HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2016Town of Hillsborough,
North Carolina
Comprehensive Annual Financial Report
Year Ended June 30, 2016
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Comprehensive Annual Financial Report
Year Ended
June 30, 2016
Town of Hillsborough,
North Carolina
Tom Stevens
Mayor
Eric J. Peterson
Town Manager
Heidi Lamay
Finance Director
Town of Hillsborough Finance Department
Phillip Cordeiro, Assistant Finance Director
Keri Carnes, Financial Analyst
Sarah Kimrey, Accounting Technician
Donna Duncan, Accounts Payable Clerk
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Town of Hillsborough, North Carolina
Table of Contents
Introductory Section
List of Principal Officials ....................................................................................................... i
Organization Chart ................................................................................................................. ii
Letter of Transmittal .............................................................................................................. iii
GFOA Certificate of Achievement ........................................................................................ ix
Financial Section
Independent Auditors’ Report .................................................................................................... 1
Management’s Discussion and Analysis .................................................................................. 5
Basic Financial Statements
Exhibit Government-Wide Financial Statements:
1 Statement of Net Position ........................................................................................................ 16
2 Statement of Activities ............................................................................................................. 18
Fund Financial Statements:
3 Balance Sheet - Governmental Funds .................................................................................... 22
4 Statement of Revenues, Expenditures and Changes in Fund Balance -
Governmental Funds ............................................................................................................. 24
5 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - General Fund ............................................................................................................ 26
6 Statement of Net Position - Proprietary Fund ......................................................................... 27
7 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Fund .......... 28
8 Statement of Cash Flows - Proprietary Fund ......................................................................... 29
Notes to Financial Statements .................................................................................................... 31
Required Supplementary Financial Data
Exhibit
Law Enforcement Officers’ Special Separation Allowance Required
Supplementary Information:
A Schedule of Funding Progress ................................................................................................ 63
Other Postemployment Benefits Required Supplementary Information:
B Schedule of Funding Progress and Schedule of Employer Contributions............................. 64
Local Government Employees’ Retirement System Required Supplementary
Information:
C-1 Schedule of Proportionate Share of Net Pension Liability (Asset) ......................................... 65
C-2 Schedule of Contributions ....................................................................................................... 66
Town of Hillsborough, North Carolina
Supplementary Information:
Combining and Individual Fund Financial Statements Section
Schedule Governmental Funds:
1 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget
and Actual - General Fund ..................................................................................................... 69
2 Statement of Revenues, Expenditures, and Changes in Fund Balance -Budget and
Actual - General Capital Projects Fund ................................................................................. 74
3 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget
and Actual - General Capital Reserve Fund ......................................................................... 75
4 Combining Balance Sheet - Nonmajor Governmental Funds ................................................ 76
5 Combining Statement of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Nonmajor Governmental Funds ........................................................... 78
6 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Downtown Improvements Capital Project Fund - Nonmajor Capital Project
Fund ........................................................................................................................................ 80
7 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Town Barn Improvements Capital Project Fund - Nonmajor Capital
Project Fund ........................................................................................................................... 81
8 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk Phase II Capital Project Fund - Nonmajor Capital Project Fund ........... 82
9 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk Phase III Capital Project Fund - Nonmajor Capital Project Fund .......... 83
10 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk CMAQ Capital Project Fund - Nonmajor Capital Project Fund .............. 84
11 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Rail Station
Capital Project Fund - Nonmajor Capital Project Fund ......................................................... 85
12 Schedule of Revenues, Expenditures and Changes in Fund Balance - Public
Works Building Capital Project Fund - Nonmajor Capital Project Fund ............................... 86
Enterprise Fund:
13 Schedule of Revenues - Budget and Actual (Non-GAAP) - Water and Sewer Fund............ 87
14 Schedule of Expenditures - Budget and Actual (Non-GAAP) - Water and Sewer
Fund ........................................................................................................................................ 88
15 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Projects Fund............................................ 91
16 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund ........................................... 92
Fiduciary Fund:
17 Statement of Changes in Assets and Liabilities - Special Assessment Debt Agency
Fund ........................................................................................................................................ 93
Other Schedules
18 Schedule of Ad Valorem Taxes Receivable .................................................................................. 96
19 Analysis of Current Tax Levy ......................................................................................................... 97
Town of Hillsborough, North Carolina
Statistical Section
Table Financial Trends Information:
1 Net Position by Component ..................................................................................................... 102
2 Changes in Net Position… ...................................................................................................... 104
3 Fund Balances, Governmental Funds .................................................................................... 108
4 Changes in Fund Balances, Governmental Funds ................................................................ 110
Revenue Capacity Information:
5 Program Revenues by Function/Program .............................................................................. 114
6 Tax Revenues by Source, Governmental Funds ................................................................... 116
7 Assessed Value and Actual Value of Taxable Property ......................................................... 117
8 Direct and Overlapping Property Tax Rates ........................................................................... 118
9 Property Tax Review and Collections ..................................................................................... 119
10 Principal Property Taxpayers .................................................................................................. 121
11 Water Sold by Type of Customer and In and Out of Town .................................................... 122
12 Water and Sewer Rates .......................................................................................................... 124
Debt Capacity Information:
13 Ratios of Outstanding Debt by Type ....................................................................................... 126
14 Ratios of General Bonded Debt Outstanding ......................................................................... 127
15 Direct and Overlapping Governmental Activities Debt ........................................................... 129
16 Legal Debt Margin Information ................................................................................................ 130
Demographic and Economic Information:
17 Demographic and Economic Statistics ................................................................................... 133
18 Principal Employers ................................................................................................................. 134
19 Full-Time Equivalent City Government Employees by Function/Program ............................ 135
Operating Information:
20 Operating Indicators by Function/Program ............................................................................. 138
21 Capital Asset Statistics by Function/Program ......................................................................... 140
Compliance Section
Independent Auditors’ Report 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 ....................................... 145
Schedule
20 Schedule of Findings and Responses ........................................................................................... 147
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Introductory Section
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Town of Hillsborough, North Carolina
i
List of Principal Officials
Board of Town Commissioners
Tom Stevens, Mayor
Kathleen Ferguson ......................................... Mayor Pro Tem
Mark Bell .......................................................... Commissioner
Evelyn P. Lloyd ................................................. Commissioner
Jenn Weaver .................................................... Commissioner
Brian Lowen ..................................................... Commissioner
Town Officials
Eric J. Peterson, Town Manager
Heidi Lamay, Finance Director
Emily Bradford, Budget Officer
Kenneth Keel, Town Engineer/Utilities Director
Katherine Cathey, Town Clerk/Human Resources Director
Duane Hampton, Police Chief
Margaret Hauth, Planning Director
Ken Hines, Public Works Director
Catherine Wright, Public Information Officer
Jennifer Della Valle, Management Analyst/Assistant PIO
Robert Hornik, Town Attorney
Town of Hillsborough, North Carolina
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December 23, 2016
Honorable Mayor Stevens,
Board of Town Commissioners,
and Citizens of Hillsborough
Hillsborough, North Carolina 27278
The Comprehensive Annual Financial Report of Hillsborough, North Carolina for the fiscal year ended
June 30, 2016, is submitted for your review and use. The Town, like all other local governments in the
state, is required by state law to publish a complete set of financial statements within four months of the
close of each fiscal year. Responsibility for the accuracy of the data and the completeness and fairness of
the presentation, including all disclosures, rests with the Town. As management, we assert that, to the
best of our knowledge, this financial report is complete and reliable in all material respects, and is
reported in a manner designed to fairly present the financial position and results of the operations of the
governmental and business-type activities. All disclosures necessary to gain the maximum understanding
of the Town’s financial affairs have been included.
The Town’s management is responsible for establishing and maintaining an internal control structure that
is designed to ensure the Town’s assets are protected from loss, theft or misuse, and to ensure adequate
accounting data are compiled to allow for the preparation of financial statements which conform with
accounting principles generally accepted in the United States of America (GAAP). Since the cost of
internal controls should not outweigh their benefits, the Town’s internal control structure has been
designed to provide reasonable rather than absolute assurance that the financial statements will be free
from material misstatement.
North Carolina statutes and the Town’s Ordinance require an annual audit by independent certified public
accountants. The accounting firm of Dixon Hughes Goodman LLP, a firm of licensed certified public
accountants, was selected and awarded the contract for Fiscal Year 2016. The goal of an independent
audit is to provide reasonable assurance that the financial statements are free of material misstatement.
An independent audit involves examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements; assessing the accounting principles used and the significant
estimates made by management; and evaluating the overall financial statement presentation. Generally
accepted accounting principles require that management provide a narrative introduction, overview and
analysis to accompany the basic financial statements in the form of Management’s Discussion and
Analysis (MD&A). This transmittal letter is designed to complement the Management’s Discussion &
Analysis and should be read in conjunction with it. The Town’s MD&A can be found immediately following
the independent auditor’s report.
The Reporting Entity and Its Services
Founded in 1754, Hillsborough, the county seat of Orange County, is located at the intersection of
interstates 85 and 40, near several urban centers and universities. The small town setting is six to 30
miles from Chapel Hill, Durham, and Raleigh. Hillsborough’s 6,398 residents have easy access to
employment opportunities within the Research Triangle Park area. Within Hillsborough, the economy is
centered on government, retail, service providers, and manufacturing. Orange County and the Town of
Hillsborough are major local employers. The Town’s historical sites attract a large number of tourists.
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The Town is operated under the council-manager form of government. Commissioners on the five-
member, nonpartisan board serve four-year staggered terms and are elected at large. The mayor, also
elected at large, serves a two-year term, chairs the board meetings, and votes when a tie occurs.
The Town provides a full range of municipal services, including police, fire inspection and protection,
parks, street maintenance, solid waste collection, and cemetery. The Town provides financial support to
certain boards, agencies and commissions to assist their efforts in serving citizens. The Town has
evaluated its relationship with each of these entities according to criteria established by Governmental
Accounting Standards Board Statement 14 and has determined that the Hillsborough Tourism
Development Authority and Hillsborough Tourism Board are required to be included in the financial report.
The Town operates its own water and sanitary sewer systems. The Town’s water treatment plant has a
capacity of three million gallons per day (MGD) and is currently treating an average daily flow of 1.161
MGD. The Town’s water system serves a total of 5,824 customers, which includes Town residents and
customers from outlying areas. The sanitary sewer system has a treatment capacity of 3 MGD, with a
current average daily flow of 0.950 MGD.
Economic Conditions and Outlook
The Town of Hillsborough, Orange County and the Research Triangle Park area are considered to be
among the most desirable areas of the country to live and work, according to several national surveys.
The economy of Hillsborough is diversified with government, manufacturing, wholesale and retail
businesses, as well as numerous service providers. Approximately 42.00% of Hillsborough’s tax base is
commercial in nature - this is a strong indicator of a healthy and diverse property tax base. Local
industries are involved in a range of operations, from simple assembly to complex manufacturing
processes resulting in products such as hydraulic equipment, electronic equipment, and computerized
medical diagnostic equipment.
The Town’s unemployment rate has been below state and national rates over the past 18 years. This
trend continued during the current year in which the Town’s unemployment rate, as of June 2016 was
4.2% for Orange County, while the state and national rates were 5.3% and 5%, respectively.
The Town’s economy is expected to remain stable because of the benefits derived from a lower
unemployment rate, a stable employment base, and the development of a 337-acre mixed-use
development called Waterstone annexed in 2004. While taking longer to develop than expected,
Waterstone is expected to increase the Town’s population by 25% and increase the tax base by 25%
over the next few years. The single-family and townhome developments started construction in 2014 and
many are now occupied. Sales have continued at a good pace in 2016. Several of the apartment homes
were also completed and occupied in 2016. These three residential projects alone will add over 500
residential units and more than 1,000 residents to Hillsborough. U.N.C. Hospitals officially opened in July
of 2015. The medical office section opened in 2013 and has already expanded to include more
administrative offices and a variety of medical services.
In addition to the Waterstone development, Hillsborough is seeing growth throughout town. Current
projects which are nearly complete or well under construction include: Corbin Creek Woods (18 units),
Forrest Ridge (233 units), and Elfin Pond Townhomes (104 units). The combination of these
developments and growth in Waterstone will roughly increase Hillsborough's population by 30% over the
next few years. Other projects, commercial and residential, are currently in the planning stages by various
developers throughout town.
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The Town's investment several years ago in the 20-acre lot primarily obtained as a rail station site is
strategically located adjacent to both of the rail lines, downtown, Daniel Boone Villages, and the Collins
property (138 acres of undeveloped land). This is the planned site for a rail station and potential public-
private partnership for development in this area. The Sustainable Cities Design Academy grant was
awarded to the Town in early 2014 and provided a concept plan in 2016 to help with economic
development efforts in this area. This encourages the type of infill development that is congruent with the
Town's long-term vision, as well as being more sustainable and affordable from a municipal service
provision perspective. NCDOT has included $7.38 million in its Transportation Improvement Plan for this
project in beginning in FY2017. Design may begin during FY2017 with construction to follow in FY2019
and 2020.
The stable outlook reflects the continued economic development within the Town and maintenance of the
Town’s good financial position. Reserve levels are sufficient and within the Town’s adopted policy. The
outlook also reflects the expectation that the Town will effectively manage its debt burden and capital
needs.
Long-Term Financial Planning and Major Initiatives
Each year, the Town prepares a multiyear operational and capital improvement budget. While this is the
eighteenth year a multiyear financial planning format has been used; FY08 was the first year that a
balanced scorecard system was used to implement and communicate the board’s mission, vision, and
strategic priorities. During the year, the Town funded and managed many significant projects including the
following:
The Wastewater Plant upgrade began in September 2011. The project is to be completed
in two phases. Phase I was substantially completed by June of 2014. Final close-out on
the project was completed in 2016. Phase II is estimated to begin construction 7 to 12
years from now. The upgrade was needed due to the limitations in hydraulic capacity and
to meet the new Falls Lake nutrient reduction criteria, which go into effect in 2016.
Completed the fourth and final year of a $2.0 million street repaving and repair plan. The
plan is being funded without debt and uses the Town's Powell Bill (gas tax allocation) and
General Fund revenues to pay for the four-year project. The plan addresses (1) the
highest priority street repaving and repair needs and, (2) will identify the average annual
cost and lane miles for repaving, while also decreasing the life cycle costs associated
with maintaining the street system.
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Riverwalk Phases II and III were completed and a grand opening celebration was held in
October of 2014 ($2.24 million with annual debt payments of about $128,000 starting in
FY14). The Riverwalk runs from Allison Street near Occoneechee Mountain east, through
downtown, and connects with Orange County’s River Park, passing just south of
Cameron Street, and extending west until connection with the Classical American Homes
Preservation Trust property near the Historic Occoneechee Speedway and its trail
system, ending near Cameron Street. The Trust completed trail and bridge work in 2016
that will extend the connection to the Speedway, as well as the Mountains to Sea Trail.
Congestion Mitigation and Air Quality (CMAQ) Grant Sidewalk, Pedestrian Safety and
Accessibility Project ($124,000) - Pedestrian and bicycle connectors for Nash, Calvin and
Allison streets; sidewalk/accessibility; curb, gutter and other improvements; and
connections for Gold Park and Riverwalk. This would complete the western connection
from Gold Park to Allison Street and add a sidewalk with access trails near Occoneechee
Mountain State Natural Area. The project cost of $124,000 to leverage $496,000 of
CMAQ funds is scheduled for 2017.
The Town is in the process of addressing future capital facility needs that will be critical in
serving Hillsborough's growing population. Land and buildings have been acquired near
the current Town Hall that can eventually be used to relocate the Town Hall Annex,
Police Department headquarters, and Fire Station that are currently located downtown.
All three facilities are outdated, in need of upgrade, and are occupying property that
would be better used to compliment current business uses in the downtown district. Town
staff worked on a space study in early 2016 to help plan for operational facility needs
over the next 20 years. An RFP for Architectural Design will be issued in the fall of 2016.
It is likely that a second fire station will soon be needed in the southern part of town. In
addition, the current public works facilities are in exceptionally poor shape and located
adjacent to the Eno River in the flood plain.
In order to relocate town staff located at the Town Hall Annex, the town bought the
property located at 101 E. Corbin. The initial down payment cost $125,000 and lease
payments are being applied towards the remaining $825,000 principle balance.
To address long-term water supply needs and accommodate the type of growth that
match the Town's vision, Phase 2 expansion of the West Fork Eno River Reservoir is
currently in the design stage. Phase 2 will yield an additional 1.2 million gallons per day
of water capacity. Construction is scheduled to begin in early 2017 and must be
completed by the end of calendar year 2018 to comply with the current permit. Delay in
construction means that new permit requirements could more than double the current
$8.3 million estimate for the project. Construction is projected to start in 2017.
The Town has been paying half-payments of $50,750 on debt for the Southern Water
Tank, although full payments are slated to begin in FY17. The water tank stores 500,000
gallons of water and is located next to the UNC Hospital.
The Town funded the second half of repairs via slip lining on the Eno River Sewer Outfall.
The total cost of this project was $400,000.
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The Town completed its annual sewer line “inflow and infiltration” reduction program,
which cost $50,000.
The Town plans to make significant improvements to downtown access, such as creating
a loading zone on W Margaret Lane, making W. King Street more walkable and
improving the right-of-way in front of the library. Design began in 2016, but the project is
on hold until more bids on the construction phase of the project are secured.
Debt Administration
Hillsborough’s current debt burden is above the North Carolina state average and below the national
average for municipalities, with net overall debt at $4,102 per capita. Additional debt incurred over recent
years will support robust projected growth, provide vital services to the Town’s new citizens, and is not
atypical of a growing community like Hillsborough. Responsible financial planning and revenues resulting
from growth will ensure the Town maintains a stable financial position. There has been no new general
bonded debt over the last 18 fiscal years, and no debt service expenditures on general obligation bonded
debt have been incurred in the General Fund during the last 18 fiscal years. The Town has avoided a
heavy debt load, which has plagued many municipalities, in its General Fund. Debt service costs make up
13.11% of General Fund expenditures. This includes short-term debt for equipment needs like garbage
trucks, leaf collection equipment, fire trucks, etc. Additionally, no bonded debt is recorded in the Water
and Sewer Fund. While there is no bonded debt, other debt payments account for 29.03% of
expenditures, which is an increase over the previous fiscal year. The primary reason for this increase is a
new wastewater treatment plant ($1.5 million in debt to the fund) and continued emphasis on maintaining
the water and sewer infrastructure of the Town.
Financial Policies
The Town of Hillsborough has adopted a policy to maintain a General Fund balance level between 20%
and 60% of operating expenditures, with a target of 33% or the equivalent of four months of operating
expenditures.
The Town has diversified its investment by security type and institution to avoid incurring unreasonable
risks inherent in over-investing in specific instruments, individual financial institutions or maturities.
Without exception, no more than 50% of the Town’s total investment portfolio will be invested in a single
security type or with a single financial institution.
Other Information
The Government Finance Officers Association (GFOA) of the United States and Canada awarded a
Certificate of Achievement for Excellence in Financial Reporting to the Town of Hillsborough for its
comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2015. The Certificate of
Achievement is a prestigious national award recognizing conformance with the highest standards for
preparation of a state and local government financial report.
To be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and
efficiently organized comprehensive annual financial report that conforms to program standards. The
annual report must satisfy both generally accepted accounting principles and applicable legal
requirements.
viii
A Certificate of Achievement is valid for a period of one year. The Town of Hillsborough has received a
Certificate of Achievement for the last 21 consecutive years (fiscal years ended 1994 through 2015). We
believe our current report continues to conform to the Certificate of Achievement program requirements,
and we will submit it to the GFOA.
Acknowledgments
We appreciate the assistance and dedication of the Finance Department staff throughout the year,
especially during the preparation of this report. We would like to thank all members of the department
who contributed to its preparation and to the independent certified public accountants, Dixon Hughes
Goodman LLP, for their assistance. The cooperation of each Town department is appreciated, as we
work together in conducting the Town’s financial operations. We also express our appreciation to the
mayor and the members of the Board of Commissioners for their continued support, guidance, and advice
in planning and conducting the financial activities of the Town in a responsible and progressive manner.
The Town’s improving financial condition in the General Fund and willingness to address the challenges
facing the Water and Sewer Fund are a tribute to that involvement.
Respectfully submitted,
Heidi Lamay
Eric J. Peterson Heidi Lamay
Town Manager Finance Director
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Financial Section
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1
Independent Auditors’ Report
Honorable Mayor and Members
of the Board of Town Commissioners
Town of Hillsborough
Hillsborough, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the Town of Hillsborough, North Carolina, as of and for the year ended
June 30, 2016, and the related notes to the financial statements, which collectively comprise the Town of
Hillsborough’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.
Auditors’ 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.
The financial statements of the Hillsborough Tourism Development Authority and the Hillsborough
Tourism Board were not audited in accordance with Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ 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 entity’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 entity’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 financial statement 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.
2
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the governmental activities, the business-type activities, the aggregate discretely
presented component units, each major fund, and the aggregate remaining fund information of the Town
of Hillsborough, North Carolina, as of June 30, 2016, and the respective changes in its financial position
and cash flows, where appropriate, thereof, and the respective budgetary comparison for the General
Fund 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 on pages 5 through 14, the Law Enforcement Officers’ Special Separation
Allowance and the Other Postemployment Benefits Schedules of Funding Progress and Employer
Contributions on pages 63 and 64, respectively, and the Local Government Employees’ Retirement
System’s Schedules of Proportionate Share of Net Pension Liability (Asset) and Contributions on pages
65 and 66 respectively, be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board who considers it to be an essential part of the 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 consist 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 provided 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 of Hillsborough’s basic financial statements. The introductory section, combining and
individual fund financial statements, budgetary schedules, other schedules, and the statistical section are
presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining and individual fund financial statements, budgetary schedules, other schedules 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, the combining and individual fund financial statements,
budgetary schedules and other schedules are fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of the basic financial statements and, accordingly, we do not express an
opinion or provide any assurance on them.
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Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 23,
2016, on our consideration of the Town of Hillsborough’s internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements
and other matters. The purpose of that 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
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 of Hillsborough’s
internal control over financial reporting and compliance.
High Point, North Carolina
December 23, 2016
4
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Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
5
Management’s Discussion and Analysis
As management of the Town of Hillsborough (the “Town”), we offer readers of the Town’s financial statements
this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2016.
Readers are encouraged to consider this information in conjunction with additional information furnished in the
Town’s financial statements, which follow this narrative.
Financial Highlights
The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred
inflows of resources at the close of the fiscal year by $63,629,228.
The Town’s total net position increased by $6,113,752 primarily due to infrastructure
improvements, an increase in the sewer rates and developer-paid capital facility fees in the
business-type activities net position.
As of the close of the current fiscal year, the Town’s governmental funds reported ending fund
balances of $6,471,920, a net decrease of $527,092 in comparison to the prior year. This is the
result of increased capital project investment. Approximately 29.81% of this total amount or
$1,929,248 is nonspendable, or restricted.
At the end of the current fiscal year, unassigned fund balance for the General Fund was
$3,698,078, or 38.09% of total General Fund expenditures, including other financing uses, for the
fiscal year.
The Town’s total debt increased by $133,784 during the current fiscal year. The Town had
additional borrowing on revolving loans payable of $974,386 and installment purchases of
$2,290,626. These additional borrowings were offset by retirement of $3,131,228 in existing debt
during the year.
The Town maintained its A2 (Moody’s Investor Service) and A (Standard & Poor’s) bond ratings
for the 21st consecutive year.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Town of Hillsborough’s basic financial
statements. The Town’s basic financial statements consist of three components: (1) government-wide financial
statements, (2) fund financial statements, and (3) notes to the financial statements (see Figure 1). The basic
financial statements present two different views of the Town through the use of government-wide statements and
fund financial statements. In addition to the basic financial statements, this report contains other supplemental
information that will enhance the reader’s understanding of the financial condition of the Town of Hillsborough.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
6
Required Components of Annual Financial Report
Figure 1
Basic financial statements
The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-Wide Financial
Statements. They provide both short- and long-term information about the Town’s financial status.
The next statements (Exhibits 3 through 8) are Fund Financial Statements. These statements focus on the
activities of the individual parts of the Town’s government. These statements provide more detail than the
government-wide statements. There are four parts to the Fund Financial Statements: (1) the governmental funds
statements; (2) the budgetary comparison statements; (3) the proprietary fund statements; and (4) the fiduciary
fund statements.
The next section of the basic financial statements is the notes section. The notes to the financial statements
explain in detail some of the data contained in those statements. After the notes, supplemental information is
provided to show details about the Town’s individual funds. Budgetary information required by the General
Statutes also can be found in this part of the statements.
Government-wide financial statements
The government-wide financial statements are designed to provide the reader with a broad overview of the
Town’s finances, similar in format to the financial statements of a private-sector business. The government-wide
statements provide short-and long-term information about the Town’s financial status as a whole.
The two government-wide statements report the Town’s net position and how they have changed. Net position is
the difference between the Town’s total assets and deferred outflows of resources and total liabilities and deferred
inflows of resources. Measuring net position is one way to evaluate the Town’s financial condition.
The government-wide statements are divided into three categories: (1) governmental activities; (2) business-type
activities; and (3) component units. The governmental activities include most of the Town’s basic services such as
public safety, fire, street maintenance, solid waste collection, cemetery and general administration. Property taxes
and state and federal grant funds finance most of these activities. The business-type activities are those that the
Town charges customers to provide. These include the water and sewer services offered by the Town. The final
category is the component units. Although legally separate from the Town, the Tourism Development Authority
and the Tourism Board are important to the Town. The Town exercises control over these entities by appointing
its members and remits a percentage of taxes collected to each of these entities.
Management’s
Discussion and
Analysis
Basic
Financial
Statements
Notes to the
Financial
Statements
Fund
Financial
Statements
Government-Wide
Financial
Statements
Summary Detail
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
7
The government-wide financial statements are on pages 16 through 21 of this report.
