HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2017
Town of Hillsborough,
North Carolina
Comprehensive Annual Financial Report
Year Ended June 30, 2017
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Comprehensive Annual Financial Report
Year Ended
June 30, 2017
Town of Hillsborough,
North Carolina
Tom Stevens
Mayor
Eric J. Peterson
Town Manager
Daphna Schwartz
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 Funds ....................................................................... 27
7 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds ........ 28
8 Statement of Cash Flows - Proprietary Funds ........................................................................ 29
9 Statement of Fiduciary Net Position - Fiduciary Fund ............................................................ 31
Notes to Financial Statements .................................................................................................... 33
Required Supplementary Financial Data
Exhibit
Law Enforcement Officers’ Special Separation Allowance Required
Supplementary Information:
A Schedule of Changes in Total Pension Liability ..................................................................... 65
Law Enforcement Officers’ Special Separation Allowance Required
Supplementary Information:
B Schedule of Total Pension Liability as a Percentage of Covered Payroll .............................. 66
Other Postemployment Benefits Required Supplementary Information:
C Schedule of Funding Progress and Schedule of Employer Contributions............................. 67
Local Government Employees’ Retirement System Required Supplementary
Information:
D-1 Schedule of Proportionate Share of Net Pension Liability (Asset) ......................................... 68
D-2 Schedule of Contributions ....................................................................................................... 69
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 ..................................................................................................... 73
2 Statement of Revenues, Expenditures, and Changes in Fund Balance -Budget and
Actual - General Capital Projects Fund ................................................................................. 78
3 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget
and Actual - General Capital Reserve Fund ......................................................................... 79
4 Combining Balance Sheet - Nonmajor Governmental Funds ................................................ 80
5 Combining Statement of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Nonmajor Governmental Funds ........................................................... 82
6 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Downtown Improvements Capital Project Fund - Nonmajor Capital Project
Fund ........................................................................................................................................ 84
7 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Town Barn Improvements Capital Project Fund - Nonmajor Capital
Project Fund ........................................................................................................................... 85
8 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk CMAQ Capital Project Fund - Nonmajor Capital Project Fund .............. 86
9 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Rail Station
Capital Project Fund - Nonmajor Capital Project Fund ......................................................... 87
10 Schedule of Revenues, Expenditures and Changes in Fund Balance - Public
Works Building Capital Project Fund - Nonmajor Capital Project Fund ............................... 88
Enterprise Funds:
11 Schedule of Revenues - Budget and Actual (Non-GAAP) - Water and Sewer Fund............ 89
12 Schedule of Expenditures - Budget and Actual (Non-GAAP) - Water and Sewer
Fund ........................................................................................................................................ 90
13 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Projects Fund............................................ 93
14 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund ........................................... 94
15 Schedule of Revenues, Expenditures - Budget and Actual (Non-GAAP) -
Stormwater Fund .................................................................................................................... 95
Fiduciary Fund:
16 Statement of Changes in Assets and Liabilities - Special Assessment Debt Agency
Fund ........................................................................................................................................ 96
Other Schedules
17 Schedule of Ad Valorem Taxes Receivable .................................................................................. 98
18 Analysis of Current Tax Levy ......................................................................................................... 99
Town of Hillsborough, North Carolina
Statistical Section
Table Financial Trends Information:
1 Net Position by Component ..................................................................................................... 104
2 Changes in Net Position… ...................................................................................................... 106
3 Fund Balances, Governmental Funds .................................................................................... 110
4 Changes in Fund Balances, Governmental Funds ................................................................ 112
Revenue Capacity Information:
5 Program Revenues by Function/Program .............................................................................. 116
6 Tax Revenues by Source, Governmental Funds ................................................................... 118
7 Assessed Value and Actual Value of Taxable Property ......................................................... 119
8 Direct and Overlapping Property Tax Rates ........................................................................... 120
9 Property Tax Revenue and Collections .................................................................................. 121
10 Principal Property Taxpayers .................................................................................................. 123
11 Water Sold by Type of Customer and In and Out of Town .................................................... 124
12 Water and Sewer Rates .......................................................................................................... 126
Debt Capacity Information:
13 Ratios of Outstanding Debt by Type ....................................................................................... 128
14 Ratios of General Bonded Debt Outstanding ......................................................................... 129
15 Direct and Overlapping Governmental Activities Debt ........................................................... 131
16 Legal Debt Margin Information ................................................................................................ 132
Demographic and Economic Information:
17 Demographic and Economic Statistics ................................................................................... 136
18 Principal Employers ................................................................................................................. 137
19 Full-Time Equivalent City Government Employees by Function/Program ............................ 138
Operating Information:
20 Operating Indicators by Function/Program ............................................................................. 140
21 Capital Asset Statistics by Function/Program ......................................................................... 142
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 ....................................... 147
Independent Auditors’ Report on Compliance for the Major State Program and
on Internal Control over Compliance in Accordance with Applicable Sections
of OMB Uniform Guidance and the State Single Audit Implementation Act .................. 149
Schedule
19 Schedule of Findings and Questioned Costs ................................................................................ 151
20 Corrective Action Plan .................................................................................................................... 154
21 Summary Schedule of Prior Year Audit Findings .................................................................... 155
22 Schedule of Expenditures of Federal and State Awards ......................................................... 156
Notes to Schedule of Expenditures of Federal and State Awards ........................................... 157
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Introductory Section
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Town of Hillsborough, North Carolina
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List of Principal Officials
Board of Town Commissioners
Tom Stevens, Mayor
Kathleen Ferguson ......................................... Mayor Pro Tem
Brian J. Lowen .................................................. Commissioner
Mark Bell .......................................................... Commissioner
Evelyn P. Lloyd ................................................. Commissioner
Jenn Weaver .................................................... Commissioner
Town Officials
Eric J. Peterson, Town Manager
Daphna Schwartz, Finance Director (effective August 28, 2017)
Phillip Cordeiro, Interim Finance Director (at June 30, 2017)
Emily Bradford, Budget Director
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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Town of Hillsborough, North Carolina
iii
December 29, 2017
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, 2017, 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 five 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 2017. 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 6,568 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.
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, planning, public spaces, 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
Town of Hillsborough, North Carolina
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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 1.453
MGD. The Town’s water system serves a total of 5,822 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 1.032 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 40% 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 distribution 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 throughout recent history. This
trend continued during the current year in which the Town’s unemployment rate, as of June 2017 was
3.7% for Orange County, while the state and national rates were 4.2% and 4.3%, 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 eight residential developments.
Waterstone is comprised of single family and townhome developments as well as apartment
homes. Construction began in 2014 with the final permits being issued in FY2017. When
complete, the development will add over 500 residential units and more than 1,000 residents to
Hillsborough.
Corbin Creek Woods subdivision is now complete and includes 18 residential lots on 12.2 acres
on Mitchell Street.
Forest Ridge is a 233 single-family unit project on U.S. 70 A. Approximately, half of the project is
completed.
Elfin’s Pond includes 118 townhomes on 24 acres at the intersection of Orange Grove Road and
Eno Mountain Road. Approximately, half of the project is completed.
515 North Churton Street is a 24-unit condominium project on 1.49 acres in the 500 block of
North Churton Street. Construction has started.
The Fiori Hill project plan proposes 46 single-family dwellings on 17.6 acres adjacent to Forest
Ridge. Construction has started.
Bellevue Mill is a renovation project to convert the former fabric mill building into an apartment
building with 114 units. The project footprint is 19.8 acres located on Nash Street. Construction
has started.
Town of Hillsborough, North Carolina
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The Collins Ridge master plan includes 950 dwellings (houses, townhouses and apartments) and
88 affordable rental units. Construction should begin within the next one to two fiscal years.
These developments will roughly increase Hillsborough's population by 30% over the next few years. The
town continues to receive commercial inquiries and experience expansion of existing businesses.
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. Additionally, a
balanced scorecard system is 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:
Street Repaving - This initiative is being funded without debt and uses the Town's Powell Bill
(gas tax allocation) and General Fund revenues to pay for the improvements. 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.
Public Works Facility Relocation to NC-86 North Property – current facility is in flood plain, small,
old, and in poor condition, with no shelters for equipment. $1 million is the placeholder cost figure
until engineer estimates are available. A $44,971 debt payment is allocated in FY18. That
payment increases to $89,941 in Year 2 of the plan.
Fiber Loop – Connect all town facilities via a fiber connection creating a network that makes file
sharing and communication between facilities/departments easier and significantly reduces
phone and internet costs. Much of this project may be done in partnership with Orange County to
share costs and save significant expenses for each organization. This project simultaneously
builds a fiber backbone capable of fostering fiber to the home, or “last mile” service, by third party
providers. Thus, this project helps attract a high-speed internet provider to serve Hillsborough.
The feasibility study was completed in late 2016 and construction cost estimates are currently
being developed. $1.5 million and a 10-year loan with $184,936 annual debt payments starting in
Year 2 (FY19) is a placeholder figure until firmer estimates are available.
North Campus Project – relocates the Town Hall Annex (finance and billing operations) and the
Town Barn meeting room functions to the former medical offices located at 101 E. Corbin Street,
purchased two years ago. The project converts the current Town Barn meeting room into much
needed office space on the Town Hall Campus. Moving the Town Hall Annex allows the police
department to temporarily address their needs by occupying this space until the new public safety
station on North Churton Street is built. This project also includes improvements to the Town Hall
Campus to improve its function as a tourist attraction and recreational space. The placeholder
cost for the project is approximately $1.25 million until design and architectural estimates can be
made. Design is currently underway and expected to be completed by the Fall 2018. Annual debt
services payments of $131,133 will be shared between the Finance, Governing Body, Ruffin-
Roulhac, Billing & Collections, and Stormwater operations.
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
Town of Hillsborough, North Carolina
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project cost of $124,000 to leverage $496,000 of CMAQ funds was underway in FY2017 and
completed in FY2018.
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 will
begin construction in February 2018. Phase 2 will yield an additional 1.2 million gallons
per day of water capacity. Construction must be substantially underway by the end of
calendar year 2018 to comply with the current permit. Delay in construction means that
new permit requirements could significantly increase the current $16 million estimate for
the project.
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 $3,651 per capita. The largest part of the outstanding
debt is for the wastewater treatment plant and the reservoir. 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 19 fiscal years, and no debt service expenditures on general obligation bonded debt
have been incurred in the General Fund during the last 19 fiscal years. The Town has avoided a heavy
debt load, which has plagued many municipalities, in its General Fund. Debt service costs make up
10.87% 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 26.53% of
expenditures, which was a decrease over the previous fiscal year. The debt payments are a significant
expense for a relatively small utility system, however, the primary reason for the higher percentage in the
Water and Sewer Fund is 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, 2016. 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.
Town of Hillsborough, North Carolina
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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,
Eric J. Peterson Daphna Schwartz Phillip Cordeiro
Town Manager Finance Director Interim Finance Director
(at June 30, 2017)
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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, 2017, 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, 2017, 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.
Emphasis of Matter
As discussed in Note 6 to the financial statements, during 2017 the Town of Hillsborough implemented
GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are
Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB
Statements 67 and 68, which resulted in a cumulative effect adjustment to net position as of the
beginning of the year. Our opinion is not modified with respect to this matter.
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 Schedules of Changes in Total Pension Liability and Total Pension Liability as a Percentage of
Covered Payroll, and the Other Postemployment Benefits Schedules of Funding Progress and Employer
Contributions on pages 65 through 67, respectively, and the Local Government Employees’ Retirement
System’s Schedules of Proportionate Share of Net Pension Liability (Asset) and Contributions on pages
68 and 69, 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 schedule of expenditures of federal and state awards is presented for purposes of additional analysis
as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the State Single Audit
Implementation Act, and is also not a required part of the 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
3
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, and the Schedule of Expenditures of Federal and State
Awards 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 29,
2017, 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 29, 2017
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, 2017.
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 $67,054,339.
The Town’s total net position increased by $3,895,355 primarily due to general fund revenues
coming in over budget and a number of capital expenditures being delayed into the 2018 fiscal
year.
As of the close of the current fiscal year, the Town’s governmental funds reported ending fund
balances of $6,926,345, a net increase of $454,425 in comparison to the prior year. This is the
result of general fund revenues coming in over budget. Approximately 39.54% of this total amount
or $2,738,426 is nonspendable, or restricted.
At the end of the current fiscal year, unassigned fund balance for the General Fund was
$4,049,462, or 44.80% of total General Fund expenditures, including other financing uses, for the
fiscal year.
The Town’s total debt decreased by $2,333,649 during the current fiscal year. The Town had
additional borrowing on installment purchases of $317,000. These additional borrowings were
offset by retirement of $2,650,649 in existing debt during the year.
The Town maintained its A2 (Moody’s Investor Service) and A (Standard & Poor’s) bond ratings
for the 22nd 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, planning, public spaces, parks, 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 stormwater as well
as 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 and stormwater 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. This fund accounts for
the Special Assessment Revenue Bonds used to finance the construction of public infrastructure in the
Waterstone District.
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 33 through 62 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 65 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
2017 2016 2017 2016 2017 2016
Current assets $ 7,756,712 $ 7,236,128 $ 13,760,520 $ 13,643,288 $ 21,517,232 $ 20,879,416
Other assets - - - - - -
Capital assets, net 18,951,348 18,752,127 54,011,478 53,303,452 72,962,826 72,055,579
Deferred outflows of
resources 1,157,884 263,121 605,747 160,615 1,763,631 423,736
Total assets and deferred
outflows of resources 27,865,944 26,251,376 68,377,745 67,107,355 96,243,689 93,358,731
Long-term liabilities
outstanding 6,509,295 4,602,436 21,046,268 20,376,203 27,555,563 24,978,639
Other liabilities 617,251 1,467,009 936,353 3,061,462 1,553,604 4,528,471
Total liabilities 7,126,546 6,069,445 21,982,621 23,437,665 29,109,167 29,507,110
Deferred inflows of
resources 56,627 155,558 23,556 66,835 80,183 222,393
Net position:
Net investment in
capital assets 15,186,419 14,242,464 34,669,712 32,483,743 49,856,131 46,726,207
Restricted 2,518,696 1,753,856 2,605,482 2,596,324 5,124,178 4,350,180
Unrestricted 2,977,656 4,030,053 9,096,374 8,522,788 12,074,030 12,552,841
Total net position,
previously reported 20,026,373 43,602,855 63,629,228
Cumulative effect
Adjustment (470,244) - (470,244)
Total net position, ending $ 20,682,771 $ 19,556,129 $ 46,371,568 $ 43,602,855 $ 67,054,339 $ 63,158,984
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 $67,054,339 as of June 30, 2017. The Town’s net position increased
by $3,895,355 for the fiscal year ended June 30, 2017. However, the largest portion (74.35%) 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, $5,124,178 (7.64%)
represents resources that are subject to external restrictions on how they may be used. The remaining balance of
$12,074,030 (15.01%) 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.
Continued low cost of debt due to low interest rates.
The Town of Hillsborough’s Changes in Net Position
Figure 3
Governmental Activities Business-Type Activities Total
2017 2016 2017 2016 2017 2016
Revenues:
Program revenues:
Charges for services $ 423,663 $ 366,461 $ 9,847,139 $ 10,713,397 $ 10,270,802 $ 11,079,858
Operating grants
and contributions 26,690 28,052 - - 26,690 28,052
Capital grants and
contributions 570,035 1,393,799 1,325,206 1,161,830 1,895,241 2,555,629
General revenues:
Property taxes 6,044,526 5,669,640 - - 6,044,526 5,669,640
Local option sales
taxes 1,364,779 1,265,473 - - 1,364,779 1,265,473
Gross receipts on
short-term rental
property 8,679 7,433 - - 8,679 7,433
Privilege licenses 2,830 2,630 - - 2,830 2,630
Motor vehicle license
fees 345 546 - - 345 546
Solid waste disposal 5,357 4,032 - - 5,357 4,032
Unrestricted inter-
governmental
revenues 1,010,393 1,034,811 - - 1,010,393 1,034,811
Other 96,373 59,892 19,897 12,118 116,270 72,010
Total revenues 9,553,670 9,832,769 11,192,242 11,887,345 20,745,912 21,720,114
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
2017 2016 2017 2016 2017 2016
Expenses:
General government $ 1,860,970 $ 2,010,349 $ - $ - $ 1,860,970 $ 2,010,349
Public safety 4,289,900 3,982,055 - - 4,289,900 3,982,055
Transportation 666,523 615,849 - - 666,523 615,849
Environmental
protection 590,798 708,367 - - 590,798 708,367
Economic and
physical development 466,791 402,800 - - 466,791 402,800
Community activities
and projects 57,673 93,236 - - 57,673 93,236
Parks and recreation 398,802 97,891 - 398,802 97,891
Interest on long-term
debt 95,571 121,783 - - 95,571 121,783
Stormwater - - 302,983 - 302,983 -
Water and sewer - - 8,120,546 7,574,032 8,120,546 7,574,032
Total expenses 8,427,028 8,032,330 8,423,529 7,574,032 16,850,557 15,606,362
Increase in net position 1,126,642 1,800,439 2,768,713 4,313,313 3,895,355 6,113,752
Net position, beginning,
previously reported 20,026,373 18,225,934 43,602,855 39,289,542 63,629,228 57,515,476
Cumulative effect adjustment (470,244) - - - (470,244) -
Net position, beginning,
adjusted 19,556,129 - 43,602,855 39,289,542 63,158,984 57,515,476
Net position, ending $ 20,682,771 $ 20,026,373 $ 46,371,568 $ 43,602,855 $ 67,054,339 $ 63,629,228
Governmental activities. Governmental activities increased the Town’s net position by $1,126,642, thereby
accounting for 28.92% 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.
