.8

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 6

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Cary’s June 2020 unemployment rate is 5.7%. Cary’s unemployment rate compares favorably to the state’s average unemployment rate of 7.7%. Cary’s estimated population at June 30, 2020, was 170,322, an increase of 2,775 during the year. The number of both single family residential and multi-family residential new construction permits issued decreased 3.4% from the prior year while the number of all nonresidential building permits issued increased 7.2%. These factors were considered in preparing Cary’s budget for fiscal year 2021.

Wake County conducted a property revaluation as of January 1, 2020. Cary’s taxable property increased a projected 20.7%. State law requires that during revaluation years, each government must publish a tax rate that would keep total property tax revenue at the same level as if revaluation had not taken place. Although the revenue neutral tax rate after the January 1, 2020 revaluation was estimated to be $.30 per hundred dollars assessed valuation of taxable property, the decision was made to continue the $.35 tax rate that was in effect for fiscal year 2020. Keeping the tax rate at $.35 enables the Cary to continue implementation of the strategic goals and initiatives outlined in the Imagine Cary Community Plan and to keep transportation and PRCR bond projects on track.

Other key items to note in the fiscal year 2021 budget include:

• an appropriation of $22.5 million from General Fund fund balance primarily comprised of transfers to governmental capital projects;

• no increase in the current $19.50 per month solid waste fee for residential service; • decreased utility rates by 4% as a direct response to the COVID-19 pandemic.

The capital budget for fiscal year 2021 is $142.4 million to provide funding for the following purposes in addition to the current $746.5 million ongoing capital project authorizations:

• $63.6 million for transportation projects; • $21.2 million for parks and recreation projects; • $23.8 million for general government projects; • $2.1 million for fire projects; • $1 million for downtown projects; • $18.6 million (net of partner reimbursements) for water projects; and • $12.1 million (net of partner reimbursements) for sewer projects, primarily

related to pump station and wastewater plant improvements.

The capital improvement plan for 20 years beyond fiscal year 2021 totals $2.1 billion.

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This report is designed to provide a general overview of Cary’s finances for those with an interest in Cary’s finances. Questions concerning any of the information found in this report or requests for additional financial information should be directed to Karen Mills, Chief Financial Officer, Town of Cary, Post Office Box 8005, Cary, North Carolina 27512-8005; (919) 469-4380 or karen.mills@townofcary.org.

BASIC FINANCIAL STATEMENTS

ENTITY-WIDE FINANCIAL STATEMENTS

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 7

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 8

STATEMENT OF NET POSITION TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

EXHIBIT A Business Total Governmental Type Primary

Activities Activities Government ASSETS

Equity in Pooled Cash and Investments $222,917,286 290,078,407 512,995,693 Accrued Interest on Investments 797,730 1,028,252 1,825,982 Ad Valorem Taxes Receivable, net 282,139 -- 282,139 Accounts Receivable, net 48,661,774 12,527,297 61,189,071 Inventories 2,667,897 -- 2,667,897 Prepaid Assets 77,856 -- 77,856 Equity in Pooled Cash and Investments - Restricted 29,535,143 2,130,632 31,665,775 Capital Assets:

Land, Land Improvements and Construction in Progress 370,898,517 225,625,891 596,524,408 Other Capital Assets, Net of Accumulated Depreciation 583,803,520 634,688,678 1,218,492,198

TOTAL ASSETS 1,259,641,862 1,166,079,157 2,425,721,019

DEFERRED OUTFLOW OF RESOURCES Deferred Contributions to OPEB 30,158,268 6,813,008 36,971,276 Deferred Contributions to Pension Plans 19,342,954 2,061,776 21,404,730 Deferred Charge on Debt Refinancings 598,388 669,876 1,268,264

TOTAL DEFERRED OUTFLOW OF RESOURCES 50,099,610 9,544,660 59,644,270

LIABILITIES Accounts Payable and Accrued Liabilities 21,933,645 5,928,628 27,862,273 Internal Balances 1,551,373 (1,551,373) -- Accrued Bond Interest 672,999 1,295,409 1,968,408 Retainage Payable 826,295 484,482 1,310,777 Advance from Customers 390,131 (2,895) 387,236 Unearned Revenues 22,003,633 599,119 22,602,752 Deposits 1,344,267 1,964,615 3,308,882 Long-term Liabilities:

Portion Due or Payable Within One Year 26,288,329 14,025,335 40,313,664 Portion Due or Payable After One Year 310,604,579 307,715,760 618,320,339

TOTAL LIABILITIES 385,615,251 330,643,022 716,258,273

DEFERRED INFLOWS OF RESOURCES Prepaid Taxes & Vehicle Tags 177,595 -- 177,595 OPEB Deferrals 25,385,866 5,764,675 31,150,541 Pension Deferrals 1,202,175 474,768 1,676,943

TOTAL DEFERRED INFLOWS OF RESOURCES 26,765,636 6,239,443 33,005,079

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 7 9

STATEMENT OF NET POSITION TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

EXHIBIT A Business Total Governmental Type Primary

Activities Activities Government NET POSITION

Net Investment in Capital Assets $895,029,651 577,530,144 1,472,559,795 Restricted for: Stabilization by State Statute 24,736,097 -- 24,736,097 Steven's Endowment (Nonspendable) 231,377 -- 231,377 Street Projects 10,401,162 -- 10,401,162 Parks, Recreation and Culture 4,385,013 -- 4,385,013 Public Safety 1,952,787 -- 1,952,787 CDBG Program 14,496 -- 14,496 Oasis Program -- 28,060 28,060 Unrestricted (39,389,998) 261,183,148 221,793,150

TOTAL NET POSITION $897,360,585 838,741,352 1,736,101,937

The accompanying notes are an integral part of these basic financial statements.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 0

STATEMENT OF ACTIVITIES TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

EXHIBIT B

Program Revenues Operating Capital Primary Government

Charges for Grants and Grants and Governmental Business-type FUNCTIONS / PROGRAMS: Expenses Services Contributions Contributions Activities Activities Total Primary Government:

Governmental Activities: General Government $38,591,370 3,646,110 781,474 (267,347) (34,431,133) -- (34,431,133) Public Safety 61,395,884 563,494 893,934 26,333 (59,912,123) -- (59,912,123) Public Works 36,221,844 12,718,053 137,821 -- (23,365,970) -- (23,365,970) Parks, Recreation and Culture 25,345,254 6,088,938 744,792 5,333,852 (13,177,672) -- (13,177,672) Development 10,229,636 3,768,924 419,380 -- (6,041,332) -- (6,041,332) Infrastructure 56,745,241 3,099,896 5,970,901 46,093,135 (1,581,309) -- (1,581,309) Interest Expense & Debt Service Fees 4,052,489 -- -- -- (4,052,489) -- (4,052,489)

TOTAL GOVERNMENTAL ACTIVITIES 232,581,718 29,885,415 8,948,302 51,185,973 (142,562,028) -- (142,562,028)

Business-type Activities: Utility 78,738,515 93,879,504 -- 9,661,931 -- 24,802,920 24,802,920

TOTAL BUSINESS-TYPE ACTIVITIES 78,738,515 93,879,504 -- 9,661,931 -- 24,802,920 24,802,920

Total Primary Government $311,320,233 123,764,919 8,948,302 60,847,904 (142,562,028) 24,802,920 (117,759,108)

General revenues: Ad Valorem Taxes 97,047,340 -- 97,047,340 Sales Tax 37,752,049 -- 37,752,049 Occupancy Tax 1,134,060 -- 1,134,060 ABC Revenue 1,162,825 -- 1,162,825 Other Taxes & Licenses 1,964,217 -- 1,964,217 Unrestricted Intergovernmental 11,023,464 -- 11,023,464 Investment Earnings 8,891,025 11,073,770 19,964,795 Gain on Sale of Capital Assets 138,739 39,272 178,011 Miscellaneous Revenue 433,476 729,264 1,162,740

Total General Revenues 159,547,195 11,842,306 171,389,501

CHANGE IN NET POSITION 16,985,167 36,645,226 53,630,393

NET POSITION - Beginning of Year 880,375,418 802,096,126 1,682,471,544

NET POSITION - End of Year $897,360,585 838,741,352 1,736,101,937

The accompanying notes are an integral part of these basic financial statements.

Net (Expense) Revenue and Changes in Net Position

GOVERNM ENTAL FUNDS

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 1

GOVERNMENTAL FUNDS FINANCIAL STATEMENTS

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 2

BALANCE SHEET - GOVERNMENTAL FUNDS TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

EXHIBIT C Emergency Economic Capital Transit Telephone CDBG Development Total

General Projects Special System Special Special Special Governmental Fund Fund Revenue Fund Revenue Fund Revenue Fund Revenue Fund Funds

ASSETS

UNRESTRICTED ASSETS Equity in Pooled Cash and Investments $84,018,987 118,893,467 1,325,080 -- 29,604 596,808 204,863,946 Accrued Interest on Investments 355,998 441,732 -- -- -- -- 797,730 Ad Valorem Taxes Receivable, net of allowance for doubtful accounts 282,139 -- -- -- -- -- 282,139 Accounts Receivable, net of allowance for doubtful accounts 18,184,557 787,924 1,637,303 47,956 -- -- 20,657,740 Inventories 2,630,930 -- -- -- -- -- 2,630,930 Other Assets 77,856 -- -- -- -- -- 77,856 TOTAL UNRESTRICTED ASSETS 105,550,467 120,123,123 2,962,383 47,956 29,604 596,808 229,310,341

RESTRICTED ASSETS Equity in Pooled Cash and Investments

Unspent Debt Proceeds --- 7,715,424 --- -- -- -- 7,715,424 Unspent Restricted Grants & Intergovernmental 980,001 11,124,753 -- 913,891 14,496 -- 13,033,141 Customer Deposits & Other Funds Held 6,123,482 2,654,096 -- -- -- -- 8,777,578

TOTAL RESTRICTED ASSETS 7,103,483 21,494,273 -- 913,891 14,496 -- 29,526,143

TOTAL ASSETS 112,653,950 141,617,396 2,962,383 961,847 44,100 596,808 258,836,484

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts Payable 12,287,048 8,642,022 577,168 2,852 29,604 -- 21,538,694 Retainage Payable -- 826,295 -- -- -- -- 826,295 Self Insurance Payable 248,947 -- -- -- -- -- 248,947 Advance from Customers 371,596 18,535 -- -- -- -- 390,131 Deposits 1,335,269 -- -- -- -- -- 1,335,269 TOTAL LIABILITIES 14,242,860 9,486,852 577,168 2,852 29,604 -- 24,339,336

DEFERRED INFLOWS OF RESOURCES Property Taxes Receivable & Prepaid 321,534 -- -- -- -- -- 321,534 Vehicle Tags Receivable & Prepaid -- 111,757 53,459 -- -- -- 165,216

TOTAL DEFERRED INFLOWS OF RESOURCES 321,534 111,757 53,459 -- -- -- 486,750

Major Funds Non-Major Funds Reported as Major

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 3

Emergency Economic Capital Transit Telephone CDBG Development Total

General Projects Special System Special Special Special Governmental Fund Fund Revenue Fund Revenue Fund Revenue Fund Revenue Fund Funds

Major Funds Non-Major Funds Reported as Major

BALANCE SHEET - GOVERNMENTAL FUNDS TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

EXHIBIT C

FUND BALANCES

Nonspendable: Inventories $2,630,930 -- -- -- -- -- 2,630,930 Prepayments 77,856 -- -- -- -- -- 77,856 Steven's Estate Endowment 231,377 -- -- -- -- -- 231,377

Restricted: Stabilization by State Statute 22,196,864 782,379 1,708,898 47,956 -- -- 24,736,097 Street Projects -- 15,636,356 -- -- -- -- 15,636,356 Parks, Recreation and Culture 120,160 4,264,853 -- -- -- -- 4,385,013 Fire Projects & Activities 8,986 958,316 -- -- -- -- 967,302 Police Operations & Activities 1,032,763 -- -- 911,039 -- -- 1,943,802 CDBG Projects -- -- -- -- 14,496 -- 14,496