Fund financial statements
The fund financial statements (see Figure 1) provide a more detailed look at the Town’s most significant activities.
A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The Town of Hillsborough, like all other governmental entities in
North Carolina, uses fund accounting to ensure and reflect compliance (or noncompliance) with finance-related
legal requirements, such as the General Statutes or the Town’s budget ordinance. All of the funds of the Town
can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.
Governmental Funds - Governmental funds are used to account for those functions reported as governmental
activities in the government-wide financial statements. Most of the Town’s basic services are accounted for in
governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and
what monies are left at year end that will be available for spending in the next year. Governmental funds are
reported using an accounting method called modified accrual accounting that provides a short-term spending
focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that
helps him or her determine if there are more or less financial resources available to finance the Town’s programs.
The relationship between governmental activities (reported in the Statement of Net Position and the Statement of
Activities) and governmental funds is described in a reconciliation that is a part of the fund financial statements.
The Town of Hillsborough adopts an annual budget for its General Fund, as required by the General Statutes.
The budget is a legally adopted document that incorporates input from the citizens of the Town, the management
of the Town, and the decisions of the Board about which services to provide and how to pay for them. It also
authorizes the Town to obtain funds from identified sources to finance these current-period activities. The
budgetary statement provided for the General Fund demonstrates how well the Town complied with the budget
ordinance and whether or not the Town succeeded in providing the services as planned when the budget was
adopted. The budgetary comparison statement uses the budgetary basis of accounting and is presented using the
same format, language, and classifications as the legal budget document. The statement shows four columns:
(1) the original budget as adopted by the Board; (2) the final budget as amended by the Board; (3) the actual
resources, charges to appropriations, and ending balances in the General Fund; and (4) the difference or
variance between the final budget and the actual resources and charges. To account for the difference between
the budgetary basis of accounting and the modified accrual basis, a reconciliation showing the differences in the
reported activities is shown at the end of the budgetary statement.
Proprietary Funds - The Town of Hillsborough has one type of proprietary fund. Enterprise Funds are used to
report the same functions presented as business-type activities in the government-wide financial statements. The
Town uses enterprise funds to account for its water and sewer activity. These funds are the same as those
functions shown in the business-type activities in the Statement of Net Position and the Statement of Activities.
Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside of the
government. The Town of Hillsborough has one fiduciary fund, which is an agency fund.
Notes to the Financial Statements - The notes provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements. The notes to the
financial statements are on pages 31 through 59 of this report.
Other Information - In addition to the basic financial statements and accompanying notes, this report includes
certain required supplementary information concerning the Town’s progress in funding its obligation to provide
pension benefits to its employees. Required supplementary information can be found beginning on page 63 of this
report.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
8
Interdependence with other entities - The Town depends on financial resources flowing from, or associated
with, both the federal government and the State of North Carolina. Because of this dependency, the Town is
subject to changes in specific flows of intergovernmental revenues based on modifications to federal and state
laws and federal and state appropriations.
Government-wide financial analysis
The Town of Hillsborough’s Net Position
Figure 2
Governmental Business-Type
Activities Activities Total
2016 2015 2016 2015 2016 2015
Current assets $ 7,236,128 $ 8,034,257 $ 13,643,288 $ 10,895,848 $ 20,879,416 $ 18,930,105
Other assets - 302,808 - 174,356 - 477,164
Capital assets, net 18,752,127 16,404,558 53,303,452 51,857,285 72,055,579 68,261,843
Deferred outflows of
resources 263,121 241,287 160,615 178,067 423,736 419,354
Total assets and deferred
outflows of resources 26,251,376 24,982,910 67,107,355 63,105,556 93,358,731 88,088,466
Long-term liabilities
outstanding 4,602,436 4,356,104 20,376,203 20,089,420 24,978,639 24,445,524
Other liabilities 1,467,009 1,635,422 3,061,462 3,301,647 4,528,471 4,937,069
Total liabilities 6,069,445 5,991,526 23,437,665 23,391,067 29,507,110 29,382,593
Deferred inflows of
resources 155,558 765,450 66,835 424,947 222,393 1,190,397
Net position:
Net investment in
capital assets 14,242,464 11,870,401 32,483,743 30,507,881 46,726,207 42,378,282
Restricted 1,753,856 1,558,393 2,596,324 2,591,600 4,350,180 4,149,993
Unrestricted 4,030,053 4,797,140 8,522,788 6,190,061 12,552,841 10,987,201
Total net position $ 20,026,373 $ 18,225,934 $ 43,602,855 $ 39,289,542 $ 63,629,228 $ 57,515,476
As noted earlier, net position may serve over time as one useful indicator of a government’s financial condition.
The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of
resources at the close of the fiscal year by $63,629,228 as of June 30, 2016. The Town’s net position increased
by $6,113,752 for the fiscal year ended June 30, 2016. However, the largest portion (73.44%) reflects the Town’s
net investment in capital assets (e.g., land, buildings, machinery, equipment, distribution and collection systems
and infrastructure, less any related debt still outstanding that was issued to acquire those items). The Town uses
these capital assets to provide services to citizens; consequently, these assets are not available for future
spending. Although the Town’s investment in its capital assets is reported net of the outstanding related debt, the
resources needed to repay that debt must be provided by other sources, since the capital assets cannot be used
to liquidate these liabilities. An additional portion of the Town of Hillsborough’s net position, $4,350,180 (6.84%)
represents resources that are subject to external restrictions on how they may be used. The remaining balance of
$12,552,841 (19.72%) is unrestricted and may be used to meet the Town’s ongoing obligation to citizens and
creditors.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
9
Several particular aspects of the Town’s financial operations positively influenced the total unrestricted net
position:
Continued diligence in the collection of property taxes by maintaining a tax collection percentage
in excess of 98%.
Numerous cost savings measures implemented by all departments.
Many departments finishing the year with expenditures under budget.
Increase to the sewer rate yielding higher than expected revenues.
Continued low cost of debt due to the Town’s good bond rating and low interest rates.
The Town of Hillsborough’s Changes in Net Position
Figure 3
Governmental Activities Business-Type Activities Total
2016 2015 2016 2015 2016 2015
Revenues:
Program revenues:
Charges for services $ 366,461 $ 387,014 $ 10,713,397 $ 8,939,712 $ 11,079,858 $ 9,326,726
Operating grants
and contributions 28,052 10,610 - - 28,052 10,610
Capital grants and
contributions 1,393,799 253,460 1,161,830 1,484,316 2,555,629 1,737,776
General revenues:
Property taxes 5,669,640 5,434,983 - - 5,669,640 5,434,983
Local option sales
taxes 1,265,473 1,215,819 - - 1,265,473 1,215,819
Gross receipts on
short-term rental
property 7,433 9,163 - - 7,433 9,163
Privilege licenses 2,630 30,902 - - 2,630 30,902
Motor vehicle license
fees 546 3,477 - - 546 3,477
Solid waste disposal 4,032 4,064 - - 4,032 4,064
Unrestricted inter-
governmental
revenues 1,034,811 998,629 - - 1,034,811 998,629
Other 59,892 42,139 12,118 745 72,010 42,884
Total revenues 9,832,769 8,390,260 11,887,345 10,424,773 21,720,114 18,815,033
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
10
The Town of Hillsborough’s Changes in Net Position
Figure 3 (Continued)
Governmental Activities Business-Type Activities Total
2016 2015 2016 2015 2016 2015
Expenses:
General government $ 2,010,349 $ 1,416,316 $ - $ - $ 2,010,349 $ 1,416,316
Public safety 3,982,055 3,929,568 - - 3,982,055 3,929,568
Transportation 615,849 130,485 - - 615,849 130,485
Environmental
protection 708,367 963,296 - - 708,367 963,296
Economic and
physical development 402,800 387,801 - - 402,800 387,801
Community activities
and projects 93,236 220,890 - - 93,236 220,890
Parks and recreation 97,891 74,137 - 97,891 74,137
Interest on long-term
debt 121,783 101,260 - - 121,783 101,260
Water and sewer - - 7,574,032 7,383,564 7,574,032 7,383,564
Total expenses 8,032,330 7,223,753 7,574,032 7,383,564 15,606,362 14,607,317
Increase in net position $ 1,800,439 $ 1,166,507 $ 4,313,313 $ 3,041,209 $ 6,113,752 $ 4,207,716
Net position, beginning 18,225,934 17,059,427 39,289,542 36,248,333 57,515,476 53,307,760
Net position, ending $ 20,026,373 $ 18,225,934 $ 43,602,855 $ 39,289,542 $ 63,629,228 $ 57,515,476
Governmental activities. Governmental activities increased the Town’s net position by $1,800,439, thereby
accounting for 29.45% of the total growth in the net position of the Town of Hillsborough. Key elements of this
increase are as follows:
Continued diligence in the collection of property taxes.
Maintaining consistent levels of expenses.
Increases in unrestricted intergovernmental revenues.
Business-type activities. Business-type activities increased the Town’s net position by $4,313,313, accounting
for 70.55% of the total growth in the government’s net position. Key elements of this increase are as follows:
An increase in sewer revenue resulting from a sewer rate increase of 8.8%.
Contributions of capital assets in the amount of $1,157,638.
Cost-cutting measures resulting in lower than expected expenses.
Financial analysis of the Town of Hillsborough’s funds
As noted earlier, the Town of Hillsborough uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements.
Governmental funds. The focus of the Town’s governmental funds is on providing information on near-term
inflows, outflows, and balances of usable resources. Such information is useful in assessing the Town’s financing
requirements.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
11
The General Fund is the chief operating fund of the Town. At the end of the current fiscal year, the Town of
Hillsborough’s fund balance available in the General Fund was $4,370,974, while total fund balance reached
$5,931,686. The Governing Body of the Town of Hillsborough has determined that the Town should maintain a
fund balance of 20% to 60% (with a targeted or preferred goal of 33%) of general fund expenditures in case of
unforeseen needs or opportunities, in addition to meeting the cash flow needs of the Town. The Town currently
has fund balance available for appropriation of 45.70% of general fund expenditures, while total fund balance
represents 62.01% of the same amount.
At June 30, 2016, the governmental funds of the Town reported a combined fund balance of $6,471,920, with a
net decrease in fund balance of $527,092. This decrease is partially related to increased investment in capital
projects. This investment was driven mostly by increased demand for housing and development within the Town
of Hillsborough and surrounding geographic areas.
General fund budgetary highlights. During the fiscal year, the Town revised the budget on several occasions.
Generally, budget amendments fall into one of three categories: (1) amendments made to adjust the estimates
that are used to prepare the original budget ordinance once exact information is available; (2) amendments made
to recognize new funding amounts from external sources, such as federal and state grants; and (3) increases in
appropriations that become necessary to maintain services.
The difference between the original budget and the final budget is attributed in part to the following:
$80,000 to conduct a pedestrian corridor feasibility study.
$50,000 to conduct Collins Ridge connectivity study.
$37,000 to cover additional cost of paving Substation parking lot.
$34,000 to conduct an environmental review on the rail station property.
$25,000 for a market analysis.
$20,000 for a conceptual design on the rail station.
Actual operating revenues for the General Fund were more than the budgeted amount by $550,932. Expenditures
were $142,289 less than budgeted, primarily due to the delaying of purchases and bids coming in lower than
anticipated.
Proprietary funds. The Town’s proprietary funds provide the same type of information found in the government-
wide statements, but in more detail. Unrestricted net position of the Water and Sewer Fund at the end of the fiscal
year amounted to $8,522,788, a 37.69% or $2,332,727 increase from the previous year. The increase is largely
attributed to payment of principal on notes and installment purchases for the Town’s water and sewer capital
infrastructure. The total growth in net position was $4,313,313. Other factors concerning the fund’s finances have
been addressed in the discussion of the Town’s business-type activities.
Capital asset and debt administration
Capital assets. The Town’s investment in capital assets for its governmental and business-type activities as of
June 30, 2016 totals $72,055,579 (net of accumulated depreciation). These assets include buildings, land,
machinery and equipment, infrastructure, park facilities and vehicles.
Major capital asset transactions during the year include the following:
Street resurfacing ($340,022)
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
12
Engine Truck ($480,079)
Singer Property ($1,049,579)
Major developer-dedicated capital asset transactions during the year include the following:
Waterstone Estates Phase III water and sewer lines ($226,092)
Waterstone Estates Phase II water and sewer lines ($173,910)
Elfin Pond Phase I water and sewer lines ($235,437)
Cates Creek park water and sewer lines ($212,775)
Waterstone Terrace Phase II water and sewer lines ($309,423)
Cates Creek parkway street and storm water ($1,285,357)
The Town of Hillsborough’s Capital Assets
(Net of Accumulated Depreciation)
Figure 4
Governmental Business-Type
Activities Activities Total
2016 2015 2016 2015 2016 2015
Land $ 3,653,081 $ 3,523,007 $ 6,064,293 $ 6,005,443 $ 9,717,374 $ 9,528,450
Construction in progress 293,133 325,015 3,466,558 2,468,749 3,759,691 2,793,764
Intangibles in progress - - 200,000 - 200,000 -
Buildings and
improvements 5,237,514 4,871,396 19,934,037 20,408,398 25,171,551 25,279,794
Plant and distribution
systems - - 22,459,024 21,917,564 22,459,024 21,917,564
Infrastructure 8,182,237 6,599,774 569,050 499,002 8,751,287 7,098,776
Equipment 189,499 125,020 442,902 430,263 632,401 555,283
Vehicles 1,196,663 960,346 167,588 127,866 1,364,251 1,088,212
Total $ 18,752,127 $ 16,404,558 $ 53,303,452 $ 51,857,285 $ 72,055,579 $ 68,261,843
Additional information on the Town’s capital assets can be found in Note 4.A.5. of the basic financial statements.
Long-term debt. As of June 30, 2016, the Town of Hillsborough had no outstanding bonded debt. The Town’s
debt represents revolving loans payable and installment purchases secured solely by revenues of the project or
specified purchases.
The Town of Hillsborough’s Outstanding Debt
Revolving Loans Payable and Installment Purchases
Figure 5
Governmental Business-Type
Activities Activities Total
2016 2015 2016 2015 2016 2015
Revolving loan payable $ - $ - $ 18,511,848 $ 18,605,655 $ 18,511,848 $ 18,605,655
Installment purchases 4,534,728 4,606,799 3,269,750 2,970,088 7,804,478 7,576,887
Total $ 4,534,728 $ 4,606,799 $ 21,781,598 $ 21,575,743 $ 26,316,326 $ 26,182,542
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
13
The Town’s total debt increased by $133,784 during the current fiscal year, primarily due to additional borrowings
exceeding repayments.
As mentioned in the financial highlights section of this document, the Town maintained, for the 21st consecutive
year, its A2 bond rating from Moody’s Investor Service and A rating from Standard and Poor’s Corporation. This
bond rating is a clear indication of the sound financial condition of the Town of Hillsborough. This achievement is
a primary factor in keeping interest costs low on the Town’s outstanding debt.
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 government’s boundaries. The legal debt
margin for the Town of Hillsborough is $61,219,484. The Town does not have any bonds authorized but unissued
at June 30, 2016.
Additional information regarding the Town’s long-term debt can be found in Note 4.B.8 of the basic financial
statements.
Economic factors and next year’s budgets and rates
The following key economic indicators reflect the stability and prosperity of the Town of Hillsborough.
Low unemployment. Orange County’s unemployment rate of 4.6% as of June 30, 2016, is well
below the state average of 4.9%.
Water/sewer rate increase. In the new fiscal year, beginning July 1, 2016, the water rate
remained the same and the sewer rate increased by 8.8%.
No increase in property tax rate. The property tax rate will not increase in FY 17.
No general obligation debt in the General Fund.
Budget highlights for the fiscal year ending June 30, 2017
Governmental activities: With new development ramping up in FY16 and an increase expected for FY17,
forecasts for the primary sources of revenue were calculated using a 2% growth factor for sales tax and a 4.8%
growth factor for property tax. As in prior years, the Town’s budget development was guided by three principles:
(1) take care of what we’ve got; (2) invest in Hillsborough’s future; and (3) minimize rate impacts on the
citizens/customers.
Original budgeted operational expenditures in the General Fund were expected to increase 28.99% or $2,052,083
over FY16 original budget. Appropriated fund balance of $612,096 was recommended to balance the FY17
budget. The largest increments are in employee compensation, including funding compensation and benefits
adjustments, new positions, street repair, and debt service on Riverwalk Phases II and III.
Other budget highlights in brief:
Pay classification and compensation update ($100,000).
Design of Public Works facility ($25,000).
Street resurfacing ($350,000).
Replace 18-year old knuckleboom truck ($145,000).
Replace 25-year old dump truck ($110,000).
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
14
Replace in-vehicle police video systems ($36,000).
Replace vibratory asphalt roller ($52,000).
Expenses to increase by 4.6%.
Merit system budgeted at 3.25% average raise for employees.
Business-type activities: Water rates and sewer rates will not increase in 2017.
Original budgeted operational expenditures in the Water/Sewer Fund are expected to increase by 4.00% to
$348,483 over FY15 original budget. Actual expenditures for FY 16 were $350,942 under budget, primarily due to
debt financing the entire South Zone Water Tank rather than using capital reserve fees to reduce the debt
issuance amount. Debt service payments will begin in FY16 with the capital reserve funds being used to cover the
payments for the first few years. Many cuts and deferments were made to this year’s budget to avoid a more
significant rate increase and to limit the further use of net position.
The Town continues work to correct sewer inflow and infiltration problems ($50,000 annually). This ongoing
project is critical, as inflow and infiltration create a variety of serious issues, such as decreased plant treatment
capacity, pump station overflows, lower quality treatment of discharged water and increased operational costs.
Other budget highlights in brief:
Road improvements related to West Fork Eno Reservoir Phase II expansion ($500,000). Design
began in FY 14 ($200,000).
NC-86 water line improvement ($90,000).
Design and rights-of-way acquisition for North Zone Water Loop ($50,000). $120,000 anticipated
for construction in FY18.
Effluent aeration equipment for the Wastewater Treatment Plant ($253,000).
Merit system budgeted at 3.25% average raise for employees.
High-deductible health insurance alternative offered at no cost to employees and given initial
monies for deposit to health savings account.
Requests for information
This report is designed to provide an overview of the Town’s finances. Questions concerning any of the
information found in this report or requests for additional information should be directed to the Director of Finance,
Town of Hillsborough, 137 North Churton Street, Post Office Box 429, Hillsborough, North Carolina 27278.
15
Basic Financial Statements
Exhibit 1
(2 pages)Statement of Net Position
Hillsborough
Tourism Hillsborough
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
ASSETS
Current assets:
Cash and investments 5,489,790$ 8,658,033$ 14,147,823$ 203,060$ 228,267$
Receivables:
Taxes receivable, net 142,999 - 142,999 - -
Accrued interest receivable,
property taxes 22,236 - 22,236 - -
Accounts receivable, net 56,372 1,022,468 1,078,840 - -
Due from other governments 884,452 - 884,452 - -
Due from primary government - - - 14,051 67,551
Prepaid expenses 50,109 22,823 72,932 - 788
Restricted assets:
Cash and investments 590,170 3,939,964 4,530,134 - -
Total current assets 7,236,128 13,643,288 20,879,416 217,111 296,606
Noncurrent assets:
Capital assets:
Land and construction-in-
progress 3,946,214 9,730,851 13,677,065 - -
Other capital assets, net of
depreciation 14,805,913 43,572,601 58,378,514 - -
Total capital assets 18,752,127 53,303,452 72,055,579 - -
Total noncurrent assets 18,752,127 53,303,452 72,055,579 - -
Total assets 25,988,255 66,946,740 92,934,995 217,111 296,606
DEFERRED OUTFLOWS OF
RESOURCES
Pension deferrals 263,121 136,632 399,753 - -
Deferred loss on defeasance of
debt - 23,983 23,983 - -
263,121 160,615 423,736 - -
June 30, 2016
Town of Hillsborough, North Carolina
Primary Government Component Units
The notes to the financial statements are an integral part of this statement. 16
Exhibit 1
(2 pages)
Hillsborough
Tourism Hillsborough
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
LIABILITIES
Current liabilities:
Accounts payable and accrued
liabilities 546,561$ 615,410$ 1,161,971$ -$ 37,032$
Payable from restricted assets -
customer deposits - 405,734 405,734 -
Accrued interest payable 35,890 82,459 118,349 - -
Due to component units 81,602 - 81,602 - -
Current portion of long-term
liabilities 802,956 1,957,859 2,760,815 - -
Total current liabilities 1,467,009 3,061,462 4,528,471 - 37,032
Long-term liabilities:
Net pension liability 247,634 128,590 376,224
Due in more than one year 4,354,802 20,247,613 24,602,415 - -
Total noncurrent liabilities 4,602,436 20,376,203 24,978,639 - -
Total liabilities 6,069,445 23,437,665 29,507,110 - 37,032
DEFERRED INFLOWS OF
RESOURCES
Pension deferrals 128,708 66,835 195,543 - -
Unearned revenue 26,850 - 26,850 - -
155,558 66,835 222,393 - -
NET POSITION
Net investment in capital assets 14,242,464 32,483,743 46,726,207 - -
Restricted for:
Stabilization by state statute 1,313,855 - 1,313,855 14,051 67,551
Streets 99,907 - 99,907 - -
Capital projects 340,094 - 340,094 - -
Water and sewer projects - 2,596,324 2,596,324 - -
Unrestricted 4,030,053 8,522,788 12,552,841 203,060 192,023
Total net position 20,026,373$ 43,602,855$ 63,629,228$ 217,111$ 259,574$
Primary Government Component Units
The notes to the financial statements are an integral part of this statement. 17
Exhibit 2
(4 pages)
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
Primary government
Governmental activities:
General government 2,010,349$ 122,233$ 23,372$ 1,285,357$
Public safety 3,982,055 13,645 - -
Transportation 615,849 184,863 - 80,000
Environmental protection 708,367 - 4,680 -
Economic and physical
development 402,800 41,000 - -
Community activities and
projects 93,236 - - -
Parks and recreation 97,891 4,720 - 28,442
Interest on long-term obligations 121,783 - - -
Total governmental activities 8,032,330 366,461 28,052 1,393,799
Business-type activities:
Water and sewer 7,574,032 10,713,397 - 1,161,830
Total business-type
activities 7,574,032 10,713,397 - 1,161,830
Total primary government 15,606,362$ 11,079,858$ 28,052$ 2,555,629$
Component units
Hillsborough Tourism
Development Authority 33,850$ -$ -$ -$
Hillsborough Tourism Board 317,912 - - -
Total component units 351,762$ -$ -$ -$
Year Ended June 30, 2016
Statement of Activities
Town of Hillsborough, North Carolina
Program Revenues
The notes to the financial statements are an integral part of this statement. 18
Exhibit 2
(4 pages)
Tourism
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
(579,387)$ -$ (579,387)$ -$ -$
(3,968,410) - (3,968,410) - -
(350,986) - (350,986) - -
(703,687) - (703,687) - -
(361,800) - (361,800) - -
(93,236) - (93,236) - -
(64,729) - (64,729) - -
(121,783) - (121,783) - -
(6,244,018) - (6,244,018) - -
- 4,301,195 4,301,195 - -
- 4,301,195 4,301,195 - -
(6,244,018) 4,301,195 (1,942,823) - -
(33,850)$ -$
- (317,912)
(33,850) (317,912)
Primary Government Component Units
Net Revenue (Expense) and Changes in Net Position
The notes to the financial statements are an integral part of this statement. 19
Exhibit 2
(4 pages)
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
Year Ended June 30, 2016
Statement of Activities
Town of Hillsborough, North Carolina
Program Revenues
General revenues:
Taxes:
Property taxes, levied for general purposes
Local option sales taxes
Gross receipts on short-term rental property
Privilege licenses
Motor vehicle license fees
Solid waste disposal
Unrestricted intergovernmental revenues
Investment earnings, unrestricted
Payment from Town of Hillsborough
Miscellaneous
Total general revenues and transfers
Change in net position
Net position, beginning
Net position, ending
The notes to the financial statements are an integral part of this statement. 20
Exhibit 2
(4 pages)
Tourism
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
Primary Government Component Units
Net Revenue (Expense) and Changes in Net Position
5,669,640$ -$ 5,669,640$ -$ -$
1,265,473 - 1,265,473 - -
7,433 - 7,433 - -
2,630 - 2,630 - -
546 - 546 - -
4,032 - 4,032 - -
1,034,811 - 1,034,811 - -
16,771 12,118 28,889 - -
- - - 68,346 326,355
43,121 - 43,121 - -
8,044,457 12,118 8,056,575 68,346 326,355
1,800,439 4,313,313 6,113,752 34,496 8,443
18,225,934 39,289,542 57,515,476 182,615 251,131
20,026,373$ 43,602,855$ 63,629,228$ 217,111$ 259,574$
The notes to the financial statements are an integral part of this statement. 21
Exhibit 3
(2 pages)Balance Sheet
Consolidated
General Capital Total Total
General Projects Nonmajor Governmental
Fund Fund Funds Funds
ASSETS
Cash and investments 5,271,686$ -$ 218,104$ 5,489,790$
Taxes receivable 142,999 - - 142,999
Accounts receivable, net 56,372 - - 56,372
Prepaid items 175,392 - - 175,392
Due from other governments 856,010 - 28,442 884,452
Due from other funds 126,054 - - 126,054
Restricted assets
Cash and investments 124,022 466,148 - 590,170
Total assets 6,752,535$ 466,148$ 246,546$ 7,465,229$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued
liabilities 528,597$ -$ 17,964$ 546,561$
Due to component units 81,602 - - 81,602
Due to other funds - 126,054 - 126,054
Total liabilities 610,199 126,054 17,964 754,217
DEFERRED INFLOWS OF RESOURCES 210,650 - 28,442 239,092
FUND BALANCES
Nonspendable
Prepaid items 175,392 - - 175,392
Restricted for:
Stabilization by state statute 1,285,413 - 28,442 1,313,855
Streets 99,907 - - 99,907
Capital projects - 340,094 - 340,094
Committed for:
Capital projects - - 171,698 171,698
Assigned for:
Sidewalks 19,800 - - 19,800
Affordable housing 41,000 - - 41,000
Subsequent year’s expenditures 612,096 - - 612,096
Unassigned 3,698,078 - - 3,698,078
Total fund balances 5,931,686 340,094 200,140 6,471,920
Total liabilities, deferred
inflows of resources and
fund balances 6,752,535$ 466,148$ 246,546$ 7,465,229$
Major Funds
Town of Hillsborough, North Carolina
June 30, 2016
Governmental Funds
The notes to the financial statements are an integral part of this statement. 22
Exhibit 3
(2 pages)Balance Sheet
Town of Hillsborough, North Carolina
June 30, 2016
Governmental Funds
Amounts reported for governmental activities in the statement of net
position are different because:
Total fund balances, governmental funds 6,471,920$
Capital assets used in governmental activities are not financial resources
and therefore not reported in the funds.18,752,127
Deferred outflows of resources related to pensions are not reported in the
funds 263,121
Other long-term assets (accrued interest receivable from property taxes) are
not available to pay from current-period expenditures and therefore are
inflows of resources in the funds 22,236
Liabilities for earned revenues considered deferred inflows of resources in
the fund statements 212,242
Deferred inflows of resources related to pensions are not reported in the
funds (128,708)
Prepaid expenses in the fund statements for debt service payments that
represent a reduction of long-term obligations in governmental activities. (125,283)
Some liabilities, including accrued interest, are not due and payable in the
current period, and therefore are not reported in the funds. (5,193,648)
Pension liability (247,634)
Net position of governmental activities 20,026,373$
The notes to the financial statements are an integral part of this statement. 23
Exhibit 4
(2 pages)
Consolidated
General
Capital Total Total
General Projects Nonmajor Governmental
Fund Fund Funds Funds
Revenues
General revenues:
Ad valorem taxes 5,669,002$ -$ -$ 5,669,002$
Other taxes and licenses 1,280,114 - - 1,280,114
Unrestricted intergovernmental revenues 1,034,811 - - 1,034,811
Restricted intergovernmental revenues 262,144 - - 262,144
Investment earnings 15,593 1,049 129 16,771
Contribution from property owners - 381,406 - 381,406
Other general revenues 118,323 - - 118,323
Total general revenues 8,379,987 382,455 129 8,762,571
Functionally related revenues:
Use and rental fees 176,878 - - 176,878
Total revenues 8,556,865 382,455 129 8,939,449
Expenditures
General government 1,825,877 381,407 - 2,207,284
Public safety 3,837,900 480,078 - 4,317,978
Transportation 878,233 - - 878,233
Environmental protection 547,921 - - 547,921
Economic and physical development 397,828 - 16,227 414,055
Community activities and projects 821,677 - - 821,677
Parks and recreation 97,891 - 49,459 147,350
Debt service:
Principal retirement 1,037,623 - - 1,037,623
Interest and fiscal charges 120,355 - - 120,355
Total expenditures 9,565,305 861,485 65,686 10,492,476
Revenues under expenditures (1,008,440) (479,030) (65,557) (1,553,027)
Other financing sources (uses)
Transfer to General Fund - (126,054) (195,483) (321,537)
Transfer to Downtown Improvements
Capital Project Fund (30,000) - - (30,000)
Transfer to Rail Station Capital Project Fund (54,000) - - (54,000)
Transfer to Riverwalk - CMAQ Fund (9,500) - - (9,500)
Transfer to Public Works Building
Capital Project Fund (50,000) - - (50,000)
Transfer from General Fund - - 143,500 143,500
Transfer from General Capital Projects Fund 126,054 - - 126,054
Transfer from Riverwalk Phase II Fund 173,425 - - 173,425
Transfer from Riverwalk Phase III Fund 22,058 - - 22,058
Installment purchase obligations issued 544,906 481,029 - 1,025,935
Total other financing sources (uses) 722,943 354,975 (51,983) 1,025,935
Net change in fund balances (285,497) (124,055) (117,540) (527,092)
Fund balances, beginning 6,217,183 464,149 317,680 6,999,012
Fund balances, ending 5,931,686$ 340,094$ 200,140$ 6,471,920$
Major Funds
Governmental Funds
Year Ended June 30, 2016
Statement of Revenues and Expenditures and Changes in Fund Balance
Town of Hillsborough, North Carolina
The notes to the financial statements are an integral part of this statement. 24
Exhibit 4
(2 pages)
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in Fund Balance
Governmental Funds
Year Ended June 30, 2016
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balance to the Statement of Activities
Net change in fund balances - total governmental funds (527,092)$
Amounts reported for governmental activities in the statement of activities are
different because:
Governmental funds report capital outlays as expenditures. However, in the
statement of activities, the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
capital outlays ($1,962,820) exceeded depreciation ($900,608) in the current
period.1,062,212
The net effect of transactions involving capital assets donated to the Town. 1,285,353
Contributions to the pension plan in the current fiscal year are not included in the
statement of activities 234,583
Governmental funds report prepayments of future period obligations as expenditures.