Increases in property tax revenue.
Increases in local option sales tax and solid waste disposal revenue.
Business-type activities. Business-type activities increased the Town’s net position by $2,768,713, accounting
for 71.08% of the total growth in the government’s net position. However, this is a 35.8% decrease as compared
to the increase in net position for fiscal year 2016. Key elements of this increase are as follows:
Contributions of capital assets in the amount of $1,325,206.
A decrease of 65.67% in other operating revenues, namely water and sewer capital facility fees,
water and sewer lateral fees, engineering review fees, and water meter fees. These revenues can
be sporadic from year-to-year due to a number of factors relating to when newly constructed
homes are ready to be connected to the town’s water and sewer system.
Cost-cutting measures resulting in lower than expected expenses.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
11
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.
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 $4,836,987, while total fund balance reached
$6,509,632. 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 46.17% of general fund expenditures, while total fund balance
represents 74.23% of the same amount.
At June 30, 2017, the governmental funds of the Town reported a combined fund balance of $6,926,345, with a
net increase in fund balance of $454,425. This increase is primarily related to an increase in property tax
revenues over the previous fiscal year.
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.
Actual operating revenues for the General Fund were more than the budgeted amount by $497,991. Expenditures
were $1,213,030 less than budgeted, primarily due to the delaying of purchases and multiple long-term
vacancies.
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 $8,766,619, a 2.86% or $243,831 increase from the previous year. The increase is largely
attributed to expenditures coming in lower than expected. The total growth in net position was $2,438,958.
Unrestricted net position of the Stormwater Fund at the end of the fiscal year amounted to $329,755. The
increase is largely attributed to this being the first year the town has managed its stormwater program as a
separate fund, and taking a conservative approach to expending stormwater fee revenues. The total growth in net
position was also $329,755, as the year ended June 30, 2017 was the first year of operations for this fund.
Other factors concerning the fund’s finances have been addressed in the discussion of the Town’s business-type
activities.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
12
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, 2017 totals $72,962,826 (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:
Meter Infrastructure ($331,101)
Street resurfacing ($316,492)
Major developer-dedicated capital asset transactions during the year include the following:
Corbinton Commons Phase 2 & 3 water and sewer lines ($1,108,517)
Huddle and Mitchell Streets water and sewer lines ($199,615)
Cates Creek water and sewer lines ($117,538)
Strouds Creek water and sewer lines ($99,151)
The Town of Hillsborough’s Capital Assets
(Net of Accumulated Depreciation)
Figure 4
Governmental Business-Type
Activities Activities Total
2017 2016 2017 2016 2017 2016
Land $ 3,632,871 $ 3,653,081 $ 6,095,544 $ 6,064,293 $ 9,728,415 $ 9,717,374
Construction in progress 619,769 293,133 3,960,184 3,466,558 4,579,954 3,759,691
Intangibles in progress - - - 200,000 - 200,000
Buildings and
improvements 5,011,224 5,237,514 19,193,270 19,934,037 24,204,494 25,171,551
Plant and distribution
systems - - 23,149,532 22,459,024 23,149,532 22,459,024
Infrastructure 8,525,479 8,182,237 655,323 569,050 9,180,801 8,751,287
Equipment 257,055 189,499 470,143 442,902 727,198 632,401
Vehicles 904,950 1,196,663 288,096 167,588 1,193,046 1,364,251
Intangibles - - 199,386 - 199,386 -
Total $ 18,951,348 $ 18,752,127 $ 54,011,478 $ 53,303,452 $ 72,962,826 $ 72,055,579
Additional information on the Town’s capital assets can be found in Note 4.A.5. of the basic financial statements.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
13
Long-term debt. As of June 30, 2017, 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
2017 2016 2017 2016 2017 2016
Revolving loan payable $ - $ - $ 17,443,655 $ 18,511,848 $ 17,443,655 $ 18,511,848
Installment purchases 4,025,201 4,534,728 2,513,821 3,269,750 6,539,022 7,804,478
Total $ 4,025,201 $ 4,534,728 $ 19,957,476 $ 21,781,598 $ 23,982,677 $ 26,316,326
The Town’s total debt decreased by $2,333,649 during the current fiscal year, primarily due to repayments
exceeding additional borrowings.
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 $66,383,811. The Town does not have any bonds authorized but unissued
at June 30, 2017.
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 3.7% as of June 30, 2017, is below
the state average of 4.2%.
No increase in water/sewer rates.
No increase in property tax rate.
No general obligation debt in the General Fund.
Budget highlights for the fiscal year ending June 30, 2018
Governmental activities: Fiscal year 2018, a revaluation year for property tax, will mark the fifth consecutive
year without a property tax rate increase. In fact, the rate was reduced from 68 cents to 62 cents per $100 of
assessed valuation. The revenue neutral rate was 62.16 cents. Orange County projects property values will
increase an average of 14.8% in Hillsborough, yet personal, motor vehicle and public service values will actually
see decreases in the 1% to 7% range. Vehicle fees, which are used to pay for Hillsborough’s street repaving
program, will increase by $20, to a $30 fee. Expenditures in the General Fund are expected to rise approximately
4.18% to $10,399,638. The majority of this increase is attributable to ad valorem taxes. Appropriated fund balance
of $753,403 was recommended to balance the FY18 budget.
Town of Hillsborough, North Carolina
Management’s Discussion and Analysis
14
Other budget highlights in brief:
Police Radio Replacements ($70,000).
Street resurfacing ($370,000).
Expenses to increase by 5.2%.
Merit system budgeted at 3.25% average raise for employees.
Business-type activities: Water rates and sewer rates will not increase in 2018.
Operational expenditures in the Water/Sewer Fund are expected to increase by 13.70% over the FY17 final
budget. Many cuts and deferments were made to this year’s budget to avoid a more significant rate increase and
to limit additional fund balance appropriations.
Other budget highlights in brief:
West Fork Eno Reservoir Phase II expansion will begin in March 2018 with the first debt payment
in January of 2019.
Main Control Panel Replacement at Water Plant ($95,000).
Design for Expansion of Old Water Plant: Line Crew & Operations Building ($50,000)
Replace 1971 Tanker ($60,000)
Sewer line repairs to continue annual “inflow and infiltration” reduction program. ($50,000)
Replacement of 1993 Dump Truck ($55,000).
Merit system budgeted at 3.25% average raise for employees.
Requests for information
This report is designed to provide an overview of the Town’s finances. Questions concerning any of the
information found in this report or requests for additional information should be directed to the Director of Finance,
Town of Hillsborough, 137 North Churton Street, Post Office Box 429, Hillsborough, North Carolina 27278.
15
Basic Financial Statements
Exhibit 1
(2 pages)Statement of Net Position
Hillsborough
Tourism Hillsborough
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
ASSETS
Current assets:
Cash and investments 5,762,244$ 8,221,044$ 13,983,288$ 226,151$ 229,501$
Receivables:
Taxes receivable, net 124,776 - 124,776 - -
Accrued interest receivable,
property taxes 20,848 - 20,848 - -
Accounts receivable, net 297,929 1,343,083 1,641,012 - -
Due from other governments 984,404 - 984,404 - -
Due from primary government - - - 12,498 70,276
Prepaid expenses 57,810 530,039 587,849 - 689
Restricted assets:
Cash and investments 508,701 3,666,354 4,175,055 - -
Total current assets 7,756,712 13,760,520 21,517,232 238,649 300,466
Noncurrent assets:
Capital assets:
Land and construction-in-
progress 4,252,640 10,055,728 14,308,368 - -
Other capital assets, net of
depreciation 14,698,708 43,955,750 58,654,458 - -
Total capital assets 18,951,348 54,011,478 72,962,826 - -
Total noncurrent assets 18,951,348 54,011,478 72,962,826 - -
Total assets 26,708,060 67,771,998 94,480,058 238,649 300,466
DEFERRED OUTFLOWS OF
RESOURCES
Pension deferrals 1,157,884 596,911 1,754,795 - -
Deferred loss on defeasance of
debt - 8,836 8,836 - -
1,157,884 605,747 1,763,631 - -
June 30, 2017
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 425,372$ 408,964$ 834,336$ 52$ 39,163$
Payable from restricted assets -
customer deposits - 453,998 453,998 -
Accrued interest payable 31,108 73,391 104,499 - -
Unearned revenue 77,997 - 77,997
Due to component units 82,774 - 82,774 - -
Current portion of long-term
liabilities 787,049 1,831,363 2,618,412 - -
Total current liabilities 1,404,300 2,767,716 4,172,016 52 39,163
Long-term liabilities:
Net pension liability 1,288,796 672,242 1,961,038 - -
Total pension liability 566,336 - 566,336 - -
Due in more than one year 3,867,114 18,542,663 22,409,777 - -
Total noncurrent liabilities 5,722,246 19,214,905 24,937,151 - -
Total liabilities 7,126,546 21,982,621 29,109,167 52 39,163
DEFERRED INFLOWS OF
RESOURCES
Pension deferrals 56,627 23,556 80,183 - -
NET POSITION
Net investment in capital assets 15,186,419 34,669,712 49,856,131 - -
Restricted for:
Stabilization by state statute 2,270,111 - 2,270,111 12,498 70,276
Streets 33,073 - 33,073 - -
Capital projects 215,512 - 215,512 - -
Water and sewer projects - 2,605,482 2,605,482 - -
Unrestricted 2,977,656 9,096,374 12,074,030 226,099 191,027
Total net position 20,682,771$ 46,371,568$ 67,054,339$ 238,597$ 261,303$
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 1,860,970$ 214,056$ 16,816$ -$
Public safety 4,289,900 13,555 - -
Transportation 666,523 185,922 - 210,278
Environmental protection 590,798 - 9,874 -
Economic and physical
development 466,791 5,000 - 335,134
Community activities and
projects 57,673 - - -
Parks and recreation 398,802 5,130 - 24,623
Interest on long-term obligations 95,571 - - -
Total governmental activities 8,427,028 423,663 26,690 570,035
Business-type activities:
Water and sewer 8,120,546 9,214,401 - 1,325,206
Stormwater 302,983 632,738 - -
Total business-type
activities 8,423,529 9,847,139 - 1,325,206
Total primary government 16,850,557$ 10,270,802$ 26,690$ 1,895,241$
Component units
Hillsborough Tourism
Development Authority 48,118$ -$ -$ -$
Hillsborough Tourism Board 344,539 - - -
Total component units 392,657$ -$ -$ -$
Year Ended June 30, 2017
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
(1,630,098)$ -$ (1,630,098)$ -$ -$
(4,276,345) - (4,276,345) - -
(270,323) - (270,323) - -
(580,924) - (580,924) - -
(126,657) - (126,657) - -
(57,673) - (57,673) - -
(369,049) - (369,049) - -
(95,571) - (95,571) - -
(7,406,640) - (7,406,640) - -
- 2,419,061 2,419,061 - -
329,755 329,755
- 2,748,816 2,748,816 - -
(7,406,640) 2,748,816 (4,657,824) - -
(48,118)$ -$
- (344,539)
(48,118) (344,539)
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, 2017
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
Gain on disposal of capital assets
Miscellaneous
Total general revenues and transfers
Change in net position
Net position, beginning
Cumulative effect adjustment
Net position, beginning, adjusted
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
6,044,526$ -$ 6,044,526$ -$ -$
1,364,779 - 1,364,779 - -
8,679 - 8,679 - -
2,830 - 2,830 - -
345 - 345 - -
5,357 - 5,357 - -
1,010,393 - 1,010,393 - -
37,562 19,897 57,459 - -
- - - 69,604 346,268
1,023 - 1,023 - -
57,788 - 57,788 - -
8,533,282 19,897 8,553,179 69,604 346,268
1,126,642 2,768,713 3,895,355 21,486 1,729
20,026,373 43,602,855 63,629,228 217,111 259,574
(470,244) - (470,244) - -
19,556,129 43,602,855 63,158,984 217,111 259,574
20,682,771$ 46,371,568$ 67,054,339$ 238,597$ 261,303$
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 5,431,958$ -$ 330,286$ 5,762,244$
Taxes receivable 124,776 - - 124,776
Accounts receivable, net 297,929 - - 297,929
Prepaid items 219,730 - - 219,730
Due from other governments 732,736 - 251,668 984,404
Restricted assets
Cash and investments 293,189 215,512 - 508,701
Total assets 7,100,318$ 215,512$ 581,954$ 7,897,784$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued
liabilities 296,287$ -$ 129,085$ 425,372$
Unearned revenue 77,997 - - 77,997
Due to component units 82,774 - - 82,774
Total liabilities 457,058 - 129,085 586,143
DEFERRED INFLOWS OF RESOURCES 133,628 - 251,668 385,296
FUND BALANCES
Nonspendable
Prepaid items 219,730 - - 219,730
Restricted for:
Stabilization by state statute 1,419,842 - 850,269 2,270,111
Streets 33,073 - - 33,073
Capital projects - 215,512 - 215,512
Committed for:
Capital projects - - 159,314 159,314
Assigned for:
Sidewalks 20,800 - - 20,800
Affordable housing 46,000 - - 46,000
Subsequent year’s expenditures 720,725 - - 720,725
Unassigned 4,049,462 - (808,382) 3,241,080
Total fund balances 6,509,632 215,512 201,201 6,926,345
Total liabilities, deferred
inflows of resources and
fund balances 7,100,318$ 215,512$ 581,954$ 7,897,784$
Major Funds
Town of Hillsborough, North Carolina
June 30, 2017
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, 2017
Governmental Funds
Amounts reported for governmental activities in the statement of net
position are different because:
Total fund balances, governmental funds 6,926,345$
Capital assets used in governmental activities are not financial resources
and therefore not reported in the funds.18,951,348
Deferred outflows of resources related to pensions are not reported in the
funds 1,157,884
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 20,848
Liabilities for earned revenues considered deferred inflows of resources in
the fund statements 385,296
Deferred inflows of resources related to pensions are not reported in the
funds (56,627)
Prepaid expenses in the fund statements for debt service payments that
represent a reduction of long-term obligations in governmental activities. (161,920)
Some liabilities, including accrued interest, are not due and payable in the
current period, and therefore are not reported in the funds. (4,685,271)
Total pension liability (566,336)
Net pension liability (1,288,796)
Net position of governmental activities 20,682,771$
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 6,064,137$ -$ -$ 6,064,137$
Other taxes and licenses 1,381,990 - - 1,381,990
Unrestricted intergovernmental revenues 1,010,393 - - 1,010,393
Restricted intergovernmental revenues 346,496 - 28,442 374,938
Investment earnings 36,091 1,471 - 37,562
Contribution from property owners - 18,955 - 18,955
Other general revenues 79,734 - - 79,734
Total general revenues 8,918,841 20,426 28,442 8,967,709
Functionally related revenues:
Use and rental fees 232,611 - - 232,611
Total revenues 9,151,452 20,426 28,442 9,200,320
Expenditures
General government 1,581,546 18,955 26,978 1,627,479
Public safety 4,084,416 - - 4,084,416
Transportation 865,285 - - 865,285
Environmental protection 449,935 - 4,420 454,355
Economic and physical development 442,006 - 234,141 676,147
Community activities and projects 57,673 - - 57,673
Parks and recreation 397,672 - 30,780 428,452
Debt service:
Principal retirement 790,345 - - 790,345
Interest and fiscal charges 100,353 - - 100,353
Total expenditures 8,769,231 18,955 296,319 9,084,505
Revenues over (under) expenditures 382,221 1,471 (267,877) 115,815
Other financing sources (uses)
Transfer to General Fund - (126,053) - (126,053)
Transfer to Downtown Improvements
Capital Project Fund (129,737) - - (129,737)
Transfer to Town Barn Improvements
Capital Project Fund (114,201) - - (114,201)
Transfer to Public Works Building
Capital Project Fund (25,000) - - (25,000)
Transfer from General Fund - - 268,938 268,938
Transfer from General Capital Projects Fund 126,053 - - 126,053
Installment purchase obligations issued 317,000 - - 317,000
Sale of capital assets 21,610 - - 21,610
Total other financing sources (uses) 195,725 (126,053) 268,938 338,610
Net change in fund balances 577,946 (124,582) 1,061 454,425
Fund balances, beginning 5,931,686 340,094 200,140 6,471,920
Fund balances, ending 6,509,632$ 215,512$ 201,201$ 6,926,345$
Major Funds
Governmental Funds
Year Ended June 30, 2017
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, 2017
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 454,425$
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 ($893,524) exceeded depreciation ($873,331) in the current
period.20,193
The net effect of transactions involving capital assets donated to the Town. 199,615
Contributions to the pension plan in the current fiscal year are not included in the
statement of activities 282,223
Benefit payments paid and adminstrative expense for the LEOSSA are not included
in the statement of activities 13,510
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 (19,611)
Proceeds received from disposal/transfer of capital assets (21,610)
Gain on disposal/transfer of capital assets 1,023
Change in deferred revenues related to grants receivable. 191,278
The repayment of the principal of long-term debt ($790,345) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position.790,345
The issuance of the principal of long-term debt ($317,000) provides current
financial resources to governmental funds. This transaction has no effect on net
position.(317,000)
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds.