Committed: Street Projects -- 46,500,975 -- -- -- -- 46,500,975 Downtown Projects -- 11,630,092 -- -- -- -- 11,630,092 Parks, Recreation and Culture 90,836 26,392,454 -- -- -- -- 26,483,290 Fire Projects -- (915,184) -- -- -- -- (915,184) Police Operations & Activities (LEOSSA) 3,700,999 -- -- -- -- -- 3,700,999 General Governmental Projects -- 12,015,406 -- -- -- -- 12,015,406 Governmental Capital Projects -- 14,753,140 -- -- -- -- 14,753,140 Transit -- -- 622,858 -- -- -- 622,858 Economic Development -- -- -- -- -- 596,808 596,808

Assigned: Subsequent Year Appropriations 28,583,497 -- -- -- -- -- 28,583,497 Affordable Housing 859,337 -- -- -- -- -- 859,337 Worker's Compensation Self Insurance 1,986,863 -- -- -- -- -- 1,986,863 Small Claims Self Insurance 2,110,137 -- -- -- -- -- 2,110,137 Parks, Recreation and Culture 162,275 -- -- -- -- -- 162,275

Fund Balance Unassigned 34,296,676 -- -- -- -- -- 34,296,676

TOTAL FUND BALANCES 98,089,556 132,018,787 2,331,756 958,995 14,496 596,808 234,010,398

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $112,653,950 141,617,396 2,962,383 961,847 44,100 596,808 258,836,484

The accompanying notes are an integral part of these basic financial statements.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 4

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

EXHIBIT D

Amounts reported for governmental activities in the statement of net position are different because:

Governmental Funds Internal Service

Funds Total

ENDING FUND BALANCE - GOVERNMENTAL FUNDS $234,010,398 -- 234,010,398

953,383,713 1,318,324 954,702,037

5,542,101 158,300 5,700,401

-- 18,399,307 18,399,307

(74,611) -- (74,611)

-- (394,946) (394,946)

(1,302,574) (9,000) (1,311,574)

(332,937,047) (3,955,716) (336,892,763)

22,636,952 276,229 22,913,181

309,155 -- 309,155

NET POSITION OF GOVERNMENTAL ACTIVITIES $881,568,087 15,792,498 897,360,585

The accompanying notes are an integral part of these basic financial statements.

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.

Internal service fund current assets (cash and inventory) included as governmental activities. Current internal service fund receivables are included in number above.

Long-term receivables (net of related unearned revenues) are not available to pay for current-period expenditures and are not included in the funds. This also includes internal service fund current receivables that have been added to governmental activities.

Non-current accrued bond interest and deferred outflows (deferred charge on debt refinancing) are not available or due in the current period and, therefore, are not reported in the funds. This is a net amount.

Certain non-current liabilities are not due in the current period and, therefore, not reported in the funds. This also includes an internal balance (liability) related to internal service funds, miscellaneous adjustments for short-term liabilities that are included with long-term liabilities for readability and reporting purposes, as well as an internal service fund deposit.

Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds.

Internal service fund current liabilities included as governmental activities (accounts payable and other accrued liabilities).

Pension and OPEB activity relating to deferred outflows and deferred inflows is not used or reported in the funds.

Deferred inflows of resources related to property tax and vehicle tag fees that are not available to pay for current period expenditures and are not included in the funds.

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 5

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TOWN OF CARY, NORTH CAROLINA For the Year Ended June 30, 2020

EXHIBIT E Emergency Economic

Capital Transit Telephone CDBG Development Total General Projects Special System Special Special Special Governmental

Fund Fund Revenue Fund Revenue Fund Revenue Fund Revenue Fund Funds REVENUES

Ad Valorem Taxes $97,059,900 -- -- -- -- -- 97,059,900 Other Taxes and Licenses 40,170,962 283,347 1,558,837 575,467 -- -- 42,588,613 Unrestricted Intergovernmental 10,458,217 565,247 -- -- -- -- 11,023,464 Restricted Intergovernmental 1,219,612 7,597,028 5,032,821 -- 422,500 37,500 14,309,461 Permits and Fees 4,463,068 5,817,451 632,994 -- -- -- 10,913,513 Sales and Services 18,215,022 -- 362,131 -- -- -- 18,577,153 Investment Earnings, net of market adjustment 3,960,215 5,161,837 -- 8,993 -- -- 9,131,045 Miscellaneous 3,242,825 1,596,712 12,873 -- -- -- 4,852,410

TOTAL REVENUES 178,789,821 21,021,622 7,599,656 584,460 422,500 37,500 208,455,559

EXPENDITURES Current:

General Government, net 28,918,783 8,100,339 -- -- -- 927,642 37,946,764 Public Safety, net 53,471,204 5,353,799 -- 309,796 -- -- 59,134,799 Public Works, net 31,673,712 -- -- -- -- -- 31,673,712 Parks, Recreation and Culture 16,515,586 21,607,443 -- -- -- -- 38,123,029 Development 8,804,899 -- -- -- 519,727 -- 9,324,626 Infrastructure 6,381,413 25,544,961 7,284,116 -- -- -- 39,210,490

Debt service: Principal 12,843,014 -- -- -- -- -- 12,843,014 Interest 4,102,943 -- -- -- -- -- 4,102,943 Bond Service Charges 358,626 -- -- -- -- -- 358,626 Reimbursement for Open Space (766,647) -- -- -- -- -- (766,647)

Non Departmental Expenditures 5,494,255 -- 3,142 -- -- -- 5,497,397

TOTAL EXPENDITURES 167,797,788 60,606,542 7,287,258 309,796 519,727 927,642 237,448,753

REVENUES OVER (UNDER) EXPENDITURES 10,992,033 (39,584,920) 312,398 274,664 (97,227) (890,142) (28,993,194)

OTHER FINANCING SOURCES (USES) Transfers In -- 9,728,985 1,630,514 -- 107,000 885,717 12,352,216 Transfers Out (12,352,216) -- -- -- -- -- (12,352,216) Sale of Assets & Material 180,726 100,000 -- -- -- -- 280,726 Capital Lease Obligations Issued 1,425,807 -- -- -- -- -- 1,425,807 General Obligation Bonds Issued -- 17,571,914 -- -- -- -- 17,571,914 Premium Received on General Obligation Bonds 184,399 71,973 -- -- -- -- 256,372

TOTAL OTHER FINANCING SOURCES (USES) (10,561,284) 27,472,872 1,630,514 -- 107,000 885,717 19,534,819

NET CHANGE IN FUND BALANCE 430,749 (12,112,048) 1,942,912 274,664 9,773 (4,425) (9,458,375)

FUND BALANCE - Beginning of Year 97,658,807 144,130,835 388,844 684,331 4,723 601,233 243,468,773

FUND BALANCE - End of Year $98,089,556 132,018,787 2,331,756 958,995 14,496 596,808 234,010,398

The accompanying notes are an integral part of these basic financial statements.

Major Funds Non-Major Funds Reported as Major

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 6

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

EXHIBIT F

Amounts reported for governmental activities in the Statement of Activities are different because:

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($9,458,375)

31,843,296

(31,987,683)

42,344,914

(8,585)

(1,506,114)

12,843,013

(19,254,093)

Other Post Employment Benefits expense adjustment (7,053,280) Local Government Employee Retirement System expense adjustment (5,810,627) Law Enforcement Separation Allowance expense adjustment (711,307)

3,782,049

409,080

1,552,879

CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $16,985,167

The accompanying notes are an integral part of these basic financial statements.

As stated above, In the Statement of Activities the cost of assets is allocated over their estimated useful lives and reported as depreciation expense. This amount does not include depreciation related to the internal service funds of approximately $205,604 (see separate item below for combined internal service fund activity).

Contracts for long-term capital lease obligations are included as current financial resources in the Governmental Funds, but should be removed since they are included as a long-term liability on the Statement of Net Position.

The repayment of the principal of long-term debt consumes the current financial resources of Governmental Funds, but does not have an effect on the Statement of Activities and should be added back.

Certain proceeds from the sale of assets that affect Governmental Funds do not constitute a gain on the Statement of Activities and certain book losses that are not included in the Governmental Funds should be reported on the Statement of Activities. This is a net amount.

Donated general infrastructure and other capital contributions related to developer agreements do not effect the Governmental Funds, but should be included as a revenue on the Statement of Activities.

Governmental funds report capital outlays and construction in progress as expenditures. In the Statement of Activities the cost of those assets is allocated over their estimated useful lives (through depreciation, see below) and should be added back.

The remaining net expense of activities in the internal service funds for fleet and health insurance services, not included above, that relate to governmental activities (based on participation) are not reported in the Governmental Funds, but need to be included in the Statement of Activities.

Certain revenues are not included in the Governmental Funds since they do not provide current financial resources. These need to be recognized and included in the Statement of Activities.

Debt interest expense and annual amortization of the deferred charge on debt refinancings (deferred outflow) are not reported in the Governmental Funds, but need to be included on the Statement of Activities.

Certain other operational expense adjustments are not related to expenditures in the Governmental Funds, but should be included in the Statement of Activities. This includes payments on capital leases and long-term committments that are not considered expenses on the Statement of Activities.

A portion of expense activity related to the Local Government Employee Retirement System and other post employment benefits (not including fleet internal service fund portion), as well as all of the Law Enforcement Separation Allowance retirement expense are not reported in the Governmental funds and should be included in the Statement of Activities:

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 8 7

GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual REVENUES Ad Valorem Taxes Current Year $96,073,865 96,073,865 96,894,595 820,730 94,352,652 Prior Years 50,000 50,000 96,912 46,912 63,350 Penalties and Interest 65,000 65,000 68,393 3,393 66,045 TOTAL 96,188,865 96,188,865 97,059,900 871,035 94,482,047

Other Taxes and Licenses ABC Revenue 961,946 961,946 1,162,825 200,879 1,106,714 Beer and Wine Licenses -- -- 6,845 6,845 7,303 Wake County Sales Tax 16,462,920 16,462,920 16,860,562 397,642 16,392,830 One Half Cent Sales Tax 20,159,103 20,159,103 20,891,487 732,384 19,989,203 Occupancy Tax 1,068,655 1,068,655 1,134,060 65,405 1,433,904 Animal Licenses -- -- -- -- 7,782 Rental Vehicle Tax 115,000 115,000 115,183 183 123,985 TOTAL 38,767,624 38,767,624 40,170,962 1,403,338 39,061,721

Unrestricted Intergovernmental Utility & Piped Natural Gas Sales Tax 10,182,552 10,182,552 9,759,979 (422,573) 10,338,477 Wine and Beer Tax 676,251 676,251 698,238 21,987 687,037 TOTAL 10,858,803 10,858,803 10,458,217 (400,586) 11,025,514

Restricted Intergovernmental Federal Grants -- -- 873,189 873,189 637,824 State Grants -- -- 28,778 28,778 50,412 County Grants & Other Restricted Funding 299,505 299,505 317,645 18,140 317,255 TOTAL 299,505 299,505 1,219,612 920,107 1,005,491

Permits and Fees Building Permits 3,071,188 3,071,188 2,769,052 (302,136) 3,121,143 Rezoning/Variance Request Fees 41,462 41,462 40,950 (512) 33,450 Site/Final Plan Review Fees 200,363 200,363 156,475 (43,888) 163,550 Inspection Fees 479,257 479,257 237,990 (241,267) 294,657 Traffic Impact Analysis Fee 225,000 225,000 61,150 (163,850) 270,145 Grading Permits 169,750 169,750 92,910 (76,840) 141,336 Vehicle License Fees 500,000 500,000 632,994 132,994 571,814 Miscellaneous Permits & Fees 579,976 579,976 471,547 (108,429) 908,259 TOTAL 5,266,996 5,266,996 4,463,068 (803,928) 5,504,354