However, in the statement of activities, these costs are recognized when incurred. (47,110)
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds.
Change in unavailable revenue for taxes 638
Proceeds received from disposal/transfer of capital assets (3,125)
Gain on disposal/transfer of capital assets 3,125
Change in deferred revenues related to grants receivable. 35,841
The repayment of the principal of long-term debt ($1,037,623) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position.1,037,623
The issuance of the principal of long-term debt ($1,025,935) provides current
financial resources to governmental funds. This transaction has no effect on net
position.(1,025,935)
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds.
Change in accrued interest on general long-term debt (1,428)
Compensated absences (14,789)
Net pension obligation (41,926)
Pension expense (155,571)
Net OPEB obligation (41,960)
Changes in net position of governmental activities 1,800,439$
The notes to the financial statements are an integral part of this statement. 25
Exhibit 5
Statement of Revenues and Expenditures and Changes in Fund Balance
Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
General revenues
Ad valorem taxes 5,475,000$ 5,475,000$ 5,669,002$ 194,002$
Other taxes and licenses 1,209,650 1,209,650 1,280,114 70,464
Unrestricted intergovernmental revenues 745,000 817,200 1,034,811 217,611
Restricted intergovernmental revenues 180,150 180,150 262,144 81,994
Investment earnings 500 10,055 15,593 5,538
Other general revenues 57,000 137,000 118,323 (18,677)
Total general revenues 7,667,300 7,829,055 8,379,987 550,932
Functionally related revenues
Use and rental fees 130,000 130,570 176,878 46,308
Total revenues 7,797,300 7,959,625 8,556,865 597,240
Expenditures
General government 1,827,473 2,122,587 1,919,847 202,740
Public safety 4,150,120 4,456,562 4,050,532 406,030
Transportation 1,020,226 1,087,966 878,233 209,733
Environmental protection 789,740 813,271 706,333 106,938
Economic and physical development 353,426 425,626 397,828 27,798
Community activities and projects 393,393 406,082 949,810 (543,728)
Parks and recreation 396,005 395,500 662,722 (267,222)
Contingency 200,000 - - -
Total expenditures 9,130,383 9,707,594 9,565,305 142,289
Revenues under expenditures (1,333,083) (1,747,969) (1,008,440) 739,529
Other financing sources (uses)
Transfer to General Capital Projects Fund (50,000) (50,000) - 50,000
Transfer to Downtown Improvements
Capital Project Fund (25,000) (30,000) (30,000) -
Transfer to Rail Station Capital Project Fund - (54,000) (54,000) -
Transfer to Riverwalk - CMAQ Fund - (9,500) (9,500) -
Transfer to Public Works Building
Capital Project Fund - - (50,000) (50,000)
Transfer from General Capital Reserve Fund 126,054 126,054 126,054 -
Transfer from Riverwalk Phase II Fund - - 173,425 173,425
Transfer from Riverwalk Phase III Fund - - 22,058 22,058
Installment purchase obligations issued - 10,300 544,906 534,606
Total other financing sources (uses) 51,054 (7,146) 722,943 730,089
Appropriated fund balance 1,282,029 1,755,115 - (1,755,115)
Net change in fund balance -$ -$ (285,497) (285,497)$
Fund balance, beginning 6,217,183
Fund balance, ending 5,931,686$
Year Ended June 30, 2016
Budget and Actual
Town of Hillsborough, North Carolina
General Fund
The notes to the financial statements are an integral part of this statement. 26
Exhibit 6
Proprietary Fund
Proprietary
Fund Type
Enterprise
ASSETS
Current assets:
Cash and investments 8,658,033$
Accounts receivable, net 1,022,468
Prepaid expenses 22,823
Restricted assets:
Cash and investments 3,939,964
Total current assets 13,643,288
Noncurrent assets:
Capital assets:
Land and construction-in-progress 9,730,851
Other capital assets, net of depreciation 43,572,601
Total capital assets 53,303,452
Total noncurrent assets 53,303,452
Total assets 66,946,740
DEFERRED OUTFLOWS OF RESOURCES
Pension deferrals 136,632
Deferred loss on defeasance of debt 23,983
Total deferred outflows of resources 160,615
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 615,410
Payable from restricted assets - customer deposits 405,734
Accrued interest payable 82,459
Current portion of long-term liabilities 1,957,859
Total current liabilities 3,061,462
Long-term liabilities:
Net pension liability 128,590
Due in more than one year 20,247,613
Total noncurrent liabilities 20,376,203
Total liabilities 23,437,665
DEFERRED INFLOWS OF RESOURCES
Pension deferrals 66,835
NET POSITION
Net investment in capital assets 32,483,743
Restricted for:
Water and sewer projects 2,596,324
Unrestricted 8,522,788
Total net position 43,602,855$
Statement of Net Position
Town of Hillsborough, North Carolina
June 30, 2016
The notes to the financial statements are an integral part of this statement. 27
Exhibit 7
Proprietary Fund
Proprietary
Fund Type
Enterprise
Operating revenues
Charges for services 8,032,455$
Other operating revenues 2,680,942
Total operating revenues 10,713,397
Operating expenses
Personnel services 2,515,369
Depreciation 1,514,044
Other current charges 3,038,013
Total operating expenses 7,067,426
Operating income 3,645,971
Nonoperating revenues (expenses)
Investment earnings 12,118
Gain on disposal of capital assets 4,192
Interest and fees (506,606)
Total nonoperating revenues (expenses) (490,296)
Income before capital contributions 3,155,675
Capital contributions and transfers:
Capital contribution from developer 1,157,638
Total capital contributions and transfers 1,157,638
Change in net position 4,313,313
Net position, beginning of year 39,289,542
Net position end of year 43,602,855$
Year Ended June 30, 2016
Statement of Revenues, Expenses and Changes in Net Position
Town of Hillsborough, North Carolina
The notes to the financial statements are an integral part of this statement. 28
Exhibit 8
(2 pages)
Proprietary Fund
Proprietary
Fund-Type
Enterprise
Cash flows from operating activities
Cash received from customers 10,793,486$
Cash paid for goods and services (2,931,301)
Cash paid to or on behalf of employees for services (2,522,352)
Net cash provided by operating activities 5,339,833
Cash flows from capital and related financing activities
Acquisition and construction of capital assets (2,251,151)
Proceeds from sale of capital assets 4,192
Proceeds from issuance of long-term debt 2,239,077
Principal paid on bonds, notes and installment purchases (2,033,222)
Interest paid on bonds and installment purchases (493,455)
Net cash used by capital and related financing activities (2,534,559)
Cash flows from investing activities
Interest on investments 12,118
Net cash provided by investing activities 12,118
Net increase in cash and cash equivalents 2,817,392
Cash and cash equivalents, beginning 9,780,605
Cash and cash equivalents, ending 12,597,997$
Cash and cash equivalents
Unrestricted 8,658,033$
Restricted 3,939,964
Total cash and cash equivalents 12,597,997$
Statement of Cash Flows
Town of Hillsborough, North Carolina
Year Ended June 30, 2016
The notes to the financial statements are an integral part of this statement. 29
Exhibit 8
(2 pages)
Proprietary Fund
Proprietary
Fund-Type
Enterprise
Statement of Cash Flows
Town of Hillsborough, North Carolina
Year Ended June 30, 2016
Reconciliation of operating income to net cash provided
by operating activities
Operating income 3,645,971$
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 1,514,044
Provision for uncollectible accounts 43,957
Changes in assets and liabilities:
Accounts receivable 45,006
Net pension asset 174,356
Prepaid expense (19,011)
Deferred outflows of resources for pensions 2,305
Accounts payable and accrued liabilities 137,330
Deposits (8,874)
OPEB liability 24,477
Net pension liability 128,590
Deferred inflows of resources for pensions (358,112)
Compensated absences payable 9,794
Net cash provided by operating activities 5,339,833$
Supplemental schedule of noncash investing and financing
activities
Capital asset additions included in accounts payable and
accrued liabilities 314,003$
Capital contribution from developer 1,157,638$
The notes to the financial statements are an integral part of this statement. 30
Town of Hillsborough, North Carolina
Notes to Financial Statements
31
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The accounting policies of the Town of Hillsborough (the “Town”) conform to accounting principles generally
accepted in the United States of America (“GAAP”) as applicable to governments. The Governmental Accounting
Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and
financial reporting principles. The following is a summary of the more significant accounting policies:
A. Reporting entity
The Town of Hillsborough is a municipal corporation which is governed by an elected mayor and a five-member
board. As required by GAAP, these financial statements present the Town and its component units, which are
legally separate entities for which the Town is financially accountable. The discretely presented component units
presented below are reported in separate columns in the Town’s financial statements in order to emphasize that
they are legally separate from the Town.
Hillsborough Tourism Development Authority (the “Authority”)
The Authority was created on April 9, 2012 by resolution of the Town, under the authority of the North Carolina
General Assembly. The Authority is responsible for promoting travel and tourism in the Hillsborough area. The
Authority receives revenue from a three percent occupancy tax, which is levied and collected by the Town and the
remitted net of administration fees. The members of the Authority are appointed by the Town’s Board of
Commissioners.
Hillsborough Tourism Board (“the Board”)
The Board was created on November 8, 1993, by resolution of the Town, under the authority of the North Carolina
General Assembly. The Board is responsible for promoting tourism within the Town of Hillsborough. The Board
receives revenues through a one percent prepared food and beverage tax, which is levied and collected by the
Town and remitted net of administration fees. The Board is composed of nine members appointed by the Town’s
Board of Commissioners.
Requests for complete financial statements for each of the component units may be directed to the Finance
Officer, c/o Hillsborough Tourism Development Authority or c/o Hillsborough Tourism Board, Hillsborough, North
Carolina, or by telephone at (919) 732-2104.
B. Basis of presentation
Government-wide statements: The statement of net position and the statement of activities include the financial
activities of the overall government. These statements distinguish between the governmental and business-type
activities of the Town. Governmental activities generally are financed through taxes, intergovernmental revenues,
and other non-exchange transactions. Business-type activities are financed in whole or in part by fees charged to
external parties.
The statement of activities presents a comparison between direct expenses and program revenues for the different
business-type activities of the Town and for each function of the Town’s governmental activities. Direct expenses
are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. Indirect expense allocations that have been made in the funds have been reversed for the
statement of activities. Program revenues include (a) fees and charges paid by the recipients of goods or services
offered by the programs, and (b) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular program. Revenues that are not classified as program revenues, including all taxes,
are presented as general revenues.
Town of Hillsborough, North Carolina
Notes to Financial Statements
32
Fund financial statements: The fund financial statements provide information about the Town’s funds. Separate
statements for each fund category - governmental and proprietary - are presented. The emphasis of fund financial
statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining
governmental and enterprise funds are aggregated and reported as nonmajor funds.
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. Nonoperating revenues, such as subsidies and investment earnings, result from
nonexchange transactions or ancillary activities.
The Town’s fiduciary fund is presented in the fund financial statements as an agency fund. Since by definition
these assets are being held for the benefit of a third party and cannot be used to address activities or obligations of
the government, these funds are not incorporated into the government-wide statements.
The Town reports the following major governmental funds:
General Fund. The General Fund is the general operating fund of the Town. 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, state grants, and various other taxes and licenses. The primary
expenditures are for general government administration, public safety, street maintenance and
construction, and sanitation services.
General Capital Projects Fund. This fund is used to accumulate expenditures related to multiple capital
projects budgeted to be completed within one year. The General Capital Reserve Fund is consolidated in
the General Capital Projects Fund.
The Town reports the following nonmajor governmental funds:
Downtown Improvements Capital Project Fund. This fund is used to account for certain improvements to
the downtown area of the Town.
Town Barn Improvements Capital Project Fund. The fund is used to account for various renovations and
upgrades to the Town Barn, including certain data processing equipment.
Riverwalk Phase II Capital Project Fund. The project will connect Gold Park/Riverwalk Phase I to
downtown. The connection will serve as a highly desirable recreation amenity, pedestrian route and
economic development investment by adding an additional attraction to downtown that should draw more
tourists.
Riverwalk Phase III Capital Project Fund. Phase III of Riverwalk will extend Riverwalk east toward lands
owned by Classical American Home Preservation Trust to make its outside connections to the trails at the
Historic Occoneechee Speedway. This trail portion will have a natural, unpaved surface to protect
sensitive lands and denote a transition from an urban greenway to less formal trails operated by the trust
for the public’s use.
Riverwalk CMAQ Capital Project Fund. Three important sidewalk components are grouped for funding
purposes through the Congestion Mitigation and Air Quality program within the Department of
Transportation. Riverwalk provides a viable alternative to driving by allowing many residents of
Hillsborough to walk or bike into downtown, whether for work, shopping, or recreation. These sidewalk
connections are along Eno Mountain Road and provide access into the Occoneechee State natural area
(connecting to Gold Park); South Nash Street near the commercial area and the rail trestle, and Calvin
Street, connecting to Gold Park and Riverwalk.
Town of Hillsborough, North Carolina
Notes to Financial Statements
33
Rail Station Capital Project Fund. This fund will account for design, engineering, construction and
construction oversight of the passenger rail station which is approximately 6,000 square foot building with
about 100 parking spaces, utilities, and site access
Public Works Building Capital Project Fund. This fund will account for design, project management,
construction, construction inspection, and water and sewer utilities for a new Public Works Building.
The Town reports the following major enterprise fund:
Water and Sewer Fund. This fund is used to account for the Town’s water and sewer operations. For
financial reporting purposes, the Water and Sewer Capital Projects Fund (“WS Capital Projects Fund”) and
Water and Sewer Capital Reserve Fund (“WS Capital Reserve Fund”) have been consolidated with the
Water and Sewer Fund.
The Town reports the following fiduciary fund:
Special Assessment Debt Agency Fund. This fund is used to account for proceeds that the Town has
received from special assessments that have not been remitted to Regions Bank. Regions Bank is the
Trustee of the Series 2013 Special Revenue Bonds.
C. Measurement focus and basis of accounting
In accordance with North Carolina General Statutes, all funds of the Town are maintained during the year using
the modified accrual basis of accounting.
Government-wide and proprietary fund financial statements. The government-wide and proprietary fund
financial statements are reported using the economic resources measurement focus. The government-wide and
proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded
when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash
flows take place. Nonexchange transactions, in which the Town gives (or receives) value without directly receiving
(or giving) equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue
from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and
donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or
privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including
special assessments. Internally dedicated resources are reported as general revenues rather than as program
revenues. Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. The principal operating revenues of the Town’s enterprise funds
are charges to customers for sales and services. The Town also recognizes as operating revenue the portion of
tap fees intended to recover the cost of connecting new customers to the water and sewer system. Operating
expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and
expenses.
Governmental fund financial statements. Governmental funds are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized
when measurable and available. Expenditures are recorded when the related fund liability is incurred, except for
principal and interest on general long-term debt, claims and judgments, and compensated absences, which are
recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are
reported as other financing sources.
Town of Hillsborough, North Carolina
Notes to Financial Statements
34
The Town considers all revenues available if they are collected within 90 days after year end, except for property
taxes. Ad valorem taxes receivable are not accrued as a 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 subsequent 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 they are received. Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited
registration plates are shown as a receivable in these financial statements and are offset by deferred inflows of
resources.
Sales taxes and certain intergovernmental revenues, such as utilities franchise tax, collected and held by the state
at year end on behalf of the Town, are recognized as revenue. Sales taxes are considered a shared revenue for
the Town because the tax is levied by Orange County and then remitted to and distributed by the State.
Intergovernmental revenues and sales and services are not susceptible to accrual, because generally they are not
measurable until received in cash. Grant revenues that are unearned at year end are recorded as deferred inflows
of resources. Under the terms of grant agreements, the Town funds certain programs by a 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. It is the Town’s
policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants,
and then by general revenues.
D. Budgetary data
The Town’s budgets are adopted by the governing board as required by the North Carolina General Statutes. An
annual budget is adopted for the General Fund and the Water and Sewer Fund. All annual appropriations lapse at
the fiscal year end. Project ordinances are adopted for the Downtown Improvements Capital Project Fund, Town
Barn Improvements Capital Project Fund, Riverwalk Phase II Capital Project Fund, Riverwalk Phase III Capital
Project Fund, Riverwalk CMAQ Capital Project Fund, Rail Station Capital Project Fund, Public Works Building
Capital Project Fund, General Capital Projects Fund, Water and Sewer Capital Projects Fund, and the Water and
Sewer Capital Reserve Fund. The enterprise fund projects and capital reserve are consolidated with the Water and
Sewer Fund for reporting purposes. All budgets are prepared using the modified accrual basis of accounting.
Expenditures may not legally exceed appropriations at the functional level for all annually budgeted funds and at
the object level for the multiyear funds. The Town Manager is authorized by the budget ordinance to transfer
appropriations and may allow any amount of money to be transferred between functional areas within a fund. The
Town Manager is also authorized to effect interdepartmental transfers within the same fund, not to exceed 10% of
the appropriated monies for the department whose allocation is reduced. The Finance Director may make minor
adjustments to the budget without obtaining prior governing board approval by formal budget amendment. Such
changes must be within a fund and not between two or more funds. The Finance Director is required to inform the
board at the next meeting after the budget adjustment is made. Budget amendments typically involve larger sums
of money and require the governing board’s approval. During the year, several amendments to the original budget
were necessary.
E. Assets, liabilities, deferred outflows/inflows of resources and fund equity
(1) Deposits and investments
All deposits of the Town are made in board-designated official depositories and are secured as required by state
law (G.S. 159-31). The Town may designate, as an official depository, any bank or savings association whose
principal office is located in North Carolina. Also, the Town may establish time deposit accounts such as NOW and
SuperNOW accounts, money market accounts, and certificates of deposit.
Town of Hillsborough, North Carolina
Notes to Financial Statements
35
State law [G.S. 159-30(c)] authorizes the Town to invest in obligations of the United States or obligations fully
guaranteed both as to principal and interest 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 nonguaranteed federal
agencies; certain high quality issues of commercial paper and bankers’ acceptances; and the North Carolina
Capital Management Trust (“NCCMT”). The Town’s investments are reported at fair value as determined by
quoted market prices. The securities of the NCCMT Cash Portfolio, a SEC-registered (2a-7) external investment
pool, are measured at amortized cost, which is the NCCMT’s share price.
(2) Cash and cash equivalents
The Town pools money from several funds to facilitate disbursement and investment and to maximize investment
income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash
equivalents.
For purposes of the statement of cash flows, the Enterprise Fund considers all short-term and long-term fixed-
income investments (including restricted assets) to be cash equivalents.
(3) Restricted assets
The Water and Sewer Fund, General Fund, and General Capital Projects Fund have unexpended debt proceeds
that are classified as restricted assets because their use is completely restricted to the purpose for which the debt
agreements were originally issued. Customer deposits held by the Town before any services are supplied are
restricted to the service for which the deposit was collected. Powell Bill funds are also classified as restricted cash
because they can only be expended for the purposes of maintaining, repairing, constructing, reconstruction or
widening of local streets per G.S. 136-41.4. In addition, contributions from developers that are restricted by Town
ordinance are restricted to the purpose of the donation.
Town of Hillsborough Restricted Cash
Governmental activities:
General Fund
Streets $ 99,907
Unspent debt proceeds 24,115
General Capital Projects Fund
Unspent debt proceeds 950
General Capital Reserve Fund
Developer donations - future capital projects 465,198
Total governmental activities 590,170
Business-type activities:
Water and Sewer Fund
Unspent debt proceeds 937,906
Customer deposits 405,734
Developer donations - perpetual maintenance 441,138
Developer donations - water and sewer needs 2,155,186
Total business-type activities 3,939,964
Total restricted cash $ 4,530,134
Town of Hillsborough, North Carolina
Notes to Financial Statements
36
(4) Ad valorem taxes receivable
In accordance with state law [G.S. 105-347 and G.S. 159-13(a)], the Town levies ad valorem taxes on property
other than motor vehicles on July 1, the beginning of the fiscal year. The taxes are due on September 1 (lien date);
however, interest does not accrue until the following January 6. These taxes are based on the assessed values as
of January 1, 2015. As allowed by state law, the Town has established a schedule of discounts that apply to taxes
that are paid prior to the due date. In the Town’s General Fund, ad valorem tax revenues are reported net of such
discounts.
(5) Allowances for doubtful accounts
All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful
accounts. This amount is estimated by analyzing the percentage of receivables written off in prior years.
(6) Prepaid items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid
items in both government-wide and fund statements, and expensed as items are used.
(7) Capital assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks,
and similar items) are reported in the applicable governmental or business-type activities columns in the
government-wide financial statements. Capital assets are defined by the government as assets with an initial,
individual cost of more than a certain cost and an estimated useful life in excess of two years.