Change in accrued interest on general long-term debt 4,782
Compensated absences (18,577)
Loss on disposal of capital assets -
Pension expense (413,796)
Net OPEB obligation (40,158)
Changes in net position of governmental activities 1,126,642$
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 5,904,500$ 5,888,500$ 6,064,137$ 175,637$
Other taxes and licenses 1,261,000 1,261,000 1,381,990 120,990
Unrestricted intergovernmental revenues 883,915 946,415 1,010,393 63,978
Restricted intergovernmental revenues 180,150 186,072 346,496 160,424
Investment earnings 11,500 11,500 36,091 24,591
Other general revenues 60,000 127,363 79,734 (47,629)
Total general revenues 8,301,065 8,420,850 8,918,841 497,991
Functionally related revenues
Use and rental fees 141,000 141,000 232,611 91,611
Total revenues 8,442,065 8,561,850 9,151,452 589,602
Expenditures
General government 1,753,589 1,706,612 1,678,274 28,338
Public safety 4,330,334 4,566,703 4,347,248 219,455
Transportation 1,092,203 1,244,205 865,285 378,920
Environmental protection 745,912 780,635 585,339 195,296
Economic and physical development 414,295 532,866 442,006 90,860
Community activities and projects 373,043 469,936 199,090 270,846
Parks and recreation 518,166 681,304 651,989 29,315
Contingency 150,000 - - -
Total expenditures 9,377,542 9,982,261 8,769,231 1,213,030
Revenues under expenditures (935,477) (1,420,411) 382,221 1,802,632
Other financing sources (uses)
Transfer to General Capital Reserve Fund (78,480) - - -
Transfer to Downtown Improvements
Capital Project Fund (84,673) (129,737) (129,737) -
Transfer to Town Barn Improvements
Capital Project Fund - (114,201) (114,201) -
Transfer to Public Works Building
Capital Project Fund (25,000) (25,000) (25,000) -
Transfer from General Capital Reserve Fund 204,534 126,054 126,053 (1)
Installment purchase obligations issued 307,000 307,623 317,000 9,377
Sale of capital assets - - 21,610 21,610
Total other financing sources (uses) 323,381 164,739 195,725 30,986
Appropriated fund balance 612,096 1,255,672 - (1,255,672)
Net change in fund balance -$ -$ 577,946 577,946$
Fund balance, beginning 5,931,686
Fund balance, ending 6,509,632$
Year Ended June 30, 2017
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 Funds
Major Non-major
Water & Sewer Stormwater
Fund Fund Total
ASSETS
Current assets:
Cash and investments 7,950,961$ 270,083$ 8,221,044$
Accounts receivable, net 1,272,035 71,048 1,343,083
Prepaid expenses 528,571 1,468 530,039
Restricted assets:
Cash and investments 3,666,354 - 3,666,354
Total current assets 13,417,921 342,599 13,760,520
Noncurrent assets:
Capital assets:
Land and construction-in-progress 10,055,728 - 10,055,728
Other capital assets, net of depreciation 43,955,750 - 43,955,750
Total capital assets 54,011,478 - 54,011,478
Total noncurrent assets 54,011,478 - 54,011,478
Total assets 67,429,399 342,599 67,771,998
DEFERRED OUTFLOWS OF RESOURCES
Pension deferrals 570,271 26,640 596,911
Deferred loss on defeasance of debt 8,836 - 8,836
Total deferred outflows of resources 579,107 26,640 605,747
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 405,295 3,669 408,964
Payable from restricted assets - customer deposits 453,998 - 453,998
Accrued interest payable 73,391 - 73,391
Current portion of long-term liabilities 1,831,363 - 1,831,363
Total current liabilities 2,764,047 3,669 2,767,716
Long-term liabilities:
Net pension liability 642,240 30,002 672,242
Due in more than one year 18,537,901 4,762 18,542,663
Total noncurrent liabilities 19,180,141 34,764 19,214,905
Total liabilities 21,944,188 38,433 21,982,621
DEFERRED INFLOWS OF RESOURCES
Pension deferrals 22,505 1,051 23,556
NET POSITION
Net investment in capital assets 34,669,712 - 34,669,712
Restricted for:
Water and sewer projects 2,605,482 - 2,605,482
Unrestricted 8,766,619 329,755 9,096,374
Total net position 46,041,813$ 329,755$ 46,371,568$
Statement of Net Position
Town of Hillsborough, North Carolina
June 30, 2017
The notes to the financial statements are an integral part of this statement. 27
Exhibit 7
Proprietary Funds
Major Non-major
Water & Sewer Stormwater
Fund Fund Total
Operating revenues
Charges for services 8,294,061$ 629,488$ 8,923,549$
Other operating revenues 920,340 3,250 923,590
Total operating revenues 9,214,401 632,738 9,847,139
Operating expenses
Personnel services 2,611,104 124,264 2,735,368
Depreciation 1,683,683 - 1,683,683
Other current charges 3,355,851 178,719 3,534,570
Total operating expenses 7,650,638 302,983 7,953,621
Operating income 1,563,763 329,755 1,893,518
Nonoperating revenues (expenses)
Investment earnings 19,897 - 19,897
Loss on disposal of capital assets (357) - (357)
Interest and fees (469,551) - (469,551)
Total nonoperating revenues (expenses) (450,011) - (450,011)
Income before capital contributions 1,113,752 329,755 1,443,507
Capital contributions and transfers:
Capital contribution from developer 1,325,206 - 1,325,206
Total capital contributions and transfers 1,325,206 - 1,325,206
Change in net position 2,438,958 329,755 2,768,713
Net position, beginning of year 43,602,855 - 43,602,855
Net position end of year 46,041,813$ 329,755$ 46,371,568$
Year Ended June 30, 2017
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 Funds
Major Non-major
Water & Sewer Stormwater
Fund Fund Total
Cash flows from operating activities
Cash received from customers 9,013,098$ 561,690$ 9,574,788$
Cash paid for goods and services (3,876,596) (178,291) (4,054,887)
Cash paid to or on behalf of employees for
services (2,656,030) (113,316) (2,769,346)
Net cash provided by operating activities 2,480,472 270,083 2,750,555
Cash flows from capital and related financing
activities
Acquisition and construction of capital assets (1,193,457) - (1,193,457)
Principal paid on bonds, notes and installment
purchases (1,824,122) - (1,824,122)
Interest paid on bonds and installment purchases (463,472) - (463,472)
Net cash used by capital and related
financing activities (3,481,051) - (3,481,051)
Cash flows from investing activities
Interest on investments 19,897 - 19,897
Net cash provided by investing activities 19,897 - 19,897
Net increase in cash and cash
equivalents (980,682) 270,083 (710,599)
Cash and cash equivalents, beginning 12,597,997 - 12,597,997
Cash and cash equivalents, ending 11,617,315$ 270,083$ 11,887,398$
Cash and cash equivalents
Unrestricted 7,950,961$ 270,083$ 8,221,044$
Restricted 3,666,354 - 3,666,354
Total cash and cash equivalents 11,617,315$ 270,083$ 11,887,398$
Statement of Cash Flows
Town of Hillsborough, North Carolina
Year Ended June 30, 2017
The notes to the financial statements are an integral part of this statement. 29
Exhibit 8
(2 pages)
Proprietary Funds
Major Non-major
Water & Sewer Stormwater
Fund Fund Total
Statement of Cash Flows
Town of Hillsborough, North Carolina
Year Ended June 30, 2017
Reconciliation of operating income to net cash
provided by operating activities
Operating income 1,563,763$ 329,755$ 1,893,518$
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation 1,683,683 - 1,683,683
Provision for uncollectible accounts 178,884 - 178,884
Changes in assets and liabilities:
Accounts receivable (428,451) (71,048) (499,499)
Prepaid expense (505,748) (1,468) (507,216)
Deferred outflows of resources for pensions (433,639) (26,640) (460,279)
Accounts payable and accrued liabilities (83,518) 3,669 (79,849)
Deposits 48,264 - 48,264
OPEB liability 22,848 1,385 24,233
Net pension liability 513,650 30,002 543,652
Deferred inflows of resources for pensions (44,330) 1,051 (43,279)
Compensated absences payable (34,934) 3,377 (31,557)
Net cash provided by operating activities 2,480,472$ 270,083$ 2,750,555$
Supplemental schedule of noncash investing
and financing activities
Capital asset additions included in accounts
payable and accrued liabilities 187,406$ -$ 187,406$
Capital contribution from developer 1,325,206$ -$ 1,325,206$
The notes to the financial statements are an integral part of this statement. 30
Exhibit 9
Agency Fund
Special
Assessment Debt
ASSETS
Cash and investments 25$
LIABILITIES
Miscellaneous liabilities 25$
Town of Hillsborough, North Carolina
Statement of Fiduciary Net Position
Fiduciary Fund
Year Ended June 30, 2017
The notes to the financial statements are an integral part of this statement. 31
32
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Town of Hillsborough, North Carolina
Notes to Financial Statements
33
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
34
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 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.
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
Town of Hillsborough, North Carolina
Notes to Financial Statements
35
Water and Sewer Capital Reserve Fund (“WS Capital Reserve Fund”) have been consolidated with the
Water and Sewer Fund.
The Town reports the following nonmajor enterprise fund:
Stormwater Fund. This fund is used to account for the operations of the Town’s stormwater management
department.
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.
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
Town of Hillsborough, North Carolina
Notes to Financial Statements
36
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, the Water and Sewer Fund, and the Stormwater 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 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 water and sewer
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
37
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 $ 33,073
Unspent debt proceeds 260,116
General Capital Projects Fund
Unspent debt proceeds 950
General Capital Reserve Fund
Developer donations - future capital projects 214,562
Total governmental activities 508,701
Business-type activities:
Water and Sewer Fund
Unspent debt proceeds 606,874
Customer deposits 453,998
Developer donations - perpetual maintenance 441,138
Developer donations - water and sewer needs 2,164,344
Total business-type activities 3,666,354
Total restricted cash $ 4,175,055
Town of Hillsborough, North Carolina
Notes to Financial Statements
38
(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, 2016. 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. 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
39
(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 2017 fiscal year, contributions
made to the Law Enforcement Officers’ Special Separation Allowance plan from January 1, 2017 through June 30,
2017, 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.
(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.
Town of Hillsborough, North Carolina
Notes to Financial Statements
40
The governmental fund types classify fund balances as follows:
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.
Town of Hillsborough, North Carolina
Notes to Financial Statements
41
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.
(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 $ 1,581,546 $ 96,728 $ 1,678,274
Public safety 4,084,416 262,832 4,347,248
Environmental protection 449,935 135,404 585,339
Community activities and projects 57,673 141,417 199,090
Parks and recreation 397,672 254,317 651,989
Debt service:
Principal retirement 790,345 (790,345) (1) -
Interest and fiscal charges 100,353 (100,353) (1) -
(1) Reclassification of debt service payments.
3. Stewardship, Compliance and Accountability
A. Noncompliance with North Carolina General Statutes
During the year ended June 30, 2017, the Town entered into a contract with a vendor for services related to the
implementation of an advanced metering infrastructure, including bill management and customer service related to
the water and sewer utilities provided by the Town. Under the terms of the contract, a $200,000 payment was due
to the vendor during July 2017. In accordance with State law [G.S. 159-28(a)], it is required that a signed preaudit
certification be included on any written contract or written agreement requiring the payment of money. The former
Finance Director for the Town signed the preaudit certification and instructed that the payment be made to the
vendor during July 2017, though proper budgetary authority for the payment did not exist at the time the payment
was made.
Town of Hillsborough, North Carolina
Notes to Financial Statements
42
B. Deficit in Fund Balance or Net Position of Individual Funds
As of June 30, 2017, the Downtown Improvements Capital Project Fund has a deficit in fund balance of $72,076.
This deficit fund balance results from grant revenues the town must recognize on these financial statements as
deferred due to receipt not taking place within 90 of the fiscal year-end. This deficit fund balance will be eliminated
when grant funds are received in the 2018 fiscal year.
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, 2017, the Town’s deposits had a carrying amount of $5,301,864 and a bank balance of $5,551,543. Of
the bank balance, $500,000 was covered by federal depository insurance and $5,051,543 in interest-bearing
deposits were covered under the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2017.
At June 30, 2017, the Authority’s deposits had a carrying amount and bank balance of $226,151. All of the bank
balance was covered by federal depository insurance.
At June 30, 2017, the Board’s deposits had a carrying amount and bank balance of $229,501. All of the bank
balance was covered by federal depository insurance.
Investments
At June 30, 2017, the Town had $12,855,454 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
43
Governmental
Activities
General Fund:
Sales and use tax distribution $ 368,354
Utilities franchise and telecommunications tax 142,688
Other government agencies 85,114
Sales tax refunds 136,580
732,736
Downtown Improvements Capital Project Fund
STP grant funds 227,045
Riverwalk CMAQ Capital Project Fund
CMAQ grant funds 24,623
$ 984,404
(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, 2017
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
Water and Sewer Enterprise Fund $ 30,757
Town of Hillsborough, North Carolina
Notes to Financial Statements
44
(5) Capital assets
Governmental capital asset activity for the year ended June 30, 2017 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Governmental activities:
Capital assets not
being depreciated:
Land $ 3,653,081 $ - $ (20,210) $ - $ 3,632,871
Construction-in-
progress 293,133 377,825 - (51,189) 619,769
Total capital assets
not being depreciated 3,946,214 $ 377,825 $ (20,210) $ (51,189) 4,252,640
Capital assets being
depreciated:
Buildings and
improvements 6,990,652 $ - $ - $ - 6,990,652
Infrastructure 8,796,942 516,108 - 51,189 9,364,239
Equipment 671,663 113,763 (3,450) - 781,976
Vehicles 4,012,934 85,444 (56,851) - 4,041,527
Total capital assets
being depreciated 20,472,191 $ 715,315 $ (60,301) $ 51,189 21,178,394
Less accumulated
depreciation for:
Buildings and
improvements 1,753,138 $ 226,290 $ - $ - 1,979,428
Infrastructure 614,705 224,055 - - 838,760
Equipment 482,164 45,829 (3,072) - 524,921
Vehicles 2,816,271 377,157 (56,851) - 3,136,577
Total accumulated
depreciation 5,666,278 $ 873,331 $ (59,923) $ - 6,479,686
Total capital assets
being depreciated, net 14,805,913 14,698,708
Governmental activity
capital assets, net $ 18,752,127 $ 18,951,348
Depreciation expense was charged to functions/programs of the primary government as follows:
General government $ 279,488
Public safety 250,507
Transportation 187,974
Economic and physical development 23,619
Environmental protection 131,743
$ 873,331
Town of Hillsborough, North Carolina
Notes to Financial Statements
45
Business-type capital asset activity for the year ended June 30, 2017 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Business-type activities:
Capital assets not
being amortized or
depreciated:
Land $ 6,064,293 $ 31,251 $ - $ - $ 6,095,544
Intangibles-in-
Progress 200,000 131,101 - (331,101) -
Construction-in-
progress 3,466,558 493,626 - - 3,960,184
Total capital assets
not being amortized or
depreciated 9,730,851 $ 655,978 $ - $ (331,101) 10,055,728
Capital assets being
amortized or depreciated:
Buildings and
improvements 27,783,910 $ - $ - $ - 27,783,910
Plant and distribution
systems 30,985,878 1,325,206 - - 32,311,084
Infrastructure 637,336 102,537 - - 739,873
Equipment 1,562,534 116,192 (3,450) - 1,675,276
Intangible assets -
Software - - - 331,101 331,101
Vehicles 764,403 192,174 - - 956,577
Total capital assets
being amortized
or depreciated 61,734,061 $ 1,736,109 $ (3,450) $ 331,101 63,797,821
Less accumulated
depreciation and
amortization for:
Buildings and
improvements 7,849,873 $ 740,767 $ - $ - 8,590,640
Plant and distribution
systems 8,526,855 634,697 - - 9,161,552
Infrastructure 68,286 16,264 - - 84,550
Equipment 1,119,633 88,572 (3,072) - 1,205,133
Intangible assets - 131,715 - - 131,715
Vehicles 596,813 71,668 - - 668,481
Total accumulated
depreciation and
amortization 18,161,460 $ 1,683,683 $ (3,072) $ - 19,842,071
Depreciable assets, net 43,572,601 43,955,750
Business-type activity
capital assets, net $ 53,303,452 $ 54,011,478
Town of Hillsborough, North Carolina
Notes to Financial Statements
46
(6) Construction commitments
The Town has active construction projects as of June 30, 2017 with the following remaining commitments:
Remaining
Project Spent-to-Date Commitment
Downtown Improvements $ 196,154 $ 594,111
West Fork Eno Reservoir 1,745,554 271,791
Effluent Aeration Project 104,550 335,250
Waterstone Water Tank 1,602,080 106,920
Total $ 3,648,338 $ 1,308,072
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 officers (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, 2017, was 8.00% of compensation for law
enforcement officers and 7.25% 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 $429,432 for the year ended June 30, 2017.
Town of Hillsborough, North Carolina
Notes to Financial Statements
47
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, 2017, the Town reported a liability of $1,961,038 for its proportionate share of the net pension liability.
The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net
pension liability was determined by an actuarial valuation as of December 31, 2015. The total pension liability was
then rolled forward to the measurement date of June 30, 2016 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, 2016, the Town’s
proportion was 0.0924%, which was an increase of 0.0086% from its proportion measured as of June 30, 2015.