2020

Budget

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GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual

2020

Budget

Sales and Services Sanitation Fees $11,823,158 11,823,158 11,847,051 23,893 10,159,279 Rental Revenue 75,401 75,401 135,111 59,710 150,311 Cellular Tower Lease Proceeds 825,000 825,000 887,251 62,251 747,011 Community Recreation Misc. Program Revenues 29,000 29,000 17,164 (11,836) 31,807 Sports Program Revenues 548,000 548,000 304,076 (243,924) 582,461 Senior Program Revenues 220,000 220,000 143,177 (76,823) 184,215 Community Center Program Revenues 1,551,962 1,551,962 616,870 (935,092) 1,537,817 Outdoor Recreation Program Revenues 341,717 341,717 120,253 (221,464) 312,912 Environmental (Steven's Nature) Program Revenues 34,054 34,054 12,643 (21,411) 37,242 Cary Art Center Program Revenues 885,998 885,998 459,028 (426,970) 952,462 The Cary Theater Program Revenues 147,800 147,800 115,884 (31,916) 169,973 Downtown Events Program Revenues 22,450 22,450 5,516 (16,934) 17,722 Festival & Outdoor Program Revenues 222,000 222,000 50,728 (171,272) 163,391 Historic (Page-Walker) Program Revenues 137,000 137,000 59,318 (77,682) 152,932 Sports Venue Misc. Program Revenues 324,000 324,000 415,586 91,586 379,205 Tennis Park Revenues 2,137,500 2,137,500 1,475,860 (661,640) 2,108,217 Skate Park Revenues 126,000 126,000 81,926 (44,074) 120,467 Soccer Park Revenues 873,829 873,829 501,521 (372,308) 896,461 USA Baseball Revenues 685,579 685,579 556,080 (129,499) 665,960 Miscellaneous Parks & Recreation Program Revenues 66,890 66,890 29,792 (37,098) 76,953 Miscellaneous Sales and Services 300,000 300,000 380,187 80,187 435,611 TOTAL 21,377,338 21,377,338 18,215,022 (3,162,316) 19,882,409

Investment Earnings 2,145,000 2,145,000 2,207,217 62,217 1,948,749 Market Adjustment -- -- 1,752,998 1,752,998 1,872,558 Investment Earnings, net 2,145,000 2,145,000 3,960,215 1,815,215 3,821,307

Miscellaneous Donations 95,000 95,000 63,779 (31,221) 99,262 Local Government Reimbursements 1,220,671 1,220,671 1,156,125 (64,546) 886,703 NCDOT Traffic Signal Reimbursement 550,000 550,000 509,775 (40,225) 893,647 Miscellaneous Revenues 255,000 255,000 1,513,146 1,258,146 700,636 TOTAL 2,120,671 2,120,671 3,242,825 1,122,154 2,580,248

TOTAL REVENUES 177,024,802 177,024,802 178,789,821 1,765,019 177,363,091

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GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual

2020

Budget

EXPENDITURES

GENERAL GOVERNMENT Storm Response (1006) $ -- -- 60,227 (60,227) -- Pandemic Response (1007) -- -- 829,596 (829,596) -- Legislative (4110) 759,093 764,093 761,579 2,514 697,876 Town Clerk (4130) 949,916 949,916 649,284 300,632 256,752 Legal (4140) 1,673,366 1,568,366 1,259,043 309,323 1,489,108 Town Manager's Office (4200,4250) 3,785,563 5,194,563 3,830,706 1,363,857 3,697,531 Organizational Development (4201) 482,815 482,815 443,470 39,345 146,918 Capital Program Management (4202) 354,811 314,811 295,486 19,325 85,466 Public Safety Administration (4203) 374,184 419,184 414,905 4,279 84,827 Special Projects (4204) 285,144 445,144 441,188 3,956 135,521 Public Information (4220) 17,310 -- 63 (63) 785,270 311 Center (4700) 575,194 895,194 846,899 48,295 -- Technology Services (4500) 16,772,797 16,480,107 14,196,482 2,283,625 13,127,951 Capital Lease Purchases (4520) 1,300,000 1,300,000 1,425,807 (125,807) 2,909,471 Accounting (4410) 5,320,549 5,320,549 4,175,924 1,144,625 3,412,881 Purchasing (4420) -- -- 47 (47) 954,619 Financial Strategy Management (4450) 505,171 505,171 475,734 29,437 555,496 Human Resources (4600) 2,745,913 2,745,913 2,155,926 589,987 1,913,212 Town-wide Expenses (4610) 998,589 998,589 964,948 33,641 1,452,683 Workers' Compensation 1,694,000 1,694,000 1,619,203 74,797 1,410,769 Small Claims 240,316 740,316 207,870 532,446 198,711

Self Insurance Reimbursement

From Fleet Management Internal Service Fund (16,940) (16,940) (16,940) -- (21,982) From Transit Special Revenue Fund (7,623) (7,623) (7,623) -- -- From Utility System Enterprise Fund (182,613) (182,613) (182,613) -- (245,184)

Indirect Cost Reimbursement

From Fleet Management Internal Service Fund (480,569) (480,569) (480,569) -- (289,718) From Transit Special Revenue Fund (128,430) (128,430) (128,430) -- (214,363) From Utility System Enterprise Fund (5,319,429) (5,319,429) (5,319,429) -- (4,264,118) TOTAL GENERAL GOVERNMENT, net 32,699,127 34,683,127 28,918,783 5,764,344 28,279,697

PUBLIC SAFETY Police (5110, 5120) 27,817,036 27,941,726 27,073,580 868,146 25,327,504 Fire (5300) 24,916,608 25,681,608 25,680,095 1,513 23,272,670 Law Enforcement Separation Allowance 1,230,341 1,230,341 717,529 512,812 665,027 Reimbursement from Parks, Recreation & Culture -- -- -- -- (44,001) TOTAL PUBLIC SAFETY, net 53,963,985 54,853,675 53,471,204 1,382,471 49,221,200

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GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual

2020

Budget

GENERAL OPERATIONS Public Works Public Works - Administration (7010) $1,849,131 1,721,922 1,319,800 402,122 1,485,438 Facilities Management (7015) 18,153,045 18,167,318 17,634,165 533,153 17,591,193 Field Operations (7020) 16,505,690 16,476,021 13,981,672 2,494,349 15,015,004 Solid Waste Management (7025) 5,445,713 5,445,713 5,360,074 85,639 4,931,645 Recycling (7026) 3,110,515 3,110,515 2,749,838 360,677 2,327,431 Yard Waste Division (7027) 2,690,251 2,690,251 2,438,290 251,961 2,435,431 Reimbursement from Parks, Recreation & Culture (2,475,502) (2,650,502) (2,650,502) -- (2,422,714) Reimbursement from Utility System Enterprise Fund (10,287,983) (10,220,774) (9,159,625) (1,061,149) (11,150,011) Total Public Works, net 34,990,860 34,740,464 31,673,712 3,066,752 30,213,417

Parks, Recreation and Cultural Arts Administration (6210) 1,748,040 1,684,040 1,446,326 237,714 1,771,844

Community Recreation Community Recreation (6250) 337,887 337,887 335,619 2,268 372,366 Sports Programs (6251) 1,561,615 1,376,615 1,324,457 52,158 1,414,756 Senior Programs (6252) 552,020 552,020 524,450 27,570 491,991 Community Centers (6253) 2,599,353 2,399,353 1,940,117 459,236 2,060,810 Outdoor Recreation Programs (6254) 716,256 591,256 438,477 152,779 492,654 Environmental Programs (6255) 413,298 413,298 317,727 95,571 303,054 TOTAL 6,180,429 5,670,429 4,880,847 789,582 5,135,631

Cultural Arts & Downtown Cultural Arts Administration (6355) 1,256,654 1,306,654 1,305,716 938 1,194,992 Cary Arts Center (6350) 1,930,297 1,893,297 1,889,376 3,921 1,792,527 The Cary Theatre (6351) 628,544 515,544 499,003 16,541 607,162 Special Downtown Events (6352) 170,524 145,524 125,943 19,581 139,385 Festivals & Outdoor Programming (6353) 222,170 172,170 155,618 16,552 215,221 Historic Programs (6354) 376,496 386,496 382,597 3,899 361,554 Regency Amphitheatre (6356) 688,382 1,069,365 579,140 490,225 550,590 TOTAL 5,273,067 5,489,050 4,937,393 551,657 4,861,431

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GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual

2020

Budget

Sports Venue Sports Venue Administration (6305) $459,255 466,255 464,249 2,006 426,071 Tennis Park (6310) 2,443,958 2,436,958 2,380,000 56,958 2,424,351 Skate Park (6320) 304,441 304,441 303,061 1,380 278,074 Soccer Park (6330) 1,234,340 1,234,340 1,224,669 9,671 1,212,101 USA Baseball (6340) 965,957 965,957 879,041 86,916 963,554 TOTAL 5,407,951 5,407,951 5,251,020 156,931 5,304,151

Total Parks, Recreation & Cultural Arts 18,609,487 18,251,470 16,515,586 1,735,884 17,073,057

TOTAL OPERATIONS, net 53,600,347 52,991,934 48,189,298 4,802,636 47,286,474

DEVELOPMENT AND INFRASTRUCTURE Development

Planning (5505) 2,153,628 1,931,785 1,537,290 394,495 1,957,777 Affordable Housing (5507) 1,100,231 1,126,515 896,285 230,230 341,957 Inspections and Permits (5510) 4,899,521 4,899,521 4,776,179 123,342 4,424,636 Development Support Services (5515) 1,811,181 1,686,740 1,539,567 147,173 1,555,743 Historic Preservation (5550) 181,068 181,068 55,578 125,490 --

TOTAL 10,145,629 9,825,629 8,804,899 1,020,730 8,280,113

Infrastructure Facility Design (3600) 5,844,263 5,419,263 4,598,986 820,277 4,948,308 Water Resources (3500) -- -- 81 (81) 1,578,865

Sustainability (3610) 275,336 425,336 170,094 255,242 183,161 Stormwater (3700) 1,784,596 1,784,596 1,612,252 172,344 435,602 TOTAL 7,904,195 7,629,195 6,381,413 1,247,782 7,145,936

DEVELOPMENT AND INFRASTRUCTURE 18,049,824 17,454,824 15,186,312 2,268,512 15,426,049

Debt Service Principal 12,843,014 12,843,014 12,843,014 -- 12,366,132 Interest 4,508,525 4,508,525 4,102,943 405,582 4,133,199 Bond Service Charges 611,200 611,200 358,626 252,574 273,664 Reimbursement for Open Space (766,647) (766,647) (766,647) -- (794,469)

TOTAL DEBT SERVICE, net 17,196,092 17,196,092 16,537,936 658,156 15,978,526

Non-Departmental Expenditures 5,709,475 5,709,475 5,494,255 215,220 5,355,162

TOTAL EXPENDITURES, net 181,218,850 182,889,127 167,797,788 15,091,339 161,547,108

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GENERAL FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT G 2019 Variance Positive

Original Final Actual (Negative) Actual

2020

Budget

Revenues Over Expenditures ($4,194,048) (5,864,325) 10,992,033 16,856,358 15,815,983

OTHER FINANCING SOURCES (USES) Transfers In (Out), net: Transit Special Revenue Fund (1,630,514) (1,630,514) (1,630,514) -- (1,630,514) Economic Development Fund (675,000) (885,717) (885,717) -- (825,000) CDBG Special Revenue Fund (107,000) (107,000) (107,000) -- (149,000) Streets Capital Project Sub-Fund (500,000) (1,500,000) (1,500,000) -- (650,000) Downtown Capital Project Sub-Fund -- (3,214,494) (3,214,494) -- (850,000) General Government Capital Project Sub-Fund (2,400,000) (2,414,491) (2,414,491) -- (3,600,000) Parks and Recreation Capital Project Sub-Fund (2,600,000) (2,600,000) (2,600,000) -- (2,440,000) Proceeds from Sale of Assets 350,000 350,000 180,726 (169,274) 565,605 Fire Installment Purchase Proceeds -- -- -- -- 84,444 Capital Lease Proceeds 1,300,000 1,300,000 1,425,807 125,807 2,909,471 General Obligation Bonds Issued 400,000 400,000 -- (400,000) -- Fire General Obligation Bonds Premium -- -- 184,399 184,399 -- Appropriation from Fund Balance 10,056,562 16,166,541 -- (16,166,541) -- TOTAL OTHER FINANCING USES, net 4,194,048 5,864,325 (10,561,284) (16,425,609) (6,584,994)

Revenues and Other Sources Over (Under) Expenditures and Other Uses $ -- -- 430,749 430,749 9,230,989

FUND BALANCE - Beginning of Year 97,658,807 88,427,818

FUND BALANCE - End of Year $98,089,556 97,658,807

The accompanying notes are an integral part of these basic financial statements.