Minimum capitalization costs are as follows:
Cost
Land and easements $ 1
Buildings, improvements 10,000
Distribution system 15,000
Vehicles, furniture and equipment 5,000
Infrastructure 35,000
Donated capital assets received prior to July 1, 2015 are recorded at their estimated fair value at the date of
donation. Donated capital assets received after July 1, 2015 are recorded at acquisition value. All other purchased
or constructed assets are recorded at cost or estimated historical cost. Donated capital assets are recorded at their
estimated fair value at time of donation. The cost of normal maintenance and repairs that do not add to the value
of the asset or materially extend assets’ lives are not capitalized.
Capital assets are depreciated using the straight-line method over their estimated useful lives:
Asset Class Estimated Useful Lives
Buildings and building improvements 30 years
Infrastructure 40 years
Plant and distribution systems 50 years
Furnishings, fixtures, equipment and computers 5 to 10 years
Vehicles 3 to 5 years
Town of Hillsborough, North Carolina
Notes to Financial Statements
37
(8) Deferred outflows/inflows of resources
In addition to assets, the statement of financial position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, Deferred Outflows of Resources, 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. The Town’s contributions made to the pension plan in the 2016 fiscal year, certain pension
deferrals, and the deferred loss on defeasance of debt meet this criterion. In addition to liabilities, the statement of
financial position will sometimes report a separate section for deferred inflows of resources. This separate financial
statement element, Deferred Inflows of Resources, represents an acquisition of net position that applies to a future
period and so will not be recognized as revenue until then. The Town has several items that meet the criterion for
this category: taxes receivable, grants receivable and deferrals of pension expense. In addition, the Town has
unearned revenue items that meet the criterion for this category.
(9) Long-term obligations
In the government-wide financial statements and the 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 or
business-type activities, or proprietary fund-type statement of net position. Long-term debt premiums and
discounts are deferred and amortized over the life of the debt using the straight-line method that approximates the
effective interest method. Long-term debt is reported net of the applicable premiums or discounts. Debt issuance
costs, except for prepaid insurance costs, are expensed in the reporting period in which they are incurred. Prepaid
insurance costs are expensed over the life of the debt.
In fund financial statements, governmental fund types recognize debt premiums and discounts, as well as debt
issuance costs, during the current period. The face amount of debt issued is 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 service expenditures.
(10) Compensated absences
The vacation policy of the Town provides for the accumulation of up to 240 hours earned vacation leave, with such
leave being fully vested when earned. For the Town’s government-wide and proprietary funds, an expense and a
liability for compensated absences and the salary-related payments are recorded as the leave is earned. The
Town has assumed a first-in, first-out method of using accumulated compensated time. The portion of that time
that is estimated to be used in the next fiscal year has been designated as a current liability and included in the
long-term liabilities due within one year on the government-wide financial statements.
The Town’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 determination of length of
service for retirement benefit purposes. Since the Town has no obligation for the accumulated sick leave until it is
actually taken, no accrual for sick leave has been made.
(11) Net position/fund balances
Net position
Net position in government-wide and proprietary fund financial statements is classified as net investment in capital
assets, restricted, and unrestricted. Restricted net position represent 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.
Fund balances
In the governmental fund financial statements, fund balance is comprised of five classifications designed to
disclose the hierarchy of constraints placed on how the fund balance can be spent.
The governmental fund types classify fund balances as follows:
Town of Hillsborough, North Carolina
Notes to Financial Statements
38
Nonspendable fund balance - 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.
Prepaid items - Portion of fund balance that is not available for appropriation because it represents the
year-end fund balance of prepaid items, which are not expendable, available resources.
Restricted fund balance - This classification includes amounts that are restricted to specific purposes externally
imposed by creditors or imposed by law.
Restricted for stabilization by state statute - Portion of fund balance that is restricted by state statute [G.S.
159-8(a)].
Restricted for streets - Powell Bill portion of fund balance that is restricted by revenue source for street
construction and maintenance expenditures. This amount represents the balance of the total unexpended
Powell Bill funds.
Restricted for capital projects - Portion of fund balance representing unexpended contributions from
developers and debt proceeds that are restricted by Town ordinance and the developers for future general
capital projects.
Committed fund balance - Portion of fund balance that can only be used for specific purposes imposed by the
government through majority vote of the Town’s governing body - the Board of Town Commissioners (highest level
of decision-making authority). The Board of Town Commissioners can, by adoption of an ordinance prior to the
end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in
place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation.
Committed for capital projects - Portion of fund balance that can only be used for the construction of
capital projects.
Assigned fund balance - Portion of fund balance the Town of Hillsborough intends to use for specific purposes that
are considered neither restricted nor committed. Unassigned fund balances may be assigned by the Town Board,
Town Manager, or Finance Director for specific purposes through the budget process or agenda items.
Assigned for sidewalks - Portion of fund balance that is to be used for the future construction of sidewalks.
Assigned for affordable housing - Portion of fund balance that is to be used for the future construction of
affordable housing.
Assigned for subsequent year’s expenditures - Portion of fund balance that is appropriated in the next
year’s budget that is not already classified in restricted or committed. The governing body approves the
appropriation.
Unassigned fund balance - Portion of fund balance that has not been restricted, committed, or assigned to specific
purposes or other funds.
The Town of Hillsborough has a revenue-spending policy that provides guidance for programs with multiple
revenue sources. The Finance Officer will use resources in the following hierarchy: bond and installment financing
proceeds, federal funds, state funds, local non-town funds, and town funds. For purposes of fund balance
classification, expenditures are to be spent from restricted fund balance first, followed in order by committed fund
balance, assigned fund balance and, finally, unassigned fund balance. The Finance Officer has the authority to
deviate from this policy, if it is in the best interest of the Town.
The Town of Hillsborough has adopted a policy to maintain the General Fund fund balance level between 20% and
60% of operating expenditures, with a target of 33%, or the equivalent of four months of operating expenditures.
Town of Hillsborough, North Carolina
Notes to Financial Statements
39
(12) Pensions
For purposes 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 Employee’s 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. The Town’s employer contributions
are recognized when due and the Town 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.
2. Reconciliation of GAAP and Budgetary-Basis Expenditures
The accompanying schedule reconciles certain General Fund transactions, which are treated differently on
Exhibit 4 (GAAP basis) and Exhibit 5 (budgetary basis). These differences relate to capital lease transactions and
are summarized below:
Increase
Exhibit 4 (Decrease) Exhibit 5
General government $ 1,825,877 $ 93,970 $ 1,919,847
Public safety 3,837,900 212,632 4,050,532
Environmental protection 547,921 158,412 706,333
Community activities and projects 821,677 128,133 949,810
Parks and recreation 97,891 564,831 662,722
Debt service:
Principal retirement 1,037,623 (1,037,623) (1) -
Interest and fiscal charges 120,355 (120,355) (1) -
(1) Reclassification of debt service payments.
3. Stewardship, Compliance and Accountability
A. Excess of expenditures over appropriations
For the fiscal year ended June 30, 2016, expenditures made in the Town’s General Fund exceeded the authorized
appropriations made by the governing board for community activities and projects by $543,728, and for parks and
recreation by $267,222. The over-expenditure of community activities and projects occurred because the Town did
not budget for the purchase of a building and land that was purchased through the issuance of debt. The Town
also did not budget for the offsetting debt proceeds. The over-expenditure of parks and recreation occurred
because the Town did not budget for the use of loan proceeds that were applied to a loan balance as debt service
payments. Management and the board will more closely review the budget to actual reports to ensure compliance
in future years.
For the fiscal year ended June 30, 2016, expenditures made in the Town’s Water and Sewer Fund exceeded the
authorized appropriations made by the governing board for billing and collection by $291,123. The over-
expenditure of billing and collection occurred because the Town did not budget for the purchase of a building and
land that was purchased through the issuance of debt. The Town also did not budget for the offsetting debt
proceeds. Management and the board will more closely review the budget to actual reports to ensure compliance
in future years.
Town of Hillsborough, North Carolina
Notes to Financial Statements
40
For the fiscal year ended June 30, 2016, expenditures were made in the Town’s Water and Sewer Capital Projects
Fund related to the automatic meter reading project in the amount of $200,000, for which budgetary appropriations
had not yet been made by the governing board. The over-expenditure occurred because the Town did not adjust
the budget to reflect that the $200,000 expenditure would be incurred during the fiscal year ended June 30, 2016,
despite the related cash payment not being due until July 2016. Management and the board will more closely
review the budget to actual reports to ensure compliance in future years.
4. Detail Notes on All Funds
A. Assets
(1) Deposits
All of the deposits of the Town, the Authority, and the Board are either insured or collateralized by 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 the Town’s, the Authority’s, or the Board’s agents in the entities’ names.
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 the Town, the Authority, and the Board, these deposits are considered to be held by their agents in the
entities’ names. The amount of the pledged collateral is based on an approved averaging method for noninterest-
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 the Town, the Authority, the Board, or the escrow agent.
Because of the inability to measure the exact amounts of collateral pledged for the Town, the Authority, or the
Board 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. The Town has no formal
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. The Town
complies with the provisions of G.S. 159-31 when designating official depositories and verifying that deposits are
properly secured. The Authority and the Board have no formal policy regarding custodial credit risk for deposits.
At June 30, 2016, the Town’s deposits had a carrying amount of $7,085,756 and a bank balance of $7,141,380. Of
the bank balance, $500,000 was covered by federal depository insurance and $6,641,380 in interest-bearing
deposits were covered under the Pooling Method. The Town had $550 in petty cash on hand at June 30, 2016.
At June 30, 2016, the Authority’s deposits had a carrying amount of $203,060 and a bank balance of $203,060. All
of the bank balance was covered by federal depository insurance.
At June 30, 2016, the Board’s deposits had a carrying amount of $228,267 and a bank balance of $228,267. All of
the bank balance was covered by federal depository insurance.
Investments
At June 30, 2016, the Town had $11,591,651 invested with the North Carolina Capital Management Trust’s Cash
Portfolio, which carried a credit rating of AAAm by Standard and Poor’s. The Town has no policy regarding credit
risk of its investments.
(3) Due from other governments
Amounts due from other governments consist of the following:
Town of Hillsborough, North Carolina
Notes to Financial Statements
41
Governmental
Activities
General Fund:
Sales and use tax distribution $ 348,005
Utilities franchise and telecommunications tax 144,348
Other government agencies 116,117
Sales tax refunds 247,540
856,010
Riverwalk CMAQ Capital Project Fund
CMAQ grant funds 28,442
$ 884,452
(4) Receivables - allowance for doubtful accounts
The amounts presented in the Balance Sheet and the Statement of Net Position for the year ended June 30, 2016
is net of the following allowances for doubtful accounts, which are based on historical percentages of receivables
not expected to be collected.
General Fund:
Taxes receivable $ 69,990
Enterprise Fund $ 208,469
Town of Hillsborough, North Carolina
Notes to Financial Statements
42
(5) Capital assets
Governmental capital asset activity for the year ended June 30, 2016 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Governmental activities:
Capital assets not
being depreciated:
Land $ 3,523,007 $ 130,074 $ - $ - $ 3,653,081
Construction-in-
progress 325,015 122,804 - (154,686) 293,133
Total capital assets
not being depreciated 3,848,022 $ 252,878 $ - $ (154,686) 3,946,214
Capital assets being
depreciated:
Buildings and
improvements 6,398,091 $ 592,561 $ - $ - 6,990,652
Infrastructure 7,016,877 1,625,379 - 154,686 8,796,942
Equipment 590,992 102,166 (21,495) - 671,663
Vehicles 3,396,036 675,193 (58,295) - 4,012,934
Total capital assets
being depreciated 17,401,996 $ 2,995,299 $ (79,790) $ 154,686 20,472,191
Less accumulated
depreciation for:
Buildings and
improvements 1,526,695 $ 226,443 $ - $ - 1,753,138
Infrastructure 417,103 197,602 - - 614,705
Equipment 465,972 37,687 (21,495) - 482,164
Vehicles 2,435,690 438,876 (58,295) - 2,816,271
Total accumulated
depreciation 4,845,460 $ 900,608 $ (79,790) $ - 5,666,278
Total capital assets
being depreciated, net 12,556,536 14,805,913
Governmental activity
capital assets, net $ 16,404,558 $ 18,752,127
Depreciation expense was charged to functions/programs of the primary government as follows:
General government $ 257,863
Public safety 309,094
Transportation 163,497
Economic and physical development 21,199
Environmental protection 148,955
$ 900,608
Town of Hillsborough, North Carolina
Notes to Financial Statements
43
Business-type capital asset activity for the year ended June 30, 2016 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Business-type activities:
Capital assets not
being depreciated:
Land $ 6,005,443 $ 58,850 $ - $ - $ 6,064,293
Intangibles-in-
Progress - 200,000 - - 200,000
Construction-in-
progress 2,468,749 997,809 - - 3,466,558
Total capital assets
not being depreciated 8,474,192 $ 1,256,659 $ - $ - 9,730,851
Capital assets being
depreciated:
Buildings and
improvements 27,515,817 $ 268,093 $ - $ - 27,783,910
Plant and distribution
systems 29,828,240 1,157,638 - - 30,985,878
Infrastructure 552,981 84,355 - - 637,336
Equipment 1,466,645 95,889 - - 1,562,534
Vehicles 702,027 97,577 (35,201) - 764,403
Total capital assets
being depreciated 60,065,710 $ 1,703,552 $ (35,201) $ - 61,734,061
Less accumulated
depreciation for:
Buildings and
improvements 7,107,419 $ 742,454 $ - $ - 7,849,873
Plant and distribution
systems 7,910,676 616,179 - - 8,526,855
Infrastructure 53,979 14,307 - - 68,286
Equipment 1,036,382 83,251 - - 1,119,633
Vehicles 574,161 57,853 (35,201) - 596,813
Total accumulated
depreciation 16,682,617 $ 1,514,044 $ (35,201) $ - 18,161,460
Total capital assets
being depreciated, net 43,383,093 43,572,601
Business-type activity
capital assets, net $ 51,857,285 $ 53,303,452
Town of Hillsborough, North Carolina
Notes to Financial Statements
44
(6) Construction commitments
The Town has active construction projects as of June 30, 2016 with the following remaining commitments:
Remaining
Project Spent-to-Date Commitment
Riverwalk CMAQ-Sidewalk $ 91,966 $ 8,826
West Fork Eno Reservoir 1,729,846 287,500
Waterstone Water Tank 1,602,080 106,920
Total $ 3,423,892 $ 403,246
B. Liabilities
(1) Pension plan and postemployment obligations
(a) Local Governmental Employees’ Retirement System
Plan description. The Town of Hillsborough is a participating employer in the statewide Local Governmental
Employees’ Retirement System (LGERS), a cost-sharing multiple-employer defined benefit pension plan
administered by the state of North Carolina. LGERS membership is comprised of general employees and local law
enforcement offers (LEOs) of participating local governmental entities. Article 3 of G.S. Chapter 128 assigns the
authority to establish and amend benefit provisions to the North Carolina General Assembly. Management of the
plan is vested in the LGERS Board of Trustees, which consists of 13 members - nine appointed by the Governor,
one appointed by the State Senate, one appointed by the House of Representatives, and the State Treasurer and
State Superintendent, who serve as ex-officio members. The Local Governmental Employees’ Retirement System
is included in the Comprehensive Annual Financial Report (CAFR) for the state of North Carolina. The State’s
CAFR includes financial statements and required supplementary information for LGERS. That report may be
obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-
1410, or by calling (919) 981-5454.
Benefits provided. LGERS provides retirement and survivor benefits. Retirement benefits are determined as 1.85%
of the member’s average final compensation times the member’s years of creditable service. A member’s average
final compensation is calculated as the average of a member’s four highest consecutive years of compensation.
Plan members are eligible to retire with full retirement benefits at age 65 with five years of creditable service, at
age 60 with 25 years of creditable service, or at any age with 30 years of creditable service. Plan members are
eligible to retire with partial retirement benefits at age 50 with 20 years of creditable service or at age 60 with five
years of creditable service. Survivor benefits are available to eligible beneficiaries of members who die while in
active service or within 180 days of their last day of service and who have either completed 20 years of creditable
service regardless of age or have completed five years of service and have reached age 60. Eligible beneficiaries
may elect to receive a monthly Survivor’s Alternate Benefit for life or a return of the member’s contributions. The
plan does not provide for automatic post-retirement benefit increases. Increases are contingent upon actuarial
gains of the plan.
Contributions. Contribution provisions are established by General Statute 128-30 and may be amended only by the
North Carolina General Assembly. Town employees are required to contribute 6% of their compensation.
Employer contributions are actuarially determined and set annually by the LGERS Board of Trustees. The Town’s
contractually required contribution rate for the year ended June 30, 2016, was 7.15% of compensation for law
enforcement officers and 6.67% for general employees, actuarially determined as an amount that, when combined
with employee contributions, is expected to finance the costs of benefits earned by employees during the year.
Contributions to the pension plan from the Town were $356,396 for the year ended June 30, 2016.
Town of Hillsborough, North Carolina
Notes to Financial Statements
45
Refunds of contributions. Town employees who have terminated service as a contributing member of LGERS, may
file an application for a refund of their contributions. By state law, refunds to members with at least five years of
service include 4% interest. State law requires a 60 day waiting period after service termination before the refund
may be paid. The acceptance of a refund payment cancels the individual’s right to employer contributions or any
other benefit provided by LGERS.
Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of
resources related to pensions
At June 30, 2016, the Town reported a liability of $376,224 for its proportionate share of the net pension liability.
The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of December 31, 2014. The total pension liability was
then rolled forward to the measurement date of June 30, 2015 utilizing update procedures incorporating the
actuarial assumptions. The Town’s proportion of the net pension liability was based on a projection of the Town’s
long-term share of future payroll covered by the pension plan, relative to the projected future payroll covered by
the pension plan of all participating LGERS employers, actuarially determined. At June 30, 2015, the Town’s
proportion was 0.0838%, which was an increase of 0.0029% from its proportion measured as of June 30, 2014.
For the year ended June 30, 2016, the Town recognized pension expense of $222,831. At June 30, 2016, the
Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the
following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ - $ 88,433
Net difference between projected and actual earnings on pension
plan investments - 107,110
Changes in proportion and differences between Town contributions
and proportionate share of contributions 43,357 -
Town contributions subsequent to the measurement date 356,396 -
Total $ 399,753 $ 195,543
$356,396 of the amount reported as deferred outflows of resources related to Town contributions subsequent to
the measurement date that will be recognized as a decrease of the net pension liability in the year ended June 30,
2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized
in pension expense as follows:
Year Ended June 30:
2017 $ (112,209)
2018 (112,209)
2019 (112,131)
2020 184,362
2021 -
Thereafter -
Town of Hillsborough, North Carolina
Notes to Financial Statements
46
Actuarial assumptions. The total pension liability in the December 31, 2014 actuarial valuation was determined
using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation 3.0 percent
Salary increases 4.25 to 8.55 percent, including inflation
and productivity factor
Investment rate of return 7.25 percent, net of pension plan
investment expense, including inflation
The plan currently uses mortality tables that vary by age, gender, employee group (i.e., general, law enforcement
officer) and health status (i.e. disabled and healthy). The current mortality rates are based on published tables and
based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain a
provision to reflect future mortality improvements.
The actuarial assumptions used in the December 31, 2014 valuation were based on the results of an actuarial
experience study for the period January 1, 2005 through December 31, 2009.
Future ad hoc COLA amounts are not considered to be substantively automatic and are therefore not included in
the measurement.
The projected long-term investment returns and inflation assumptions are developed through review of current and
historical capital markets data, sell-side investment research, consultant whitepapers, and historical performance
of investment strategies. Fixed income return projections reflect current yields across the U.S. Treasury yield curve
and market expectations of forward yields projected and interpolated for multiple tenors and over multiple year
horizons. Global public equity return projections are established through analysis of the equity risk premium and
the fixed income return projections. Other asset categories and strategies’ return projections reflect the foregoing
and historical data analysis. These projections are combined to produce the long-term expected rate of return by
weighting the expected future real rates of return by the target asset allocation percentage and by adding expected
inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class as of
June 30, 2015 are summarized in the following table:
Long-Term
Expected
Target Real Rate
Asset Class Allocation of Return
Fixed income 29.0% 2.2%
Global equity 42.0% 5.8%
Real estate 8.0% 5.2%
Alternatives 8.0% 9.8%
Credit 7.0% 6.8%
Inflation protection 6.0% 3.4%
Total 100.0%
The information above is based on 30-year expectations developed with the consulting actuary for the 2014 asset,
liability, and investment policy study for the North Carolina Retirement Systems, including LGERS. The long-term
nominal rates of return underlying the real rates of return are arithmetic annualized figures. The real rates of return
are calculated from nominal rates by multiplicatively subtracting a long-term inflation assumption of 3.00%. All
rates of return and inflation are annualized.
Town of Hillsborough, North Carolina
Notes to Financial Statements
47
Discount rate. The discount rate used to measure the total pension liability was 7.25%. The projection of cash
flows used to determine the discount rate assumed that contributions from plan members will be made at the
current contribution rate and that contributions from employers will be made at statutorily required rates, actuarially
determined. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to
make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of
return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
Sensitivity of the Town’s proportionate share of the net pension liability to changes in the discount rate. The
following presents the Town’s proportionate share of the net pension liability calculated using the discount rate of
7.25 percent, as well as what the Town’s proportionate share of the net pension asset or net pension liability would
be if it were calculated using a discount rate that is one percentage point lower (6.25 percent) or one percentage
point higher (8.25 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(6.25%) (7.25%) (8.25%)
Town’s proportionate share of the net pension
liability (asset) $ 2,623,462 $ 376,224 $ (1,517,025)
Pension plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position is available
in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North Carolina.
(b) Law Enforcement Officers’ Special Separation Allowance
Plan description. The Town of Hillsborough administers a public employee retirement system (the “Separation
Allowance”), a single-employer defined benefit pension plan that provides retirement benefits to the Town’s
qualified sworn law enforcement officers. The Separation Allowance is equal to 0.85% of the annual equivalent of
the base rate of compensation most recently applicable to the officer for each year of creditable service. The
retirement benefits are not subject to any increases in salary or retirement allowances that may be authorized by
the General Assembly. Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit
provisions to the North Carolina General Assembly. A stand-alone financial statement has not been issued for this
plan.
All full-time law enforcement officers of the Town are covered by the Separation Allowance. At December 31,
2015, the Separation Allowance’s membership consisted of:
Retirees receiving benefits 2
Terminated plan members entitled to, but not yet receiving benefits -
Active plan members 28
Total 30
(ii) Summary of significant accounting policies
Basis of accounting. The Town has chosen to fund the Separation Allowance on a pay-as-you-go basis. Pension
expenditures are made from the General Fund, which is maintained on the modified accrual basis of accounting.
Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.
Town of Hillsborough, North Carolina
Notes to Financial Statements
48
The Separation Allowance has no assets accumulated in a trust that meets the following criteria which are outlined
in GASB Statements 67 and 68:
Contributions to the pension plan and earnings of those contributions are irrevocable
Pension plan assets are dedicated to providing benefits to plan members
Pension plan assets are legally protected from the creditors or employers, nonemployer
contributing entities, the plan administrator, and plan members.
Method used to value investments. No funds are set aside to pay benefits and administration costs. These
expenditures are paid as they come due.
(iii) Contributions
The Town is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to
fund the benefit payments on a pay-as-you-go basis through appropriations made in the General Fund operating
budget. The Town’s obligation to contribute to this plan is established and may be amended by the North Carolina
General Assembly. There were no contributions made by employees.
The annual required contribution for the current year was determined as part of the December 31, 2015 actuarial
valuation using the actuarial cost method. The actuarial assumptions included (a) a 3.57% investment rate of
return and (b) projected salary increases ranging from 3.5% to 7.35% per year. Both (a) and (b) included an
inflation component of 3.0%. The assumptions did not include post-employment benefit increases.
Annual pension cost and net pension obligation. The Town’s annual pension cost and net pension obligation to the
Separation Allowance for the current year were as follows:
Annual required contribution $ 67,917
Interest on net pension liability 544
Adjustment to annual required contribution (956)
Annual pension cost 67,505
Contributions made 25,579
Increase in net pension liability 41,926
Net pension obligation, beginning of year 10,877
Net pension obligation, end of year $ 52,803
Three-Year Trend Information
Annual Percentage Net
Pension of APC Pension
Year Ended June 30 Cost (APC) Contributed Obligation
6/30/2014 $ 53,533 92.76% (19,673)
6/30/2015 61,585 50.39% 10,877
6/30/2016 67,505 37.89% 52,803
Funded status and funding process: As of December 31, 2015, the most recent actuarial valuation date, the plan
was not funded. The actuarial accrued liability for benefits and the unfunded actuarial accrued liability (“UALL”)
were $556,718. The covered payroll (annual payroll of active employees covered by the plan) was $1,650,937,
and the ratio of the UAAL to the covered payroll was 33.72%.
Town of Hillsborough, North Carolina
Notes to Financial Statements
49
The schedule of funding progress, presented as required supplementary information following the notes to the
financial statements, presents multiyear trend information about whether the actuarial value of plan assets are
increasing or decreasing over time relative to the actuarial accrued liability for benefits.
(c) Supplemental Retirement Income Plan
Plan description. The Town of Hillsborough contributes to the Supplemental Retirement Income Plan (the “Plan”),
a defined contribution pension plan administered by the Department of State Treasurer and a board of trustees.
The Plan provides retirement benefits to law enforcement officers employed by the Town. Article 5 of
G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North Carolina General
Assembly. The Supplemental Retirement Income Plan for Law Enforcement Officers is included in the CAFR for
the state of North Carolina. The state’s CAFR includes the pension trust fund financial statements for the Internal
Revenue Section 401(k) plan that includes the Supplemental Retirement Income Plan for Law Enforcement
Officers. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center,
Raleigh, North Carolina 27699-1410, or by calling (919) 981-5454. Additionally, the Town has elected to include all
permanent, full-time employees under this plan.