For the year ended June 30, 2017, the Town recognized pension expense of $543,413. At June 30, 2017, 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 $ 36,845 $ 68,717
Changes of assumptions 134,314 -
Net difference between projected and actual earnings on pension
plan investments 1,084,207 -
Changes in proportion and differences between Town contributions
and proportionate share of contributions 56,487 -
Town contributions subsequent to the measurement date 429,432 -
Total $ 1,741,285 $ 68,717
$429,432 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:
2018 $ 199,404
2019 199,496
2020 527,005
2021 317,231
2022 -
Thereafter -
Town of Hillsborough, North Carolina
Notes to Financial Statements
48
Actuarial assumptions. The total pension liability in the December 31, 2015 actuarial valuation was determined
using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation 3.0 percent
Salary increases 3.50 to 7.75 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, 2015 valuation were based on the results of an actuarial
experience study for the period January 1, 2010 through December 31, 2014.
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, 2016 are summarized in the following table:
Long-Term
Expected
Target Real Rate
Asset Class Allocation of Return
Fixed income 29.0% 1.4%
Global equity 42.0% 5.3%
Real estate 8.0% 4.3%
Alternatives 8.0% 8.9%
Credit 7.0% 6.0%
Inflation protection 6.0% 4.0%
Total 100.0%
The information above is based on 30-year expectations developed with the consulting actuary for the 2016 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
49
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) $ 4,654,457 $ 1,961,038 $ (288,707)
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 under the age of 62 who have completed at least 30 years of creditable
service or have attained 55 years of age and have completed five or more years of creditable service. The
Separation Allowance is equal to 0.85 percent 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.
All full-time law enforcement officers of the Town are covered by the Separation Allowance. At the December 31,
2015 valuation date, 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
A separate report was not issued for the plan.
(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
50
The Separation Allowance has no assets accumulated in a trust that meets the criteria which are outlined in GASB
Statement 73.
(iii) Actuarial assumptions:
The entry age actuarial cost method was used in the December 31, 2015 valuation. The total pension liability in the
December 31, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all
periods included in the measurement:
Inflation 3.0 percent
Salary increases 3.50 to 7.35 percent, including inflation and productivity factor
Discount rate 3.86 percent
The discount rate is based on the weekly average of the Bond Buyer General Obligation 20-year Municipal Bond
Index determined at the end of each month for the year ending December 31, 2016.
Mortality rates are based on the RP-2014 series mortality tables with adjustments for mortality improvements
based on Scale AA.
(iv) Change in actuarial assumptions:
On the prior measurement date (December 31, 2015), the Municipal Bond Index Rate, on which the discount rate
is based, was 3.57%. Since the Prior Measurement Date, the Municipal Bond Index Rate has increased to 3.86%
as of the Measurement Date (December 31, 2016). This resulted in a $13,621 reduction in the Total Pension
Liability.
(v) 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. Administration costs of the Separation
Allowance are financed through investment earnings. The Town paid $33,003 as benefits came due for the
reporting period.
(vi) Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources
related to pensions:
At June 30, 2017 the Town reported a total pension liability of $566,336. The total pension liability was measured
as of December 31, 2016 based on a December 31, 2015 actuarial valuation. The total pension liability was then
rolled forward to the measurement date of December 31, 2016 utilizing update procedures incorporating the
actuarial assumptions. For the year ended June 30, 2017, the Town recognized pension expense of $54,755.
Town of Hillsborough, North Carolina
Notes to Financial Statements
51
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ - $ -
Changes of assumptions - 11,466
Town benefit payments and plan administrative expense
made subsequent to the measurement date 13,510 -
Total $ 13,510 $ 11,466
The $13,510 reported as deferred outflows of resources related to pensions resulting from benefit payments made
and administrative expenses incurred subsequent to the measurement date will be recognized as a decrease of
the total pension liability in the year ended June 30, 2018. Other amounts reported as deferred inflows of
resources related to pensions will be recognized in pension expense as follows:
Year Ended
June 30,
2018 $ (2,155)
2019 (2,155)
2020 (2,155)
2021 (2,155)
2022 (2,155)
Thereafter (691)
Total $ (11,466)
(vii) Sensitivity of the Town’s total pension liability to changes in the discount rate:
The following presents the Town’s total pension liability calculated using the discount rate of 3.86 percent, as well
as what the Town’s total pension liability would be if it were calculated using a discount rate that is 1-percentage-
point lower (2.86 percent) or 1-percentage-point higher (4.86 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(2.86%) (3.86%) (4.86%)
Total pension liability $ 614,638 $ 566,336 $ 521,761
2017
Beginning balance $ 556,718
Service cost 36,956
Interest on the total pension liability 19,286
Changes of benefit terms -
Differences between expected and actual experience in the
measurement of the total pension liability -
Changes of assumptions or other inputs (13,621)
Benefit payments (33,003)
Ending balance of the total pension liability $ 566,336
Town of Hillsborough, North Carolina
Notes to Financial Statements
52
The plan currently uses mortality tables that vary by age, 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.
(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, 2017 were
$460,689, which consisted of $286,904 from the Town and $173,785 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
53
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 $1,073 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 $33,316 or 0.71% 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 0.34% and 0.37% of covered payroll,
respectively. The Town’s contributions totaled $33,316 in fiscal year 2017. Employees who did not meet the
wellness requirements paid $2,052 in premiums for coverage. 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 $ 96,860
Interest on net OPEB obligation 18,944
Adjustment to annual required contribution (18,097)
Annual OPEB cost 97,707
Contributions made (33,316)
Increase in net OPEB obligation 64,391
Net OPEB obligation, beginning of year 473,584
Net OPEB obligation, end of year $ 537,975
The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation for 2017, 2016, and 2015 were as follows:
Town of Hillsborough, North Carolina
Notes to Financial Statements
54
Percentage
of Annual
Annual OPEB Cost Net OPEB
Year Ended June 30 OPEB Cost Contributed Obligation
2015 $ 125,284 52.1% $ 407,147
2016 94,039 29.4% 473,584
2017 97,707 34.4% 537,975
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
55
For the fiscal year ended June 30, 2017, the Town made contributions to the State for death benefits of $5,195.
The Town’s required contributions for employees not engaged in law enforcement and for law enforcement officers
represented 55.0% and 45.0% of covered payroll, respectively.
(4) Accounts payable and accrued liabilities
Accounts payable and accrued liabilities at June 30, 2017 were as follows:
Business-
Governmental Type
Activities Activities Total
Payable to vendors and others $ 258,770 $ 380,632 $ 639,402
Accrued payroll and related liabilities 166,602 28,332 194,934
Total accounts payable and accrued liabilities $ 425,372 $ 408,964 $ 834,336
(5) Deferred outflows and inflows of resources
The Town has deferred outflows of resources, which are comprised of $429,432 of current year LGERS pension
contributions, $13,510 of benefit payments made and administrative expenses for LEOSSA from January 1, 2017
through June 30, 2017, $1,311,853 of pension deferrals and $8,836 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 $ 124,776 $ -
Grant receivable (General Fund) 8,852 -
Grant receivable (Riverwalk CMAQ Capital Project Fund) 24,623 -
Grant receivable (Downtown Improvements Capital Project Fund) 227,045 -
$ 385,296 $ -
Pension deferrals $ 80,183
(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 ($50,879,483); 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 ($758,124); fine arts
($500,000); 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
56
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. $ 490,400
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%. 271,178
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%. 547,230
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. 185,022
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. 649,803
Town of Hillsborough, North Carolina
Notes to Financial Statements
57
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. $ 512,807
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. 71,410
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. 173,017
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. 500,702
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. 340,628
Note payable to BB&T, executed December 2016, in the amount of
$317,000 for the purchase of a dump truck and knuckle boom
truck. The note is payable in nine semi-annual payments of
$36,637 with interest payable at 1.57%, and is secured by the
trucks. 283,004
4,025,201
Less current portion 664,300
$ 3,360,901
The future minimum payments on the notes payable as of June 30, 2017 are as follows:
Year Ending June 30, Principal Interest Total
2018 $ 664,300 $ 83,864 $ 748,164
2019 826,753 74,220 900,973
2020 645,897 57,658 703,555
2021 537,551 44,436 581,987
2022 378,050 32,823 410,873
2023 - 2027 720,382 102,387 822,769
2028 - 2032 252,268 22,782 275,050
$ 4,025,201 $ 418,170 $ 4,443,371
Town of Hillsborough, North Carolina
Notes to Financial Statements
58
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). $ 953,000
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. 337,642
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. 300,421
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. 922,758
2,513,821
Less current portion 645,400
$ 1,868,421
The long-term debt requirements to maturity as of June 30, 2017 for the Enterprise Fund are as follows:
Year Ending June 30, Principal Interest Total
2018 $ 645,400 $ 39,954 $ 685,354
2019 405,887 40,634 446,521
2020 416,830 32,000 448,830
2021 101,959 25,772 127,731
2022 81,745 23,473 105,218
2023 - 2027 441,323 84,769 526,092
2028 - 2032 420,677 25,578 446,255
$ 2,513,821 $ 272,180 $ 2,786,001
a. The provisions of this loan agreement contain certain financial covenants related to the maintenance of fund
balance. At June 30, 2017, the Town was in compliance with such covenants.
Town of Hillsborough, North Carolina
Notes to Financial Statements
59
b. General obligation indebtedness
The Town’s legal debt margin at June 30, 2017 was $66,383,811.
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, 2017 was $686,002.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2017 are as follows:
Business-Type Activities
Year Ending June 30, Principal Interest Total
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 76,222 10,138 86,360
2023 - 2026 304,892 20,276 325,168
$ 686,002 $ 91,240 $ 777,242
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, 2017 was
$15,138,505.
Annual debt service requirements to maturity for this Revolving Loan Payable as of June 30, 2017 are as follows:
Business-Type Activities
Year Ending June 30, Principal Interest Total
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 890,500 284,204 1,174,704
2023 - 2027 4,452,500 1,093,090 5,545,590
2028 - 2032 4,452,500 546,544 4,999,044
2033 - 2034 1,781,005 65,586 1,846,591
$ 15,138,505 $ 3,344,852 $ 18,483,357
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, 2017. 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, 2017 was $1,619,148.
Town of Hillsborough, North Carolina
Notes to Financial Statements
60
d. Changes in long-term debt
Current
Portion of
Balance Balance Long-Term
July 1, 2016 Increases Decreases June 30,2017 Liabilities
Governmental activities:
Installment purchases $ 4,534,728 $ 317,000 $ 826,527 $ 4,025,201 $ 664,300
Compensated absences 287,920 141,326 122,749 306,497 122,749
Other postemployment
benefits 282,307 60,936 20,778 322,465 -
Net pension liability
(LGERS) 247,634 1,041,162 - 1,288,796 -
Total pension liability
(LEOSSA) 52,803 513,533 - 566,336 -
$ 5,405,392 $ 2,073,957 $ 970,054 $ 6,509,295 $ 787,049
Business-type activities:
Installment purchases $ 3,269,750 $ - $ 755,929 $ 2,513,821 $ 645,400
Revolving loans payable 18,511,848 - 1,068,193 17,443,655 1,068,192
Other postemployment
benefits 191,277 24,233 - 215,510 -
Net pension liability
(LGERS) 128,590 543,652 - 672,242 -
Compensated absences 232,597 86,214 117,771 201,040 117,771
$ 22,334,062 $ 654,099 $ 1,941,893 $ 21,046,268 $ 1,831,363
Compensated absences, the total pension liability (LEOSSA), 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, 2017, $3,140,000 of special assessment debt remained outstanding.
(9) Operating leases
The Town leases certain vehicles and office equipment under non-cancelable operating leases expiring at various
times through 2022. Future minimum lease payments approximate the following:
Year Ended
June 30,
2018 $ 73,091
2019 73,091
2020 72,484
2021 71,284
2022 141,306
Rent expense under operating leases for the year ended June 30, 2017 was $71,284.
Town of Hillsborough, North Carolina
Notes to Financial Statements
61
C. Interfund balances and activity
Transfers to/from other funds
Transfers to/from other funds at June 30, 2017 consist of the following:
From the General Fund to the Downtown Improvements Capital
Project Fund for design work $ 129,737
From the General Fund to the Public Works Building Capital
Projects Fund for design and project management 25,000
From the General Fund to the Town Barn Renovations Fund for
design work 114,201
From the General Capital Reserve Fund to the General Fund for
debt service payments 126,053
$ 394,991
D. Net investment in capital assets
Governmental Business-Type
Capital assets $ 18,951,348 $ 54,011,478
Less: related debt
Installment purchases (4,025,201) (2,513,821)
Revolving loans payable - (17,443,655)
Add: deferred loss on defeasance of debt - 8,836
Add: unexpended debt proceeds 260,272 606,874
Net investment in capital assets $ 15,186,419 $ 34,669,712
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 $ 6,509,632
Less:
Prepaid items 219,730
Stabilization by state statute 1,419,842
Streets - Powell Bill 33,073
Sidewalks 20,800
Affordable housing 46,000
Appropriated fund balance in subsequent fiscal year’s budget 720,725
Working capital/fund balance policy 4,049,462
Remaining fund balance General Fund $ -
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 $ 389,177
Town of Hillsborough, North Carolina
Notes to Financial Statements
62
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 $2,467 to the Council during the fiscal year ended June 30,
2017.
6. Changes in Accounting Principles
The Town implemented Governmental Accounting Standards Board (GASB) Statement No. 73, Accounting and
Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68 and
Amendments to Certain Provisions of GASB Statements 67 and 68, in the fiscal year ending June 30, 2017. The
implementation of the statement required the Town to record beginning total pension liability and the effects on net
position of benefit payments and administrative expenses paid by the Town to the Law Enforcement Officers’
Special Separation Allowance during the measurement period. The information necessary for full retrospective
application is not available, so the accounting change was implemented in 2017 with a cumulative effect
adjustment to net position as of the beginning of the year. As a result, net position for the governmental activities at
July 1, 2016 decreased $470,244.
7. Significant Effects of Subsequent Events
Effective September 14, 2017 the Town entered into a financing agreement for the purchase of police vehicles in
the total principal amount of $465,522. The terms of the loan agreement call for bi-annual principal and interest
payments in the amount of $54,509, commencing in July 2018 and continuing through July 2022. The loan bears
interest at a rate of 1.86 percent per annum.
63
Required Supplementary Financial Data
This section contains additional information required by generally accepted accounting principles.
Schedule of Changes in Total Pension Liability for the Law Enforcement Officers’ Special Separation
Allowance.
Schedule of Total Pension Liability as a Percentage of Covered Payroll for the Law Enforcement Officers’
Special Separation Allowance.
Schedules of Funding Progress and Employer Contributions for Other Postemployment Benefits.
Schedule of Proportionate Share of Net Pension Liability (Asset) for Local Government Employees’
Retirement System
Schedule of Contributions to Local Government Employees’ Retirement System
64
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Exhibit ATown of Hillsborough, North Carolina
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Schedule of Changes in Total Pension Liability
June 30, 2017
2017
Beginning balance 556,718$
Service Cost 36,956
Interest on the total pension liability 19,286
Changes of benefit terms -
Differences between expected and actual experience
in the measurement of the total pension liability -
Changes of assumptions or other inputs (13,621)
Benefit payments (33,003)
Other changes -
Ending balance of the total pension liability 566,336$
The amounts presented for each fiscal year were determined as of the prior fiscal year
ending December 31.
65
Exhibit BTown of Hillsborough, North Carolina
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Schedule of Total Pension Liability as a Percentage of Covered Payroll
June 30, 2017
2017
Total pension liability 566,336$
Covered payroll 1,650,937
Total pension liability as a percentage of covered payroll 34.30%
Notes to the schedules:
The Town of Hillsborough has no assets accumulated in a trust that meets the criteria
in paragraph 4 of GASB Statement 73 to pay related benefits.
66
Exhibit C
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%
2017 96,860 34.40%
Schedule of Funding Progress
Schedule of Employer Contributions
Town of Hillsborough, North Carolina
Other Postemployment Benefits
Required Supplementary Information
67
Exhibit D-1
2017 2016 2015 2014
Hillsborough's proportion of the net pension
liability (asset) (%)0.0924%0.0838% 0.0809% 0.0797%
Hillsborough's proportion of the net pension
liability (asset) ($)1,961,038$ 376,224$ (477,164)$ 960,691$
Hillsborough's covered-employee payroll 5,235,777$ 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 37.45%7.74% -10.21% 21.70%
Plan fiduciary net position as a percentage
of the total pension liability 91.47%98.09% 102.64% 94.35%
* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.