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TRANSIT SPECIAL REVENUE FUND BUDGETARY COMPARISON STATEMENT TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT H

2019 Variance Positive

Original Final Actual (Negative) Actual

REVENUES

Federal Transit Administration Grant $1,589,415 1,589,415 3,170,253 1,580,838 1,514,183 Federal Transit Administration Grant (CARES) -- -- 1,640,000 1,640,000 -- TJCOG Grant -- -- -- -- 4,157 State Maintenance Assistance Program Grant 156,532 156,532 222,568 66,036 217,487 Wake County Transit Tax 2,334,692 2,334,692 1,558,837 (775,855) 1,411,834 Vehicle License Fee 500,000 500,000 632,994 132,994 571,814 C-Tran Ticket Sales 557,805 557,805 362,131 (195,674) 517,024 Miscellaneous Revenue -- -- 12,873 12,873 363 TOTAL REVENUE 5,138,444 5,138,444 7,599,656 2,461,212 4,236,862

EXPENDITURES

Transit Operations (5700) Personnel Services 723,369 723,369 598,638 124,731 462,770 Operations & Maintenance 6,782,115 6,782,115 6,685,478 96,637 6,152,828 Allocation Accounts - Telephone -- -- 3,142 (3,142) 3,692 TOTAL EXPENDITURES, net 7,505,484 7,505,484 7,287,258 218,226 6,619,290

Revenue Over (Under) Expenditures (2,367,040) (2,367,040) 312,398 2,679,438 (2,382,428)

OTHER FINANCING SOURCES Transfers In from General Fund 1,630,514 1,630,514 1,630,514 -- 1,630,514 Appropriation from Fund Balance 736,526 736,526 -- (736,526) -- TOTAL OTHER FINANCING SOURCES 2,367,040 2,367,040 1,630,514 (736,526) 1,630,514

Revenues and Other Sources Over (Under) Expenditures $ -- -- 1,942,912 1,942,912 (751,914)

FUND BALANCE - Beginning of Year 388,844 1,140,758

FUND BALANCE - End of Year $2,331,756 388,844

The accompanying notes are an integral part of these basic financial statements.

Budget

2020

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EMERGENCY TELEPHONE SYSTEM SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020 WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED JUNE 30, 2019

EXHIBIT I

2019 Variance Positive

Original Final Actual (Negative) Actual

RESTRICTED REVENUES

911 System Funding $575,467 575,467 575,467 -- 693,677 Investment Earnings -- -- 8,993 8,993 7,224 TOTAL REVENUE 575,467 575,467 584,460 8,993 700,901

EXPENDITURES

Eligible 911 System Operations Personnel Services 22,500 22,500 34,112 (11,612) 9,448 Operations & Maintenance 831,962 831,962 275,684 556,278 441,439 TOTAL EXPENDITURES 854,462 854,462 309,796 544,666 450,887

Revenue Under Expenditures (278,995) (278,995) 274,664 553,659 250,014

OTHER FINANCING SOURCES Appropriation from Fund Balance 278,995 278,995 -- (278,995) -- TOTAL OTHER FINANCING SOURCES (USES) 278,995 278,995 -- (278,995) --

Revenues Under Expenditures $ -- -- 274,664 274,664 250,014

FUND BALANCE - Beginning of Year 684,331 434,317

FUND BALANCE - End of Year $958,995 684,331

The accompanying notes are an integral part of these basic financial statements.

2020

Budget

PROPRIETARY FUNDS

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 9 5

PROPRIETARY FUNDS FINANCIAL STATEMENTS

TOWN OF CARY | WWW.TOWNOFCARY.ORG Pa ge 9 6

STATEMENT OF NET POSITION - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

Utility Governmental Systems Activities -

EXHIBIT J Enterprise Internal Fund Service Funds

ASSETS Current Assets

Equity in Pooled Cash and Investments $290,078,407 18,353,340 Accrued Interest on Investments 1,028,252 --- Accounts Receivable, net of allowance for doubtful accounts 12,527,297 158,300 Inventories --- 36,967 Equity in Pooled Cash and Investments-Restricted Customer Deposits & Other Restricted Funds 2,130,632 9,000

TOTAL CURRENT ASSETS 305,764,588 18,557,607

Non-Current Assets Capital Assets

Land, Land Improvements and Construction-in-Progress 225,625,891 --- Other Capital Assets, net of accumulated depreciation 634,688,678 1,318,324

Total Capital Assets, net 860,314,569 1,318,324

TOTAL NON-CURRENT ASSETS, net 860,314,569 1,318,324

TOTAL ASSETS 1,166,079,157 19,875,931

DEFERRED OUTFLOW OF RESOURCES Deferred Contributions to Pension Plans 2,061,776 191,363 Deferred Contributions to OPEB 6,813,008 369,701 Deferred Charge on Debt Refinancings 669,876 ---

TOTAL DEFERRED OUTFLOW OF RESOURCES 9,544,660 561,064

LIABILITIES AND NET POSITION Current liabilities

Accounts Payable and Accrued Liabilities 5,928,628 394,946 Debt Payable 12,996,141 --- Accrued Debt Interest Payable 1,295,409 --- Retainage Payable 484,482 --- Compensated Absences 845,094 47,240 Developer Fee Credits 161,000 --- Advance from Customers (2,895) --- Miscellaneous Liabilities 207,042 ---

TOTAL CURRENT LIABILITIES 21,914,901 442,186

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STATEMENT OF NET POSITION - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA JUNE 30, 2020

Utility Governmental Systems Activities -

EXHIBIT J Enterprise Internal Fund Service Funds

Non-Current liabilities Debt Payable, net of deferred premium/discount $267,686,067 --- Deposits 1,964,615 9,000 Unearned Revenue 599,119 --- Compensated Absences 609,707 34,081 Developer Fee Credits 2,611,100 --- Claims Incurred But Not Reported --- 1,755,171 Unfunded Pension Obligation 4,249,805 355,607 Unfunded Other Post-Employment Benefits 32,559,081 1,763,617

TOTAL NON-CURRENT LIABILITIES 310,279,494 3,917,476

TOTAL LIABILITIES 332,194,395 4,359,662

DEFERRED INFLOW OF RESOURCES Pension Deferrals 474,768 (27,773) OPEB Deferrals 5,764,675 312,608

TOTAL DEFERRED INFLOW OF RESOURCES 6,239,443 284,835

NET POSITION Net Investment in Capital Assets 577,530,144 1,318,325 Restricted for Oasis Assistance Program 28,060 --- Unrestricted Net Position 259,631,775 14,474,173

TOTAL NET POSITION 837,189,979 15,792,498

Adjustment for Internal Service Fund Activities 1,551,373

TOTAL NET POSITION - Business-Type Activities $838,741,352

The accompanying notes are an integral part of these basic financial statements.

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STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

EXHIBIT K Utility Systems Governmental Enterprise Activities -

Fund Internal Service Funds OPERATING REVENUES

Charges for Services $83,610,746 1,636,052 Health and Dental Premiums --- 19,800,523 Other Operating Revenues 1,707,450 300,000

TOTAL OPERATING REVENUES 85,318,196 21,736,575

OPERATING EXPENSES

Administrative 17,662,422 --- Field Operations 8,185,753 --- Utility Systems Management 4,088,685 --- Water Reclamation Facilities 8,888,081 --- Cary/Apex Water Treatment Plant 8,045,702 --- Miscellaneous Utility System Projects 2,719,828 --- Fleet Management Expense --- 2,024,080 Insurance Claims & Administrative Fees --- 18,613,338 Depreciation 19,292,161 205,604

TOTAL OPERATING EXPENSES 68,882,632 20,843,022

OPERATING INCOME 16,435,564 893,553

NONOPERATING REVENUES (EXPENSES)

Water and Sewer Development Fees 8,561,308 --- Investment Earnings, net of market adjustment 11,073,770 381 Reimbursements 90,318 --- Miscellaneous Revenue 729,264 --- Reimbursement to Governmental Activities for Open Space (766,647) --- Interest Expense, net of amount capitalized (9,189,239) --- Bond Service Expense (10,790) --- Bond Refunding Loss Amortization (107,396) --- Sale of Capital Assets 39,272 7,001

TOTAL NONOPERATING REVENUE, net 10,419,860 7,382

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STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

EXHIBIT K Utility Systems Governmental Enterprise Activities -

Fund Internal Service Funds

INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS $26,855,424 900,935

Capital Contributions 9,661,931 84,797

CHANGE IN NET POSITION 36,517,355 985,732

Adjustment for Internal Service Activities 127,871

CHANGE IN NET POSITION - Business-Type Activities 36,645,226

NET POSITION - Beginning of Year, Business-Type Activities 802,096,126

TOTAL NET POSITION - End of Year, Business-Type Activities $838,741,352

TOTAL NET POSITION - Beginning of Year, Internal Service Funds 14,806,766

TOTAL NET POSITION - End of Year, Internal Service Funds $15,792,498

The accompanying notes are an integral part of these basic financial statements.

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STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA For the Year Ended June 30, 2020

EXHIBIT L Utility Governmental Systems Activities -

Enterprise Internal Fund Service Funds

OPERATING ACTIVITIES Cash Received from Customers (Ratepayers) $87,388,797 21,736,575 Cash Paid for Goods and Services (29,809,711) (763,307) Cash Paid To or On Behalf of Employees for Services (17,600,099) (1,119,476) Cash Paid for Health and Dental Insurance Claims -- (18,260,581) Other Operating Revenues Received 729,264 --

NET CASH PROVIDED BY OPERATING ACTIVITIES 40,708,251 1,593,211

CAPITAL AND RELATED FINANCING ACTIVITIES Bond Issuance Costs & Debt Service Fees Paid (10,790) -- Principal Payments on Long-term Debt, net of partner reimbursement (12,733,500) -- Interest Paid on Long-term Debt, net of partner reimbursement (10,432,701) -- Reimbursement to General Fund & Capital Project Fund for Open Space (766,647) -- Water & Sewer Development Fees Received 8,384,434 -- Acquisition and Construction of Capital Assets (25,027,334) (203,970) Proceeds Received from Sale of Assets 39,272 7,001

NET CASH PROVIDED BY (USED IN) CAPITAL AND RELATED FINANCING ACTIVITIES (40,547,266) (196,969)

NET CASH PROVIDED BY INVESTING ACTIVITIES Investment Earnings Received, net of Unrealized Gain 11,201,913 1,343

NET INCREASE (DECREASE) IN CASH AND INVESTMENTS 11,362,898 1,397,585

CASH AND INVESTMENTS AT BEGINNING OF YEAR 280,846,141 16,964,755

CASH AND INVESTMENTS AT END OF YEAR $292,209,039 18,362,340

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STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS TOWN OF CARY, NORTH CAROLINA For the Year Ended June 30, 2020

EXHIBIT L Utility Governmental Systems Activities -

Enterprise Internal Fund Service Funds

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES

Operating Income $16,435,564 893,553

Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities

Depreciation 19,292,161 205,604

Adjustment for LGERS Pension Expense 1,321,583 71,765 Adjustment for Unfunded Other Post Employment Benefits 1,604,216 87,114 Adjustment for Construction in Progress Write-off 576,644 --

Changes in Assets and Liabilities - Decrease in Accounts Receivable 2,111,667 -- Decrease in Inventory -- 9,851 Increase (Decrease) in Accounts Payable and Accrued Liabilities (1,633,181) 134,713 Increase in Compensated Absenses Liability 150,558 653 Increase in Miscellaneous Liability 160,841 189,958 (Decrease) in Deposits (35,115) -- (Decrease) in Unearned Revenue (5,951) -- Increase in Miscellaneous Revenue 729,264 --

TOTAL ADJUSTMENTS 24,272,687 699,658

NET CASH PROVIDED BY OPERATING ACTIVITIES $40,708,251 1,593,211

NONCASH TRANSACTIONS Contributed Capital ($9,661,931) -- Deferred Loss on Refunding Amortization 107,396 -- Amortization of Deferred Premium & Discount (1,199,302) -- Net Change in Net Position from Noncash Transactions 10,753,837 84,797

NET EFFECT OF NONCASH TRANSACTIONS $ -- 84,797

The accompanying notes are an integral part of these basic financial statements.