Funding policy. Article 12E of G.S. Chapter 143 requires the Town to contribute each month an amount equal to
5% of each officer’s salary, and all amounts contributed are vested immediately. The Town has elected to
contribute each month an amount equal to 5.0% of each participating general employee’s salary. Also, the
participants may make voluntary contributions to the Plan. Contributions for the year ended June 30, 2016 were
$405,582, which consisted of $271,670 from the Town and $133,912 from employees.
(2) Other postemployment benefit obligations
Plan description. According to a Town resolution, the Town administers a single-employer defined benefit
Healthcare Plan (the “HC Plan”). The HC Plan provides post-retirement healthcare benefits until they become
eligible for Medicare to retirees of the Town who were hired before February 1, 2009, who have at least 20 years
of creditable service, and who attain age 55 for regular employees and age 52 for law enforcement employees.
Employees hired on or after February 1, 2009, must complete 30 years of service and attain age 60 for regular
employees and age 57 for law enforcement employees before becoming eligible for post-retirement benefits. The
Town pays the full cost of coverage for these benefits. The Town’s Board of Commissioners may amend the
benefit provisions. A separate report was not issued for the HC Plan.
Law Enforcement Non-Law Enforcement
Hired On Hired On
Hired Before or After Hired Before or After
Retired Employees’ Years February 9, February 9, February 9, February 9,
of Creditable Service 2009 2009 2009 2009
Less than 20 years’ continuous service Not eligible for Not eligible for Not eligible for Not eligible for
coverage coverage coverage coverage
20 or more years’ continuous service:
Before age 52 Not eligible for Not eligible for Not eligible for Not eligible for
coverage coverage coverage coverage
Age 52 to 55 Full coverage Not eligible for Not eligible for Not eligible for
paid for by Town coverage coverage coverage
Age 55 until eligible for Medicare Full coverage Not eligible for Full coverage Not eligible for
paid for by Town coverage paid for by Town coverage
30 or more years’ continuous service:
Before age 57 Full coverage Not eligible for Full coverage Not eligible for
paid for by Town coverage paid for by Town coverage
Age 57 to 60 Full coverage Full coverage Full coverage Not eligible for
paid for by Town paid for by Town paid for by Town coverage
Age 60 until eligible for Medicare Full coverage Full coverage Full coverage Full coverage
paid for by Town paid for by Town paid for by Town paid for by Town
Town of Hillsborough, North Carolina
Notes to Financial Statements
50
Membership of the HC Plan consisted of the following at December 31, 2014, the date of the latest actuarial
valuation:
Law
General Enforcement
Employees Officers
Retirees and dependents receiving benefits 2 3
Active plan members 59 27
Total 61 30
Funding policy. The Town pays the cost of coverage for the healthcare benefits paid to qualified retirees under a
Town resolution that can be amended by the Board of Commissioners. The Town’s members pay up to $1,056 per
month for full family coverage. The Town has chosen to fund the healthcare benefits on a pay-as-you-go basis.
The current annual required contribution of the employer (“ARC”) rate is 2.64% of annual covered payroll. For the
current year, the Town contributed $27,602 or 0.58% of annual covered payroll. The Town obtains healthcare
coverage through private insurers. The Town’s required contributions, under a Town resolution, for employees not
engaged in law enforcement and for law enforcement officers represented 0.19% and 0.39% of covered payroll,
respectively. The Town’s contributions totaled $27,602 in fiscal year 2016. Employees who did not meet the
wellness requirements paid $1,470 in premiums for coverage. Employees who elected to cover dependents paid
for coverage in the amount of $48,791. The Town’s obligation to contribute to the plan is established and may be
amended by the Board of Commissioners.
Summary of significant accounting policies. Postemployment expenditures are made from the General Fund,
which is maintained on the modified accrual basis of accounting. No funds are set aside to pay benefits and
administration costs. These expenditures are paid as they come due.
Annual other postemployment benefits (“OPEB”) cost and net OPEB obligation. The Town‘s annual OPEB cost
(expense) is calculated based on the ARC, an amount actuarially determined in accordance with the parameters of
GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover
normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to
exceed 30 years. The following table shows the components of the Town’s annual OPEB cost for the year, the
amount actually contributed to the plan, and changes in the Town’s net OPEB obligation for the healthcare
benefits:
Annual required contribution $ 124,664
Interest on net OPEB obligation 13,887
Adjustment to annual required contribution (44,512)
Annual OPEB cost 94,039
Contributions made (27,602)
Increase in net OPEB obligation 66,437
Net OPEB obligation, beginning of year 407,147
Net OPEB obligation, end of year $ 473,584
The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation for 2016, 2015, and 2014 were as follows:
Town of Hillsborough, North Carolina
Notes to Financial Statements
51
Percentage
of Annual
Annual OPEB Cost Net OPEB
Year Ended June 30 OPEB Cost Contributed Obligation
2014 $ 117,508 50.0% $ 347,187
2015 125,284 52.1% 407,147
2016 94,039 29.4% 473,584
Funded status and funding progress. As of December 31, 2014, the most recent actuarial valuation date, the plan
was not funded. The actuarial accrued liability for benefits and, thus, the UAAL was $1,008,928. The covered
payroll (annual payroll of active employees covered by the plan) was $4,723,959, and the ratio of the UAAL to the
covered payroll was 21.4%. Actuarial valuations of an ongoing plan involve estimates of the value of reported
amounts and assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and healthcare trends. Amounts determined regarding the
funded status of the plan and the annual required contributions of the employer are subject to continual revision,
as actual results are compared with past expectations and new estimates are made about the future. The schedule
of funding progress, presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial methods and assumptions. Projections of benefits for financial reporting purposes are based on the
substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits
provided at the time of each valuation, and the historical pattern of sharing of benefit costs between the employer
and plan members at that point. The actuarial methods and assumptions used include techniques that are
designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value assets,
consistent with the long-term perspective of the calculations.
In the December 31, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The
actuarial assumptions included a 4% investment rate of return (net of administrative expenses), which is the
expected long-term investment returns on the employer’s own investments calculated, based on the funded level
of the plan at the valuation date, and an annual medical cost trend increase of 7.50% to 5.00% annually. The
investment rate included a 3.00% inflation assumption. The assumed rate of return reflects the fact that no assets
are set aside with the Town that are legally held exclusively for retiree health benefits. The UAAL is being
amortized as a level percentage of pay on an open basis. The remaining amortization period at December 31,
2014 was 30 years.
(3) Other employment benefit
The Town has also elected to provide death benefits to employees through the Death Benefit Plan for Members of
the Local Governmental Employees’ Retirement System (“Death Benefit Plan”), a multiple-employer, state-
administered, cost-sharing plan funded on a one-year term cost basis. The beneficiaries of those employees who
die in active service after one year of contributing membership in the System, or who die within 180 days after
retirement or termination of service, and have at least one year of contributing membership in the System at the
time of death, are eligible for death benefits. Lump-sum death benefit payments to beneficiaries are equal to the
employee’s 12 highest months’ salary in a row during the 24 months prior to the employee’s death, but the benefit
may not exceed $50,000 or be less than $25,000. All death benefit payments are made from the Death Benefit
Plan. The Town has no liability beyond the payment of monthly contributions. The contributions to the Death
Benefit Plan cannot be separated between the post-employment benefit amount and the other benefit amount.
Contributions are determined as a percentage of monthly payroll based upon rates established annually by the
State. Separate rates are set for employees not engaged in law enforcement and for law enforcement officers. The
Town considers these contributions to be immaterial.
Town of Hillsborough, North Carolina
Notes to Financial Statements
52
For the fiscal year ended June 30, 2016, the Town made contributions to the State for death benefits of $5,085.
The Town’s required contributions for employees not engaged in law enforcement and for law enforcement officers
represented 41.1% and 58.9% of covered payroll, respectively.
(4) Accounts payable and accrued liabilities
Accounts payable and accrued liabilities at June 30, 2016 were as follows:
Governmental Business-Type
Activities Activities Total
Payable to vendors and others $ 168,094 $ 514,225 $ 682,319
Accrued payroll and related liabilities 378,467 101,185 479,652
Total accounts payable and accrued liabilities $ 546,561 $ 615,410 $ 1,161,971
(5) Deferred outflows and inflows of resources
The Town has deferred outflows of resources, which are comprised of $356,396 of current year LGERS pension
contributions, $43,357 of pension deferrals and $23,983 of deferred loss on defeasance of debt.
Deferred inflows of resources at year end is comprised of the following:
Unavailable Unearned
Revenue Revenue
Taxes receivable $ 142,999 $ -
Grant receivable (General Fund) 40,800 -
Grant receivable (Riverwalk CMAQ Capital Project Fund) 28,442 -
Other prepaid receipts - 26,850
$ 212,241 $ 26,850
Pension deferrals $ 195,543
(6) Risk management
The Town is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors
and omissions; injuries to employees; and natural disasters. The Town participates in three self-funded risk
financing pools administered by the North Carolina League of Municipalities. Through these pools, the Town
obtains general liability coverage of $3 million per occurrence; auto liability coverage of $2 million per occurrence;
property coverage up to the total insurance values of the property policy; and workers’ compensation coverage up
to statutory limits. The property/liability and workers compensation pools are reinsured through commercial
companies for single occurrence claims against general liability and auto liability in excess of $1 million, property in
excess of $500,000, and $1 million up to statutory limits for workers’ compensation. The property liability pool has
an aggregate limit for the total property losses in a single year, with the reinsurance limit based upon a percentage
of the total insurance values.
The Town carries commercial insurance for all other risks of loss, including property ($50,233,967); general liability
($3 million per occurrence); law enforcement liability ($2 million per occurrence); public employees scheduled bond
($60,000 - includes $50,000 for the finance director and $10,000 for the deputy tax collector), public employees
blanket bond/crime ($10,000); computer equipment ($447,500); municipal equipment ($614,866); fine arts
($550,000); animal mortality ($22,800); and public officials’ liability ($1 million per occurrence). There have been
no significant reductions in insurance coverage in the prior year, and settled claims resulting from these risks have
not exceeded commercial insurance coverage in any of the past three fiscal years.
Town of Hillsborough, North Carolina
Notes to Financial Statements
53
The old motor pool facility is in an area of the state that has been mapped and designated an “A” area (an area
close to a river) by the Federal Emergency Management Agency. Flood coverage on the old, dilapidated facility
has been discontinued since the building is now used for storage only. Other town structures are designated as “B,
C and X” areas (low-risk areas) and are insured for flood damage through the Interlocal Risk Financing Fund of
North Carolina pool for $5 million per occurrence and aggregate with a $50,000 deductible. There is no coverage
through the Interlocal Fund for structures in any flood zone other than “B, C, and X.”
The Authority and the Board carried commercial coverage for Public Officials Liability with coverage of $1,000,000
for all claims. Both the Board and the Authority do not carry flood insurance nor have any employees.
(7) Claims and contingent liabilities
The Town has elected to pay the direct cost of employment security benefits in lieu of paying unemployment taxes.
A liability for such payments could accrue in the period following the discharge of an employee.
(8) Long-term obligations
(a) Installment purchases
Governmental activities:
Note payable to BB&T, executed April 2008, in the amount of
$1,226,000 for the construction of a Town Park and
Improvements. The note is payable in 30 semi-annual payments of
$40,867 plus interest at 2.22%, and is secured by such assets. $ 572,133
Note payable to BB&T, executed in July 2013, in the amount of
$438,057 for the refinance of a note payable for the purchase of
land for municipal operations. The note is payable in 21 semi-
annual payments of $20,860 plus interest at 2.22%, and is secured
by land. The previous note payable on the land for municipal
operations included interest at 3.92%. 312,898
Note payable to BB&T, executed in July 2013, in the amount of
$839,086 for the refinance of a note payable for the purchase of
real property and a building to be used as the fleet maintenance
facility. The note is payable in 23 semi-annual payments of
$36,482 plus interest at 2.44%, and is secured by real property
and a building. The previous note payable on the fleet
maintenance facility included interest at 3.79%. 620,194
Note payable to BB&T, executed May 2012, in the amount of
$227,000 for the purchase of a garbage truck. The note is payable
in ten semi-annual payments of $23,634 with interest payable at
1.48%, and is secured by the truck. 46,915
Note payable to SunTrust, executed November 2011, in the amount
of $812,021 for the purchase of a fire truck. The note is payable in
14 semi-annual payments of $63,027 with interest payable at
2.185%, and is secured by the truck. 305,060
Note payable to BB&T, executed August 2013, in the amount of
$1,450,000 for the purchase of land for Riverwalk Phases II and
III. The note is payable in 20 semi-annual payments of $72,500
plus interest and matures in August 2023. Interest is payable at
2.35% and the note payable is secured by land. 794,803
Town of Hillsborough, North Carolina
Notes to Financial Statements
54
Note payable to BB&T, executed August 2014, in the amount of
$615,368 for the purchase of land for municipal operations. The
note is payable in 30 semi-annual payments of $20,512 plus
interest and matures in August 2029. Interest is payable at 2.88%
and the note payable is secured by the land. $ 553,832
Note payable to BB&T, executed August 2014, in the amount of
$175,000 for the purchase of a document management system.
The note is payable in 10 semi-annual principal and interest
payments of $18,189 and matures in July 2019. Interest is payable
at 1.5% and the note payable is secured by the document
management system. 106,323
Note payable to BB&T, executed August 2014, in the amount of
$424,000 for the purchase of a garbage truck and a leaf truck. The
note is payable in 10 semi-annual principal and interest payments
of $44,068 and matures in July 2019. Interest is payable at 1.5%
and the note payable is secured by the trucks. 257,605
Note payable to Singer Holdings, LLC, executed in July 2015, for
the purchase of land and a building for municipal operations. The
note is payable in 30 semi-annual principal and interest payments
of $22,689 and matures in July 2030. Interest is payable at 3.0%
and the note is secured by the land and building. 530,390
Note payable to BB&T, executed August 2015, in the amount of
$481,000 for the purchase of a fire truck. The note is payable in
ten semi-annual payments of $50,201 with interest payable at
1.57%, and is secured by the truck. 434,575
4,534,728
Less current portion 671,995
$ 3,862,733
The future minimum payments on the notes payable as of June 30, 2016 are as follows:
Year Ending June 30, Principal Interest Total
2017 $ 671,995 $ 93,587 $ 765,582
2018 750,203 86,608 836,811
2019 757,110 70,589 827,699
2020 575,157 55,124 630,281
2021 465,696 43,019 508,715
2022 - 2026 981,070 102,102 1,083,172
2027 - 2031 333,497 22,780 356,277
$ 4,534,728 $ 473,809 $ 5,008,537
Town of Hillsborough, North Carolina
Notes to Financial Statements
55
Business-type activities:
Enterprise fund - Water/Sewer Fund:
Note payable to BB&T, executed May 2009, in the amount of
$5,525,000 for the advance refunding of debt of the 1998 Water
serial bonds and the Cedar Grove Reservoir installment debt. The
note was payable in 20 semi-annual payments of varying amounts
with interest payable at 3.69%. The note was modified on July 15,
2013. The modifications separated the debt into two tranches. The
first tranche in the amount of $1,939,000 has varying annual
principal payments through October 2017 with interest at 1.66%.
The second tranche in the amount of $1,469,000 has varying
annual principal payments through October 2019 with interest at
1.88%. The note is secured by improvements (a). $ 1,571,000
Note payable to BB&T, executed March 2012, in the amount of
$1,051,273 for the construction of water tanks and lines. The note
is payable in 20 semi-annual payments of $52,564 plus interest at
2.26%, and is secured by the water tanks and lines. 442,769
Note payable to Singer Holdings, LLC, executed in July 2015, for
the purchase of land and a building for water and sewer billing
operations. The note is payable in 30 semi-annual principal and
interest payments of $13,614 and matures in July 2030. Interest is
payable at 3.0% and the note is secured by the land and building. 318,234
Note payable to BB&T, executed June 2016, in the amount of
$937,747 for the design, equipping and installation of Advanced
Metering Infrastructure (AMI). The note is payable in 29 semi-
annual principal and interest payments of $38,995 and matures in
June 2031. Interest is payable at 2.4% and the note payable is
secured by the AMI. 937,747
3,269,750
Less current portion 740,809
$ 2,528,941
The long-term debt requirements to maturity as of June 30, 2016 for the Enterprise Fund are as follows:
Year Ending June 30, Principal Interest Total
2017 $ 740,809 $ 40,957 $ 781,766
2018 660,389 63,961 724,350
2019 405,887 40,634 446,521
2020 416,830 32,000 448,830
2021 101,959 25,772 127,731
2022 – 2026 430,268 95,824 526,092
2027 - 2031 513,608 37,997 551,605
$ 3,269,750 $ 337,145 $ 3,606,895
a. The provisions of this loan agreement contain certain financial covenants related to the maintenance of fund
balance. At June 30, 2016, the Town was in compliance with such covenants.
Town of Hillsborough, North Carolina
Notes to Financial Statements
56
b. General obligation indebtedness
The Town’s legal debt margin at June 30, 2016 was $61,219,484.
c. Revolving loans payable
On May 7, 2002, the Town was approved for a maximum loan amount of $1,802,952 from the U.S. Environmental
Protection Agency passed through the North Carolina Department of Environmental and Natural Resources under
the Drinking Water State Revolving Fund. The loan proceeds were used to upgrade the water plant. The loan is
repayable in equal principal payments of $76,222 plus interest of 2.66% through fiscal year ending 2026. The total
amount outstanding at June 30, 2016 was $762,224.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2016 are as follows:
Business-Type Activities
Year Ending June 30, Principal Interest Total
2017 $ 76,222 $ 20,276 $ 96,498
2018 76,222 18,248 94,470
2019 76,222 16,220 92,442
2020 76,222 14,192 90,414
2021 76,222 12,166 88,388
2022 - 2026 381,114 30,414 411,528
$ 762,224 $ 111,516 $ 873,740
On October 6, 2011, the Town was approved for a maximum loan amount of $18,894,640 from the U.S.
Environmental Protection Agency passed through the North Carolina Department of Environmental and Natural
Resources under the Clean Water State Revolving Fund. The loan proceeds were used for a Wastewater
Treatment Plant Upgrade and Expansion Project. The loan is repayable in equal principal payments of $890,500
plus interest of 2.455% through fiscal year ending 2034. The total amount outstanding at June 30, 2016 was
$16,029,006.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2016 are as follows:
Business-Type Activities
Year Ending June 30, Principal Interest Total
2017 $ 890,500 $ 393,512 $ 1,284,012
2018 890,500 371,650 1,262,150
2019 890,500 349,788 1,240,288
2020 890,500 327,926 1,218,426
2021 890,500 306,064 1,196,564
2022 - 2026 4,452,500 1,202,400 5,654,900
2027 - 2031 4,452,500 655,852 5,108,352
2032 - 2034 2,671,506 131,172 2,802,678
$ 16,029,006 $ 3,738,364 $ 19,767,370
On October 6, 2014, the Town was approved for a maximum loan amount of $2,029,398 from the U.S.
Environmental Protection Agency passed through the North Carolina Department of Environmental and Natural
Resources under the Drinking Water State Revolving Fund. The loan proceeds are being used for the Waterstone
Elevated Water Tank Project. Project-to-date drawdowns were $1,822,088 at June 30, 2016. The loan is repayable
in equal principal payments of $101,470, with no interest, through fiscal year ending 2035. The first payment was
made in April 2016. The total amount outstanding at June 30, 2016 was $1,720,618.
Town of Hillsborough, North Carolina
Notes to Financial Statements
57
d. Changes in long-term debt
Current
Balance Portion of
Balance June 30, Long-Term
July 1, 2015 Increases Decreases 2016 Liabilities
Governmental activities:
Installment purchases $ 4,606,799 $ 1,025,935 $ 1,098,006 $ 4,534,728 $ 671,995
Compensated absences 273,131 145,750 130,961 287,920 130,961
Other postemployment
benefits 240,347 59,393 17,433 282,307 -
Net pension liability
(LGERS) - 247,634 - 247,634 -
Net pension obligation
(LEO) 10,877 67,505 25,579 52,803 -
$ 5,131,154 $ 1,546,217 $ 1,271,979 $ 5,405,392 $ 802,956
Business-type activities:
Installment purchases $ 2,970,088 $ 1,264,691 $ 965,029 $ 3,269,750 $ 740,809
Revolving loans payable 18,605,655 974,386 1,068,193 18,511,848 1,068,192
Other postemployment
benefits 166,800 34,646 10,169 191,277 -
Net pension liability
(LGERS) - 128,590 - 128,590 -
Compensated absences 222,803 158,652 148,858 232,597 148,858
$ 21,965,346 $ 2,560,965 $ 2,192,249 $ 22,334,062 $ 1,957,859
Compensated absences, the net pension obligation (LEO), and net pension liability (LGERS) for governmental
activities have typically been liquidated in the General Fund.
e. Special assessment debt
In October 2013, the Town issued $4,630,000 of Special Assessment Revenue Bonds to finance the construction
of public infrastructure in the Waterstone District. The Town is in no manner obligated to repay this special
assessment debt and functions only as an agent for the property owners by remitting collections of special
assessments to the Trustee. At June 30, 2016, $3,480,000 of special assessment debt remained outstanding.
Town of Hillsborough, North Carolina
Notes to Financial Statements
58
C. Interfund balances and activity
Transfers to/from other funds
Transfers to/from other funds at June 30, 2016 consist of the following:
From the General Fund to the Downtown Improvements Capital
Project Fund for design work $ 30,000
From the General Fund to the Rail Station Capital Projects Fund for
conceptual site design and environmental review 54,000
From the General Fund to the Riverwalk CMAQ Capital Project
Fund for consulting and construction 9,500
From the General Fund to the Public Works Building Capital
Projects Fund for design and project management 50,000
From the Riverwalk Phase II Capital Projects Fund to the General
Fund to transfer the remaining fund balance and close out the fund 173,425
From the Riverwalk Phase II Projects Fund to the General Fund to
transfer the remaining fund balance and close out the fund 22,058
From the General Capital Reserve Fund to the General Fund for
debt service payments 126,054
$ 465,037
D. Net investment in capital assets
Governmental Business-Type
Capital assets $ 18,752,127 $ 53,303,452
Less: related debt
Installment purchases (4,534,728) (3,269,750)
Revolving loans payable - (18,511,848)
Add: deferred loss on defeasance of debt - 23,983
Add: unexpended debt proceeds 25,065 937,906
Net investment in capital assets $ 14,242,464 $ 32,483,743
E. Fund balance
The following schedule provides management and citizens with information on the portion of General Fund fund
balance that is available for appropriation.
Total fund balance General Fund $ 5,931,686
Less:
Prepaid items 175,392
Stabilization by state statute 1,285,413
Streets - Powell Bill 99,907
Sidewalks 19,800
Affordable Housing 41,000
Appropriated fund balance in subsequent fiscal year’s budget 612,096
Working capital/fund balance policy 3,698,078
Remaining fund balance General Fund $ -
Town of Hillsborough, North Carolina
Notes to Financial Statements
59
The outstanding encumbrances are amounts needed to pay any commitments related to purchase orders and
contracts that remain unperformed at year end.
Encumbrances
General Fund $ 246,978
5. Jointly Governed Organization
The Town, in conjunction with seven counties and 37 other municipalities, established the Triangle J Council of
Governments (the “Council”). The participating governments established the Council to coordinate various funding
received from federal and state agencies. Each participating government appoints one member to the Council’s
governing board. The Town paid membership fees of $2,494 to the Council during the fiscal year ended June 30,
2016.
6. Significant Effects of Subsequent Events
The Town commenced an eminent domain proceeding in Orange County Superior Court pursuant to Chapter 40A
of the North Carolina General Statutes on July 27, 2016, to acquire an historic property known as the “Colonial
Inn”. The Town intends to acquire the property so that it may be rehabilitated and preserved, and to use the
property for a public purpose, such as offices, an historic museum or library, and/or other similar purposes. The
Town will likely seek to “partner” with non-profits and other entities to help finance the project. The Town deposited
$250,000 with the Clerk of Orange County Superior Court when it filed the eminent domain proceeding. The
amount of the deposit represents the Town’s estimate of the fair market value of the property based on appraisal
reports prepared for the Town. The current owner of the Colonial Inn property has filed an Answer in the
proceeding, contesting the Town’s authority to acquire the property and contesting the amount of compensation to
which they claim to be entitled. The current owner disagrees with the appraisal reports prepared for the Town. The
litigation is currently in early stages.
60
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61
Required Supplementary Financial Data
This section contains additional information required by generally accepted accounting principles.
Schedule of Funding Progress for Law Enforcement Officers’ Special Separation Allowance.
Schedules of Funding Progress and Employer Contributions for Other Postemployment Benefits.