Town of Hillsborough, North Carolina
Schedule of Proportionate Share of Net Pension Liability (Asset)
Local Government Employees' Retirement System
Required Supplementary Information
Last Four Fiscal Years*
68
Exhibit D-2Town of Hillsborough, North Carolina
Schedule of Contributions
Local Government Employees' Retirement System
Required Supplementary Information
Last Four Fiscal Years
2017 2016 2015 2014
Contractually required contribution 429,432$ 356,396$ 357,402$ 333,343$
Contributions in relation to the contractually
required contribution 429,432 356,396 357,402 333,343
Contribution deficiency (excess)-$ -$ -$ -$
Hillsborough's covered-employee payroll 5,750,308$ 5,235,777$ 4,861,624$ 4,672,868$
Contributions as a percentage of covered-
employee payroll 7.47%6.81% 7.35% 7.13%
69
70
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71
Supplementary Information
72
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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, 2017 with Comparative Actual Amounts for
Year Ended June 30, 2016
2016
Variance
Positive
Budget Actual (Negative) Actual
Revenues
General revenues:
Ad valorem taxes:
Current 5,869,000$ 6,040,414$ 171,414$ 5,629,442$
Prior 500 1,307 807 4,016
Penalties and interest 19,000 22,416 3,416 35,544
5,888,500 6,064,137 175,637 5,669,002
Other taxes and licenses:
Local option sales tax 1,249,500 1,364,779 115,279 1,265,473
Gross receipts on short-term
rental property 7,000 8,679 1,679 7,433
Privilege licenses 1,000 2,830 1,830 2,630
Motor vehicle license fees - 345 345 546
Solid waste disposal 3,500 5,357 1,857 4,032
1,261,000 1,381,990 120,990 1,280,114
Unrestricted intergovernmental
revenues:
Franchise tax 450,000 541,009 91,009 589,466
Beer and wine tax 27,000 29,257 2,257 27,828
Food and beverage tax 379,915 368,370 (11,545) 347,057
Occupancy tax 89,500 71,757 (17,743) 70,460
946,415 1,010,393 63,978 1,034,811
Restricted intergovernmental
revenues:
Powell Bill 185,922 185,922 - 184,863
Federal grants - 42,611 42,611 39,200
State grants - 108,089 108,089 -
Other 150 9,874 9,724 38,081
186,072 346,496 160,424 262,144
Investment earnings 11,500 36,091 24,591 15,593
Other general revenues 127,363 79,734 (47,629) 118,323
Total general revenues 8,420,850 8,918,841 497,991 8,379,987
2017
73
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, 2017 with Comparative Actual Amounts for
Year Ended June 30, 2016
2016
Variance
Positive
Budget Actual (Negative) Actual
2017
Functionally related revenues:
Use and rental fees:
Zoning permits 50,000$ 105,815$ 55,815$ 42,382$
Cable franchise 50,000 80,656 30,656 51,879
Time Warner Cable PEG fees 27,000 27,585 585 27,972
Fire inspection fees 14,000 13,555 (445) 13,645
Affordable Housing - 5,000 5,000 41,000
Total functionally related
revenues 141,000 232,611 91,611 176,878
Total revenues 8,561,850 9,151,452 589,602 8,556,865
Expenditures
General government:
Governing body:
Personnel services 48,141 48,512
Other services and charges 231,396 190,497
Reimbursement from enterprise
funds (132,774) (119,471)
135,241 146,763 (11,522) 119,538
Ruffin-Roulhac:
Other services and charges 38,824 77,972
Capital outlay 10,603 -
Reimbursement from enterprise
funds (26,781) (38,986)
(9,664) 22,646 (32,310) 38,986
Administration:
Personnel services 708,514 667,671
Other services and charges 424,093 414,203
Reimbursement from enterprise
funds (547,121) (519,585)
595,321 585,486 9,835 562,289
Finance:
Personnel services 419,459 445,682
Other services and charges 92,535 100,572
Debt service payments 9,076 4,538
Reimbursement from enterprise
funds (271,460) (274,244)
272,490 249,610 22,880 276,548
74
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, 2017 with Comparative Actual Amounts for
Year Ended June 30, 2016
2016
Variance
Positive
Budget Actual (Negative) Actual
2017
Planning:
Personnel services 335,553$ 350,089$
Other services and charges 78,088 260,337
440,575$ 413,641 26,934$ 610,426
Motor pool:
Personnel services 251,747 244,129
Other services and charges 157,616 173,408
Debt service payments 87,652 89,432
Capital outlay - 68,323
Reimbursement from enterprise
funds (236,887) (263,232)
272,649 260,128 12,521 312,060
Total general government 1,706,612 1,678,274 28,338 1,919,847
Public safety:
Police department:
Personnel services 2,336,651 2,206,701
Other services and charges 300,761 296,518
Capital outlay 166,951 178,102
Debt service payments 36,377 36,377
2,962,334 2,840,740 121,594 2,717,698
Fire inspections/code enforcement:
Personnel services 118,736 116,959
Other services and charges 22,744 20,465
Debt service payments 226,455 176,255
374,717 367,935 6,782 313,679
Safety:
Personnel services 93,915 88,242
Other services and charges 352,747 164,914
Capital outlay - 15,490
Reimbursement from enterprise
funds (245,402) (134,232)
281,980 201,260 80,720 134,414
Fire protection
Other services and charges 937,313 884,741
947,672 937,313 10,359 884,741
Total public safety 4,566,703 4,347,248 219,455 4,050,532
75
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, 2017 with Comparative Actual Amounts for
Year Ended June 30, 2016
2016
Variance
Positive
Budget Actual (Negative) Actual
2017
Transportation:
Street department/Powell Bill:
Personnel services 250,131$ 243,324$
Other services and charges 195,502 208,211
Capital outlay 419,652 426,698
1,244,205$ 865,285 378,920$ 878,233
Total transportation 1,244,205 865,285 378,920 878,233
Environmental protection:
Sanitation department:
Personnel services 261,582 246,450
Other services and charges 124,336 120,264
Debt service payments 135,404 158,412
710,115 521,322 188,793 525,126
Cemetery:
Other services and charges 59,552 41,551
66,520 59,552 6,968 41,551
Stormwater:
Personnel services 677 92,513
Other services and charges 3,788 47,143
4,000 4,465 (465) 139,656
Total environmental
protection 780,635 585,339 195,296 706,333
Economic and physical development:
Tourism:
Other services and charges - 442,006 - 397,828
532,866 442,006 90,860 397,828
Total economic and physical
development 532,866 442,006 90,860 397,828
Community activities and projects:
Contributions 5,000 25,170
Other services and charges 52,673 68,066
Debt service payments 141,417 128,133
Capital outlay - 728,441
Total community activities
and projects 469,936 199,090 270,846 949,810
76
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, 2017 with Comparative Actual Amounts for
Year Ended June 30, 2016
2016
Variance
Positive
Budget Actual (Negative) Actual
2017
Parks and recreation:
Personnel services 72,938$ 17,724$
Other services and charges 324,734 80,167
Debt service payments 254,317 564,831
Total parks and recreation 681,304$ 651,989 29,315$ 662,722
Total expenditures 9,982,261 8,769,231 1,213,030 9,565,305
Revenues under
expenditures (1,420,411) 382,221 1,802,632 (1,008,440)
Other financing sources (uses):
Transfer to other funds:
Downtown Improvements Capital
Project Fund (129,737) (129,737) - (30,000)
Town Barn Improvements Capital
Project Fund (114,201) (114,201) - -
Rail Station Capital Project Fund - - - (54,000)
Riverwalk - CMAQ Fund - - - (9,500)
Public Works Project Fund (25,000) (25,000) - (50,000)
Transfer from other funds:
General Capital Projects Fund - - - -
General Capital Reserve Fund 126,054 126,053 (1) 126,054
Riverwalk Phase II Fund - - - 173,425
Riverwalk Phase III Fund - - - 22,058
Installment purchase obligations
issued 307,623 317,000 9,377 544,906
Sale of capital assets - 21,610 21,610 -
Total other financing sources
(uses)164,739 195,725 30,986 722,943
Appropriated fund balance 1,255,672 - (1,255,672) -
Net change in fund balance -$ 577,946 577,946$ (285,497)
Fund balance, beginning 5,931,686 6,217,183
Fund balance, ending 6,509,632$ 5,931,686$
77
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 1,391,992 - 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 655,623 655,622 - 655,622 1
Construction 4,600,000 3,151,885 18,955 3,170,840 1,429,160
Total expenditures 7,989,384 6,541,268 18,955 6,560,223 1,429,161
Revenues under
expenditures (7,989,277) (6,541,161) (18,955) (6,560,116) 1,429,161
Other financing sources
(uses):
Installment purchase
obligations issued 3,319,650 3,319,650 - 3,319,650 -
Contribution from property
owners 4,600,000 3,151,884 18,955 3,170,839 (1,429,161)
Transfer from General Fund 77,647 77,647 - 77,647 -
Transfer to General Fund (8,020) (7,070) - (7,070) 950
Total other financing
sources 7,989,277 6,542,111 18,955 6,561,066 (1,428,211)
Net change in fund
balance -$ 950$ - 950$ 950$
Fund balance, beginning 950
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 1,471
Transfers out - Capital Reserve Fund (126,053)
Fund balance, beginning (Capital Reserve Fund) 339,144
Fund balance, ending (Consolidated General
Capital Projects Fund) 215,512$
Actual
Town of Hillsborough, North Carolina
Budget and Actual
General Capital Projects Fund
Year Ended June 30, 2017
Statement of Revenues, Expenditures, and Changes in Fund Balance
78
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 15,337 1,471 16,808 1,743
Total revenues 1,120,065 1,120,337 1,471 1,121,808 1,743
Expenditures 212,818 - - - 212,818
Revenues over
expenditures 907,247 1,120,337 1,471 1,121,808 214,561
Other financing uses
Transfer to General Fund (504,216) (378,162) (126,053) (504,215) 1
Transfer to Water Sewer
Capital Reserve Fund (403,031) (403,031) - (403,031) -
Total other financing
uses (907,247) (781,193) (126,053) (907,246) 1
Net change in fund
balance -$ 339,144$ (124,582) 214,562$ 214,562$
Fund balance, beginning 339,144
Fund balance, ending 214,562$
General Capital Reserve Fund
Town of Hillsborough, North Carolina
Budget and Actual
Actual
Year Ended June 30, 2017
Statement of Revenues, Expenditures, and Changes in Fund Balance
79
Schedule 4
(2 pages)
Downtown Town Barn Riverwalk
Improvements Improvements CMAQ
Capital Capital Capital
Projects Project Project
Fund Fund Fund
ASSETS
Cash and investments 23,529$ 94,972$ 101,070$
Due from other governments 227,045 - 24,623
Total assets 250,574$ 94,972$ 125,693$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities 95,605$ 2,700$ 30,780$
Total liabilities 95,605 2,700 30,780
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue 227,045 - 24,623
Total deferred inflows
of resources 227,045 - 24,623
Fund balances:
Restricted for:
Stabilization by state statute 736,306 89,972 16,657
Committed for:
Capital projects - 2,300 53,633
Unassigned (808,382) - -
Total fund balances (72,076) 92,272 70,290
Total liabilities, deferred inflows of
resources, and fund balances 250,574$ 94,972$ 125,693$
June 30, 2017
Nonmajor Governmental Funds
Town of Hillsborough, North Carolina
Combining Balance Sheet
80
Schedule 4
(2 pages)
Public Works
Rail Station Building Total
Capital Capital Nonmajor
Project Project Governmental
Fund Fund Funds
40,135$ 70,580$ 330,286$
- - 251,668
40,135$ 70,580$ 581,954$
-$ -$ 129,085$
- - 129,085
- - 251,668
- - 251,668
6,134 1,200 850,269
34,001 69,380 159,314
- - (808,382)
40,135 70,580 201,201
40,135$ 70,580$ 581,954$
81
Schedule 5
(2 pages)Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual
Downtown Town Barn Riverwalk
Improvements Improvements CMAQ
Capital Capital Capital
Project Project Project
Fund Fund Fund
Revenues
Restricted intergovernmental
revenues:
Federal grants -$ -$ 28,442$
Total revenues - - 28,442
Expenditures
Current:
General government - 26,978 -
Environmental protection - - -
Economic and physical development 234,141 - -
Parks and recreation - - 30,780
Total expenditures 234,141 26,978 30,780
Revenues under
expenditures (234,141) (26,978) (2,338)
Other financing sources
Transfer from General Fund 129,737 114,201 -
Total other financing sources 129,737 114,201 -
Net change in fund balances (104,404) 87,223 (2,338)
Fund balances, beginning 32,328 5,049 72,628
Fund balances, ending (72,076)$ 92,272$ 70,290$
Year Ended June 30, 2017
Nonmajor Governmental Funds
Town of Hillsborough, North Carolina
82
Schedule 5
(2 pages)
Public Works
Rail Station Building Total
Capital Capital Nonmajor
Project Project Governmental
Fund Fund Funds
-$ -$ 28,442$
- - 28,442
- - 26,978
- 4,420 4,420
- - 234,141
- - 30,780
- 4,420 296,319
- (4,420) (267,877)
- 25,000 268,938
- 25,000 268,938
- 20,580 1,061
40,135 50,000 200,140
40,135$ 70,580$ 201,201$
83
Schedule 6
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 731,000$ -$ -$ -$ (731,000)$
Total revenues 731,000 - - - (731,000)
Expenditures
Design 3,172$ 3,172$ -$ 3,172$ -$
Construction 934,565 - 234,141 234,141 700,424
Total expenditures 937,737 3,172 234,141 237,313 700,424
Revenues
under expenditures (206,737) (3,172) (234,141) (237,313) (30,576)
Other financing sources
Transfer from General Fund 206,737 35,500 129,737 165,237 (41,500)
Net change in fund
balance -$ 32,328$ (104,404) (72,076)$ (72,076)$
Fund balance, beginning 32,328
Fund balance,
ending (72,076)$
Actual
Year Ended June 30, 2017
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
84
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, 2017
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design 130,500$ 11,250$ 26,978$ 38,228$ 92,272$
Construction 3,701 3,701 - 3,701 -
Total expenditures 134,201 14,951 26,978 41,929 92,272
Revenues
under expenditures (134,201) (14,951) (26,978) (41,929) 92,272
Other financing sources
Transfer from General Fund 134,201 20,000 114,201 134,201 -
134,201 20,000 114,201 134,201 -
Net change in fund
balance -$ 5,049$ 87,223 92,272$ 92,272$
Fund balance, beginning 5,049
Fund balance, ending 92,272$
Actual
85
Schedule 8Town 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, 2017
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues:
Federal grants 496,000$ 45,132$ 28,442$ 73,574$ (422,426)$
Total revenues 496,000 45,132 28,442 73,574 (422,426)
Expenditures
Design 121,800 100,998 30,780 131,778 (9,978)
Construction 507,700 5,006 - 5,006 502,694
Total expenditures 629,500 106,004 30,780 136,784 492,716
Revenues
under expenditures (133,500) (60,872) (2,338) (63,210) 70,290
Other financing sources
Transfer from General Fund 133,500 133,500 - 133,500 -
Net change in fund
balance -$ 72,628$ (2,338) 70,290$ 70,290$
Fund balance, beginning 72,628
Fund balance, ending 70,290$
Actual
86
Schedule 9
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 40,135
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, 2017
87
Schedule 10
Budget and Actual
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Expenditures
Design 75,000$ -$ 4,420$ 4,420$ 70,580$
Total expenditures 75,000 - 4,420 4,420 70,580
Revenues
under expenditures (75,000) - (4,420) (4,420) 70,580
Other financing sources
Transfer from General Fund 75,000 50,000 25,000 75,000 -
Net change in fund
balance -$ 50,000$ 20,580 70,580$ 70,580$
Fund balance, beginning 50,000
Fund balance, ending 70,580$
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, 2017
88
Schedule 11
Enterprise Fund
2016
Variance
Positive
Budget Actual (Negative)Actual
Revenues
Operating revenues:
Water charges 3,960,000$ 3,897,326$ (62,674)$ 4,009,818$
Sewer charges 4,000,000 4,575,619 575,619 3,978,680
Other receipts 825,850 920,340 94,490 2,685,134
8,785,850 9,393,285 607,435 10,673,632
Nonoperating revenues:
Interest on investments 1,000 10,670 9,670 5,498
Total revenues 8,786,850$ 9,403,955$ 617,105$ 10,679,130$
Town of Hillsborough, North Carolina
Budget and Actual (Non - GAAP)
Water and Sewer Fund
Year Ended June 30, 2016
2017
Year Ended June 30, 2017 with Comparative Actual Amounts for
Schedule of Revenues
89
Schedule 12
(3 pages)
2016
Variance
Positive
Budget Actual (Negative) Actual
Expenditures
Engineering:
Personnel services 418,031$ 407,001$
Other services and charges 1,493,526 1,430,359
Capital outlay 29,309 -
Total engineering 2,211,750$ 1,940,866 270,884$ 1,837,360
Billing and collection:
Personnel services 333,932 375,500