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NOTES

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

NNoottee 11 SSUUMMMMAARRYY OOFF SSIIGGNNIIFFIICCAANNTT AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS

The Town of Cary (Cary)’s basic financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Cary’s significant accounting policies are described below.

Cary has implemented all applicable GASB pronouncements as required and as applicable in previous years. Included herein is a list of GASB pronouncements that became effective during fiscal year 2020 and pronouncements that were issued during fiscal year 2020 but not yet effective.

GASB pronouncements effective as of the fiscal year ended June 30, 2020:

GASB Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance – This statement provides temporary relief to governments and other stakeholders, in the light of the COVID-19 pandemic, by postponing the effective dates for Statements and Implementation Guides that were originally scheduled to become effective for periods beginning after June 15, 2018 and later.

The GASB has issued pronouncements prior to fiscal year ended June 30, 2020 that impact future reporting periods:

GASB Statement No. 84, Fiduciary Activities – This statement intends to align and enhance consistency with reporting on fiduciary activity. According to this standard, there are four types of fiduciary funds, three of which relate to legally binding trust funds and the fourth encapsulates all other fiduciary activity. This statement is effective for fiscal year ending June 30, 2021. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 87, Leases – This statement establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. This will require recognition of certain lease assets and liabilities that were previously classified as operating leases. This statement is effective for fiscal year ending June 30, 2022. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 90, Majority Equity Interests – This statement intends to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. This statement is effective for fiscal year ending June 30, 2021. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 91, Conduit Debt Obligations – This statement intends to provide a single method of reporting conduit debt obligations by issuers and eliminates diversity in practice associated with commitments extended by issuers, arrangements associated with conduit debt obligations, and related note disclosures. This statement is effective for fiscal year ending June 30, 2023. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 92, Omnibus 2020 – This statement intends to enhance comparability in accounting and financial reporting and to improve the consistency of

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This statement is effective for fiscal year ending June 30, 2022. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 93, Replacement of Interbank Offered Rates – This statement intends to address the accounting and financial reporting implications that result from the replacement of an interbank offered rate (IBOR). This statement is effective for fiscal year ending June 30, 2023. The effective date for this standard was extended due to the issuance of GASB Statement No. 95.

GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements – This statement intends to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). This statement is effective for fiscal year ending June 30, 2023.

GASB Statement No. 96, Subscription-Based Information Technology Arrangements – This statement intends to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for governments. This statement is effective for fiscal year ending June 30, 2023.

GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans- an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32. This statement intends to increase consistency and comparability related to the reporting of fiduciary component units. This statement is effective for fiscal year ending June 30, 2022.

A. RREEPPOORRTTIINNGG EENNTTIITTYY

Cary is a municipal corporation that is governed by an elected mayor and a six-member council. Cary's basic financial statements include all funds over which Cary has accountability. The Cary Economic Development Corporation is the only component unit of Cary and it has no assets, liabilities or other activity to be recorded. It was created in 2002 as a mechanism for Cary to issue certificates of participation (COP’s) and Limited Obligation Bonds (LOB’s). It will remain in existence until all related debt is fully paid and can be used for future COP or LOB issuances.

B. EENNTTIITTYY--WWIIDDEE AANNDD FFUUNNDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS

The entity-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information for all of the activities of Cary. Eliminations have been made to minimize the double reporting of internal activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on customer demand-based fees and charges for support.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program Revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported instead as general revenues.

Cary’s accounts are organized and operated on the basis of funds. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts comprised of assets, liabilities, fund equity, revenues, and expenditures or expenses, as applicable. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with financial, legal and contractual provisions. The minimum number of funds is maintained consistent with legal

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

A. RREEPPOORRTTIINNGG EENNTTIITTYY

B. EENNTTIITTYY--WWIIDDEE AANNDD FFUUNNDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

and managerial requirements. Funds are defined as major or non-major in the basic financial statements according to GASB reporting standards, which categorize funds based on relative size and materiality.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as investment earnings, result from non-exchange transactions or ancillary activities.

Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Cary has several non-major governmental funds; however, they are all reported as major funds in separate columns in the fund financial statements. There are no non-major business-type funds.

C. MMEEAASSUURREEMMEENNTT FFOOCCUUSS,, BBAASSIISS OOFF AACCCCOOUUNNTTIINNGG AANNDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTT PPRREESSEENNTTAATTIIOONN

In accordance with North Carolina General Statutes, all funds of Cary are maintained during the year using the modified accrual basis of accounting.

The entity-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Non- exchange transactions, in which Cary gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants and donations. Property taxes are recorded on an accrual basis and are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, Cary considers revenues to be available if they are collected within 90 days of the end of the current fiscal period, except for property taxes. Expenditures are generally recorded when a liability is incurred, which is the same as accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from general long-term debt and acquisitions under capital leases are reported as other financing sources.

Ad valorem taxes receivable are not accrued as revenue because the amount is not susceptible to accrual. At June 30, taxes receivable for property other than motor vehicles are materially past due and are not considered to be an available resource to finance the operations of the current year. Also, as of September 1, 2013, State law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this change in the law, the State of North Carolina is responsible for billing and collecting the property taxes on registered motor vehicles on behalf of all municipalities and special tax districts. Property taxes are due when vehicles are registered. The billed taxes are applicable to the fiscal year in which the bills are paid.

Sales taxes and certain intergovernmental revenues that are collected and held by the State at year-end on behalf of Cary are recognized as revenue. Sales taxes are considered a shared revenue for Cary because the tax is levied by Wake and Chatham Counties and then remitted to and distributed by the State. Intergovernmental revenues and sales and services are not subject to full accrual because they are generally not measurable until received in cash. Grant revenues, which are unearned at year-end, are recorded as unearned revenues. Under the terms of the grant agreements, Cary funds certain programs in combination of specific cost-reimbursement grants, categorical block grants and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. Excluding debt funding, it is Cary’s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

and then by general revenues. In the event that debt proceeds are included, Cary will spend debt proceeds first unless there is an agreement tying specific expenditures to grant proceeds. When both restricted and unrestricted resources are available for use, it is Cary’s policy to use restricted resources first, then unrestricted resources, as they are needed.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Cary reports the following major governmental funds:

GGeenneerraall FFuunndd - The General Fund is the general operating fund of Cary. It is used to account for all financial resources except those required to be accounted for in another fund. The primary revenue sources are ad valorem taxes, various other taxes and licenses and state-shared revenues. The primary expenditures are for public safety, streets and highways, infrastructure planning, sanitation, recycling, parks and recreation, development activities, general government services, and debt service for the payment of general long- term principal, interest and related costs. It also includes all activities related to the Law Enforcement Officers Separation Allowance.

CCaappiittaall PPrroojjeeccttss FFuunndd - The Capital Projects Fund is used to account for financial resources to be used for the acquisition and/or construction of major capital facilities (other than those financed by proprietary funds) and infrastructure. Cary has six sub-funds within the Capital Projects Fund: Street Projects, Parks and Recreation Projects, Fire Projects, General Governmental Projects, Downtown Projects, and General Capital Reserve.

SSppeecciiaall RReevveennuuee FFuunnddss – Cary operated four special revenue funds during fiscal year 2020. The Transit Special Revenue Fund is used to account for the operations of GoCary, Cary’s transit system, which is partially funded by federal and state grants, and Wake County sales tax. The Emergency Telephone System Special Revenue Fund is used to account for all allowable 911 expenditures reimbursable by the State from telecommunication fees remitted by providers. The Community Development Block Grant (CDBG) Special Revenue Fund is used to account for activity related to the CDBG Federal entitlement grant received from the Department of Housing and Urban Development. The Economic Development Special Revenue Fund is used to account for special economic related activities in Cary and may be partially funded by grant activity. All funds are annually budgeted, except the CDBG and Economic Development Special Revenue Funds, which have multi-year budgets. To provide better transparency, Cary has voluntarily chosen to report all these funds as major in the basic financial statements.

Cary reports the following major enterprise fund:

UUttiilliittyy SSyysstteemm - An enterprise fund is used to account for operations and maintenance of the utility system which includes three wastewater treatment facilities, the jointly owned Cary/Apex Water Treatment Plant and related infrastructure and the jointly owned Western Wake Regional Water Reclamation Facility and related infrastructure. This fund also covers acquisition and/or construction of other major utility capital facilities and infrastructure, as well as the debt service for the payment of utility long-term debt principal, interest and related costs. The fund is comprised of four sub-funds: Utility System Operations, Water Projects, Sewer Projects and Utility Capital Reserve. This is Cary’s only enterprise fund.

Cary reports the following internal service funds:

FFlleeeett – This fund is used to account for the activity of fleet services provided by the Public Works Department and charged to other departments of Cary on a cost- reimbursement basis. The primary activity is governmental, and all balances are allocated accordingly for the entity-wide financial statements.

HHeeaalltthh IInnssuurraannccee – This fund is used to account for employee and retiree health and dental claims expense incurred by Cary related to the decision to self-insure for these

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

benefits. This fund also collects premiums from Cary’s employees and retirees to cover claims expense for elected spouse and/or family coverage. The primary activity is governmental, and all balances are allocated accordingly for the entity-wide financial statements.

As a general rule, the effect of interfund activity has been eliminated from the entity-wide financial statements. Exceptions to this general rule are reimbursements to the General Fund and other charges between Cary’s utility system function and various other functions of Cary. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

CD.. BBUUDDGGEETTAARRYY

Cary’s budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted for the General Fund, the General Capital Reserve Fund (a sub- fund of the Capital Project Fund), the Transit Special Revenue Fund, the Emergency Telephone System Special Revenue Fund, the Health Insurance Internal Service Fund, the Fleet Management Internal Service Fund and the Utility System Operations Fund and Utility Capital Reserve Fund (both of which are sub-funds of the Utility System Enterprise Fund). All annual appropriations lapse at the fiscal year-end. However, based on an ordinance, funds for unpaid purchase orders or delayed projects may be rolled over to the subsequent year. Multi-year project ordinances are adopted for the Parks, Street, Fire, General Governmental, and Downtown Project Funds (all sub-funds of the Capital Project Fund), for the Water and Sewer Project Funds (both sub-funds of the Utility Systems Enterprise Fund) the Community Development Block Grant Special Revenue Fund and the Economic Development Special Revenue Fund.

All budgets are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at a functional level for all annually budgeted funds and a project-type level for the multi-year project funds. Amendments are required for any revisions that alter the total fund or project-type budget and must be approved by Town Council. Cross-functional amendments may be made by Town Management and reported to Town Council on a quarterly basis. Cary internally manages expenditures on a line item, departmental and project basis and, although not legally required, budget amendments may occur between line items and between departments of the same function or project type. All internal budget amendments must be approved by the Finance department with some of these amendments being forwarded to the Town Manager for additional approval. During the year numerous budget amendments to the original budget were necessary. The original budget ordinance was adopted by July 1 of the fiscal year in accordance with State law.