Schedule of Proportionate Share of Net Pension Liability (Asset) for Local Government Employees’
Retirement System
Schedule of Contributions to Local Government Employees’ Retirement System
62
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Exhibit A
Actuarial
Accrued
Liability UAAL as
Actuarial (AAL) -Unfunded a % of
Actuarial Value of
Projected AAL Funded Covered
Covered
Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll
Date (a) (b) (b) - (a)(a) (b)(c)((b - a)/c)
12/31/2006 -$ 429,075$ 429,075$ 0.00% 1,229,480$ 34.90%
12/31/2007 - 478,258 478,258 0.00% 1,275,715 37.49%
12/31/2008 - 484,358 484,358 0.00% 1,466,263 33.03%
12/31/2009 - 515,994 515,994 0.00% 1,373,891 37.56%
12/31/2010 - 460,998 460,998 0.00% 1,371,368 33.62%
12/31/2011 - 431,911 431,911 0.00% 1,358,876 31.78%
12/31/2012 - 417,455 417,455 0.00% 1,381,255 30.22%
12/31/2013 - 405,686 405,686 0.00% 1,397,887 29.02%
12/31/2014 - 428,191 428,191 0.00% 1,561,351 27.42%
12/31/2015 - 556,718 556,718 0.00% 1,650,937 33.72%
Town of Hillsborough, North Carolina
Required Supplementary Information
Law Enforcement Officers' Special Separation Allowance
Schedule of Funding Progress
Schedule of Funding Progress
63
Exhibit B
Schedule of Funding Progress and Schedule of Employer Contributions
Actuarial
Accrued
Liability UAAL as
Actuarial (AAL) -Unfunded a % of
Actuarial Value of
Projected AAL Funded Covered
Covered
Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll
Date (a) (b) (b) - (a)(a) (b)(c)((b - a)/c)
12/31/2008 - 1,167,518$ 1,167,518$ 0.00% 4,590,807$ 25.4%
12/31/2011 - 1,169,128 1,169,128 0.00% 4,337,051 27.0%
12/31/2014 - 1,008,928 1,008,928 0.00% 4,723,959 21.4%
Year Annual Annual
Ended Required Percentage
June 30 Contribution Contributed
2011 119,002$ 38.34%
2012 128,907 38.10%
2013 117,508 48.37%
2014 117,508 50.04%
2015 124,664 52.40%
2016 124,664 22.14%
Schedule of Funding Progress
Schedule of Employer Contributions
Town of Hillsborough, North Carolina
Other Postemployment Benefits
Required Supplementary Information
64
Exhibit C-1
2016 2015 2014
Hillsborough's proportion of the net pension
liability (asset) (%)0.00%0.00% 0.00%
Hillsborough's proportion of the net pension
liability (asset) ($)376,224$ (477,164)$ 960,691$
Hillsborough's covered-employee payroll 4,861,624$ 4,672,868$ 4,428,097$
Hillsborough's proportionate share of the
net pension liability (asset) as a
percentage of its covered-employee payroll 7.74%-10.21% 21.70%
Plan fiduciary net position as a percentage
of the total pension liability 100.00%100.00% 100.00%
* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.
Last Three Fiscal Years*
Required Supplementary Information
Town of Hillsborough, North Carolina
Schedule of Proportionate Share of Net Pension Liability (Asset)
Local Government Employees' Retirement System
65
Exhibit C-2Town of Hillsborough, North Carolina
Schedule of Contributions
Local Government Employees' Retirement System
Required Supplementary Information
Last Three Fiscal Years
2016 2015 2014
Contractually required contribution 356,396$ 357,402$ 333,343$
Contributions in relation to the contractually
required contribution 356,396 357,402 333,343
Contribution deficiency (excess)-$ -$ -$
Hillsborough's covered-employee payroll 5,235,777$ 4,861,624$ 4,672,868$
Contributions as a percentage of covered-
employee payroll 6.81%7.35% 7.13%
66
67
Supplementary Information
68
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Schedule 1
(5 pages)
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Year Ended June 30, 2015
2015
Variance
Positive
Budget Actual (Negative) Actual
Revenues
General revenues:
Ad valorem taxes:
Current 5,440,000$ 5,629,442$ 189,442$ 5,398,141$
Prior 15,000 4,016 (10,984) 15,269
Penalties and interest 20,000 35,544 15,544 23,856
5,475,000 5,669,002 194,002 5,437,266
Other taxes and licenses:
Local option sales tax 1,178,150 1,265,473 87,323 1,215,819
Gross receipts on short-term
rental property 5,000 7,433 2,433 9,163
Privilege licenses - 2,630 2,630 30,902
Motor vehicle license fees 23,500 546 (22,954) 3,477
Solid waste disposal 3,000 4,032 1,032 4,064
1,209,650 1,280,114 70,464 1,263,425
Unrestricted intergovernmental
revenues:
Franchise tax 350,000 589,466 239,466 567,970
Beer and wine tax 25,000 27,828 2,828 30,514
Food and beverage tax 368,000 347,057 (20,943) 327,428
Occupancy tax 74,200 70,460 (3,740) 72,717
817,200 1,034,811 217,611 998,629
Restricted intergovernmental
revenues:
Powell Bill 180,000 184,863 4,863 187,682
Local grants - 39,200 39,200 -
Rollout cart grant - - - 57,750
Other 150 38,081 37,931 102,037
180,150 262,144 81,994 347,469
Investment earnings 10,055 15,593 5,538 1,048
Other general revenues 137,000 118,323 (18,677) 56,727
Total general revenues 7,829,055 8,379,987 550,932 8,104,564
2016
69
Schedule 1
(5 pages)
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Year Ended June 30, 2015
2015
Variance
Positive
Budget Actual (Negative) Actual
2016
Functionally related revenues:
Use and rental fees:
Zoning permits 30,570$ 42,382$ 11,812$ 98,201$
Cable franchise 60,000 51,879 (8,121) 56,142
Time Warner Cable PEG fees 30,000 27,972 (2,028) 27,766
Fire inspection fees 10,000 13,645 3,645 12,068
Affordable Housing - 41,000 41,000 -
Total functionally related
revenues 130,570 176,878 46,308 194,177
Total revenues 7,959,625 8,556,865 597,240 8,298,741
Expenditures
General government:
Governing body:
Personnel services 48,512 40,738
Other services and charges 190,497 164,900
Reimbursement from enterprise
fund (119,471) (116,138)
191,063 119,538 71,525 89,500
Ruffin-Roulhac:
Other services and charges 77,972 108,519
Reimbursement from enterprise
fund (38,986) (40,125)
36,486 38,986 (2,500) 68,394
Administration:
Personnel services 667,671 531,733
Other services and charges 414,203 360,293
Reimbursement from enterprise
fund (519,585) (450,981)
616,190 562,289 53,901 441,045
Finance:
Personnel services 445,682 355,708
Other services and charges 100,572 96,395
Debt service payments 4,538 -
Capital outlay - 49,841
Reimbursement from enterprise
fund (274,244) (263,563)
302,515 276,548 25,967 238,381
70
Schedule 1
(5 pages)
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Year Ended June 30, 2015
2015
Variance
Positive
Budget Actual (Negative) Actual
2016
Planning:
Personnel services 350,089$ 326,817$
Other services and charges 260,337 113,641
652,086$ 610,426 41,660$ 440,458
Motor pool:
Personnel services 244,129 240,265
Other services and charges 173,408 168,138
Debt service payments 89,432 91,212
Capital outlay 68,323 -
Reimbursement from enterprise
fund (263,232) (246,596)
324,247 312,060 12,187 253,019
Total general government 2,122,587 1,919,847 202,740 1,530,797
Public safety:
Police department:
Personnel services 2,206,701 2,157,933
Other services and charges 296,518 249,995
Capital outlay 178,102 234,270
Debt service payments 36,377 18,189
3,012,545 2,717,698 294,847 2,660,387
Fire inspections/code enforcement:
Personnel services 116,959 112,565
Other services and charges 20,465 140,356
Debt service payments 176,255 126,233
325,972 313,679 12,293 379,154
Safety:
Personnel services 88,242 86,760
Other services and charges 164,914 154,364
Capital outlay 15,490 -
Reimbursement from enterprise
fund (134,232) (152,928)
223,854 134,414 89,440 88,196
Fire protection
Other services and charges 884,741 861,859
894,191 884,741 9,450 861,859
Total public safety 4,456,562 4,050,532 406,030 3,989,596
71
Schedule 1
(5 pages)
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Year Ended June 30, 2015
2015
Variance
Positive
Budget Actual (Negative) Actual
2016
Transportation:
Street department/Powell Bill:
Personnel services 243,324$ 215,199$
Other services and charges 208,211 221,784
Capital outlay 426,698 757,221
1,087,966$ 878,233 209,733$ 1,194,204
Total transportation 1,087,966 878,233 209,733 1,194,204
Environmental protection:
Sanitation department:
Personnel services 246,450 250,936
Other services and charges 120,264 178,737
Capital outlay - 434,871
Debt service payments 158,412 143,960
578,867 525,126 53,741 1,008,504
Cemetery:
Other services and charges 41,551 24,224
59,470 41,551 17,919 24,224
Stormwater:
Personnel services 92,513$ 90,693$
Other services and charges 47,143 42,833
Reimbursement from enterprise
fund - (14,489)
174,934 139,656 35,278 119,037
Total environmental
protection 813,271 706,333 106,938 1,151,765
Economic and physical development:
Tourism:
Other services and charges - 397,828 - 388,611
425,626 397,828 27,798 388,611
Total economic and physical
development 425,626 397,828 27,798 388,611
Community activities and projects:
Contributions 25,170 28,420
Other services and charges 68,066 43,588
Debt service payments 128,133 79,660
Capital outlay 728,441 764,250
Total community activities
and projects 406,082 949,810 (543,728) 915,918
72
Schedule 1
(5 pages)
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
General Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Year Ended June 30, 2015
2015
Variance
Positive
Budget Actual (Negative) Actual
2016
Parks and recreation:
Personnel services 17,724$ 5,582$
Capital outlay - 14,021
Other services and charges 80,167 54,535
Debt service payments 564,831 274,129
Total parks and recreation 395,500$ 662,722 (267,222)$ 348,267
Total expenditures 9,707,594 9,565,305 142,289 9,519,158
Revenues under
expenditures (1,747,969) (1,008,440) 739,529 (1,220,417)
Other financing sources (uses):
Transfer to other funds:
General Capital Projects Fund (50,000) - (50,000) -
Downtown Improvements Capital
Project Fund (30,000) (30,000) - (5,500)
Town Barn Improvements Capital
Project Fund - - - (20,000)
Riverwalk Phase II Fund - - - (1,858)
Rail Station Capital Project Fund (54,000) (54,000) - -
Riverwalk - CMAQ Fund (9,500) (9,500) - -
Public Works Project Fund - (50,000) 50,000 -
Transfer from other funds:
General Capital Projects Fund - - - 7,070
General Capital Reserve Fund 126,054 126,054 - 126,054
Riverwalk Phase II Fund - 173,425 173,425 -
Riverwalk Phase III Fund - 22,058 22,058 -
Installment purchase obligations
issued 10,300 544,906 534,606 1,214,368
Total other financing sources
(uses)(7,146) 722,943 730,089 1,320,134
Appropriated fund balance 1,755,115 - (1,755,115) -
Net change in fund balance -$ (285,497) (285,497)$ 99,717
Fund balance, beginning 6,217,183 6,117,466
Fund balance, ending 5,931,686$ 6,217,183$
73
Schedule 2
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Investment earnings 107$ 107$ -$ 107$ -$
Total revenues 107 107 - 107 -
Expenditures
Capital equipment 1,391,992 911,914 480,078 1,391,992 -
Fleet maintenance facility 1,117,257 1,117,257 - 1,117,257 -
Garbage truck 224,512 224,512 - 224,512 -
Municipal operations site 655,624 655,622 - 655,622 2
Construction 4,630,000 2,770,478 381,407 3,151,885 1,478,115
Total expenditures 8,019,385 5,679,783 861,485 6,541,268 1,478,117
Revenues under
expenditures (8,019,278) (5,679,676) (861,485) (6,541,161) 1,478,117
Other financing sources
(uses):
Installment purchase
obligations issued 3,318,700 2,838,621 481,029 3,319,650 950
Contribution from property
owners 4,630,000 2,770,478 381,406 3,151,884 (1,478,116)
Transfer from General Fund 77,647 77,647 - 77,647 -
Transfer to General Fund (7,069) (7,070) - (7,070) (1)
Total other financing
sources 8,019,278 5,679,676 862,435 6,542,111 (1,477,167)
Net change in fund
balance -$ -$ 950 950$ 950$
Fund balance, beginning -
Fund balance, ending 950
Amounts reported for Revenue, Expenditures and Changes in Fund
Balance are different for the Budgeted/Actual Statement due to
consolidation of the General Capital Reserve Fund
Interest on investments 1,049
Transfers out - Capital Reserve Fund (126,054)
Fund balance, beginning (Capital Reserve Fund) 464,149
Fund balance, ending (Consolidated General
Capital Projects Fund) 340,094$
Actual
Town of Hillsborough, North Carolina
Budget and Actual
General Capital Projects Fund
Year Ended June 30, 2016
Statement of Revenues, Expenditures, and Changes in Fund Balance
74
Schedule 3
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Capital contributions 1,105,000$ 1,105,000$ -$ 1,105,000$ -$
Interest on investments 15,065 14,288 1,049 15,337 272
Total revenues 1,120,065 1,119,288 1,049 1,120,337 272
Expenditures 338,873 - - - 338,873
Revenues over
expenditures 781,192 1,119,288 1,049 1,120,337 339,145
Other financing uses
Transfer to General Fund (378,161) (252,108) (126,054) (378,162) (1)
Transfer to Water Sewer
Capital Reserve Fund (403,031) (403,031) - (403,031) -
Total other financing
uses (781,192) (655,139) (126,054) (781,193) (1)
Net change in fund
balance -$ 464,149$ (125,005) 339,144$ 339,144$
Fund balance, beginning 464,149
Fund balance, ending 339,144$
General Capital Reserve Fund
Town of Hillsborough, North Carolina
Budget and Actual
Actual
Year Ended June 30, 2016
Statement of Revenues, Expenditures, and Changes in Fund Balance
75
Schedule 4
(2 pages)
Downtown Town Barn Riverwalk
Improvements Improvements Phase II
Capital Capital Capital
Projects Project Project
Fund Fund Fund
ASSETS
Cash and investments 32,328$ 5,049$ -$
Due from other governments - - -
Total assets 32,328$ 5,049$ -$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities -$ -$ -$
Total liabilities - - -
DEFERRED INFLOWS OF RESOURCES
Unearned revenue - - -
Total deferred inflows
of resources - - -
Fund balances:
Restricted for:
Stabilization by state statute - - -
Committed for:
Capital projects 32,328 5,049 -
Total fund balances 32,328 5,049 -
Total liabilities, deferred inflows of
resources, and fund balances 32,328$ 5,049$ -$
June 30, 2016
Nonmajor Governmental Funds
Town of Hillsborough, North Carolina
Combining Balance Sheet
76
Schedule 4
(2 pages)
Riverwalk Riverwalk Public Works
Phase III CMAQ Rail Station Building Total
Capital Capital Capital Capital Nonmajor
Project Project Project Project Governmental
Fund Fund Fund Fund Funds
-$ 87,951$ 42,776$ 50,000$ 218,104$
- 28,442 - - 28,442
-$ 116,393$ 42,776$ 50,000$ 246,546$
-$ 15,323$ 2,641 -$ 17,964$
- 15,323 2,641 - 17,964
- 28,442 - - 28,442
- 28,442 - - 28,442
- 28,442 - - 28,442
- 44,186 40,135 50,000 171,698
- 72,628 40,135 50,000 200,140
-$ 116,393$ 42,776$ 50,000$ 246,546$
77
Schedule 5
(2 pages)Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
Downtown Town Barn Riverwalk
Improvements Improvements Phase II
Capital Capital Capital
Project Project Project
Fund Fund Fund
Revenues
Restricted intergovernmental
revenues:
Investment earnings -$ -$ -$
Total revenues - - -
Expenditures
Current:
Economic and physical development 2,362 - -
Parks and recreation - - -
Total expenditures 2,362 - -
Revenues over (under)
expenditures (2,362) - -
Other financing sources (uses)
Transfer from General Fund 30,000 - -
Transfer to General Fund - - (173,425)
Total other financing sources (uses) 30,000 - (173,425)
Net change in fund balances 27,638 - (173,425)
Fund balances, beginning 4,690 5,049 173,425
Fund balances, ending 32,328$ 5,049$ -$
Year Ended June 30, 2016
Nonmajor Governmental Funds
Town of Hillsborough, North Carolina
78
Schedule 5
(2 pages)
Riverwalk Riverwalk Public Works
Phase III CMAQ Rail Station Building Total
Capital Capital Capital Capital Nonmajor
Project Project Project Project Governmental
Fund Fund Fund Fund Funds
129$ -$ -$ -$ 129$
129 - - - 129
- - 13,865 - 16,227
- 49,459 - - 49,459
- 49,459 13,865 - 65,686
129 (49,459) (13,865) - (65,557)
- 9,500 54,000 50,000 143,500
(22,058) - - - (195,483)
(22,058) 9,500 54,000 50,000 (51,983)
(21,929) (39,959) 40,135 50,000 (117,540)
21,929 112,587 - - 317,680
-$ 72,628$ 40,135$ 50,000$ 200,140$
79
Schedule 6
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 370,000$ -$ -$ -$ (370,000)$
Federal grants - - - - -
Capital contributions - - - - -
Total revenues 370,000 - - - (370,000)
Expenditures
Design 3,172$ 810$ 2,362$ 3,172$ -$
Capital equipment - - - - -
Construction 402,328 - - - 402,328
Contingency - - - - -
Total expenditures 405,500 810 2,362 3,172 402,328
Other financing sources
Transfer from General Fund 35,500 5,500 30,000 35,500 -
Net change in fund
balance -$ 4,690$ 27,638 32,328$ 32,328$
Fund balance, beginning 4,690
Fund balance,
ending 32,328$
Downtown Improvements Capital Project Fund
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Nonmajor Capital Project Fund
Actual
Year Ended June 30, 2016
80
Schedule 7Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Town Barn Improvements Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design 35,000$ 11,250$ -$ 11,250$ 23,750$
Capital equipment 120,000 - - - 120,000
Construction 235,000 3,701 - 3,701 231,299
Contingency 35,000 - - - 35,000
Total expenditures 425,000 14,951 - 14,951 410,049
Other financing sources
Transfer from General Fund 20,000 20,000 - 20,000 -
Installment purchase
obligations issued 405,000 - - - (405,000)
425,000 20,000 - 20,000 (405,000)
Net change in fund
balance -$ 5,049$ - 5,049$ 5,049$
Fund balance, beginning 5,049
Fund balance, ending 5,049$
Actual
81
Schedule 8Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Riverwalk Phase II Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues:
State grants:
PARTF grant 817,000$ 817,000$ -$ 817,000$ -$
NC trails grant 198,766 197,675 - 197,675 (1,091)
Other state grants 40,000 40,000 - 40,000 -
Local grants 20,000 20,000 - 20,000 -
Interest on investments 234 234 - 234 -
Total revenues 1,076,000 1,074,909 - 1,074,909 (1,091)
Expenditures
Land acquisition 959,368 959,368 - 959,368 -
Legal and administrative 199,686 163,703 - 163,703 35,983
Design 346,595 343,149 - 343,149 3,446
Construction 1,528,715 1,465,969 - 1,465,969 62,746
Contingency 72,278 - - - 72,278
Total expenditures 3,106,642 2,932,189 - 2,932,189 174,453
Revenues under
expenditures (2,030,642) (1,857,280) - (1,857,280) 173,362
Other financing sources (uses)
Installment purchase
obligations issued 1,209,937 1,210,000 - 1,210,000 63
Transfer from General Fund 820,705 820,705 - 820,705 -
Transfer to General Fund - - (173,425) (173,425) (173,425)
Total other financing
sources (uses) 2,030,642 2,030,705 (173,425) 1,857,280 (173,362)
Net change in fund
balance -$ 173,425$ (173,425) -$ -$
Fund balance, beginning 173,425
Fund balance, ending -$
Actual
82
Schedule 9Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Riverwalk Phase III Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues:
State grants -$ -$ -$ -$ -$
Interest on investments 47 47 129 176 129
Total revenues 47 47 129 176 129
Expenditures
Land acquisition 232,381 232,381 - 232,381 -
Legal and administrative 3,000 2,830 - 2,830 170
Engineering 3,000 2,750 - 2,750 250
Design 58,000 57,850 - 57,850 150
Construction 225,000 203,688 - 203,688 21,312
Contingency 47 - - - 47
Total expenditures 521,428 499,499 - 499,499 21,929
Revenues over (under)
expenditures (521,381) (499,452) 129 (499,323) 22,058
Other financing sources (uses)
Installment purchase
obligation issued 240,000 240,000 - 240,000 -
Transfer from General Fund 281,381 281,381 - 281,381 -
Transfer to General Fund - - (22,058) (22,058) (22,058)
Total other financing
sources (uses) 521,381 521,381 (22,058) 499,323 (22,058)
Net change in fund
balance -$ 21,929$ (21,929) -$ -$
Fund balance, beginning 21,929
Fund balance, ending -$
Actual
83
Schedule 10Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual
Riverwalk CMAQ Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues:
Federal grants 496,000$ 45,132$ -$ 45,132$ (450,868)$
Total revenues 496,000 45,132 - 45,132 (450,868)
Expenditures
Design 121,800 56,545 44,453 100,998 20,802
Construction 507,700 - 5,006 5,006 502,694
Total expenditures 629,500 56,545 49,459 106,004 523,496
Revenues
under expenditures (133,500) (11,413) (49,459) (60,872) 72,628
Other financing sources
Transfer from General Fund 133,500 124,000 9,500 133,500 -
Net change in fund
balance -$ 112,587$ (39,959) 72,628$ 72,628$
Fund balance, beginning 112,587
Fund balance, ending 72,628$
Actual
84
Schedule 11
Budget and Actual
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues:
State grants 120,000$ -$ -$ -$ (120,000)$
Total revenues 120,000 - - - (120,000)
Expenditures
Design 174,000 - 13,865 13,865 160,135
Total expenditures 174,000 - 13,865 13,865 160,135
Revenues
under expenditures (54,000) - (13,865) (13,865) 40,135
Other financing sources
Transfer from General Fund 54,000 - 54,000 54,000 -
Net change in fund
balance -$ -$ 40,135 40,135$ 40,135$
Fund balance, beginning -
Fund balance, ending 40,135$
Actual
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Rail Station Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
85
Schedule 12
Budget and Actual
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design 50,000$ -$ -$ -$ 50,000$
Total expenditures 50,000 - - - 50,000
Revenues
under expenditures (50,000) - - - 50,000
Other financing sources
Transfer from General Fund 50,000 - 50,000 50,000 -
Net change in fund
balance -$ -$ 50,000 50,000$ 50,000$
Fund balance, beginning -
Fund balance, ending 50,000$
Actual
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Public Works Building Capital Project Fund
Nonmajor Capital Project Fund
Year Ended June 30, 2016
86
Schedule 13
Enterprise Fund
2015
Variance
Positive
Budget Actual (Negative)Actual
Revenues
Operating revenues:
Water charges 3,490,000$ 4,009,818$ 519,818$ 3,812,455$
Sewer charges 3,715,000 3,978,680 263,680 4,047,368
Other receipts 2,128,666 2,685,134 556,468 1,080,659
9,333,666 10,673,632 1,339,966 8,940,482
Nonoperating revenues:
Interest on investments 250 5,498 5,248 356
Total revenues 9,333,916$ 10,679,130$ 1,345,214$ 8,940,838$
Town of Hillsborough, North Carolina
Budget and Actual (Non - GAAP)
Water and Sewer Fund
Year Ended June 30, 2015
2016
Year Ended June 30, 2016 with Comparative Actual Amounts for
Schedule of Revenues
87
Schedule 14
(3 pages)
2015
Variance
Positive
Budget Actual (Negative) Actual
Expenditures
Engineering:
Personnel services 406,722$ 396,052$
Other services and charges 1,430,638 1,342,244
Total engineering 2,003,958$ 1,837,360 166,598$ 1,738,296
Billing and collection:
Personnel services 375,500 344,945
Other services and charges 255,481 126,780
Repairs and maintenance 268 600
Capital outlay 326,943 27,462
Debt service payments 13,614 161,233
Total billing and collection 680,683 971,806 (291,123) 661,020
Water plant:
Personnel services 487,307 518,140
Other services and charges 292,899 314,246
Repairs and maintenance 34,195 49,032
Capital outlay 20,385 68,012
Debt service payments 138,839 116,613
Total water plant 1,147,047 973,625 173,422 1,066,043
Water distribution:
Personnel services 407,220 392,636
Other services and charges 238,533 208,346
Repairs and maintenance 19,850 20,583
Capital outlay 163,866 65,005
Debt service payments 163,492 24,708
Total water distribution 1,078,510 992,961 85,549 711,278
Wastewater collection:
Personnel services 399,151 392,169
Other services and charges 233,687 220,238
Repairs and maintenance 45,183 20,581
Capital outlay 97,295 115,878
Debt service payments 255,497 178,219
Total wastewater collection 1,107,967 1,030,813 77,154 927,085
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Water and Sewer Fund
2016
Enterprise Fund
Year Ended June 30, 2015
Year Ended June 30, 2016 with Comparative Actual Amounts for
88
Schedule 14
(3 pages)
2015
Variance
Positive
Budget Actual (Negative) Actual
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Water and Sewer Fund
2016
Enterprise Fund
Year Ended June 30, 2015
Year Ended June 30, 2016 with Comparative Actual Amounts for
Wastewater plant:
Personnel services 458,068$ 456,425$
Other services and charges 255,579 391,042
Repairs and maintenance 199,945 30,882
Capital outlay - 44,094
Debt service payments 1,305,874 1,378,647
Total wastewater plant 2,349,847$ 2,219,466 130,381$ 2,301,090
Reservoir:
Other services and charges 17,833 17,931
Repairs and maintenance 10,363 9,284
Debt service payments 649,360 656,998
Total reservoir 686,517 677,556 8,961 684,213
Total expenditures 9,054,529 8,703,587 350,942 8,089,025
Revenues over
expenditures 279,387 1,975,543 1,696,156 851,813
Other financing sources (uses)
Transfer to Water and Sewer
Capital Reserve Fund (1,903,443) (1,903,442) 1 (840,120)
Transfer to Water and Sewer
Capital Projects Fund (1,066,117) (1,066,117) - (975,000)
Transfer from Water and
Sewer Capital Projects Fund - 188,946 188,946 2,647
Transfer from Water and
Sewer Capital Reserve Fund 1,436,060 1,436,060 - 1,447,575
Installment purchase obligations
issued - 326,943 326,943 -
Total other financing
sources (uses)(1,533,500) (1,017,610) 515,890 (364,898)
Excess of revenues and
other financing sources
(uses) over (under)
expenditures and other
uses (1,254,113) 957,933 2,212,046 486,915
Appropriated fund balance 1,254,113 - (1,254,113) -
Excess of revenues and
other uses over
expenditures and other
uses -$ 957,933$ 957,933$ 486,915$
89
Schedule 14
(3 pages)
Town of Hillsborough, North Carolina
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2016 with Comparative Actual Amounts for
Reconciliation of budgetary basis (modified accrual) to full accrual
basis
Excess of revenues and other sources over expenditures and
other uses 957,933$
Reconciling items:
Interest income from Water and Sewer Capital Projects Fund 1,896
Interest income from Water and Sewer Capital Reserve Fund 4,724
Payment of principal on notes, bonds and installment
purchases 2,033,221
Capital outlay 608,489
Noncapitalizable capital project expenditures (3,559)
Depreciation (1,514,044)
Gain on disposal of capital assets 4,192
Proceeds from the sale of capital assets (4,192)
Decrease in net pension asset (174,356)
Decrease in deferred outflows of resources - pensions (2,305)
Increase in net pension liability (128,590)
Decrease in deferred inflows of resources - pensions 358,121
Interest expense accrual adjustment 1,996
Vacation pay accrual adjustment (9,794)
Bad debts 43,957
Increase in OPEB liability (24,477)
Capital contributions from developer 1,157,638
Amortization of deferred loss on refunding (15,147)
Installment purchase obligations issued (326,943)
Transfer from Water and Sewer Capital Projects Fund (188,946)
Transfer to Water and Sewer Capital Projects Fund 1,066,117
Transfer from Water and Sewer Capital Reserve Fund (1,436,060)
Transfer to Water and Sewer Capital Reserve Fund 1,903,442
Change in net position 4,313,313$
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Year Ended June 30, 2015
90
Schedule 15
Variance
Project Prior Current Total Positive
Authorization Years Year to Date (Negative)
Revenues
Restricted intergovernmental
revenues:
Federal grant 56,250$ 56,250$ -$ 56,250$ -$
Interest on investments 378 379 1,896 2,275 1,897
Total revenues 56,628 56,629 1,896 58,525 1,897
Expenditures
Capital improvements:
Sewer Outfall Phase II 1,688,043 1,288,044 283,064 1,571,108 116,935
Lawrence Road 980,260 980,260 - 980,260 -
Lake Ben Johnson 484,119 484,119 - 484,119 -
Backwash pump
replacement 83,923 83,923 - 83,923 -
Booster pump station 200,000 - - - 200,000
Waterstone water tank 1,963,255 1,761,561 149,459 1,911,020 52,235
Water meter replacement 750,000 707,653 3,551 711,204 38,796
Automatic meter reading
project - - 200,000 200,000 (200,000)
Effluent aeration 132,000 - 37,263 37,263 94,737
Other improvements 100,000 44,190 - 44,190 55,810
6,381,600 5,349,750 673,337 6,023,087 358,513
West Fork Eno Reservoir:
Services and charges 1,534,117 531,125 524,297 1,055,422 478,695
1,534,117 531,125 524,297 1,055,422 478,695
Total expenditures 7,915,717 5,880,875 1,197,634 7,078,509 837,208
Revenues under
expenditures (7,859,089) (5,824,246) (1,195,738) (7,019,984) 839,105
Other financing sources (uses)
Proceeds from installment
purchases 4,215,498 3,099,945 1,912,133 5,012,078 796,580
Transfer from Water and Sewer
Capital Reserve Fund 326,553 326,553 - 326,553 -
Transfer from Water and
Sewer Fund 3,694,052 2,627,935 1,066,117 3,694,052 -
Transfer to Water and Sewer
Fund (377,014) (200,000) (188,946) (388,946) (11,932)
Total other financing
sources 7,859,089 5,854,433 2,789,304 8,643,737 784,648
Excess of revenues and
other sources over
expenditures and other
financing uses -$ 30,187$ 1,593,566$ 1,623,753$ 1,623,753$
Town of Hillsborough, North Carolina
Budget and Actual (Non - GAAP)
Enterprise Fund
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Actual
Year Ended June 30, 2016
Water and Sewer Capital Projects Fund
91
Schedule 16
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments 264,139$ 264,382$ 4,724$ 269,106$ 4,967$
Expenditures 3,266,685 - - - 3,266,685
Revenues over (under)
expenditures (3,002,546) 264,382 4,724 269,106 3,271,652
Other financing sources (uses)
Transfers from Water and
Sewer Fund 7,061,513 5,922,231 1,903,442 7,825,673 764,160
Transfers from General Capital
Reserve Fund 403,031 403,031 - 403,031 -
Capital contributions 1,066,190 1,066,190 - 1,066,190 -
Transfers to Water and Sewer
Fund (4,228,635) (2,792,575) (1,436,060) (4,228,635) -
Transfers to Water and Sewer
Capital Projects Fund (1,299,553) (1,299,553) - (1,299,553) -
Total other financing
sources 3,002,546 3,299,324 467,382 3,766,706 764,160
Excess of revenues and
other sources over
expenditures -$ 3,563,706$ 472,106$ 4,035,812$ 4,035,812$
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non - GAAP)
Water and Sewer Capital Reserve Fund
Actual
Year Ended June 30, 2016
Enterprise Fund
92
Schedule 17
Beginning Ending
Balance Additions Deductions Balance
ASSETS
Cash -$ 750,770$ (749,946)$ 824$
LIABILITIES
Due to others -$ 750,770$ (749,946)$ 824$
Year Ended June 30, 2016
Town of Hillsborough, North Carolina
Statement of Changes in Assets and Liabilities
Special Assessment Debt Agency Fund
Fiduciary Fund
93
94
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95
Additional Financial Data
This section contains additional information on property taxes.