Other services and charges 376,311 255,481
Repairs and maintenance 725 268
Capital outlay - 326,943
Debt service payments 66,223 13,614
Total billing and
collection 834,082 777,191 56,891 971,806
Water plant:
Personnel services 571,480 487,307
Other services and charges 356,397 292,899
Repairs and maintenance 47,338 34,195
Capital outlay - 20,385
Debt service payments 111,301 138,839
Total water plant 1,435,419 1,086,516 348,903 973,625
Water distribution:
Personnel services 410,666 407,220
Other services and charges 238,765 238,533
Repairs and maintenance 21,057 19,850
Capital outlay 141,840 163,866
Debt service payments 124,244 163,492
Total water distribution 1,158,342 936,572 221,770 992,961
Wastewater collection:
Personnel services 407,081 399,151
Other services and charges 322,098 233,687
Repairs and maintenance 17,820 45,183
Capital outlay 175,016 97,295
Debt service payments 76,295 255,497
Total wastewater
collection 1,544,557 998,310 546,247 1,030,813
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Water and Sewer Fund
2017
Enterprise Fund
Year Ended June 30, 2016
Year Ended June 30, 2017 with Comparative Actual Amounts for
90
Schedule 12
(3 pages)
2016
Variance
Positive
Budget Actual (Negative) Actual
Town of Hillsborough, North Carolina
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Water and Sewer Fund
2017
Enterprise Fund
Year Ended June 30, 2016
Year Ended June 30, 2017 with Comparative Actual Amounts for
Wastewater plant:
Personnel services 446,319$ 458,068$
Other services and charges 304,502 255,579
Repairs and maintenance 152,672 199,945
Capital outlay 86,297 -
Debt service payments 1,284,012 1,305,874
Total wastewater plant 2,415,160$ 2,273,802 141,358$ 2,219,466
Reservoir:
Other services and charges 17,853 17,833
Repairs and maintenance 6,600 10,363
Debt service payments 640,666 649,360
Total reservoir 694,092 665,119 28,973 677,556
Total expenditures 10,293,402 8,678,376 1,615,026 8,703,587
Revenues over
expenditures (1,506,552) 725,579 2,232,131 1,975,543
Other financing sources (uses)
Transfer to Water and Sewer
Capital Reserve Fund (1,409,406) (909,406) 500,000 (1,903,442)
Transfer to Water and Sewer
Capital Projects Fund (1,263,444) (1,263,444) - (1,066,117)
Transfer from Water and
Sewer Capital Projects Fund - - - 188,946
Transfer from Water and
Sewer Capital Reserve Fund 1,510,149 1,510,149 - 1,436,060
Installment purchase
obligations issued 892,572 - (892,572) 326,943
Total other financing
sources (uses)(270,129) (662,701) (392,572) (1,017,610)
Excess of revenues and
other financing sources
(uses) over (under)
expenditures and other
uses (1,776,681) 62,878 1,839,559 957,933
Appropriated fund balance 1,776,681 - (1,776,681) -
Excess of revenues and
other uses over
expenditures and other
uses -$ 62,878$ 62,878$ 957,933$
91
Schedule 12
(3 pages)
Town of Hillsborough, North Carolina
Water and Sewer Fund
Enterprise Fund
Year Ended June 30, 2017 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 62,878$
Reconciling items:
Interest income from Water and Sewer Capital Projects Fund 69
Interest income from Water and Sewer Capital Reserve Fund 9,158
Restricted intergovernmental revenue from Water and Sewer
Capital Projects Fund -
Payment of principal on notes, bonds and installment
purchases 1,839,269
Capital outlay 432,462
Noncapitalizable capital project expenditures (187)
Depreciation (1,683,683)
Loss on disposal of capital assets (357)
Increase in deferred outflows of resources - pensions 433,639
Increase in net pension liability (513,650)
Decrease in deferred inflows of resources - pensions 44,330
Interest expense accrual adjustment 9,068
Vacation pay accrual adjustment 34,934
Bad debts (178,884)
Increase in OPEB liability (22,848)
Capital contributions from developer 1,325,206
Amortization of deferred loss on refunding (15,147)
Transfer to Water and Sewer Capital Projects Fund 1,263,444
Transfer from Water and Sewer Capital Reserve Fund (1,510,149)
Transfer to Water and Sewer Capital Reserve Fund 909,406
Change in net position 2,438,958$
Schedule of Expenditures
Budget and Actual (Non - GAAP)
Year Ended June 30, 2016
92
Schedule 13
Variance
Project Prior Current Total Positive
Authorization Years Year to Date (Negative)
Revenues
Restricted intergovernmental
revenues:
Federal grant 56,251$ 56,250$ -$ 56,250$ (1)$
Interest on investments 2,271 2,275 69 2,344 73
Total revenues 58,522 58,525 69 58,594 72
Expenditures
Capital improvements:
Sewer Outfall Phase II 1,688,044 1,571,108 67,498 1,638,606 49,438
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 250,000 - 2,388 2,388 247,612
Waterstone water tank 2,039,842 1,911,020 1,062 1,912,082 127,760
Water meter replacement 750,000 711,204 - 711,204 38,796
Automatic meter reading
project 937,747 200,000 131,101 331,101 606,646
Effluent aeration 585,000 37,263 116,667 153,930 431,070
Other improvements 350,000 44,190 - 44,190 305,810
8,148,935 6,023,087 318,716 6,341,803 1,807,132
West Fork Eno Reservoir:
Services and charges 2,444,117 1,055,422 288,970 1,344,392 1,099,725
Construction 7,841,468 - - - 7,841,468
Land acquisition 26,552 - 26,552 26,552 -
10,312,137 1,055,422 315,522 1,370,944 8,941,193
Total expenditures 18,461,072 7,078,509 634,238 7,712,747 10,748,325
Revenues under
expenditures (18,402,550) (7,019,984) (634,169) (7,654,153) 10,748,397
Other financing sources (uses)
Proceeds from installment
purchases 13,497,408 5,012,078 - 5,012,078 (8,485,330)
Transfer from Water and Sewer
Capital Reserve Fund 326,553 326,553 - 326,553 -
Transfer from Water and
Sewer Fund 4,967,535 3,694,052 1,263,444 4,957,496 (10,039)
Transfer to Water and Sewer
Fund (388,946) (388,946) - (388,946) -
Total other financing
sources 18,402,550 8,643,737 1,263,444 9,907,181 (8,495,369)
Excess of revenues and
other sources over
expenditures and other
financing uses -$ 1,623,753$ 629,275$ 2,253,028$ 2,253,028$
Town of Hillsborough, North Carolina
Budget and Actual (Non - GAAP)
Enterprise Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
Actual
Year Ended June 30, 2017
Water and Sewer Capital Projects Fund
93
Schedule 14
Statement of Revenues, Expenditures, and Changes in Fund Balance
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments 264,139$ 269,106$ 9,158$ 278,264$ 14,125$
Expenditures 3,430,102 - - - 3,430,102
Revenues over (under)
expenditures (3,165,963) 269,106 9,158 278,264 3,444,227
Other financing sources (uses)
Transfers from Water and
Sewer Fund 8,735,079 7,825,673 909,406 8,735,079 -
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 (5,738,784) (4,228,635) (1,510,149) (5,738,784) -
Transfers to Water and Sewer
Capital Projects Fund (1,299,553) (1,299,553) - (1,299,553) -
Total other financing
sources 3,165,963 3,766,706 (600,743) 3,165,963 -
Excess of revenues and
other sources over
expenditures -$ 4,035,812$ (591,585)$ 3,444,227$ 3,444,227$
Town of Hillsborough, North Carolina
Budget and Actual (Non - GAAP)
Water and Sewer Capital Reserve Fund
Actual
Year Ended June 30, 2017
Enterprise Fund
94
Schedule 15
Variance
Favorable
Budget Actual (Unfavorable)
Revenues
Operating revenues:
Stormwater charges 594,804 629,488 34,684$
Other operating revenues 1,000 3,250 2,250
Total revenues 595,804 632,738 36,934
Expenditures
Operating expenditures:
Personnel services 115,089
Other services and charges 108,160
Repairs and maintenance 70,559
Total expenditures 595,804 293,808 301,996
Revenues over
expenditures -$ 338,930 338,930$
Reconciliation of modified accrual
basis to full accrual basis:
Increase in accrued vacation pay (3,377)
Depreciation
Increase in net pension liability (30,002)
Increase in other post employment
benefits (1,385)
Increase in deferred outflows of
resources - pensions 26,640
Increase in deferred inflows of
resources - pensions (1,051)
Change in net position 329,755$
Year Ended June 30, 2017
Town of Hillsborough, North Carolina
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non - GAAP)
Stormwater Fund
Enterprise Fund
95
Schedule 16
Beginning Ending
Balance Additions Deductions Balance
ASSETS
Cash 824$ 745,364$ (746,163)$ 25$
LIABILITIES
Due to others 824$ 745,364$ (746,163)$ 25$
Year Ended June 30, 2017
Town of Hillsborough, North Carolina
Statement of Changes in Assets and Liabilities
Special Assessment Debt Agency Fund
Fiduciary Fund
96
97
Additional Financial Data
This section contains additional information on property taxes.
Schedule of Ad Valorem Taxes Receivable
Analysis of Current Tax Levy
Schedule 17
Uncollected Uncollected
Balance Collections Balance
Fiscal Year July 1, 2016 Additions and Credits June 30, 2017
2016-2017 -$ 6,044,907$ 5,995,089$ 49,818$
2015-2016 62,310 - 31,103 31,207
2014-2015 36,427 - 12,056 24,371
2013-2014 30,402 - 8,976 21,426
2012-2013 16,612 - - 16,612
2011-2012 16,050 - 3,562 12,488
2010-2011 9,805 - - 9,805
2009-2010 11,836 - 1,696 10,140
2008-2009 15,344 - 7,220 8,124
2006-2007 14,203 - 3,428 10,775
2007-2008 - - - -
212,989 6,044,907$ 6,063,130$ 194,766
Less allowance for
uncollectible
accounts:
General Fund (69,990) (69,990)
142,999$ 124,776$
Reconciliation of collections and credits with revenues:
Ad valorem taxes - General Fund 6,064,137$
Motor vehicle license fees - General Fund 345
Penalties and interest (22,416)
Adjustments and refunds 21,064
6,063,130$
June 30, 2017
Town of Hillsborough, North Carolina
Schedule of Ad Valorem Taxes Receivable
98
Schedule 18
Property
Excluding
Registered Registered
Property Total Motor Motor
Valuation** Rate Levy* Vehicles Vehicles
Original levy:
Property taxed at
current year’s rate 880,112,647$ 0.6800 5,984,766$ 5,561,955$ 422,811$
Motor vehicle license
fees - 56,720 - 56,720
Penalties and interest - 3,421 3,421 -
Total property
valuation 880,112,647$ 6,044,907 5,565,376 479,531
Releases and abatements - - -
Net levy 6,044,907 5,565,376 479,531
Uncollected taxes at
June 30, 2017 49,818 49,750 68
Current year’s
taxes collected 5,995,089$ 5,515,626$ 479,463$
Current levy
collection
percentage 99.18% 99.11% 99.99%
* Total adjusted levy includes discoveries and abatements.
** Property tax valuation prior to the discoveries and abatements.
Year Ended June 30, 2017
Town of Hillsborough, North Carolina
Analysis of Current Tax Levy
Town-Wide
Total Levy
99
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100
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.
101
This page left blank intentionally.
102
Financial Trends Information
103
Town of Hillsborough, North Carolina
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
2008 2009 2010 2011
Governmental activities:
Net investment in capital
assets 1,736,635$ 2,375,505$ 3,268,065$ 5,338,508$
Restricted 1,660,871 563,417 806,780 2,121,546
Unrestricted 3,329,482 4,891,494 5,402,272 3,766,961
Total governmental
activities net position 6,726,988$ 7,830,416$ 9,477,117$ 11,227,015$
Business-type activities
Net investment in capital
assets 20,174,460$ 21,590,822$ 21,736,659$ 24,316,110$
Restricted 2,011,464 2,438,955 2,128,459 1,721,067
Unrestricted 4,268,347 3,495,837 4,020,580 3,518,417
Total business-type
activities net position 26,454,271$ 27,525,614$ 27,885,698$ 29,555,594$
Primary government
Net investment in capital
assets 21,911,095$ 23,966,327$ 25,004,724$ 29,654,618$
Restricted 3,672,335 3,002,372 2,935,239 3,842,613
Unrestricted 7,597,829 8,387,331 9,422,852 7,285,378
Total primary government
net position 33,181,259$ 35,356,030$ 37,362,815$ 40,782,609$
104
Table 1
2012 2013 2014 2015 2016 2017
5,870,981$ 6,723,808$ 10,924,631$ 11,870,401$ 14,242,464$ 15,186,419$
1,570,832 1,831,742 1,700,808 1,558,393 1,753,856 2,518,696
3,984,264 4,390,314 4,433,988 4,797,140 4,030,053 2,977,656
11,426,077$ 12,945,864$ 17,059,427$ 18,225,934$ 20,026,373$ 20,682,771$
26,632,441$ 26,017,050$ 27,110,293$ 30,507,881$ 32,483,743$ 34,669,712$
1,974,677 2,590,989 2,591,211 2,591,600 2,596,324 2,605,482
2,674,119 4,084,460 6,546,829 6,190,061 8,522,788 9,096,374
31,281,237$ 32,692,499$ 36,248,333$ 39,289,542$ 43,602,855$ 46,371,568$
32,503,422$ 32,740,858$ 38,034,924$ 42,378,282$ 46,726,207$ 49,856,131$
3,545,509 4,422,731 4,292,019 4,149,993 4,350,180 5,124,178
6,658,383 8,474,774 10,980,817 10,987,201 12,552,841 12,074,030
42,707,314$ 45,638,363$ 53,307,760$ 57,515,476$ 63,629,228$ 67,054,339$
105
(accrual basis of accounting)
2008 2009 2010 2011
Expenses
Governmental activities:
General government 1,153,096$ 1,341,151$ 1,511,119$ 1,353,757$
Public safety 3,320,666 3,477,812 3,389,490 3,379,456
Transportation 1,217,558 435,870 390,313 486,940
Environmental protection 63,118 546,472 534,476 595,447
Economic and physical
development 217,638 237,278 247,420 256,092
Community activities and
projects 227,721 105,026 40,961 49,505
Parks and recreation 12,801 31,657 60,629 36,844
Unallocated interest
expense 21,248 77,316 107,315 108,598
Total governmental
activities expenses 6,233,846 6,252,582 6,281,723 6,266,639
Business-type activities:
Water and sewer 5,472,746 5,616,181 6,093,635 5,758,760
Stormwater - - - -
Total business-type
activities expenses 5,472,746 5,616,181 6,093,635 5,758,760
Total primary government
expenses 11,706,592$ 11,868,763$ 12,375,358$ 12,025,399$
Program Revenues
Governmental activities:
Charges for services:
General government 159,868$ 113,738$ 131,750$ 149,790$
Public safety 15,290 14,453 10,825 10,273
Transportation - - 2,951 -
Economic and physical
development - - - -
Parks and recreation - - - 2,170
Operating grants and
contributions 337,166 309,510 202,067 183,874
Capital grants and
contributions 265,947 686,984 1,001,630 1,191,157
Total governmental
activities program revenues 778,271 1,124,685 1,349,223 1,537,264
Last Ten Fiscal Years
Changes in Net Position
Town of Hillsborough, North Carolina
106
Table 2
(4 pages)
2012 2013 2014 2015 2016 2017
1,402,445$ 1,301,963$ 1,524,025$ 1,416,316$ 2,010,349$ 1,860,970$
2,597,911 3,395,465 3,619,529 3,929,568 3,982,055 4,289,900
1,510,493 497,540 500,491 130,485 615,849 666,523
546,612 580,312 833,623 963,296 708,367 590,798
243,163 485,977 367,389 387,801 402,800 466,791
40,996 64,878 119,251 220,890 93,236 57,673
51,500 36,267 55,849 74,137 97,891 398,802
104,518 105,022 126,250 101,260 121,783 95,571
6,497,638 6,467,424 7,146,407 7,223,753 8,032,330 8,427,028
6,151,253 6,279,271 6,271,311 7,383,564 7,574,032 8,120,546
- - - - - 302,983
6,151,253 6,279,271 6,271,311 7,383,564 7,574,032 8,423,529
12,648,891$ 12,746,695$ 13,417,718$ 14,607,317$ 15,606,362$ 16,850,557$
160,990$ 326,565$ 126,909$ 182,109$ 122,233$ 214,056$
15,593 11,426 13,893 12,068 13,645 13,555
- - - 187,682 184,863 185,922
- - - - 41,000 5,000
2,970 3,190 4,140 5,155 4,720 5,130
228,457 175,347 316,576 10,610 28,052 26,690
203,301 334,525 3,741,958 253,460 1,393,799 570,035
611,311 851,053 4,203,476 651,084 1,788,312 1,020,388
107
(accrual basis of accounting)
2008 2009 2010 2011
Last Ten Fiscal Years
Changes in Net Position
Town of Hillsborough, North Carolina
Business-type activities:
Charges for services:
Water and sewer 6,320,471$ 6,292,642$ 6,425,750$ 6,755,260$
Stormwater - - - -
Capital grants and
contributions 3,754,896 290,891 - 658,828
Total business-type
activities program revenues 10,075,367 6,583,533 6,425,750 7,414,088
Total primary government
program revenues 10,853,638$ 7,708,218$ 7,774,973$ 8,951,352$
Net (Expense) Revenue
Governmental activities (5,455,575)$ (5,127,897)$ (4,932,500)$ (4,729,375)$
Business-type activities 4,602,621 967,352 332,115 1,655,328
Total primary government
net expense (852,954)$ (4,160,545)$ (4,600,385)$ (3,074,047)$
General Revenues and Other
Changes in Net Position
Governmental activities:
Taxes 5,203,555$ 5,479,986$ 5,898,215$ 5,808,387$
Unrestricted inter-governemental
revenues 575,308 625,798 615,770 635,907
Investment earnings, unrestricted 196,325 109,920 29,889 10,838
Miscellaneous 12,508 15,621 35,327 24,141