E. AASSSSEETTSS,, LLIIAABBIILLIITTIIEESS,, DDEEFFEERRRREEDD OOUUTTFFLLOOWWSS//IINNFFLLOOWWSS OOFF RREESSOOUURRCCEESS AANNDD FFUUNNDD EEQQUUIITTYY ((NNEETT PPOOSSIITTIIOONN))

11.. DDeeppoossiittss aanndd iinnvveessttmmeennttss

Cary’s deposits are secured as required by North Carolina General Statute ("G.S.") 159-31. Cary may establish official depositories with any bank or savings and loan association whose principal office is located in North Carolina.

G.S. 159-30(c) authorizes the Cary to invest in obligations of the U.S. Treasury; obligations of any agency of the United States of America, provided the payment of interest and principal of such obligations is fully guaranteed by the United States; obligations of the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of commercial paper and bankers' acceptances; and the North Carolina Capital Management Trust (NCCMT), an SEC registered mutual fund dedicated to serving North Carolina public units.

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Cary reports the following major governmental funds:

Cary reports the following major enterprise fund:

Cary reports the following internal service funds:

HHeeaalltthh IInnssuurraannccee – This fund is used to account for employee and retiree health and dental claims expense incurred by Cary related to the decision to self-insure for these

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Cary pools most money from all funds to facilitate disbursement and investment and maximize investment income. Exceptions of non-pooled funds may include, but are not limited to, unspent bond proceeds and escrowed or endowed funds restricted for specific purposes. For purposes of the Statement of Cash Flows, Cary’s proprietary funds consider equity in pooled cash and investments to be cash equivalents as they are essentially demand deposit accounts and short term investments. Investment income is allocated based on each fund’s monthly balance in relation to the total pooled cash balance.

22.. RReecceeiivvaabblleess aanndd ppaayyaabblleess

According to the North Carolina General Statutes, ad valorem taxes levied on July 1, the beginning of the fiscal year, are due September 1 (lien date); however, interest and penalties do not accrue until the following January 6. Property taxes on certain registered motor vehicles are assessed and collected throughout the year. The taxes levied for fiscal year 2020 are based on the assessed values as of January 1, 2019.

An allowance for doubtful accounts is maintained on the ad valorem taxes receivable as described above. Cary also maintains an allowance for doubtful accounts for the sanitation receivable, utility service accounts receivable, and other miscellaneous receivables.

33.. IInnvveennttoorriieess aanndd pprreeppaaiidd iitteemmss

Inventory is determined by physical count and valued at cost using the first-in, first-out method. Inventory in the governmental funds consist of expendable supplies held for consumption and retail items held for resale.

For consumable items, the cost thereof has been recorded in inventory at the time items were purchased. Expenditure occurs when items are issued from inventory. These inventories are accounted for in the central warehouse, which is managed by the Purchasing Division of the Finance Department. Total inventory is reported in the General Fund and Fleet Management Internal Service Fund, which is considered a governmental activity in the entity-wide Statement of Net Position. Cary also holds several inventories intended for retail resale. These are considered immaterial and inventory items are expensed as purchases are made and revenues are recorded when items are sold.

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Cary’s investments with a maturity of more than one year at acquisition and non-money market investments are reported at fair value as determined by quoted market prices and in accordance with GASB Statement 31, Accounting and Financial Reporting for Certain Investments and External Investment Pools. The securities of the NCCMT Government Portfolio, a SEC-registered (2a-7) money market mutual fund, are measured at fair value. The NCCMT-term portfolio is a bond fund, has no rating and is measured at fair value. As of June 30, 2020, the Term portfolio has a duration of .15 years. Because the NCCMT Government and Term Portfolios have a weighted average maturity of less than 90 days, they are presented as an investment with a maturity of less than 6 months. In accordance with State law, Cary has invested in securities which are callable and which provide for periodic interest rate increases in specific increments until maturity. These investments are reported at fair value as determined by quoted market prices. Cary pools most money from all funds to facilitate disbursement and investment and maximize investment income. Exceptions of non-pooled funds may include, but are not limited to, unspent bond proceeds and escrowed or endowed funds restricted for specific purposes. For purposes of the Statement of Cash Flows, Cary’s proprietary funds consider equity in pooled cash and investments to be cash equivalents as they are essentially demand deposit accounts and short term investments. Investment income is allocated based on each fund’s monthly balance in relation to the total pooled cash balance. 22.. RReecceeiivvaabblleess aanndd ppaayyaabblleess According to the North Carolina General Statutes, ad valorem taxes levied on July 1, the beginning of the fiscal year, are due September 1 (lien date); however, interest and penalties do not accrue until the following January 6. Property taxes on certain registered motor vehicles are assessed and collected throughout the year. The taxes levied for fiscal year 2020 are based on the assessed values as of January 1, 2019.

Within the fund financials ad valorem taxes receivable are not accrued as revenue because the amount is not considered "available." At June 30, taxes receivable are significantly past due and are not considered to be an available resource to finance the operations of the subsequent year. Accounting principles generally accepted in the United States of America state that property tax revenues, which are measurable but not available should be recorded as deferred inflow of resources. The receivable amount is reduced by an allowance for doubtful accounts and an amount equal to the net receivable is included in the governmental Balance Sheet and the Statement of Net Position. Any property taxes collected in advance of the fiscal year to which they apply are recorded as deferred inflow of resources. An allowance for doubtful accounts is maintained on the ad valorem taxes receivable as described above. Cary also maintains an allowance for doubtful accounts for the sanitation receivable, utility service accounts receivable, and other miscellaneous receivables. 33.. IInnvveennttoorriieess aanndd pprreeppaaiidd iitteemmss Inventory is determined by physical count and valued at cost using the first-in, first-out method. Inventory in the governmental funds consist of expendable supplies held for consumption and retail items held for resale. For consumable items, the cost thereof has been recorded in inventory at the time items were purchased. Expenditure occurs when items are issued from inventory. These inventories are accounted for in the central warehouse, which is managed by the Purchasing Division of the Finance Department. Total inventory is reported in the General Fund and Fleet Management Internal Service Fund, which is considered a governmental activity in the entity-wide Statement of Net Position. Cary also holds several inventories intended for retail resale. These are considered immaterial and inventory items are expensed as purchases are made and revenues are recorded when items are sold.

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Certain payments to vendors reflect costs applicable to future accounting periods and are reported as prepaid items in both entity-wide and fund financial statements and are expensed as balances are used.

44.. RReessttrriicctteedd aasssseettss Certain cash balances, which are managed as a part of pooled cash, are restricted by purpose and source. Cash balances in the Utility Systems Fund and General Fund related to customer deposits are not available for appropriations or expenditures and are segregated on the Statement of Net Position and classified as restricted cash. Other cash balances in the major funds (Utility System Enterprise Fund and Capital Project Fund) are restricted for unspent debt proceeds and unspent grant or donation funding and are only available for designated projects as described in the individual official statements, grant agreements and as approved by Council. 55.. CCaappiittaall aasssseettss Capital assets, which include land, buildings, equipment, vehicles and infrastructure assets (e.g., water & sewer lines, water tanks, roads, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the entity-wide financial statements. Capital assets are generally defined by Cary as assets with an initial, individual cost greater than $5,000 and an estimated useful life in excess of two years. Exceptions include general infrastructure assets, which are defined by Cary as assets with an initial cost greater than $50,000, and certain other intangible assets (including software) with a cost/value greater than $25,000. Assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value, while certain intangible assets are recorded at estimated fair value. Governmental infrastructure assets (roads, sidewalks, bridges, etc) acquired prior to July 1, 2003, consist of assets acquired or that received substantial improvements subsequent to July 1, 1980, and are reported at estimated historical cost based on deflated estimated replacement costs. The cost of normal maintenance and repairs that do not add to the value to the asset or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities are expensed in the period in which they are incurred. Cary’s total interest expense during the current fiscal year was almost $10.4 million (net of partner reimbursements) in the Utility Systems Fund. Cary’s capital assets are depreciated using the straight-line method over the following estimated useful lives:

Capital asset Life

Automobiles and Light Trucks 3-5 years Heavy Trucks 6-10 years Office Furniture and Equipment 5-10 years Maintenance and Construction Equipment 3-10 years Utility System 50 years Buildings 50 years Streets, Sidewalks and Bridges 50 years Other Infrastructure 25-50 years Software and Other Intangible Assets Based on individual useful life of the asset

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

66.. DDeeffeerrrreedd oouuttfflloowwss//iinnfflloowwss ooff rreessoouurrcceess In addition to assets, the Statement of Net Position includes a separate section for deferred outflows of resources. This separate element represents a consumption of net position that applies to a future period and so will not be recognized as an expense or expenditure until then. Cary has three items that meet this criterion, contributions made to a pension plan (LGERS & LEOSSA), contributions made to other post-employment benefits (OPEB) and deferred charge on debt financings (unamortized loss on a bond defeasance). Prior to fiscal year 2013, this deferred charge on debt financings was netted against the related long-term debt but is now reported separately. In addition to liabilities, the Statement of Net Position includes a separate section for deferred inflows of resources. This separate element represents an acquisition of net position that applies to a future period and so will not be recognized as revenue until then. Deferred inflows include prepaid taxes related to property tax receivable, deferrals of pension expense, and deferrals of OPEB expense. The deferred inflow related to prepaid taxes is also included in the General Fund’s Statement of Revenues, Expenditures and Changes in Fund Balance.

77.. CCoommppeennssaatteedd aabbsseenncceess The vacation policy of Cary provides for the accumulation of up to thirty days earned vacation leave, with such leave being fully vested when earned. Also, unlimited compensatory time for non-exempt employees, if not taken, is paid to the employee upon termination of employment. All vacation leave is accrued when incurred in the entity-wide and proprietary fund financial statements. Vacation leave accrued over the 30-day limit is converted to sick leave annually. Cary's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since Cary has no obligation for the accumulated sick leave until it is actually taken, no liability for sick leave has been recorded. 88.. LLoonngg--tteerrmm oobblliiggaattiioonnss In the entity-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond refunding losses are amortized to expense over the life of the bonds. Bonds payable are reported net of the applicable bond premium and discount with the refunding loss being reported as a deferred outflow of resources. Bond issuance costs are expensed in the period incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt related expenditures. In April 2015, Council adopted a Debt Management Policy, which restricts the use of long-term debt to financing capital projects and certain equipment that provide value to current and future citizens. Per the policy, debt will not be used for operational needs. Terms for debt instruments will typically be 20 years or less for non-utility

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

debt and 30 years or less for utility related debt. In addition to state statute regulations, the policy outlines that tax supported debt service as a percentage of the approved General Fund operating budget will be 15% or less (limited flexibility is given to go up to 20%). Coverage ratios for the utility system debt will be maintained at 1.4 times for parity debt service and 1.1 times for all debt service. This is above the levels required in the current debt covenants, which is included in Note 9(D). For the fiscal year ending June 30, 2020, debt amounts (including debt service) and ratios are in accordance with the policy. Fiscal Year 2020 was the last year under this policy, as this policy was amended in September 2020. 99.. FFuunndd eeqquuiittyy –– NNeett PPoossiittiioonn Net position in entity-wide and proprietary fund financial statements are classified as net investment in capital assets; restricted; or unrestricted. Restricted net position represents constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through State statute. 1100.. FFuunndd eeqquuiittyy –– FFuunndd BBaallaanncceess In the governmental fund financial statements, fund balance is composed of five classifications designed to disclose the hierarchy of constraints placed on how fund balance can be spent. For information on fund balance policy for the General Fund, see Note 15. The governmental fund types classify fund balances as follows:

NNoonnssppeennddaabbllee FFuunndd BBaallaannccee This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Inventories – portion of fund balance that is not an available resource because it represents the year-end balance of ending inventories, which are not spendable resources.