Schedule of Ad Valorem Taxes Receivable
Analysis of Current Tax Levy
Schedule 18
Uncollected Uncollected
Balance Collections Balance
Fiscal Year July 1, 2015 Additions and Credits June 30, 2016
2015-2016 -$ 5,646,239$ 5,583,929$ 62,310$
2014-2015 69,242 - 32,815 36,427
2013-2014 51,359 - 20,957 30,402
2012-2013 38,197 - 21,585 16,612
2011-2012 19,548 - 3,498 16,050
2010-2011 9,805 - - 9,805
2009-2010 11,836 - - 11,836
2008-2009 15,344 - - 15,344
2007-2008 14,203 - - 14,203
2006-2007 - - - -
229,534 5,646,239$ 5,662,784$ 212,989
Less allowance for
uncollectible
accounts:
General Fund (69,990) (69,990)
159,544$ 142,999$
Reconciliation of collections and credits with revenues:
Ad valorem taxes - General Fund 5,669,002$
Motor vehicle license fees - General Fund 546
Penalties and interest (35,544)
Adjustments and refunds 28,780
5,662,784$
June 30, 2016
Town of Hillsborough, North Carolina
Schedule of Ad Valorem Taxes Receivable
96
Schedule 19
Property
Excluding
Registered Registered
Property Total Motor Motor
Valuation** Rate Levy* Vehicles Vehicles
Original levy:
Property taxed at
current year’s rate 821,927,649$ 0.6800 5,589,108$ 5,220,978$ 368,130$
Motor vehicle license
fees - 52,370 - 52,370
Penalties and interest - 4,761 4,761 -
Total property
valuation 821,927,649$ 5,646,239 5,225,739 420,500
Releases and abatements - - -
Net levy 5,646,239 5,225,739 420,500
Uncollected taxes at
June 30, 2016 62,310 62,310 -
Current year’s
taxes collected 5,583,929$ 5,163,429$ 420,500$
Current levy
collection
percentage 98.90% 98.81% 100.00%
* Total adjusted levy includes discoveries and abatements.
** Property tax valuation prior to the discoveries and abatements.
Year Ended June 30, 2016
Town of Hillsborough, North Carolina
Analysis of Current Tax Levy
Town-Wide
Total Levy
97
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98
Page
Financial Trends Information
103
Revenue Capacity Information
115
Debt Capacity Information
127
Demographic and Economic Information
134
Operating Information
139
Statistical Section
This part of the Town of Hillsborough's comprehensive annual financial report presents detailed information as a
context for understanding what the information in the financial statements, note disclosures, and required
supplementary information say about the Town's overall financial health.
Sources:Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year. The Town implemented GASB Statement 34 in 2004; schedules
presenting government-wide information include information beginning in that year.
These schedules contain trend information to help the reader understand how the Town's
financial performance and well-being have changed over time.
These schedules contain information to help the reader assess the Town's most significant local
revenue sources, property taxes, and water and sewer charges.
These schedules present information to help the reader assess the affordability of the Town's
current levels of outstanding debt and the Town's ability to issue additional debt in the future.
These schedules offer demographic and economic indicators to help the reader understand the
environment within which the Town's financial activities take place.
These schedules contain service and infrastructure data to help the reader understand how the
information in the Town's financial report relates to the services the Town provides and the
activities it performs.
99
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100
Financial Trends Information
101
Town of Hillsborough, North Carolina
Net Position by Component
Last Ten Fiscal Years
(accrual basis of account)
2007 2008 2009 2010
Governmental activities:
Net investment in capital
assets 1,774,382$ 1,736,635$ 2,375,505$ 3,268,065$
Restricted 192,078 1,660,871 563,417 806,780
Unrestricted 4,228,407 3,329,482 4,891,494 5,402,272
Total governmental
activities net position 6,194,867$ 6,726,988$ 7,830,416$ 9,477,117$
Business-type activities
Net investment in capital
assets 15,946,393$ 20,174,460$ 21,590,822$ 21,736,659$
Restricted 1,607,258 2,011,464 2,438,955 2,128,459
Unrestricted 4,031,059 4,268,347 3,495,837 4,020,580
Total business-type
activities net position 21,584,710$ 26,454,271$ 27,525,614$ 27,885,698$
Primary government
Net investment in capital
assets 17,720,775$ 21,911,095$ 23,966,327$ 25,004,724$
Restricted 1,799,336 3,672,335 3,002,372 2,935,239
Unrestricted 8,259,466 7,597,829 8,387,331 9,422,852
Total primary government
net position 27,779,577$ 33,181,259$ 35,356,030$ 37,362,815$
102
Table 1
2011 2012 2013 2014 2015 2016
5,338,508$ 5,870,981$ 6,723,808$ 10,924,631$ 11,870,401$ 14,242,464$
2,121,546 1,570,832 1,831,742 1,700,808 1,558,393 1,753,856
3,766,961 3,984,264 4,390,314 4,433,988 4,797,140 4,030,053
11,227,015$ 11,426,077$ 12,945,864$ 17,059,427$ 18,225,934$ 20,026,373$
24,316,110$ 26,632,441$ 26,017,050$ 27,110,293$ 30,507,881$ 32,483,743$
1,721,067 1,974,677 2,590,989 2,591,211 2,591,600 2,596,324
3,518,417 2,674,119 4,084,460 6,546,829 6,190,061 8,522,788
29,555,594$ 31,281,237$ 32,692,499$ 36,248,333$ 39,289,542$ 43,602,855$
29,654,618$ 32,503,422$ 32,740,858$ 38,034,924$ 42,378,282$ 46,726,207$
3,842,613 3,545,509 4,422,731 4,292,019 4,149,993 4,350,180
7,285,378 6,658,383 8,474,774 10,980,817 10,987,201 12,552,841
40,782,609$ 42,707,314$ 45,638,363$ 53,307,760$ 57,515,476$ 63,629,228$
103
(accrual basis of account)
2007 2008 2009 2010
Expenses
Governmental activities:
General government 990,096$ 1,153,096$ 1,341,151$ 1,511,119$
Public safety 3,165,228 3,320,666 3,477,812 3,389,490
Transportation 1,189,355 1,217,558 435,870 390,313
Environmental protection 49,052 63,118 546,472 534,476
Economic and physical
development 210,430 217,638 237,278 247,420
Community activities and
projects 54,100 227,721 105,026 40,961
Parks and recreation - 12,801 31,657 60,629
Unallocated interest
expense 10,690 21,248 77,316 107,315
Total governmental
activities expenses 5,668,951 6,233,846 6,252,582 6,281,723
Business-type activities:
Water and sewer 5,120,765 5,472,746 5,616,181 6,093,635
Total business-type
activities expenses 5,120,765 5,472,746 5,616,181 6,093,635
Total primary government
expenses 10,789,716$ 11,706,592$ 11,868,763$ 12,375,358$
Program Revenues
Governmental activities:
Charges for services:
General government 140,920$ 159,868$ 113,738$ 131,750$
Public safety 21,036 15,290 14,453 10,825
Transportation - - - 2,951
Economic and physical
development - - - -
Parks and recreation - - - -
Operating grants and
contributions 254,312 337,166 309,510 202,067
Capital grants and
contributions 159,063 265,947 686,984 1,001,630
Total governmental
activities program revenues 575,331 778,271 1,124,685 1,349,223
Last Ten Fiscal Years
Changes in Net Position
Town of Hillsborough, North Carolina
104
Table 2
(4 pages)
2011 2012 2013 2014 2015 2016
1,353,757$ 1,402,445$ 1,301,963$ 1,524,025$ 1,416,316$ 2,010,349$
3,379,456 2,597,911 3,395,465 3,619,529 3,929,568 3,982,055
486,940 1,510,493 497,540 500,491 130,485 615,849
595,447 546,612 580,312 833,623 963,296 708,367
256,092 243,163 485,977 367,389 387,801 402,800
49,505 40,996 64,878 119,251 220,890 93,236
36,844 51,500 36,267 55,849 74,137 97,891
108,598 104,518 105,022 126,250 101,260 121,783
6,266,639 6,497,638 6,467,424 7,146,407 7,223,753 8,032,330
5,758,760 6,151,253 6,279,271 6,271,311 7,383,564 7,574,032
5,758,760 6,151,253 6,279,271 6,271,311 7,383,564 7,574,032
12,025,399$ 12,648,891$ 12,746,695$ 13,417,718$ 14,607,317$ 15,606,362$
149,790$ 160,990$ 326,565$ 126,909$ 182,109$ 122,233$
10,273 15,593 11,426 13,893 12,068 13,645
- - - - 187,682 184,863
- - - - - 41,000
2,170 2,970 3,190 4,140 5,155 4,720
183,874 228,457 175,347 316,576 10,610 28,052
1,191,157 203,301 334,525 3,741,958 253,460 1,393,799
1,537,264 611,311 851,053 4,203,476 651,084 1,788,312
105
(accrual basis of account)
2007 2008 2009 2010
Last Ten Fiscal Years
Changes in Net Position
Town of Hillsborough, North Carolina
Business-type activities:
Charges for services:
Water and sewer 6,193,895$ 6,320,471$ 6,292,642$ 6,425,750$
Capital grants and
contributions 434,712 3,754,896 290,891 -
Total business-type
activities program revenues 6,628,607 10,075,367 6,583,533 6,425,750
Total primary government
program revenues 7,203,938$ 10,853,638$ 7,708,218$ 7,774,973$
Net (Expense) Revenue
Governmental activities (5,093,620)$ (5,455,575)$ (5,127,897)$ (4,932,500)$
Business-type activities 1,507,842 4,602,621 967,352 332,115
Total primary government
net expense (3,585,778)$ (852,954)$ (4,160,545)$ (4,600,385)$
General Revenues and Other
Changes in Net Position
Governmental activities:
Taxes 5,056,393$ 5,203,555$ 5,479,986$ 5,898,215$
Unrestricted inter-governemental
revenues 544,091 575,308 625,798 615,770
Investment earnings, unrestricted 219,162 196,325 109,920 29,889
Miscellaneous 21,826 12,508 15,621 35,327
Total governmental
activities 5,841,472 5,987,696 6,231,325 6,579,201
Business-type activities:
Investment earnings 246,246 233,136 107,104 27,967
Miscellaneous 70 30,691 - -
Total business-type
activities 246,316 263,827 107,104 27,967
Total primary government 6,087,788$ 6,251,523$ 6,338,429$ 6,607,168$
Change in Net Position
Governmental activities 747,852$ 532,121$ 1,103,428$ 1,646,701$
Business-type activities 1,754,158 4,866,448 1,074,456 360,084
Total primary government 2,502,010$ 5,398,569$ 2,177,884$ 2,006,785$
106
Table 2
(4 pages)
2011 2012 2013 2014 2015 2016
6,755,260$ 7,366,996$ 7,686,356$ 9,025,607$ 8,939,712$ 10,713,397$
658,828 100,000 - 1,028,171 1,484,316 1,161,830
7,414,088 7,466,996 7,686,356 10,053,778 10,424,028 11,875,227
8,951,352$ 8,078,307$ 8,537,409$ 14,257,254$ 11,075,112$ 13,663,539$
(4,729,375)$ (5,886,327)$ (5,616,371)$ (2,942,931)$ (6,572,669)$ (6,244,018)$
1,655,328 1,315,743 1,407,085 3,782,467 3,040,464 4,301,195
(3,074,047)$ (4,570,584)$ (4,209,286)$ 839,536$ (3,532,205)$ (1,942,823)$
5,808,387$ 5,816,041$ 6,371,494$ 6,603,311$ 6,698,408$ 6,949,754$
635,907 651,381 734,401 809,190 998,629 1,034,811
10,838 4,748 3,874 2,209 1,177 16,771
24,141 16,250 26,389 39,899 40,962 43,121
6,479,273 6,488,420 7,136,158 7,454,609 7,739,176 8,044,457
14,568 6,869 4,177 2,601 745 12,118
- - - - - -
14,568 6,869 4,177 2,601 745 12,118
6,493,841$ 6,495,289$ 7,140,335$ 7,457,210$ 7,739,921$ 8,056,575$
1,749,898$ 199,062$ 1,519,787$ 4,511,678$ 1,166,507$ 1,800,439$
1,669,896 1,725,643 1,411,262 3,785,068 3,041,209 4,313,313
3,419,794$ 1,924,705$ 2,931,049$ 8,296,746$ 4,207,716$ 6,113,752$
107
Governmental Funds
Last Ten Fiscal Years
2007 2008 2009 2010
General fund:
Reserved 743,476$ 852,658$ 904,063$ 1,230,710$
Unreserved 3,671,668 3,766,755 4,030,731 3,832,453
Nonspendable - - - -
Restricted - - - -
Committed - - - -
Assigned - - - -
Unassigned - - - -
4,415,144 4,619,413 4,934,794 5,063,163
All other governmental funds:
Reserved - - - 200,000
Unreserved 154,898 1,566,324 575,855 639,599
Nonspendable - - - -
Restricted - - - -
Committed - - - -
Assigned - - - -
Unassigned - - - -
154,898 1,566,324 575,855 839,599
Total fund balance 4,570,042$ 6,185,737$ 5,510,649$ 5,902,762$
Town of Hillsborough, North Carolina
(modified accrual basis of accounting)
Fund Balances
108
Table 3
2011 2012 2013 2014 2015 2016
-$ -$ -$ -$ -$ -$
- - - - - -
477 68,649 4,253 72,156 68,242 175,392
1,047,758 955,064 1,115,688 1,110,734 1,049,112 1,385,320
- - - - -
215,354 88,094 330,206 782,995 1,294,457 672,896
3,478,868 3,803,076 4,151,725 4,151,581 3,805,372 3,698,078
4,742,457 4,914,883 5,601,872 6,117,466 6,217,183 5,931,686
- - - - - -
- - - - - -
- - 52 - - -
1,073,788 227,052 716,054 844,464 509,281 368,536
204,943 856,356 - 106,105 272,548 171,698
- - 131,490 7,070 - -
(324,964) (112,038) (20,444) - - -
953,767 971,370 827,152 957,639 781,829 540,234
5,696,224$ 5,886,253$ 6,429,024$ 7,075,105$ 6,999,012$ 6,471,920$
109
Town of Hillsborough, North Carolina
Governmental Funds
Last Ten Fiscal Years
2007 2008 2009 2010
Revenues
Ad valorem taxes 3,863,679$ 3,843,372$ 4,317,508$ 4,819,371$
Other taxes and licenses 1,197,964 1,216,236 1,178,406 1,131,562
Unrestricted intergovernmental 544,091 575,308 625,798 615,770
Restricted intergovernmental 257,092 364,818 755,912 306,662
Investment earnings 219,834 195,632 109,920 29,889
Contribution from property owners - - - -
Capital contributions 135,000 235,000 235,000 200,000
Use and rental 161,956 175,158 128,191 142,575
Other general revenues 42,440 30,733 31,106 31,518
Total revenues 6,422,056 6,636,257 7,381,841 7,277,347
Expenditures
Current:
General government 1,090,839 1,255,061 1,986,459 2,552,912
Public safety 3,281,406 3,349,295 3,499,641 3,263,200
Transportation 843,439 633,474 408,258 720,627
Environmental protection 364,861 510,948 470,448 580,854
Economic and physical
development 210,430 217,638 237,278 247,420
Community activities and
projects 54,461 227,721 105,026 54,137
Parks and recreation 109,096 102,046 1,722,062 344,499
Debt service:
Principal retirement 36,638 62,140 178,595 238,111
Interest and fiscal charges 7,972 11,938 68,762 93,874
Total expenditures 5,999,142 6,370,261 8,676,529 8,095,634
Excess of revenues over (under)
expenditures 422,914 265,996 (1,294,688) (818,287)
Other financing sources (uses)
Transfers in 111,232 - 43,023 628,118
Transfers out (111,232) - (43,023) (628,118)
Insurance recovery - - - -
Debt service - principal on
refunding - - - -
Proceeds from installment notes 69,500 1,349,700 619,600 1,210,400
Total other financing sources 69,500 1,349,700 619,600 1,210,400
Net change in fund balances 492,414$ 1,615,696$ (675,088)$ 392,113$
Capital outlay included in
functional expenditures above 484,601$ 313,810$ 2,491,483$ 1,907,332$
Debt service as a percentage of
noncapital expenditures 0.81% 1.22% 4.00% 5.36%
(modified accrual basis of accounting)
Changes in Fund Balance
110
Table 4
2011 2012 2013 2014 2015 2016
4,610,003$ 4,716,460$ 5,135,469$ 5,429,114$ 5,437,266$ 5,669,002$
1,163,501 1,124,696 1,229,425 1,199,185 1,263,425 1,280,114
635,907 651,381 734,401 809,190 998,629 1,034,811
1,234,870 453,755 308,007 768,716 642,732 262,144
10,838 4,748 3,874 2,209 1,177 16,771
- - - 1,445,207 1,325,271 381,406
200,000 100,000 - - -
160,063 176,583 337,991 140,802 194,177 176,878
67,071 69,669 34,079 48,337 56,727 118,323
8,082,253 7,297,292 7,783,246 9,842,760 9,919,404 8,939,449
1,232,665 1,235,107 1,122,514 2,799,302 2,779,807 2,207,284
3,347,597 3,164,361 3,134,327 3,455,438 3,845,174 4,317,978
1,718,386 1,693,664 1,011,557 851,502 1,194,204 878,233
583,919 476,415 471,880 806,262 1,008,615 564,148
256,092 243,163 485,977 367,389 388,611 397,828
54,946 325,666 64,878 119,251 836,258 821,677
791,184 239,105 430,831 1,675,156 423,813 147,350
303,074 283,126 407,246 474,458 632,155 1,037,623
107,928 98,896 111,265 118,711 101,228 120,355
8,395,791 7,759,503 7,240,475 10,667,469 11,209,865 10,492,476
(313,538) (462,211) 542,771 (824,709) (1,290,461) (1,553,027)
717,582 440,409 369,627 169,054 160,482 465,037
(717,582) (843,440) (369,627) (169,054) (160,482) (465,037)
- 16,250 - - - -
- - - (1,256,353) - -
107,000 1,039,021 - 2,727,143 1,214,368 1,025,935
107,000 652,240 - 1,470,790 1,214,368 1,025,935
(206,538)$ 190,029$ 542,771$ 646,081$ (76,093)$ (527,092)$
2,280,672$ 1,501,851$ 997,107$ 2,246,332$ 2,619,910$ 1,962,820$
6.72% 6.10% 8.30% 7.04% 8.54%13.58%
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112
Revenue Capacity Information
113
Town of Hillsborough, North Carolina
Program Revenues by Function/Program
Last Ten Fiscal Years
(accrual basis of account)
2007 2008 2009 2010
Function/program
Governmental activities:
General government 140,920$ 159,868$ 348,738$ 331,750$
Police 64,210 134,722 14,453 28,874
Transportation 192,890 216,544 274,275 543,741
Environmental
protection 8,940 - - -
Economic and
physical development 16,302 1,190 235 -
Community activities and
projects - - - -
Parks and recreation 152,069 265,947 486,984 444,858
Subtotal governmental
activities 575,331 778,271 1,124,685 1,349,223
Business-type activities:
Water and sewer 6,628,607 10,075,367 6,583,533 6,425,750
Subtotal business-type
activities 6,628,607 10,075,367 6,583,533 6,425,750
Total primary government 7,203,938$ 10,853,638$ 7,708,218$ 7,774,973$
114
Table 5
2011 2012 2013 2014 2015 2016
382,843$ 354,227$ 361,590$ 1,388,937$ 192,719$ 1,430,962$
10,273 15,593 11,426 13,893 12,068 13,645
848,978 228,521 185,847 312,282 187,682 264,863
- - - 2,059,224 653 4,680
- - - - - 41,000
- - - - - -
295,170 12,970 292,190 429,140 257,962 33,162
1,537,264 611,311 851,053 4,203,476 651,084 1,788,312
7,414,088 7,466,996 7,686,356 10,053,778 10,424,028 11,875,227
7,414,088 7,466,996 7,686,356 10,053,778 10,424,028 11,875,227
8,951,352$ 8,078,307$ 8,537,409$ 14,257,254$ 11,075,112$ 13,663,539$
115
Town of Hillsborough, North Carolina Table 6
Tax Revenues by Source
Governmental Funds a
Last Ten Fiscal Years
(modified accrual basis of accounting)
Fiscal Ad Valorem
Year Taxes
2007 3,863,679$
2008 3,843,372
2009 4,317,508
2010 4,819,371
2011 4,610,003
2012 4,716,460
2013 5,135,469
2014 5,429,114
2015 5,437,266
2016 5,669,002
Change b
2007 - 2016 46.73%
a This table presents the Town's most significant source of revenues. All other taxes and revenues are either
comparatively insignificant or levied by a governmental entity other than the Town of Hillsborough.
b Ad Valorem tax revenue increased by 46.73 percent in the past ten years. This is primarily due to property
values being re-evaluated every four years. During the last ten years, there were two re-evaluation periods
2005 and 2009. The four-year re-evaluation period along with increasing property values and steady growth
has caused a significant increase in Ad Valorem Revenue from 2007 to 2016.