Total governmental
activities 5,987,696 6,231,325 6,579,201 6,479,273
Business-type activities:
Investment earnings 233,136 107,104 27,967 14,568
Miscellaneous 30,691 - - -
Total business-type
activities 263,827 107,104 27,967 14,568
Total primary government 6,251,523$ 6,338,429$ 6,607,168$ 6,493,841$
Change in Net Position
Governmental activities 532,121$ 1,103,428$ 1,646,701$ 1,749,898$
Business-type activities 4,866,448 1,074,456 360,084 1,669,896
Total primary government 5,398,569$ 2,177,884$ 2,006,785$ 3,419,794$
108
Table 2
(4 pages)
2012 2013 2014 2015 2016 2017
7,366,996$ 7,686,356$ 9,025,607$ 8,939,712$ 10,713,397$ 9,214,401$
- - - - - 632,738
100,000 - 1,028,171 1,484,316 1,161,830 1,325,206
7,466,996 7,686,356 10,053,778 10,424,028 11,875,227 11,172,345
8,078,307$ 8,537,409$ 14,257,254$ 11,075,112$ 13,663,539$ 12,192,733$
(5,886,327)$ (5,616,371)$ (2,942,931)$ (6,572,669)$ (6,244,018)$ (7,406,640)$
1,315,743 1,407,085 3,782,467 3,040,464 4,301,195 2,748,816
(4,570,584)$ (4,209,286)$ 839,536$ (3,532,205)$ (1,942,823)$ (4,657,824)$
5,816,041$ 6,371,494$ 6,603,311$ 6,698,408$ 6,949,754$ 7,426,516$
651,381 734,401 809,190 998,629 1,034,811 1,010,393
4,748 3,874 2,209 1,177 16,771 37,562
16,250 26,389 39,899 40,962 43,121 58,811
6,488,420 7,136,158 7,454,609 7,739,176 8,044,457 8,533,282
6,869 4,177 2,601 745 12,118 19,897
- - - - - -
6,869 4,177 2,601 745 12,118 19,897
6,495,289$ 7,140,335$ 7,457,210$ 7,739,921$ 8,056,575$ 8,553,179$
199,062$ 1,519,787$ 4,511,678$ 1,166,507$ 1,800,439$ 1,126,642$
1,725,643 1,411,262 3,785,068 3,041,209 4,313,313 2,768,713
1,924,705$ 2,931,049$ 8,296,746$ 4,207,716$ 6,113,752$ 3,895,355$
109
Governmental Funds
Last Ten Fiscal Years
2008 2009 2010 2011
General fund:
Reserved 852,658$ 904,063$ 1,230,710$ -$
Unreserved 3,766,755 4,030,731 3,832,453 -
Nonspendable - - - 477
Restricted - - - 1,047,758
Committed - - - -
Assigned - - - 215,354
Unassigned - - - 3,478,868
4,619,413 4,934,794 5,063,163 4,742,457
All other governmental funds:
Reserved - - 200,000 -
Unreserved 1,566,324 575,855 639,599 -
Nonspendable - - - -
Restricted - - - 1,073,788
Committed - - - 204,943
Assigned - - - -
Unassigned - - - (324,964)
1,566,324 575,855 839,599 953,767
Total fund balance 6,185,737$ 5,510,649$ 5,902,762$ 5,696,224$
Town of Hillsborough, North Carolina
(modified accrual basis of accounting)
Fund Balances
110
Table 3
2012 2013 2014 2015 2016 2017
-$ -$ -$ -$ -$ -$
- - - - - -
68,649 4,253 72,156 68,242 175,392 219,730
955,064 1,115,688 1,110,734 1,049,112 1,385,320 1,452,915
- - - - -
88,094 330,206 782,995 1,294,457 672,896 787,525
3,803,076 4,151,725 4,151,581 3,805,372 3,698,078 4,049,462
4,914,883 5,601,872 6,117,466 6,217,183 5,931,686 6,509,632
- - - - - -
- - - - - -
- 52 - - - -
227,052 716,054 844,464 509,281 368,536 1,065,781
856,356 - 106,105 272,548 171,698 159,314
- 131,490 7,070 - - -
(112,038) (20,444) - - - (808,382)
971,370 827,152 957,639 781,829 540,234 416,713
5,886,253$ 6,429,024$ 7,075,105$ 6,999,012$ 6,471,920$ 6,926,345$
111
Town of Hillsborough, North Carolina
Governmental Funds
Last Ten Fiscal Years
2008 2009 2010 2011
Revenues
Ad valorem taxes 3,843,372$ 4,317,508$ 4,819,371$ 4,610,003$
Other taxes and licenses 1,216,236 1,178,406 1,131,562 1,163,501
Unrestricted intergovernmental 575,308 625,798 615,770 635,907
Restricted intergovernmental 364,818 755,912 306,662 1,234,870
Investment earnings 195,632 109,920 29,889 10,838
Contribution from property owners - - - -
Capital contributions 235,000 235,000 200,000 200,000
Use and rental 175,158 128,191 142,575 160,063
Other general revenues 30,733 31,106 31,518 67,071
Total revenues 6,636,257 7,381,841 7,277,347 8,082,253
Expenditures
Current:
General government 1,255,061 1,986,459 2,552,912 1,232,665
Public safety 3,349,295 3,499,641 3,263,200 3,347,597
Transportation 633,474 408,258 720,627 1,718,386
Environmental protection 510,948 470,448 580,854 583,919
Economic and physical
development 217,638 237,278 247,420 256,092
Community activities and
projects 227,721 105,026 54,137 54,946
Parks and recreation 102,046 1,722,062 344,499 791,184
Debt service:
Principal retirement 62,140 178,595 238,111 303,074
Interest and fiscal charges 11,938 68,762 93,874 107,928
Total expenditures 6,370,261 8,676,529 8,095,634 8,395,791
Excess of revenues over (under)
expenditures 265,996 (1,294,688) (818,287) (313,538)
Other financing sources (uses)
Transfers in - 43,023 628,118 717,582
Transfers out - (43,023) (628,118) (717,582)
Insurance recovery - - - -
Debt service - principal on
refunding - - - -
Sale of capital assets - - - -
Proceeds from installment notes 1,349,700 619,600 1,210,400 107,000
Total other financing sources 1,349,700 619,600 1,210,400 107,000
Net change in fund balances 1,615,696$ (675,088)$ 392,113$ (206,538)$
Capital outlay included in
functional expenditures above 313,810$ 2,491,483$ 1,907,332$ 2,280,672$
Debt service as a percentage of
noncapital expenditures 1.22% 4.00% 5.36% 6.72%
(modified accrual basis of accounting)
Changes in Fund Balance
112
Table 4
2012 2013 2014 2015 2016 2017
4,716,460$ 5,135,469$ 5,429,114$ 5,437,266$ 5,669,002$ 6,064,137$
1,124,696 1,229,425 1,199,185 1,263,425 1,280,114 1,381,990
651,381 734,401 809,190 998,629 1,034,811 1,010,393
453,755 308,007 768,716 642,732 262,144 374,938
4,748 3,874 2,209 1,177 16,771 37,562
- - 1,445,207 1,325,271 381,406 18,955
100,000 - - - -
176,583 337,991 140,802 194,177 176,878 232,611
69,669 34,079 48,337 56,727 118,323 79,734
7,297,292 7,783,246 9,842,760 9,919,404 8,939,449 9,200,320
1,235,107 1,122,514 2,799,302 2,779,807 2,207,284 1,627,479
3,164,361 3,134,327 3,455,438 3,845,174 4,317,978 4,084,416
1,693,664 1,011,557 851,502 1,194,204 878,233 865,285
476,415 471,880 806,262 1,008,615 564,148 454,355
243,163 485,977 367,389 388,611 397,828 676,147
325,666 64,878 119,251 836,258 821,677 57,673
239,105 430,831 1,675,156 423,813 147,350 428,452
283,126 407,246 474,458 632,155 1,037,623 790,345
98,896 111,265 118,711 101,228 120,355 100,353
7,759,503 7,240,475 10,667,469 11,209,865 10,492,476 9,084,505
(462,211) 542,771 (824,709) (1,290,461) (1,553,027) 115,815
440,409 369,627 169,054 160,482 465,037 394,991
(843,440) (369,627) (169,054) (160,482) (465,037) (394,991)
16,250 - - - - -
- - (1,256,353) - - -
- - - - - 21,610
1,039,021 - 2,727,143 1,214,368 1,025,935 317,000
652,240 - 1,470,790 1,214,368 1,025,935 338,610
190,029$ 542,771$ 646,081$ (76,093)$ (527,092)$ 454,425$
1,501,851$ 997,107$ 2,246,332$ 2,619,910$ 1,962,820$ 893,524$
6.10% 8.30% 7.04% 8.54% 13.58%10.87%
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114
Revenue Capacity Information
115
Town of Hillsborough, North Carolina
Program Revenues by Function/Program
Last Ten Fiscal Years
(accrual basis of accounting)
2008 2009 2010 2011
Function/program
Governmental activities:
General government 159,868$ 348,738$ 331,750$ 382,843$
Police 134,722 14,453 28,874 10,273
Transportation 216,544 274,275 543,741 848,978
Environmental
protection - - - -
Economic and
physical development 1,190 235 - -
Community activities and
projects - - - -
Parks and recreation 265,947 486,984 444,858 295,170
Subtotal governmental
activities 778,271 1,124,685 1,349,223 1,537,264
Business-type activities:
Water and sewer 10,075,367 6,583,533 6,425,750 7,414,088
Stormwater - - - -
Subtotal business-type
activities 10,075,367 6,583,533 6,425,750 7,414,088
Total primary government 10,853,638$ 7,708,218$ 7,774,973$ 8,951,352$
116
Table 5
2012 2013 2014 2015 2016 2017
354,227$ 361,590$ 1,388,937$ 192,719$ 1,430,962$ 230,872$
15,593 11,426 13,893 12,068 13,645 13,555
228,521 185,847 312,282 187,682 264,863 396,200
- - 2,059,224 653 4,680 9,874
- - - - 41,000 340,134
- - - - - -
12,970 292,190 429,140 257,962 33,162 29,753
611,311 851,053 4,203,476 651,084 1,788,312 1,020,388
7,466,996 7,686,356 10,053,778 10,424,028 11,875,227 10,539,607
- - - - - 632,738
7,466,996 7,686,356 10,053,778 10,424,028 11,875,227 11,172,345
8,078,307$ 8,537,409$ 14,257,254$ 11,075,112$ 13,663,539$ 12,192,733$
117
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
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
2017 6,064,137
Change b
2008 - 2017 57.78%
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 2008 to 2017.
118
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
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%
2017 733,447,012 132,527,541 14,138,094 880,112,647 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.
119
Town of Hillsborough, North Carolina Table 8
Last Ten Fiscal Years
Fiscal Basic Total Fire
Year Rate Direct District b County
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
2017 0.680 0.680 - 0.8780
Source: Orange County
(rate per $100 of assessed value)
Direct and Overlapping Property Tax Rates
b The Fire District Tax applies to properties outside of the city limits.
Municipality Rates
Note:The Town's basic property tax rate may be increased only by a majority vote of the elected Town Board
of Town Commissioners.
a Overlapping rates are those of local and county governments that apply to property owners within the Town of
Hillsborough.
Overlapping Rates a
120
Town of Hillsborough, North CarolinaTable 9FiscalYearTaxes Levied CollectionsEnded for the Percentage in Subsequent PercentageJune 30, Fiscal YearAmountof LevyYearsAmountof Levy2008 4,035,215$ 3,828,830$ 1$ 195,610$ 4,024,440$ 99.73%2009 4,380,999 4,295,618 98.05% 77,257 4,372,875 99.81%2010 4,732,461 4,641,581 98.09% 80,740 4,722,321 99.79%2011 4,690,863 4,557,501 97.16% 123,557 4,681,058 99.79%2012 4,755,200 4,641,541 97.61% 101,171 4,742,712 99.74%2013 5,225,057 5,085,225 98.82% 123,220 5,208,445 99.68%2014 5,418,579 5,315,921 98.11% 81,232 5,397,153 99.60%2015 5,413,151 5,343,909 98.72% 44,871 5,388,780 99.55%2016 5,646,239 5,583,929 98.90% 31,103 5,615,032 99.45%20176,044,907 5,995,089 99.18%- 5,995,089 99.18%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 the121
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122
Table 10Percentage Percentageof Total City of Total CityTaxable Taxable Taxable TaxableAssessed Assessed Assessed AssessedTaxpayer Value Rank Value Value Rank ValueSports Endeavors Inc $34,561,985 1 4.20% 7,731,858$ 6 1.23%Hillsborough Apartments Partners LLC 16,247,601 2 1.98% - Walmart Real Estate Business 14,946,866 3 1.82% 12,758,748 2 2.03%PHE Inc 10,225,469 4 1.24% 7,608,030 7 1.21%Home Depot/HD Development 10,125,174 5 1.23% 8,933,910 5 1.42%Ashton Raleigh Residential LLC 8,954,000 6 1.09% - Daniel Boone Ltd 8,685,094 7 1.06% 9,250,351 4 1.47%Hillsborough Commons Ltd Ptns 8,497,192 8 1.03% 6,562,050 10 1.04%MDCO LLC 8,376,600 9 1.02% - Duke Energy Carolinas LLC 6,941,258 10 0.84% - Patriots Pointe - - 17,322,127 1 2.76%SLF II NC Waterstone LLC - - 11,566,500 3 1.84%Meadowlands Distribution Co - - 6,975,686 9 1.11%Artcraft Hillsborough LLC - - 7,116,719 8 1.13%Total 127,561,239$ 15.52% 95,825,979$ 15.24%Source: Orange County Property Assessment DivisionPrincipal Property TaxpayersTown of Hillsborough, North Carolina2017 2008Current Year and Nine Years Ago123
Type of Customer 2008 2009 2010 2011
Gallons billed:
In-town residential 90,776,263 88,082,088 91,194,583 103,459,804
Out-of-town residential 104,552,882 101,568,087 106,627,659 112,868,479
In-town commercial 85,878,132 88,318,823 89,569,350 74,881,598
Out-of-town commercial 28,156,261 23,213,084 22,056,653 18,219,706
Total gallons billed 309,363,538 301,182,082 309,448,245 309,429,587
Total water and sewer charges
(revenue) 5,743,722$ 6,043,820$ 6,194,638$ 6,405,307$
Total average rate per 1,000
gallons 18.57$ 20.07$ 20.02$ 20.70$
Source: Town of Hillsborough, Water Billing Office.
Revenue collected includes late payment penalties.
Due to an issue during a software system conversion in FY 2016, some of the gallons billed data was lost and is
therefore, lower than expected.
Town of Hillsborough, North Carolina
Last Ten Fiscal Years
Water Sold by Type of Customer and In and Out of Town
124
Table 11
2012 2013 2014 2015 2016 2017
102,937,205 102,755,771 111,836,111 98,914,635 100,064,880 131,412,141
120,107,805 130,921,523 111,241,276 124,805,789 100,445,055 120,756,780
73,507,962 76,624,165 78,590,500 81,985,440 75,012,631 85,946,109
18,296,584 18,153,125 17,908,575 29,452,224 18,028,437 20,781,379
314,849,556 328,454,584 319,576,462 335,158,088 293,551,003 358,896,409
6,928,835$ 7,262,510$ 7,499,183$ 7,859,823$ 7,988,498$ 8,294,061$
22.01$ 22.11$ 23.47$ 23.45$ 27.21$ 23.11$
125
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 Gallons2008 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 2016 20.98 8.07 31.54 12.13 40.92 15.74 61.49 23.65 201720.18 8.07 30.33 12.13 39.35 15.74 59.13 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 was billed for 0 to 2,600 gallons. Any usage over 2,600 gallons is billed per 1,000 gallons rate.Beginning 7/1/16, a flat charge is billed for 0 to 2,500 gallons. Any usage over 2,500 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 Sewer126
Debt Capacity Information
127
Table 13GovernmentalActivitiesGeneral TotalFiscal Installment Obligation Revolving Installment PrimaryPerYearLoans Bonds Loans Loans GovernmentCapita a2008 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 2016 4,534,728 - 18,511,848 3,269,750 26,316,326 4,102 20174,025,201 - 17,443,655 2,513,821 23,982,677 3,651 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 Years128
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
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% -
2017 - - 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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130
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 50,430,000$ 5.170% 2,607,068$
Town's overlapping debt 2,607,068
Town's direct debt 4,025,201
Total direct and overlapping debt 6,632,269$
June 30, 2017
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.
131
Town of Hillsborough, North Carolina
Legal Debt Margin Information
Last Ten Fiscal Years
2008 2009 2010 2011
Debt limit 50,262,759$ 51,380,390$ 60,236,080$ 59,858,619$
Total net debt applicable to
to limit 1,518,923 1,959,928 2,932,216 2,736,142
Legal debt margin 48,743,836$ 49,420,462$ 57,303,864$ 57,122,477$
Total net debt applicable to the
limit as a percentabe of debt limit 3.02% 3.81% 4.87% 4.57%
total assessed property value.
Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of
132
Table 16
Assessed value 880,112,647$
Debt limit (8% of assessed value)70,409,012
Debt applicable to limit:
Installment loans (4,025,201)
Legal debt margin 66,383,811$
2012 2013 2014 2015 2016 2017
60,714,122$ 60,985,183$ 62,861,200$ 62,990,706$ 65,754,212$ 70,409,012$
3,440,001 3,084,791 4,024,586 4,606,799 4,534,728 4,025,201
57,274,121$ 57,900,392$ 58,836,614$ 58,383,907$ 61,219,484$ 66,383,811$
5.67% 5.06% 6.40% 7.31% 6.90%5.72%
Legal Debt Margin
Calculation for Fiscal Year 2017
133
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134
Demographic and Economic Information
135
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%2016 6,415 * 27,575 35.70 1,408 4.6%20176,568 * 24,567 35.90 1,325 3.7%* 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.136
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 1,321 20.59% 1,322 20.08%
Orange County Government 1,115 17.38% 970 14.73%
UNC Hospital 539 8.40%
Sports Endeavors, Inc. dba Euros 416 6.48% 336 5.10%
PHE 285 4.44% 361 5.48%
Wal-Mart Associates Inc 282 4.40% 316 4.80%
Summit Consulting-Engineering 216 3.37%
Brookshire Inc 139 2.17% 117 1.78%
KAH Care LLC 118 1.84%
Home Depot 104 1.62% 104 1.58%
OE Enterprises, Inc. 118 1.79%
Piedmont Electric Membership Corp 115 1.75%
Builders First Choice 71 1.08%
Total 4,535 70.69%3,830 58.17%
Source: Town Economic Development Division and Employment Security Commission.