Prepayments – portion of fund balance that is not an available resource because it represents resources that have already been spent for expenditures that will be incurred in future periods and is therefore not spendable.

Steven’s Estate Endowment – portion of fund balance that is not an available resource due to estate requirements. The principal amount is nonspendable; however, interest earned on these funds is considered spendable and restricted.

RReessttrriicctteedd FFuunndd BBaallaannccee This classification includes amounts that are restricted to specific purposes externally imposed by donors, grantors, creditors or by state statute.

Restricted for Stabilization by State Statute – North Carolina G.S. 159-8 prohibits units of government from budgeting or spending a portion of their fund balance. This is one of several statues enacted by the North Carolina State Legislature in the 1930s that were designed to improve and maintain the fiscal health of local government units. Restricted by State Statute (RSS), is calculated at the end of each fiscal year for all annually budgeted funds. The calculation in G.S. 159-8(a) provides a formula for determining what portion of fund balance is available for appropriation. The amount of fund balance not available for appropriation is what

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

is known as “Restricted by State Statute”. Appropriated fund balance in any fund shall not exceed the sum of cash and investments minus the sum of liabilities, encumbrances, and deferred revenues arising from cash receipts, as those figures stand at the close of the fiscal year next preceding the budget. Per GASB guidance, RSS is considered a resource upon which a restriction is “imposed by law through constitutional provisions or enabling legislation”. RSS is reduced by inventories and prepaids as they are classified as nonspendable. Outstanding encumbrances are included within RSS. RSS is included as a component of restricted net position and restricted fund balance on the face of the balance sheet.

Restricted for Street Projects – portion of fund balance that represents unspent Powell Bill funding, which is considered a restricted revenue source for street construction and maintenance expenditures. Unspent balance is split between the street project fund (appropriated to specific projects), the downtown project fund (appropriated to specific projects) and capital reserve fund (available for use). All of these funds are sub-funds of the Capital Project fund.

Restricted for Parks, Recreation and Culture – portion of fund balance restricted by grantors, donors or endowment or restricted by bond order as it relates to unspent debt, for parks, recreation & cultural resource related programs and activities.

Restricted for Fire Projects & Activities – portion of fund balance restricted by donors for fire department related activities.

Restricted for Police Operations & Activities – portion of fund balance that represents unspent drug forfeiture funds and donations targeted to police that are restricted for specific police operations and activities. This restriction also includes unspent funds in the Emergency Telephone System Special Revenue Fund as dictated by the NC 911 Board. Restricted for Community Development Block Grant (CDBG) Projects – portion of the fund balance within the CDBG Special Revenue Fund that relates to unspent grant funding that is restricted for CDBG approved projects.

CCoommmmiitttteedd FFuunndd BBaallaannccee This classification includes portion of fund balance that can only be used for specific purposes imposed by majority vote by quorum of Cary’s Council (highest level of decision-making authority) through a budget ordinance amendment. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken to remove or revise it.

Committed for Street Projects – includes (1) the entire non-restricted fund balance in the Street Project Fund (sub-fund of the Capital Project Fund), which is appropriated to specific street projects or (2) a portion of non-restricted fund balance in the Capital Reserve Fund (sub-fund of the Capital Project Fund) that is committed to street projects per Cary’s ordinances or fee schedules.

Committed for Downtown Projects – includes entire non-restricted fund balance in the new Downtown Project Fund (sub-fund of Capital Project Fund), which is appropriated to specific downtown projects.

Committed for Parks, Recreation and Culture – includes (1) entire non-restricted fund balance in the Parks Project Fund (sub-fund of the Capital Project Fund), which is appropriated to specific parks, recreation and cultural resources projects or (2) a portion of non-restricted fund balance in the Capital Reserve Fund (sub-fund of the Capital Project Fund) that is committed to these same type of projects per Cary’s ordinances or fee schedules or (3) a portion of fund balance in the General Fund specifically committed to a parks, recreation and cultural resources activity by Council action.

Committed for Fire Projects – entire non-restricted fund balance in the Fire Project Fund (sub-fund of Capital Project Fund), which is appropriated to specific fire projects.

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Restricted for Fire Projects & Activities – portion of fund balance restricted by donors for fire department related activities.

Committed for Fire Projects – entire non-restricted fund balance in the Fire Project Fund (sub-fund of Capital Project Fund), which is appropriated to specific fire projects.

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Committed for Police Operations & Activities (LEOSSA) – portion of General Fund’s fund balance which is committed for payment of future retirement benefits associated with the Law Enforcement Offers’ Special Separation Allowance. Prior to fiscal year 2016, these funds were retained in a Pension Trust Fund, but due to implementation of GASB 73, starting in fiscal year 2016 these funds and other related activity are now reported in the General Fund.

Committed for General Governmental Projects – includes (1) entire non-restricted fund balance in the General Governmental Project Fund (sub-fund of the Capital Project Fund), which is appropriated to specific general governmental projects or (2) a portion of non-restricted fund balance in the General Fund specifically committed to a general governmental activity by Council action.

Committed for Governmental Capital Projects – portion of non-restricted fund balance in the Capital Reserve Fund (sub-fund of the Capital Projects Fund) that is available for any governmental project and is considered committed to this area per Cary’s ordinances or fee schedules, and by definition of a capital reserve fund.

Committed for Transit – portion of non-restricted fund balance in the Transit Special Revenue Fund that is considered committed by Council and considered committed due to guidelines related to special revenue fund balance. This amount generally represents unspent transfers from the General Fund.

Committed for Economic Development – total non-restricted fund balance in the Economic Development Special Revenue Fund is considered committed by Council and considered committed due to guidelines related to special revenue fund balance. This amount general represents unspent transfers from the General Fund.

AAssssiiggnneedd FFuunndd BBaallaannccee This classification is a portion of fund balance that Cary intends to use for specific purposes. Assignments may be created, amended or eliminated by the Town Manager’s office. Although managed as dedicated to specific areas, amounts are available for appropriation by Council.

Assigned for Subsequent Year Appropriations - portion of total fund balance not already classified in restricted or committed that is (1) appropriated in fiscal year 2021 budget or (2) appropriated through the rollover process from fiscal year 2020 to 2021 as allowed by Cary’s budget ordinance.

Assigned for Affordable Housing - portion of fund balance not already classified in restricted or committed that is assigned to affordable housing projects and activities, including rehabilitation, façade improvement and grants or loans to non-profit agencies who provide related services. These funds may be included in Cary’s Annual Action Plan for the U.S. Department of Housing and Urban Development (HUD), but are not restricted like the Community Development Block Grant funds from HUD, that are accounted for in the CDBG Special Revenue Fund.

Assigned for Workers’ Compensation Self Insurance – portion of fund balance in the General Fund not already classified in restricted or committed that is assigned to the workers compensation self-insurance program for the payment of claims and the administration of the program.

Assigned for Small Claims Self Insurance – portion of fund balance in the General Fund not already classified in restricted or committed that is assigned to the self-insurance program for small claims, which covers claims expense, co-payments and deductibles not covered by Cary’s insurance policy.

Assigned for Parks, Recreation and Culture – portion of fund balance in the General Fund not already classified in restricted or committed that is assigned to various parks, recreation and cultural resources projects or activities, including Cary festivals and some Teen Council activities.

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

UUnnaassssiiggnneedd FFuunndd BBaallaannccee This classification includes the portion of fund balance that has not been restricted, committed or assigned to specific purposes and is available for general appropriation by Council. Only the General Fund may have a positive unassigned fund balance, while other government funds may have a negative unassigned fund balance if applicable. In April 2015, Cary adopted a fund balance policy for the General Fund. At a minimum, assigned and unassigned fund balance (referred to as “accessible” in the policy) will be at least 25% of budgeted General Fund expenditures. Total fund balance shall be at least 40% of budgeted General Fund expenditures, which equates to approximately five months of operations. Amounts of assigned and unassigned over the minimum will be considered as a potential funding source for one-time capital needs. Accessible fund balance (as defined in the policy) can only be used in excess of these limits in order to provide for unforeseen shortfalls in revenues or for emergencies, such as a natural disaster. In the event balances fall below these minimums, Council will adopt a plan to restore balances to meet the policy within a three- year period at most. For the fiscal year ending June 30, 2020, fund balances and related practices remain in accordance with the policy. Fiscal Year 2020 was the last year under the policy as it is written above, as this policy was amended in September 2020. 1111.. PPeennssiioonnss For the purpose of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Local Governmental Employees’ Retirement System (LGERS) and additions to/deductions from LGERS’ fiduciary net position have been determined on the same basis as they are reported by LGERS. For this purpose, plan member contributions are recognized in the period in which the contributions are due. Cary’s employer contributions are recognized when due and Cary has a legal requirement to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of LGERS. Investments are reported at fair value. The Law Enforcement Officers Special Separation Allowance (LEOSSA) operates in a similar manner. The annual actuary analysis measures net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense. The plan currently operates on a pay-as-you-go basis, so it has no net position. Plan member contributions are recognized in the period in which the contributions are due. Cary's employer contributions are recognized when due. Benefits and refunds are recognized when due and payable in accordance with the terms of LEOSSA. Since the plan is operated on a pay-as-you-go basis with no legal trust, there are no investments. 1122.. CCoommppaarraattiivvee ddaattaa//rreeccllaassssiiffiiccaattiioonnss Comparative total data for the prior year have been presented in the fund financial statements for the annually budgeted governmental and proprietary funds in order to provide an understanding of the changes in the financial position and operations of these funds. Certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year’s presentation. Note 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY There were no incidents of non-compliance for fiscal year 2020.

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Note 3 DEPOSITS AND INVESTMENTS Deposits All of Cary’s deposits are either insured or collateralized using one of two methods. Under the Dedicated Method, all deposits that exceed the federal depository insurance coverage level are collateralized with securities held by Cary’s agent in Cary’s name. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for Cary, these deposits are considered to be held by Cary’s agent in Cary’s name. The amount of the pledged collateral is based on an approved averaging method for non-interest-bearing deposits and the actual current balance for interest-bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with Cary or the escrow agent. Because of the inability to measure the exact amounts of collateral pledged for Cary under the Pooling Method, the potential exists for under-collateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method. Cary has no policy regarding custodial credit risk for deposits but relies on the State Treasurer to enforce standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. Cary complies with the provisions of G.S. 159-31 when designating official depositories and verifying that deposits are properly secured. At June 30, 2020, Cary's deposits (including certificates of deposit) had a carrying amount of $21.4 million and a bank balance of $19.6 million. Of the bank balance, $1 million was covered by federal depository insurance and the remainder was covered by collateral held under the pooling method. At June 30, 2020, Cary’s petty cash fund totaled $17,225.

Investments Valuation Measurement

Method Fair Value Less than 1 Year 1-2 Years 2-3 Years 3-5 Years

US Treasuries Fair Value Level 1 $ 99,139,322 $ 26,983,493 $ 18,486,949 $ 36,783,398 $ 16,885,482

US Agencies -

FFCB Fair Value Level 1 82,399,034 14,710,436 27,086,424 36,386,006 4,216,168

FHLB Fair Value Level 2 223,668,267 65,530,294 48,119,933 59,058,602 50,959,438

FHLMC Fair Value Level 1 16,346,047 5,281,572 6,071,717 4,992,758 --

FNMA Fair Value Level 1 44,615,785 19,825,771 15,179,811 6,585,902 3,024,301

Municipal Paper Fair Value Level 1 5,194,665 1,871,473 842,676 810,782 1,669,734 NCCMT Government Portfolio

Fair Value Level 1 51,831,715 51,831,715 -- -- --

Total $ 523,194,835 $ 186,034,754 $ 115,787,510 $ 144,617,448 $ 76,755,123

All investments are measured using the market approach: using prices and other relevant information generated by market transactions involving identical or comparable assets or a group of assets. Level of fair value hierarchy: Fair Value Level 1 debt securities are valued using directly observable, quoted prices (unadjusted) in active markets for identical assets. Fair Value Level 2 debt securities are valued using matrix pricing technique. Matrix pricing is used to value securities based on the securities' benchmark quoted prices. Funds invested in the NCCMT Government Portfolio, a SEC-registered (2a-7) external investment pool, are measured at fair value, which is the

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

NCCMT's share price.