116
Table 7
Assessed
Total Value as a
Public- Total Direct Percent of
Fiscal Real Personal Service Assessed Tax Actual
Year Property * Property Companies Value Rate Value
2007 532,148,273$ 78,065,817$ 12,257,142$ 622,471,232$ 0.6200 100.00%
2008 535,719,952 81,267,458 11,297,072 628,284,482 0.6350 100.00%
2009 552,914,553 77,727,711 11,612,614 642,254,878 0.6700 100.00%
2010 657,426,788 83,569,294 11,954,916 752,950,998 0.6200 100.00%
2011 653,238,545 84,168,694 10,825,503 748,232,742 0.6200 100.00%
2012 661,688,578 85,866,250 11,371,703 758,926,531 0.6200 100.00%
2013 667,581,857 83,022,657 11,710,268 762,314,782 0.6800 100.00%
2014 674,676,352 99,378,379 11,710,269 785,765,000 0.6800 100.00%
2015 676,291,406 98,629,989 12,462,428 787,383,823 0.6800 100.00%
2016 676,946,203 130,843,708 14,137,738 821,927,649 0.6800 100.00%
Last Ten Fiscal Years
Assessed Value and Actual Value of Taxable Property
Town of Hillsborough, North Carolina
Note:Property in the city is reassessed each year. Property is assessed at actual value; therefore, the
assessed values are equal to actual value. Tax rates are per $100 of assessed value.
Source: Annual County Report of Valuation and Property Tax Levies.
* Real property values exclude tax-exempt property.
117
Town of Hillsborough, North Carolina Table 8
Last Ten Fiscal Years
Fiscal Basic Total Fire
Year Rate Direct District b County
2007 0.620 0.620 - 0.9030
2008 0.635 0.635 - 0.9500
2009 0.670 0.670 - 0.9980
2010 0.620 0.620 - 0.8580
2011 0.620 0.620 - 0.8580
2012 0.620 0.620 - 0.8580
2013 0.680 0.680 - 0.8580
2014 0.680 0.680 - 0.8780
2015 0.680 0.680 - 0.8780
2016 0.680 0.680 - 0.8780
Source: Orange County
(rate per $100 of assessed value)
Direct and Overlapping Property Tax Rates
b The Fire District Tax applies to properties outside of the city limits.
Municipality Rates
Note:The Town's basic property tax rate may be increased only by a majority vote of the elected Town Board
of Town Commissioners.
a Overlapping rates are those of local and county governments that apply to property owners within the Town of
Hillsborough.
Overlapping Rates a
118
Town of Hillsborough, North CarolinaTable 9FiscalYearTaxes Levied CollectionsEnded for the Percentage in Subsequent PercentageJune 30, Fiscal YearAmountof LevyYearsAmountof Levy2007 3,893,091$ 3,833,657$ 1$ 56,622$ 3,890,279$ 99.93%2008 4,035,215 3,828,830 94.89% 198,510 4,027,340 99.80%2009 4,380,999 4,295,618 98.05% 77,413 4,373,031 99.82%2010 4,732,461 4,641,581 98.09% 80,255 4,721,836 99.78%2011 4,690,863 4,557,501 97.16% 118,810 4,676,311 99.69%2012 4,755,200 4,641,541 97.61% 97,730 4,739,271 99.67%2013 5,225,057 5,085,225 98.82% 115,743 5,200,968 99.54%2014 5,418,579 5,315,921 98.11% 72,256 5,388,177 99.44%2015 5,413,151 5,343,909 98.72% 32,815 5,376,724 99.33%20165,646,239 5,583,929 98.90% - 5,583,929 98.90%Sources: Orange County Board of Equalization and Assessment, and Orange County Department of Finance.Last Ten Fiscal YearsProperty Tax Review and CollectionsFiscal Year of the Levy Total Collections to DateCollected within the119
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120
Table 10Percentage Percentageof Total City of Total CityTaxable Taxable Taxable TaxableAssessed Assessed Assessed AssessedTaxpayer Value Rank Value Value Rank ValueSports Endeavors 22,416,233$ 1 2.92% 7,376,640$ 6 1.19%Hillsborough Apartments Partners LLC 16,246,517 2 2.12%Wal-Mart Real Estate Business 15,078,247 3 1.97% 12,758,748 2 2.05%Home Depot Development 10,246,750 4 1.34% 10,760,654 3 1.73%PHE Inc. 9,920,427 5 1.29% 7,224,150 7 1.16%Daniel Boone Ltd 8,976,585 6 1.17% 8,343,619 5 1.34%Hillsborough Commons Ltd Partners 8,497,192 7 1.11% 6,562,050 10 1.05%MDCO LLC 8,376,600 8 1.09%Ashton Raleigh Residential LLC 7,596,000 9 0.99%SLF II Waterstone LLC 7,136,560 10 0.93% 9,902,156 4 1.59%Patriots Pointe LLC30,009,726 1 4.82%Artcraft Hillsborough LC7,139,119 8 1.15%Meadowlands Distributions Co.6,975,686 9 1.12%Total 114,491,111$ 14.94% 107,052,548$ 17.20%Source: Orange County Property Assessment DivisionPrincipal Property TaxpayersTown of Hillsborough, North Carolina2016 2007Current Year and Nine Years Ago121
Type of Customer 2007 2008 2009 2010
Gallons billed:
In-town residential 92,359,968 90,776,263 88,082,088 91,194,583
Out-of-town residential 105,793,065 104,552,882 101,568,087 106,627,659
In-town commercial 90,080,216 85,878,132 88,318,823 89,569,350
Out-of-town commercial 29,297,960 28,156,261 23,213,084 22,056,653
Total gallons billed 317,531,209 309,363,538 301,182,082 309,448,245
Total water and sewer charges
(revenue) 5,699,410$ 5,743,722$ 6,043,820$ 6,194,638$
Total average rate per 1,000
gallons 17.95$ 18.57$ 20.07$ 20.02$
Source: Town of Hillsborough, Water Billing Office.
Revenue collected includes late payment penalties.
Town of Hillsborough, North Carolina
Last Ten Fiscal Years
Water Sold by Type of Customer and In and Out of Town
122
Table 11
2011 2012 2013 2014 2015 2016
103,459,804 102,937,205 102,755,771 111,836,111 98,914,635 100,064,880
112,868,479 120,107,805 130,921,523 111,241,276 124,805,789 100,445,055
74,881,598 73,507,962 76,624,165 78,590,500 81,985,440 75,012,631
18,219,706 18,296,584 18,153,125 17,908,575 29,452,224 18,028,437
309,429,587 314,849,556 328,454,584 319,576,462 335,158,088 293,551,003
6,405,307$ 6,928,835$ 7,262,510$ 7,499,183$ 7,859,823$ 7,988,498$
20.70$ 22.01$ 22.11$ 23.47$ 23.45$ 27.21$
123
Town of Hillsborough, North CarolinaTable 12Water and Sewer RatesLast Ten Fiscal YearsRate perRate perRate per Rate perRate per Rate perRate per Rate perFiscal 0-3000 1,000 0-3000 1,000 0-3000 1,000 0-3000 1,000YearGallons Gallons Gallons Gallons Gallons Gallons Gallons Gallons2007 19.95$ 6.65$ 20.52$ 6.84$ 38.91$ 12.97$ 40.02$ 13.34$ 2008 20.16 6.72 21.33 7.11 39.30 13.10 41.61 13.87 2009 21.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79 2010 21.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79 2011 21.75 7.25 23.88 7.96 42.42 14.14 46.56 15.52 2012 23.04 7.68 25.98 8.66 44.94 14.98 50.67 16.89 2013 24.21 8.07 28.26 9.42 47.22 15.74 55.11 18.37 2014 21.79 8.07 30.11 11.15 42.50 15.74 58.70 21.74 2015 21.79 8.07 30.75 10.25 47.22 15.74 59.97 27.68 201620.98 8.07 31.54 12.13 40.92 15.74 61.49 23.65 Rate changes are effective with July 1 water usage unless otherwise stated.Prior to 7/1/15, a flat charge was billed for 0 to 2,700 gallons. Any usage over 2,700 gallons was billed per 1,000 gallons rate.Beginning 7/1/15, a flat charge is billed for 0 to 2,600 gallons. Any usage over 2,600 gallons is billed per 1,000 gallons rate.The construction of a reservoir in 1998 and renovations of an aging water and wastewater treatment plant have caused significant increases in water and sewerrates over the past ten years. Out-of-Town Water Out-of-Town SewerIn-Town Water In-Town Sewer124
Debt Capacity Information
125
Table 13GovernmentalActivitiesGeneral TotalFiscal Installment Obligation Revolving Installment PrimaryPerYearLoans Bonds Loans Loans GovernmentCapita a2007 231,363$ 4,189,000$ 1,448,224$ 3,388,902$ 9,257,489$ 1,502$ 2008 1,518,923 3,803,000 1,372,001 2,978,369 9,672,293 1,550 2009 1,959,928 122,000 1,295,779 6,172,366 9,550,073 1,450 2010 2,932,216 86,000 1,219,557 6,258,012 10,495,785 1,572 2011 2,736,142 50,000 1,143,336 5,741,602 9,671,080 1,582 2012 3,440,001 14,000 5,575,878 5,871,812 14,901,691 2,388 2013 3,084,791 - 16,247,369 4,914,368 24,246,528 3,850 2014 4,024,586 - 18,644,077 3,939,307 26,607,970 4,170 2015 4,606,799 - 18,605,655 2,970,088 26,182,542 4,161 20164,534,728 - 18,511,848 3,269,750 26,316,326 4,102 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.Ratios of Outstanding Debt by TypeTown of Hillsborough, North CarolinaBusiness-Type Activitiesa See Table 17 for population data. These ratios are calculated using population for the prior calendar year.Last Ten Fiscal Years126
Town of Hillsborough, North Carolina Table 14
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
Percentage of
General Actual Taxable
Fiscal Obligation Value a of Per
Year Bonds Total Property Capita b
2007 4,189,000$ 4,189,000$ 0.67% 671$
2008 3,803,000 3,803,000 0.61% 578
2009 122,000 122,000 0.00% 18
2010 86,000 86,000 0.00% 13
2011 50,000 50,000 0.00% 8
2012 14,000 14,000 0.00% 2
2013 - - 0.00% -
2014 - - 0.00% -
2015 - - 0.00% -
2016 - - 0.00% -
a See Table 7 for property value data.
b Population data can be found in Table 17.
General Bonded Debt Outstanding
Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.
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128
Table 15
Town's
Orange Co. Estimated
G.O. Bonds Estimated Share of
Outstanding Percentage Overlapping
Governmental Unit Debt Applicable a Debt
Debt repaid with property taxes 214,322,108$ 5.269% 11,291,702$
Town's overlapping debt 11,291,702
Town's direct debt 4,534,728
Total direct and overlapping debt 15,826,430$
June 30, 2016
Direct and Overlapping Governmental Activities Debt
Town of Hillsborough, North Carolina
Sources:Assessed value data used to estimate applicable percentages provided by the Orange County
Property Assessment Division. Debt outstanding data provided by each governmental unit.
129
Town of Hillsborough, North Carolina
Legal Debt Margin Information
Last Ten Fiscal Years
2007 2008 2009 2010
Debt limit 49,797,699$ 50,262,759$ 51,380,390$ 60,236,080$
Total net debt applicable to
to limit 231,363 1,518,923 1,959,928 2,932,216
Legal debt margin 49,566,336$ 48,743,836$ 49,420,462$ 57,303,864$
Total net debt applicable to the
limit as a percentabe of debt limit 0.46% 3.02% 3.81% 4.87%
total assessed property value.
Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of
130
Table 16
Assessed value 821,927,649$
Debt limit (8% of assessed value)65,754,212
Debt applicable to limit:
Installment loans (4,534,728)
Legal debt margin 61,219,484$
2011 2012 2013 2014 2015 2016
59,858,619$ 60,714,122$ 60,985,183$ 62,861,200$ 62,990,706$ 65,754,212$
2,736,142 3,440,001 3,084,791 4,024,586 4,606,799 4,534,728
57,122,477$ 57,274,121$ 57,900,392$ 58,836,614$ 58,383,907$ 61,219,484$
4.57% 5.67% 5.06% 6.40% 7.31%6.90%
Legal Debt Margin
Calculation for Fiscal Year 2016
131
Demographic and Economic Information
132
Table 17Personal PerIncome Capita(thousandsPersonal Median School UnemploymentYear Populationof dollars)Income Age Enrollment Rate 2007 6,240 5,772,365$ 46,279$ 33.00 1,180 3.9%2008 6,584 6,107,990 48,100 33.10 1,272 4.6%2009 6,677 6,186,352 47,925 33.30 1,272 7.0%2010 6,751 6,268,886 46,713 33.18 1,279 6.6%2011 6,113 * * 33.42 1,305 7.3%2012 6,239 * * 33.62 1,420 7.1%2013 6,298 * * 33.99 1,433 5.3%2014 6,381 4,905,216 34,949 33.10 1,3704.8%2015 6,292 5,287,926 37,658 33.50 1,3933.9%20166,415 * 27,575 35.70 1,408 4.6%* Information not available per Orange County Economic Development Last Ten Fiscal YearsDemographic and Economic StatisticsTown of Hillsborough, North CarolinaNote:Population, median age, and education level information are based on surveys conducted during the last quarter of the calendar year. Personal incomeinformation is a total for the year. Unemployment rate information is an adjusted yearly average. School enrollment is based on the census at the startof theschool year.Sources:Population and median age information provided by the State Library of North Carolina. Personal income information provided by the Orange CountyEconomic Development Office. Unemployment data provided by the Employment Security Commission. School enrollment data provided by the OrangeCounty Board of Education.Note:Personal income, per capita personal income, median age, and unemployment are not available at the town level and is reported at the county level.Unemployment is reported for the month of June of each year.133
Town of Hillsborough, North Carolina Table 18
Principal Employers
Current Year and Nine Years Ago
Percentage of Percentage of
Total Town Total Town
Employer Employees Population Employees Population
Orange County Schools 1,292 20.14%1,322 21.19%
Orange County Government 950 14.81%970 15.54%
Sports Endeavors, Inc.
dba Eurosport 439 6.84%336 5.38%
PHE 350 5.46%361 5.79%
Wal-Mart Associates Inc 335 5.22%316 5.06%
Brookshire Nursing Center 150 2.34%117 1.88%
Builders First 125 1.95%0.00%
UNC Hospital 106 1.65%0.00%
The Home Depot 101 1.57%104 1.67%
Piedmont Electric
Membership Corp 100 1.56%115 1.84%
0.00%
Total 3,948 61.54%3,641 58.35%
Source: Town Economic Development Division and Employment Security Commission.
Note: Information regarding Town's total employment is not available.
* Data not available
2016 2007
134
Town of Hillsborough, North Carolina Table 19
Full-Time Equivalent City Government Employees by Function/Program
Function/Program 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
General government
Administration 3 3 3 4 4 3 3 5 5 7
Finance 5 4 4 4 4 4 4 4 4 5
Planning 3 3 4 3 3 3 3 4 4 5
Safety - 1 1 1 1 1 1 1 1 1
Stormwater - - - - - - - 1 1 1
Police
Officers 26 29 29 26 26 25 27 24 28 26
Civilians 1 2 3 2 2 - - - -
Public works
Streets 3 4 4 4 4 3 3 3 4 4
Sanitation 5 5 4 4 4 4 4 4 4 4
Motor pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 3 3 4 4 4 4 4 4 4 4
Billing and collection 6 6 7 6 5 5 5 5 6 6
Water 6 6 6 6 6 6 6 6 6 6
Wastewater 9 9 10 10 8 8 8 7 6 6
Water distribution/
wastewater collection 10 11 7 8 8 11 11 11 11 12
Fire inspections 1 1 1 1 1 1 1 1 1 1
Total 84 90 90 86 83 81 83 83 88 91
Last Ten Fiscal Years
Source: Town Finance Office. Positions reported at June 30th are positions filled.
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Operating Information
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Town of Hillsborough, North Carolina
Operating Indicators by Function/Program
Last Ten Fiscal Years
Function/Program 2007 2008 2009 2010
Police
Physical arrests 792 562 524 546
Calls for service 7,273 11,181 12,490 9,619
Traffic citations 1,538 1,877 1,937 1,712
Number of policeman positions 27 29 29 29
Fire
Number of stations 1 1 1 1
Emergency responses (EMS and fire) 1,802 1,960 1,918 1,865
Fires extinguished 6 6 30 75
Number of paid firemen 19 23 23 24
Number of volunteers 15 15 12 15
Inspections 387 289 269 213
Refuse collection
Refuse collected (tons per day) 6.3 6.3 6.7 6.1
Recyclables collected (tons per day)****
Other public works
Street resurfacing (miles) 2.2 1.5 0.5 -
Potholes repaired 84 51 103 45
Parks and recreation
Number of parks 3 6 6 6
Library
Volumes in collection 94,273 84,465 78,770 75,506
Total volumes borrowed 178,911 184,301 209,023 203,450
Water
New connections 949 841 826 939
Water main breaks 32 36 46 41
Average daily consumption
(millions of gallons per day) 1.235 1.101 1.143 1.124
Peak daily consumption
(millions of gallons) 1.770 1.770 1.938 1.626
Wastewater
Average daily sewage treatment
(millions of gallons) 0.726 0.740 0.872 0.888
Education
Number of schools a 3 3 3 3
Number of teachers 113 105 105 111
Number of students 1,180 1,272 1,272 1,279
Number of classrooms b 110 95 95 95
Sources: Various city departments.
a Alternative school added for students who have not been successful in the traditional school setting in FY06
YTBD (Yet to be determined)
b Core classes only reported in FY11, FY12 and FY13
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Table 20
2011 2012 2013 2014 2015 2016
475 560 538 521 553 492
12,889 15,039 14,569 12,279 15,975 16,674
1,182 1,134 1,651 1,212 725 557
29 29 26 26.5 27 29
1 1 1 1 1 1
1,835 1,770 1,866 1,950 1,978 1,949
19 78 70 45 107 80
24 25 24 24 27 22
12 14 19 15 12 12
211 258 177 132 171 163
5.95 - 6.34 5.90 5.54 6
* * * 0.02 0.48 1
- - 2.25 2.13 4.7 2
41 36 30 36 30 25
6 6 6 6 6 7
86,526 97,536 93,421 93,886 93,656 96,393
287,938 351,216 397,379 396,164 412,416 446,499
815 767 736 799 840 946
10 30 20 15 11 27
1.129 1.048 0.913 1.103 1071 1,401
1.653 1.576 1.653 1.685 1.815 1.983
0.757 0.765 0.902 1.133 0.895 1.185
3 3 3 3 3 3
111 113 113 112 112 112
1,305 1,420 1,433 1,370 1,393 1,408
65 65 65 65 65 65
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Town of Hillsborough, North Carolina
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Function/Program 2007 2008 2009 2010
Police
Stations 2 2 2 2
Patrol units 23 23 26 26
Fire stations 1 1 1 1
Refuse collection
Collection trucks >3 3 6 6
Other public works
Streets (miles) - paved 32.89 32.89 36.15 36.15
Streets (miles) - unpaved 0.86 0.86 0.73 0.73
Streetlights 621 623 623 633
Traffic signals (all state-owned) - - - -
Parks and recreation
Acreage b 30.24 72.62 72.62 72.62
Playgrounds 3 4 4 4
Water
Water mains (miles) 126.0 146.8 146.8 147.0
Fire hydrants ^612 ^622 ^656 ^597
Storage capacity (thousands of gallons) 3,000 3,000 3,000 3,000
Wastewater
Sanitary sewers (miles) 70.0 86.4 86.4 86.4
Storm sewers (miles) a - 36.0 36.0 73.0
Treatment capacity (millions of gallons) 3.0 3.0 3.0 3.0
Area (square miles) 5.520 5.530 5.740 5.740
Sources: Various city departments.
a Storm sewer data not available.
b Includes two parks owned by the Town but are located outside of the city limits.
c 2012 figure included private hydrants - 2013 actual number of hydrants from GIS
^ Estimated
> Includes brush and leaf trucks 2009 forward
Note: No capital asset indicators are available for the general government or library function.
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Table 21
2011 2012 2013 2014 2015 2016
2 2 2 2 2 2
28 27 26 27 27 25
1 1 1 1 1 1
6 7 7 8 8 8
36.15 36.15 36.15 36.15 37.63 33.96
0.73 0.73 0.73 0.91 0.69 0.68
633 633 633 678 679 709
- - - -
72.62 74.10 74.10 74.10 74.10 74.1
4 4 4 4 4 5
147.0 148.0 148.0 150.0 151.0 149.0
614 663 c 621 619 628 628
3,000 3,000 3,000 3,000 3,000 3,500
86.4 89.0 93.0 93 94.0 96.5
73.0 73.0 73.0 75 75.0 75.0
3.0 - 3.0 3 3.0 3.0
5.740 5.740 5.760 5.80 5.800 6
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Compliance Section
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Independent Auditors’ Report 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
Honorable Mayor, Members of the Board
of Town Commissioners, and the Town Manager
Town of Hillsborough, North Carolina
We have audited, 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, the accompanying financial statements of the
governmental activities, business-type activities, the aggregate discretely presented component units,
each major fund and the aggregate remaining fund information of the Town of Hillsborough (the “Town”)
as of and for the year ended June 30, 2016, and the related notes to the financial statements, which
collectively comprise the Town’s basic financial statements, and have issued our report thereon dated
December 23, 2016. The financial statements of the Hillsborough Tourism Development Authority and the
Hillsborough Tourism Board were not audited in accordance with Government Auditing Standards.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do
not express an opinion on the effectiveness of the Town’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination
of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement
of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe
than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies, and therefore material weaknesses or significant
deficiencies may exist that were not identified. We did identify a certain deficiency in internal control,
described in the accompanying schedule of findings and responses as item 2016-001 that we consider to
be a material weakness.
146
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Hillsborough’s financial statements
are free of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit and, accordingly, we do not express such an
opinion. The results of our tests disclosed one instance of noncompliance or other matters that is required
to be reported under Government Auditing Standards and which is described in the accompanying
schedule of findings and responses as item 2016-002.
Town of Hillsborough’s Response to Finding
The Town of Hillsborough’s responses to the findings identified in our audit are described in the
accompanying schedule of findings and responses. The Town’s responses were not subjected to the
auditing procedures applied in the audit of the financial statements and, accordingly, we express no
opinion on them.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly,
this communication is not suitable for any other purpose.
High Point, North Carolina
December 23, 2016
Town Of Hillsborough, North Carolina
Schedule of Findings and Responses
Year Ended June 30, 2016
147
Schedule of Findings and Responses
Finding 2016-001: Financial Accounting Closing Procedures
Criteria: Certain asset and liability accounts were not reconciled and adjusted as of June 30.
Condition: Monthly, quarterly, and annual account reconciliations were not being performed and reviewed in a
timely manner on certain balance sheet accounts.
Cause: The Town did not follow proper review and reconciliation processes for certain balance sheet accounts.
Effect: The lack of reconciliation, or inaccurate reconciliation, of certain asset and liability accounts resulted in the
identification of several adjusting journal entries during the audit process.
Recommendation: We recommend the Town establish more effective review procedures surrounding the account
reconciliation policies and procedures, including the review of reconciliations of all accounts on a routine basis,
whether monthly, quarterly or annually, based on the specific accounts and the nature of activity during the year.
Certain areas where we noted the need for more effective review and reconciliation policies and procedures
include the following balance sheet accounts:
Cash
Due from other governments
Accrued liabilities
Long-term debt
View of responsible official and planned corrective action: The Town will continue to refine our policies and
procedures to ensure reconciliations are being performed as soon after fiscal year-end as possible. Due to the
fact that many of the adjusting journal entries this fiscal year were resultant from untimely and/or incomplete data
provided by other governments, the Town’s finance staff will continue to work towards more effective
communication with partners to facilitate the receipt of data in a timelier manner. The Town will also continue to
support continued education for finance staff related to governmental accounting and auditing standards.
Finding 2016-002: Excess of Expenditures over Appropriations
Criteria: General Statutes state that all money received and expended by a local government or public authority
should be included in the budget ordinance.
Condition: The Town expended $543,728 more in community activities and projects in the General Fund,
$267,222 more in parks and recreation in the General Fund, and $291,123 more in billing and collection in the
Water and Sewer Fund than appropriated in the annual budget ordinance.
Cause: The Town did not amend the budget ordinance for certain capital asset expenditures funded with long-
term debt proceeds.
Town Of Hillsborough, North Carolina
Schedule of Findings and Responses
Year Ended June 30, 2016
148
Effect: Moneys were expended that had not been appropriated.
Recommendation: We recommend that management review monthly budget to actual reports to determine
whether budget amendments need to be approved before incurring additional expenditures related to any
expenditures purchased through financing arrangements.
View of responsible official and planned corrective action: The Town agrees with this finding and will review
budgetary documents more closely in order to identify when budget amendments are necessary.