Note: Information regarding Town's total employment is not available.
* Data not available
2017 2008
137
Town of Hillsborough, North Carolina Table 19
Full-Time Equivalent City Government Employees by Function/Program
Function/Program 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
General government
Administration 3 3 4 4 3 3 5 5 7 9
Finance 4 4 4 4 4 4 4 4 5 5
Planning 3 4 3 3 3 3 4 4 5 5
Public Space 1
Safety 1 1 1 1 1 1 1 1 1 1
Stormwater - - - - - - 1 1 1 2
Police
Officers 29 29 26 26 25 27 24 28 26 28
Civilians 2 3 2 2 - - - - -
Public works
Streets 4 4 4 4 3 3 3 4 4 4
Sanitation 5 4 4 4 4 4 4 4 4 3
Motor pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 3 4 4 4 4 4 4 4 4 4
Billing and collection 6 7 6 5 5 5 5 6 6 6
Water 6 6 6 6 6 6 6 6 6 6
Wastewater 9 10 10 8 8 8 7 6 6 8
Water distribution/
wastewater collection 11 7 8 8 11 11 11 11 12 10
Fire inspections 1 1 1 1 1 1 1 1 1 1.5
Total 90 90 86 83 81 83 83 88 91 95.5
Last Ten Fiscal Years
Source: Town Finance Office. Positions reported at June 30th are positions filled.
138
Operating Information
139
Town of Hillsborough, North Carolina
Operating Indicators by Function/Program
Last Ten Fiscal Years
Function/Program 2008 2009 2010 2011
Police
Physical arrests 562 524 546 475
Calls for service 11,181 12,490 9,619 12,889
Traffic citations 1,877 1,937 1,712 1,182
Number of policeman positions 29 29 29 29
Fire
Number of stations 1 1 1 1
Emergency responses (EMS and fire) 1,960 1,918 1,865 1,835
Fires extinguished 6 30 75 19
Number of paid firemen 23 23 24 24
Number of volunteers 15 12 15 12
Inspections 289 269 213 211
Refuse collection
Refuse collected (tons per day) 6.3 6.7 6.1 5.95
Recyclables collected (tons per day)****
Other public works
Street resurfacing (miles) 1.5 0.5 - -
Potholes repaired 51 103 45 41
Parks and recreation
Number of parks 6 6 6 6
Library
Volumes in collection 84,465 78,770 75,506 86,526
Total volumes borrowed 184,301 209,023 203,450 287,938
Water
New connections 841 826 939 815
Water main breaks 36 46 41 10
Average daily consumption
(millions of gallons per day) 1.101 1.143 1.124 1.129
Peak daily consumption
(millions of gallons) 1.770 1.938 1.626 1.653
Wastewater
Average daily sewage treatment
(millions of gallons) 0.740 0.872 0.888 0.757
Education
Number of schools a 3 3 3 3
Number of teachers 105 105 111 111
Number of students 1,272 1,272 1,279 1,305
Number of classrooms b 95 95 95 65
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
140
Table 20
2012 2013 2014 2015 2016 2017
560 538 521 553 492 611
15,039 14,569 12,279 15,975 16,674 10,599
1,134 1,651 1,212 725 557 567
29 26 26.5 27 29 29
1 1 1 1 1 1
1,770 1,866 1,950 1,978 1,949 1,954
78 70 45 107 80 109
25 24 24 27 22 23
14 19 15 12 12 12
258 177 132 171 163 138
- 6.34 5.90 5.54 6 6
* * 0.02 0.48 1 1
- 2.25 2.13 4.7 2 2
36 30 36 30 25 15
6 6 6 6 7 7
97,536 93,421 93,886 93,656 96,393 101,177
351,216 397,379 396,164 412,416 446,499 382,740
767 736 799 840 946
30 20 15 11 27 33
1.048 0.913 1.103 1071 1,401 1,453
1.576 1.653 1.685 1.815 1.983 2.431
0.765 0.902 1.133 0.895 1.185 1.000
3 3 3 3 3 3
113 113 112 112 112 112
1,420 1,433 1,370 1,393 1,408 1,325
65 65 65 65 65 65
141
Town of Hillsborough, North Carolina
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Function/Program 2008 2009 2010 2011
Police
Stations 2 2 2 2
Patrol units 23 26 26 28
Fire stations 1 1 1 1
Refuse collection
Collection trucks >3 6 6 6
Other public works
Streets (miles) - paved 32.89 36.15 36.15 36.15
Streets (miles) - unpaved 0.86 0.73 0.73 0.73
Streetlights 623 623 633 633
Traffic signals (all state-owned) - - - -
Parks and recreation
Acreage b 72.62 72.62 72.62 72.62
Playgrounds 4 4 4 4
Water
Water mains (miles) 146.8 146.8 147.0 147.0
Fire hydrants ^622 ^656 ^597 ^614
Storage capacity (thousands of gallons) 3,000 3,000 3,000 3,000
Wastewater
Sanitary sewers (miles) 86.4 86.4 86.4 86.4
Storm sewers (miles) a 36.0 36.0 73.0 73.0
Treatment capacity (millions of gallons) 3.0 3.0 3.0 3.0
Area (square miles) 5.530 5.740 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.
142
Table 21
2012 2013 2014 2015 2016 2017
2 2 2 2 2 2
27 26 27 27 25 24
1 1 1 1 1
7 7 8 8 8 8
36.15 36.15 36.15 37.63 33.96 33.96
0.73 0.73 0.91 0.69 0.68 0.68
633 633 678 679 709 709
- - -
74.10 74.10 74.10 74.10 74.1 74.1
4 4 4 4 5 5
148.0 148.0 150.0 151.0 149.0 151.0
663 c 621 619 628 628 705
3,000 3,000 3,000 3,000 3,500 2,450
89.0 93.0 93 94.0 96.5 80.5
73.0 73.0 75 75.0 75.0 75.0
- 3.0 3 3.0 3.0 3.0
5.740 5.760 5.80 5.800 6 6
143
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145
Compliance Section
146
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147
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, 2017, 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 29, 2017. 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 certain deficiencies in internal control,
described in the accompanying schedule of findings and questioned costs as items 2017-001 and 2017-
002 that we consider to be material weaknesses.
148
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 questioned costs as item 2017-003.
Town of Hillsborough’s Responses to Findings
The Town of Hillsborough’s responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. 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 29, 2017
149
Independent Auditors’ Report on Compliance for the Major
State Program and on Internal Control over Compliance in
Accordance with Applicable Sections of OMB Uniform
Guidance and the State Single Audit Implementation Act
Honorable Mayor, Members of the Board
of Town Commissioners, and the Town Manager
Town of Hillsborough, North Carolina
Report on Compliance for the Major State Program
We have audited Town of Hillsborough, North Carolina’s compliance with the types of compliance
requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued by the
Local Government Commission that could have a direct and material effect on its major state program for
the year ended June 30, 2017. The Town of Hillsborough’s major state program is identified in the
summary of auditors’ results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and
grants applicable to its state program.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance of the Town of Hillsborough’s major state
program based on our audit of the types of compliance requirements referred to above. We conducted
our audit of compliance in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of
Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform Guidance) as described in the Audit Manual for Governmental
Auditors in North Carolina and the State Single Audit Implementation Act. Those standards, applicable
sections of the Uniform Guidance, and the State Single Audit Implementation Act require that we plan and
perform the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major state
program occurred. An audit includes examining, on a test basis, evidence about the Town of
Hillsborough’s compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for the major state
program. However, our audit does not provide a legal determination on the Town of Hillsborough’s
compliance.
Opinion on the Major State Program
In our opinion, the Town of Hillsborough complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on its major state program for
the year ended June 30, 2017.
150
Report on Internal Control over Compliance
Management of the Town of Hillsborough is responsible for establishing and maintaining effective internal
control over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the Town of Hillsborough’s internal control over
compliance with the types of requirements that could have a direct and material effect on a major state
program to determine the auditing procedures that are appropriate in the circumstances for the purpose
of expressing our opinion on compliance for the major state program and to test and report on internal
control over compliance in accordance with applicable sections of the Uniform Guidance and the State
Single Audit Implementation Act, but not for the purpose of expressing an opinion on the effectiveness of
internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the
Town of Hillsborough’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a
state program on a timely basis. A material weakness in internal control over compliance is a deficiency
or combination of deficiencies in internal control over compliance, such that there is a reasonable
possibility that material noncompliance with a type of compliance requirement of a state program will not
be prevented or detected and corrected on a timely basis. A significant deficiency in internal control over
compliance is a deficiency or combination of deficiencies in internal control over compliance with a type of
compliance requirement of a state program that is less severe than a material weakness in internal
control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not
identify any deficiencies in internal control over compliance that we consider to be material weaknesses,
as defined above. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on applicable sections of
Uniform Guidance and the State Single Audit Implementation Act. Accordingly, this report is not suitable
for any other purpose.
High Point, North Carolina
December 29, 2017
Town Of Hillsborough, North Carolina
Schedule of Findings and Questioned Costs
Year Ended June 30, 2017
151
Schedule of Findings and Questioned Costs
I. Summary of Auditors’ Results
Financial Statements
Type of auditors’ report issued on whether the
financial statements audited were prepared in
accordance with GAAP Unmodified
Internal control over financial reporting:
Material weaknesses identified? X Yes No
Significant deficiencies identified that are not
considered to be material weaknesses Yes X None reported
Noncompliance material to financial statements
noted? X Yes No
State Awards
Internal control over major state programs:
Material weaknesses identified? Yes X No
Significant deficiencies identified that are not
considered to be material weaknesses Yes X None reported
Noncompliance material to state award Yes X No
Type of auditors’ report issued on compliance for
major state program: Unmodified
Any audit findings disclosed that are required to
be reported in accordance with the State Single
Audit Implementation Act? Yes X No
Identification of major state program: Powell Bill
Town Of Hillsborough, North Carolina
Schedule of Findings and Questioned Costs
Year Ended June 30, 2017
152
II. Financial Statement Findings
Finding 2017-001: Financial Accounting Closing Procedures
MATERIAL WEAKNESS
Criteria: Certain asset and liability accounts were not properly 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.
Identification of a repeat finding: This is a repeat finding from the immediate previous audit, 2016-001.
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
Prepaid expenses
Customer accounts receivable
Due from other governments
Capital assets
Accrued liabilities
Deferred revenues
View of responsible official and planned corrective action: The Town agrees with this finding. Please refer to the
correction action plan on page 154.
Finding 2017-002: Preparation of Schedule of Expenditures of Federal and State Awards
Criteria: The Schedule of Expenditures of Federal and State Awards is the basis for determining the need for a
single audit conducted in accordance with the Uniform Guidance, as well as the State Single Audit
Implementation Act. Internal controls should be in place to ensure a complete and accurate Schedule of
Expenditures of Federal and State Awards be prepared at the end of each fiscal year.
Condition: During the course of the audit, it was discovered that the grant schedule initially provided by
management was not accurate and complete.
Cause: Internal controls were not in place to ensure that all grant activity was communicated to the finance
department in a timely manner.
Effect: The auditor discovered material adjustments to the Schedule of Expenditures of Federal and State Awards
that were necessary in order for the schedule to properly reconcile to the underlying accounting records, which
also resulted in a change in the determination of the necessity of a single audit for fiscal year 2017.
Town Of Hillsborough, North Carolina
Schedule of Findings and Questioned Costs
Year Ended June 30, 2017
153
Recommendation: We recommend that management establish internal controls surrounding the communication
and recording of grant related expenses and the preparation of the grants schedule by an individual
knowledgeable of the grant activity and status of each grant within the Town.
View of responsible official and planned corrective action: The Town agrees with this finding. Please refer to the
correction action plan on page 154
Finding 2017-003: Preaudit Certification
Criteria: All written contracts that the Town enters into for payment of money should be conducted in accordance
with G.S. 159-28(a), which requires a signed preaudit certification to be included on such contracts.
Condition: The Town entered into a contract for utility billing services and made the first payment in the amount of
$200,000 without having proper budgetary authority to do so.
Cause: The previous finance director instructed staff to make the payment despite not yet having budgetary
authority to do so.
Effect: The payment made by the Town was not properly preaudited, and was therefore in violation of North
Carolina State law.
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. Please refer to the
correction action plan on page 154.
III. State Award Findings and Questioned Costs
There were no findings related to state awards for the fiscal year ended June 30, 2017.
154
CORRECTIVE ACTION PLAN
Financial Statement Findings
Finding: 2017-001
Name of contact person: Daphna Schwartz, Finance Director
Corrective action: To address this finding, the town has recently recruited a new Finance Director with the level of
experience and proficiency in the field of governmental accounting required to serve as a mentor to all departmental
staff. Further, staff has expended significant effort to create new policy manuals for positions recently added to the
department and to institutionalize procedures. We have also collaborated heavily with the town’s independent auditors
and third-party accounting firms to identify and incorporate industry best-practices into the department’s day-to-day
operations.
Proposed completion date: 06/30/2018.
Finding: 2017-002
Name of contact person: Daphna Schwartz, Finance Director
Corrective action: To address this finding, the town will conduct a thorough evaluation of all Expenditures of Federal
and State Awards. Further, it will (through its new Finance Director) adopt policies to ensure increased oversight and
centralized management of all Federal and State Awards—from application through completion. New internal controls
will be formulated and implemented to ensure a complete and accurate Schedule of Expenditures of Federal and State
Awards is prepared at the end of each fiscal year.
Proposed completion date: 06/30/2018.
Finding: 2017-003
Name of contact person: Daphna Schwartz, Finance Director
Corrective action: To address this finding, town staff will thoroughly review the requirements for spending promulgated
by G.S. 159-28(a): budgetary accounting for appropriations. Further, the cause of this finding was immediately
addressed by management and town staff was appropriately admonished for its deviation from standard operating
procedures. Lastly, the town’s new Finance Director will emphasize the importance of budgetary accounting for
appropriations with all appropriate town staff.
Proposed completion date: 06/30/2018.
155
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
Finding 2016-001: Financial Accounting Closing Procedures
Finding 2016-001 repeated as Finding 2017-001.
Finding 2016-002: Excess of Expenditures over Appropriations
Status: Corrected
Schedule 22Schedule of Expenditures of Federal and State Awards
Federal Federal
CFDA/ (Direct and
State Grant Pass-Through) State
Grantor/Program Title Number Number Expenditures Expenditures
Federal grants:
U.S. Department of Transportation
Highway Planning and Construction Cluster:
Passed through the NC Department of
Transportation:
Highway Planning and Construction (Federal
Aid Highway Program)
Riverwalk Trail 20.205 46243.1.1 24,624$ -$
Total Passed through NC Department of
Transportation 24,624 -
Passed through the Durham-Chapel Hill-Carrboro
Metropolitan Planning Organization
Highway Planning and Construction (Federal
Aid Highway Program)
Riverwalk Trail 20.205 46243.1.1 10,663 -
Total Highway Planning and Construction
Cluster 35,287 -
U.S. Department of the Interior
Historic Preservation Fund Grants-In-Aid
Passed through the NC Department of Natural
and Cultural Resources
Hillsborough Architectural Survey Update 15.904 N/A 5,000 -
Old Town Cemetary Workshop 15.904 N/A 2,441 -
Total Historic Preservation Fund
Grants-In-Aid 7,441 -
Total assistance - federal programs 42,728 -
State grants:
NC Department of Transportation
Direct Programs
Churton Street Downtown Access Improvements DOT-18 50153.3.F1 - 227,045
Powell Bill DOT-4 2000005097 - 253,491
Total NC Department of Transportation - 480,536
NC Department of Commerce
Direct Programs
Special Appropriations
Downtown Revitalization Grant COM-2 2017-022-1257-1534 - 94,340
Total NC Department of Transportation - 94,340
NC Department of Environmental Quality
Direct Programs
Community Waste Reduction and Recycling DEQ-14 6856 - 13,749
Total NC Department of Environmental Quality - 13,749
Total assistance - state programs - 588,625
Total assistance 42,728$ 588,625$
Town of Hillsborough, North Carolina
Year Ended June 30, 2017
156
1. Basis of Presentation
The accompanying Schedule of Expenditures of Federal and State Awards (SEFSA) includes the federal and
state grant activity of the Town of Hillsborough under the programs of the federal government and the State of
North Carolina for the year ended June 30, 2017. The information in this SEFSA is presented in accordance with
the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards and the State Single Audit Implementation Act.
Because the Schedule presents only a selected portion of the operations of the Town it is not intented to and
does not present the financial position, changes in net position, or cash flows of the Town.
2. Summary of Significant Accounting Policies
Expenditures reported in the SEFSA are reported on the modified accrual basis of accounting. Such
expenditures are recognized following the cost principles contained in Uniform Guidance, wherein certain types
of expenditures are not allowable or are limited as to reimbursement.
The Town of Hillsborough has not elected to use the 10-percent de minimis indirect cost rate as allowed under
the Uniform Guidance.
Town of Hillsborough, North Carolina
Notes to Schedule of Expenditures of Federal and State Awards
Year Ended June 30, 2017
Note to Schedule of Expenditures of Federal and State Awards
157