Interest Rate Risk – In accordance with its investment policy, Cary manages its exposure to declines in fair values by requiring purchases of securities to be laddered with staggered maturity dates and limiting all securities to a final maturity of no more than five years. Credit Risk - State law limits investments in commercial paper to the top rating issued by nationally recognized statistical rating organizations (NRSROs). As of June 30, 2020, Cary had no investments in commercial paper. Cary has a formal policy that addresses the management of credit risk in various ways, including its compliance with NC G.S. 159-30, and its quarterly review of the investment portfolio by an independent consultant. Cary’s investments in the NC Capital Management Trust Government Portfolio carried a credit rating of AAAm by Standard & Poor’s as of June 30, 2020. Cary’s investments in US Agencies (Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association) are rated AAA by Standard & Poor’s and Aaa by Moody’s Investors Service as of June 30, 2020. Concentration of Credit Risk - Cary’s policy does not limit the amount that Cary may invest in any one issuer; however, Cary will make every effort to maintain a diversified investment portfolio according to security type and institution. More than 5% of Cary’s investments are in Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association securities. These investments are 43%, 16%, 3% and 9% respectively, of Cary’s total investments. NNoottee 44 RREECCEEIIVVAABBLLEESS AANNDD RREELLAATTEEDD AACCCCOOUUNNTTSS Accounts Receivable as of year-end for Cary’s individual major funds in the aggregate as presented in the fund financials and entity-wide totals, including the applicable allowances for uncollectible accounts, is as follows:

The amounts above do not include accrued interest receivable and ad valorem taxes receivable which are listed separately in the Basic Financial Statements. Taxes receivable of $406,264, as listed in the Basic Financial Statements, is net of a $124,125 allowance for doubtful accounts. Special Revenue Fund receivables include $1.6 million related to the Transit Fund and $47,956 related to the Emergency Telephone System Fund. Health Insurance Internal Service Fund receivables of $158,300 is included in Governmental Activities (primary customer) in the entity-wide financial statements.

General Receivables:

Housing Loans --$ --$ --$ --$ 1,106,394$ 1,106,394$ --$ Due from other Governments 16,363,100 787,494 1,685,259 18,835,853 27,268,815 46,104,668 809,696 Accounts 1,899,165 430 -- 1,899,595 361,326 2,260,921 12,328,843

Gross Receivables 18,262,265 787,924 1,685,259 20,735,448 28,736,535 49,471,983 13,138,539

Less: Allowance Housing Loans -- -- -- -- (732,501) (732,501) -- Accounts (77,708) -- -- (77,708) -- (77,708) (611,242)

Net total receivables at June 30, 2020 18,184,557$ 787,924$ 1,685,259$ 20,657,740$ 28,004,034$ 48,661,774$ 12,527,297$

Total Governmental

Funds

Entity-Wide Governmental

Activity

Business-type Activities (Utility

System)Capital Projects Special

Revenue Full Accrual Adjustment

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

NCCMT's share price.

General Receivables:

Gross Receivables 18,262,265 787,924 1,685,259 20,735,448 28,736,535 49,471,983 13,138,539

Less: Allowance Housing Loans -- -- -- -- (732,501) (732,501) -- Accounts (77,708) -- -- (77,708) -- (77,708) (611,242)

Net total receivables at June 30, 2020 18,184,557$ 787,924$ 1,685,259$ 20,657,740$ 28,004,034$ 48,661,774$ 12,527,297$

Total Governmental

Funds

Entity-Wide Governmental

Activity

Business-type Activities (Utility

System)Capital Projects Special

Revenue Full Accrual Adjustment

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

For governmental activities, $30.2 million of the $49.5 million accounts receivable balance is recorded as due from other governments and is related to grants or other financial assistance that was awarded. Cary enters into contractual agreements where Cary is obligated to amend the budget to establish grant revenue and supporting expenditures. The grant revenue is considered unearned until the contractual obligations of the underlying agreement are satisfied. $22 million of the grant total is considered unearned, which is the full balance of unearned revenue at June 30, 2020 for governmental activities. The remainder of the governmental receivables is related to sales tax and other similar allocations that relate to fiscal year 2020 and were received within the 90-day window after June 30, 2020. For Business-type activities, due from other governments include $.7 million related to partner receivables from the Town of Apex related to shared water and reclamation facilities, including their portion of capital projects. All the $12.3 million recorded as accounts receivable is related to customer utility services. In conformity with accounting principles generally accepted in the United States of America, revenues that are measurable but not available are reported as either an advance from customers/grantors or a deferred inflow of resources in the fund financials. The $371,596 of advance from customers in the Governmental Funds is mostly comprised of prepaid fees related to parks, recreation, and culture activities. For Business-type activities, the ($2,895) advance from customers relates to utility annexation agreements and the $599,119 in unearned revenues is related to the Town of Apex’s portion of the state revolving loan that also resides in long-term receivables. See Note 5 for details on deferred inflow of resources. NNoottee 55 DDEEFFEERRRREEDD OOUUTTFFLLOOWWSS AANNDD IINNFFLLOOWWSS OOFF RREESSOOUURRCCEESS

At June 30, 2020, the various components of deferred outflows of resources related to the entity-wide statements are as follows:

Total Deferred Outflow Related to Pension (Note 12.A) 19,342,954$ 2,061,776$ 21,404,730$ Deferred Outflow Related to OPEB (Note 12.E) 30,158,268 6,813,008 36,971,276 Deferred Charge on Debt Refinancing 598,388 669,876 1,268,264

Total Deferred Outflows 50,099,610$ 9,544,660$ 59,644,270$

Governmental Activities

Business-Type Activities

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

At June 30, 2020, the various components of deferred inflows of resources are as follows:

Governmental Deferred Inflows: Ad Valorem Taxes 321,534$ --$ 321,534$ 204,081$ 525,615$ --$ Vehicle Tag Revenue 165,216 -- 165,216 (513,236) (348,020) -- Total Deferred Inflows Related to

Property Taxes & Vehicle Tag Fees 486,750$ --$ 486,750$ (309,155)$ 177,595 --

Pension Activity (Note 12.A & B) 1,202,175 474,768 OPEB Activity (Note 12.C) 25,385,866 5,764,675 Total Deferred Inflows of Resources

at June 30, 2020 26,765,636$ 6,239,443$

Earned but Unavailable

Governmental Fund Financial

Balance

Net Unearned (Earned) Portion of

Receivables

Entity-Wide Governmental

Activity

Business-Type Activities (Utility

System) Received and

Unearned

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

At June 30, 2020, the various components of deferred inflows of resources are as follows:

Governmental Deferred Inflows: Ad Valorem Taxes 321,534$ --$ 321,534$ 204,081$ 525,615$ --$ Vehicle Tag Revenue 165,216 -- 165,216 (513,236) (348,020) -- Total Deferred Inflows Related to

Property Taxes & Vehicle Tag Fees 486,750$ --$ 486,750$ (309,155)$ 177,595 --

Pension Activity (Note 12.A & B) 1,202,175 474,768 OPEB Activity (Note 12.C) 25,385,866 5,764,675 Total Deferred Inflows of Resources

at June 30, 2020 26,765,636$ 6,239,443$

Earned but Unavailable

Governmental Fund Financial

Balance

Net Unearned (Earned) Portion of

Receivables

Entity-Wide Governmental

Activity

Business-Type Activities (Utility

System) Received and

Unearned

NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

NNoottee 66 CCAAPPIITTAALL AASSSSEETTSS Capital asset activity for the year ended June 30, 2020, was as follows:

Total Governmental assets include Internal Service Fund book value of $1.3 million. General infrastructure constructed and donated by area developers (and acquired through annexations) with a value of $42.3 million is included in governmental additions. Included in this amount is $.7 million in developer agreement adjustments.

Retirements Transfers In (Out) GG oovveerr nn mm eenn tt aall AAcc tt ii vvii tt ii eess Capital Assets, non-depreciable:

Land & Improvements 272,816,072$ 10,112,855$ --$ --$ 282,928,927$ Construction-in-Progress 65,570,354 31,075,625 (1,056,075) (7,620,314) 87,969,590

Total Capital Assets, non-depreciable 338,386,426 41,188,480 (1,056,075) (7,620,314) 370,898,517

Capital Assets, Depreciable Buildings & Improvements 120,976,493 -- -- 214,026 121,190,519 Machinery & Equipment 34,578,306 919,146 (222,649) 1,036,237 36,311,040 Vehicles 38,320,369 1,575,255 (913,331) 2,664,978 41,647,271 Infrastructure 826,544,918 31,450,782 -- 2,307,613 860,303,313 Intangible Assets 13,064,321 5,799,386 -- 1,397,460 20,261,167

Total Capital Assets, Depreciable 1,033,484,407 39,744,569 (1,135,980) 7,620,314 1,079,713,310

Less Accumulated Depreciation for: Buildings & Improvements 38,394,423 2,607,614 -- -- 41,002,037 Machinery & Equipment 20,761,375 2,258,436 (222,241) -- 22,797,570 Vehicles 24,493,918 3,744,298 (913,331) -- 27,324,885 Infrastructure 376,614,844 20,964,376 -- -- 397,579,220 Intangible Assets 4,587,515 2,618,563 -- -- 7,206,078

Total Accumulated Depreciation 464,852,075 32,193,287 (1,135,572) -- 495,909,790 Total Capital Assets, Depreciable, net 568,632,332 7,551,282 (408) 7,620,314 583,803,520

Governmental Activities Capital Assets, net 907,018,758$ 48,739,762$ (1,056,483)$ --$ 954,702,037$

Beginning Balance Additions Ending Balance

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NOTES TO BASIC FINANCIAL STATEMENTS TOWN OF CARY, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2020

Area developers donated utility infrastructure with a gross value of $9.6 million, which is included in the business-type asset additions.

Retirements Transfers In (Out) BBuussiinneessss-- TTyyppee AAcctt iivviitt iieess Capital Assets, non-depreciable:

Land & Improvements 26,655,560$ --$ --$ 87,680$ 26,743,240$ Construction-in-Progress 190,338,071 21,463,354 (576,644) (12,342,130) 198,882,651

Total Capital Assets, non-depreciable 216,993,631 21,463,354 (576,644) (12,254,450) 225,625,891

Capital Assets, Depreciable Buildings & Improvements 173,147,129 -- -- -- 173,147,129 Machinery & Equipment 12,433,894 77,210 (18,841) 640,615 13,132,878 Vehicles 6,554,104 413,726 (75,617) 589,464 7,481,677 Infrastructure 685,002,805 9,613,427 -- 11,024,371 705,640,603 Intangible Assets 1,532,038 -- -- -- 1,532,038

Total Capital Assets, Depreciable 878,669,970 10,104,363 (94,458) 12,254,450 900,934,325

Less Accumulated Depreciation for: Buildings & Improvements 41,498,439 3,463,376 -- -- 44,961,815 Machinery & Equipment 7,496,049 668,511 (18,841) -- 8,145,719 Vehicles 4,158,330 711,119 (75,617) -- 4,793,832 Infrastructure 192,416,132 14,396,111 -- -- 206,812,243 Intangible Assets 1,478,994 53,044 -- -- 1,532,038

Total Accumulated Depreciation 247,047,944 19,292,161 (94,458) -- 266,245,647 Total Capital Assets, Depreciable, net 631,622,026 (9,187,798) -- 12,254,450 634,688,678

Business-type Activities Capital Assets, net 848,615,657$ 12,275,556$ (576,644)$ --$ 860,314,569$

Beginning Balance Additions Ending Balance

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